-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T1PRYJcTt4ONsGSLDvm7tq0v4LUwSkOCbw8m7ZMEzPqUUsgXtR7RUlAxiv12c7pJ iT5sUrFiZu31EOD+687MeQ== 0000950137-02-001477.txt : 20020415 0000950137-02-001477.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950137-02-001477 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20011229 FILED AS OF DATE: 20020322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LITTELFUSE INC /DE CENTRAL INDEX KEY: 0000889331 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 363795742 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-20388 FILM NUMBER: 02582217 BUSINESS ADDRESS: STREET 1: 800 E NORTHWEST HWY CITY: DES PLAINES STATE: IL ZIP: 60016 BUSINESS PHONE: 7088241188 MAIL ADDRESS: STREET 1: 800 E. NORTHWEST HWY CITY: DES PLAINES STATE: IL ZIP: 60016 10-K405 1 c68111e10-k405.txt ANNUAL REPORT Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 29, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission file number 0-20388 LITTELFUSE, INC. (Exact name of registrant as specified in its charter) Delaware 36-3795742 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 800 East Northwest Highway, Des Plaines, Illinois 60016 (Address of principal executive offices) (Zip Code) 847/824-1188 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value, and Warrants to purchase shares of Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of 20,828,831 shares of voting stock held by non-affiliates of the registrant was approximately $565,294,473 based on the last reported sale price of the registrant's Common Stock, $.01 par value, as reported on The Nasdaq Stock Market on March 8, 2002. As of March 8, 2002, the registrant had outstanding 21,939,517 shares of Common Stock, $.01 par value. Portions of the following documents have been incorporated herein by reference to the extent indicated herein: Littelfuse, Inc. Proxy Statement dated March 22, 2002 (the "Proxy Statement") --Part III. Littelfuse, Inc. Annual Report to Stockholders for the year ended December 29, 2001 (the "Annual Report") -- Parts II and III. PART I ITEM 1. BUSINESS GENERAL Littelfuse, Inc. (the "Company" or "Littelfuse") is the world's leading supplier of circuit protection products for the electronics industry. The Company's broad line of products include both overcurrent and overvoltage protection devices to serve the needs of various segments of the electronics market including: telecommunications, computers and peripherals and consumer electronics. The Company is also the leading provider of circuit protection for the automotive industry and the third largest producer of electrical fuses in North America. In the electronic market, leading manufacturers such as Arrow, Celestica, Compaq, Dell Computer, GE, Intel, Motorola, Nokia, Palm, Panasonic, Samsung and Sony utilize electronic circuit protection components from the Company. In the automotive market, the Company or its licensees have customer relationships with all leading automobile manufacturers throughout the world. Littelfuse provides substantially all of the automotive fuse requirements for vehicles manufactured domestically by General Motors, Ford and Daimler Chrysler as well as all Japanese and most European auto manufacturer transplants. The Company also competes in the electrical fuse market with representative customers such as Carrier, John Deere, GE, Heinz, International Paper, Marconi, Otis Elevator, Procter & Gamble and Rockwell. See "Business Environment: Circuit Protection Market." The Company manufactures many of its products on fully integrated manufacturing and assembly equipment. The Company fabricates and assembles a majority of its products and maintains product quality through a rigorous quality assurance program with all sites certified under ISO 9000 standards and its world headquarters certified under the QS9000 standards. The Company's products are sold worldwide through a direct sales force and manufacturers' representatives. For the year ended December 29, 2001, approximately 52% of the Company's net sales were to customers outside the United States (exports and foreign operations). References herein to "1999" or "fiscal 1999" refer to the fiscal year ended January 1, 2000. References herein to "2000" or "fiscal 2000" refer to the fiscal year ended December 30, 2000. References herein to "2001" or "fiscal 2001" refer to the fiscal year ended December 29, 2001. BUSINESS ENVIRONMENT: CIRCUIT PROTECTION MARKET The circuit protection market can be broadly categorized into three major product areas: electronic, automotive and electrical. The Company sells products designed for the electronic, automotive and electrical areas. The Company entered the circuit protection market in 1927 with the development and introduction of the first small, fast-acting fuse capable of protecting sensitive test meters. Since that time, the Company has diversified its involvement in the circuit protection market to become a leader in the production of electronic and automotive fuses. The Company also entered the electrical fuse market in 1983 with a broad line of fuses, including several proprietary products. The Company believes it is a market leader in circuit protection devices, offering the broadest line of products in the industry and has the global presence to serve major markets throughout the world. 1 LITTELFUSE PRODUCTS Net sales of the Company's products by industry category for the periods indicated are as follows: Fiscal Year (in thousands) ---------------------------------- 2001 2000 1999 ---------------------------------- Electronic $146,342 $232,677 $154,141 Automotive 91,061 100,036 101,270 Electrical 34,746 39,207 40,956 ---------------------------------- Total $272,149 $371,920 $296,367 ================================== ELECTRONIC PRODUCTS Electronic circuit protection products are used to protect circuits in a multitude of electronic systems. The Company's product offering consists of six major categories: (1) fuses and protectors (2) positive temperature coefficient (PTC) resettables (3) varistors (4) electrostatic discharge (ESD) suppressors (5) diode arrays and thyristors and (6) fuseholders, blocks and other. Electronics fuses and protectors are devices that contain an element which melts in an overcurrent condition. Electronic miniature and subminiature fuses are designed to provide circuit protection in the limited space requirements of electronic equipment. The company's fuses are used in a wide variety of electronic products including wireless telephones, consumer electronics, computers, modems and telecommunications equipment. The Company markets its products under the following trademarked and brand names: PICO(R) II; NANO2 (R) SMF; ALF(TM) II and SMTelecom(TM). Resettables are positive temperature coefficient (PTC) polymer devices that limit the current when an overcurrent condition exists and then reset themselves once the overcurrent condition has cleared. The Company markets a line of surface mount PTC devices used primarily for computer and peripheral applications such as motherboards, disk drives, modems and printers. Varistors are ceramic-based high-energy absorption devices that provide transient overvoltage and surge suppression for automotive, telecommunication, consumer electronics and industrial applications. The Company's product line offers both radial leaded and multilayer surface mount products. 2 Electrostatic discharge (ESD) suppressors are polymer-based devices that protect an electronic system from failure due to rapid transfer of electrostatic charge to the circuit. The Company's PulseGuard(R) line of ESD suppressors is used in PC and PC peripherals, digital consumer electronics and wireless applications. Diode arrays and thyristors are fast switching silicon semiconductor structures. Diode arrays are used primarily as ESD suppressors, while thryristors are commonly used to protect telecommunications circuits from overvoltage transients such as those resulting from lightning. Applications include telephones, modems, data transmission lines and alarm systems. In addition to the above products, the Company is also a supplier of fuse holders (including OMNI-BLOK(R)), fuse blocks (including Powr-Blok(R) power distribution systems) and fuse clips primarily to customers that purchase circuit protection devices from the Company. AUTOMOTIVE PRODUCTS Fuses are extensively used in automobiles, trucks, buses and off-road equipment to protect electrical circuits and the wires that supply electrical power to operate lights, heating, air conditioning, radios, windows and other controls. Currently, a typical automobile contains 30 to 70 fuses, depending upon the options installed. The fuse content per vehicle is expected to continue to grow as more electronic features are included in automobiles. The Company also supplies fuses for the protection of electric and hybrid vehicles. The Company is a primary supplier of automotive fuses to United States, Japanese and European automotive OEMs, automotive component parts manufacturers and automotive parts distributors. The Company also sells its fuses in the replacement parts market, with its products being sold through merchandisers, discount stores and service stations, as well as under private label by national firms. The Company invented and owns all of the U.S. patents related to the blade type fuse which is the standard and most commonly used fuse in the automotive industry. The Company's automotive fuse products are marketed under the following trademarked brand names: ATO(R); MINI(R); MAXI(R); MIDI(R); J-CASE(R) and MEGA(R). Over half of the Company's North American automotive fuse sales are made to wire harness manufacturers that incorporate the fuses into their products. The remaining automotive fuse sales are made directly to automotive manufacturers and through distributors who in turn sell most of their products to automotive product wholesalers, such as warehouse distributors, discount stores and service stations. The Company has licensed its patented Mini(R) and Maxi(TM) automotive fuse designs to Bussmann, a division of Cooper Industries. Bussmann is the Company's largest domestic competitor. Additionally, the Company has entered into a licensing agreement with Pacific Engineering Company, Ltd., a Japanese fuse manufacturer, which produces and distributes the Company's patented Mini(R) automotive fuses to the Pacific Rim manufacturing operations of Japanese based automobile manufacturers. See "Business -- Patents, Trademarks and Other Intellectual Property" and "Competition." 3 ELECTRICAL PRODUCTS The Company entered the electrical fuse market in 1983 and manufactures and sells a broad range of low-voltage circuit protection products to electrical distributors and their customers in the construction, original equipment manufacturers ("OEM") and industrial maintenance and repair operations ("MRO") markets. Power fuses are used to protect circuits in various types of industrial equipment and circuits in industrial plants, office buildings and residential units. They are rated and listed under one of many Underwriters' Laboratories fuse classifications. Major applications for power fuses include protection from over-load and short-circuit currents in motor branch circuits, heating and cooling systems, control systems, lighting circuits and electrical distribution networks. The Company's POWR-GARD(TM) product line features the Indicator(TM) series power fuse used in both the OEM and MRO markets. The Indicator(TM) technology provides visual blown fuse indication at a glance, reducing maintenance and downtime on production equipment. The Indicator(TM) product offering is widely used in motor protection and industrial control panel applications. PRODUCT DESIGN AND DEVELOPMENT The Company employs scientific, engineering and other personnel to continually improve its existing product lines and to develop new products at its research and engineering facilities in Des Plaines, Illinois and Dundalk, Ireland. The Product Technology Department consists of approximately 60 engineers, chemists, metallurgists, scientists and technicians. This department is primarily responsible for the design and development of new products. Proposals for the development of new products are initiated primarily by sales and marketing personnel with input from customers. The entire product development process typically ranges from 6 to 18 months with continuous efforts to reduce the development cycle. During the fiscal years 2001, 2000 and 1999, the Company expended approximately $8.9 million, $11.2 million and $9.5 million, respectively, on product design and development. Spending for product design and development decreased in 2001 as the Company focused on controlling costs in response to the decline in sales. Product design and development costs as a percent of sales increased to 3.3% in 2001 compared to 3.0% in 2000, demonstrating the Company's continued focus on developing new technology and products to drive future growth. PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY The Company generally relies on patent and trademark laws and license and nondisclosure agreements to protect intellectual property and proprietary products. In cases where it is deemed necessary by management, key employees are required to sign an agreement that they will maintain the confidentiality of the Company's proprietary information and trade secrets. This information, for business reasons, is not disclosed to the public. 4 As of December 29, 2001, the Company owned 127 patents in North America, 31 patents in the European Economic Community and 11 patents in other foreign countries. The Company has also registered trademark protection for certain of its brand names and logos. The 127 North American patents are in the following product categories: 87 electronic, 18 automotive, 19 electrical fuse and 3 miscellaneous. New products are continually being developed to replace older products. The Company regularly applies for patent protection on such new products. Although in the aggregate the Company's patents are important in the operation of its businesses, the Company believes that the loss by expiration or otherwise of any one patent or group of patents would not materially affect its business. The Company currently licenses its MINI(R) and MAXI(R) automotive fuse technology to Bussmann, a division of Cooper Industries and the Company's largest domestic competitor. The license granted in 1987 is nonexclusive and grants the Company the right to receive royalties of 4% of the licensee's revenues from the sale of the licensed products with an annual minimum of $25,000. Each license expires upon the expiration of the licensed product patents. In addition, a second license covering the MINI(R) Fuse technology was granted to Pacific Engineering Company, Ltd., a Japanese manufacturer that produces and distributes the Company's patented automotive fuses to Pacific Rim-based automotive manufacturers. The license provides the Company with royalties of 2.5% of the licensee's revenues from the sale of the licensed products, with an annual minimum of $100,000. This second license expires on April 6, 2006. License royalties amounted to $390,000, $338,000 and $250,000 for fiscal 2001, 2000 and 1999, respectively. MANUFACTURING The Company performs the majority of its own fabrication and stamps some of the metal components used in its fuses, holders and switches from raw metal stock and makes its own contacts and springs. However, the Company does depend upon a single source for a substantial portion of its stamped metal end caps for one family of electronic fuses. The Company believes that alternative stamping sources are available at prices which would not have a material adverse effect on the Company. The Company also performs its own plating (silver, nickel, zinc, tin and oxides). In addition, all thermoplastic molded component requirements used for such products as the ATO(R), MINI(R) and MAXI(R) fuse product lines are met through the Company's in-house molding capabilities. After components are stamped, molded, plated and readied for assembly, final assembly is accomplished on fully automatic and semi-automatic assembly machines. Quality assurance and operations personnel, using techniques such as Statistical Process Control, perform tests, checks and measurements during the production process to maintain the highest levels of product quality and customer satisfaction. 5 The principal raw materials for the Company's products include copper and copper alloys, heat resistant plastics, zinc, melamine, glass, silver and solder. The Company depends upon a sole source for several heat resistant plastics. The Company believes that suitable alternative heat resistant plastics are available from other sources at prices which would not have a material adverse effect on the Company. All of the other raw materials are purchased from a number of readily available outside sources. A computer-aided design and manufacturing system (CAD/CAM) expedites product development and machine design, while reliability and high power laboratories test new products, prototype concepts and production run samples. The Company participates in "Just-in-Time" delivery programs with many of its major suppliers and actively promotes the building of strong cooperative relationships with its suppliers by involving them in pre-engineering product and process development. The Company also sponsors an annual major supplier conference and conducts a vendor certification program. MARKETING The Company's domestic sales and marketing staff of over 70 people maintains relations with major OEMs and distributors. The Company's sales and engineering personnel interact directly with the OEM engineers to ensure maximum circuit protection and reliability within the parameters of the OEM design. Internationally, the Company maintains a sales and marketing staff of over 40 people and sales offices in The Netherlands, England, Ireland, Singapore, Taiwan, Japan, Brazil, Hong Kong, Korea and China. The Company also markets its products indirectly through a worldwide organization of over 120 manufacturers' representatives and distributes through an extensive network of electronic, automotive and electrical distributors. ELECTRONIC. The Company retains manufacturers' representatives to sell its electronic products and to call on major domestic and international OEMs and distributors. The Company distributes approximately one-third of its domestic products directly to OEMs, with the remainder sold through distributors nationwide. In the Asia-Pacific region, the Company maintains a direct sales staff and utilizes manufacturers' representatives and distributors in Japan, Singapore, Korea, Taiwan, China, Malaysia, Thailand, Hong Kong, India, Indonesia, Philippines and Australia. In Europe, the Company maintains a direct sales force and utilizes manufacturers' representatives and distributors to support a wide array of customers. Unlike its US domestic representatives, most European manufacturers' representatives purchase inventory from the Company to facilitate delivery and reduce financial risks associated with currency exchange rate fluctuations. AUTOMOTIVE. The Company maintains a direct sales force to service all the major automotive OEMs (including the United States manufacturing operations of foreign-based OEMs) through both the engineering and purchasing departments of these companies. Twenty-two manufacturers' representatives represent the Company's products to aftermarket fuse retailers such as Autozone and Pep Boys. In Europe, the Company uses both a direct sales force and manufacturers' representatives to distribute its products to Mercedes Benz, BMW, Volvo, Saab, Jaguar and other OEMs, as well as aftermarket distributors. In the Asia-Pacific region, the Company has licensed its automotive fuse technology to a Japanese firm, which supplies the 6 majority of the automotive fuses to the Japanese manufacturing operations in the region including Toyota, Honda and Nissan. Additionally, the Company has a direct sales staff in Korea to call on major OEMs in that market. ELECTRICAL. The Company markets and sells its power fuses through manufacturers' representatives across North America. These representatives sell power fuse products through an electrical distribution network comprised of approximately 1,600 distributor buying locations. These distributors have customers that include electrical contractors, municipalities, utilities and factories (including both MRO and OEM). The Company's field sales force (including application engineers) and manufacturers' representatives call on both distributors and end-users (consulting engineers, municipalities, utilities and OEMs) in an effort to educate these customers on the capabilities and characteristics of the Company's products. BUSINESS SEGMENT INFORMATION The Company has three reportable business segments: The Americas, Europe and Asia-Pacific. For information with respect to the Company's operations in its three geographic areas for the fiscal year ended December 29, 2001, see "Item 8. Financial Statements and Supplementary Data - Business Segment Information" incorporated herein by reference. CUSTOMERS The Company sells to over 10,000 customers worldwide. No single customer accounted for more than 10% of net sales during the last three years. During the 2001, 2000 and 1999 fiscal years, net sales to customers outside the United States (exports and foreign operations) accounted for approximately 51.9%, 48.4% and 46.1%, respectively, of the Company's total net sales. COMPETITION The Company's products compete with similar products of other manufacturers, some of which have substantially greater financial resources than the Company. In the electronics market, the Company's competitors include AVX, Bel Fuse, Bourns, Cooper Electronics, EPCOS, Raychem Division of TYCO International, San-O Industrial Corp., STMicroelectronics and Wickmann-Werke GmbH. In the automotive fuse market, the Company's competitors, both in sales to automobile manufacturers and in the aftermarket, include Bussmann Division of Cooper Industries and Pudenz Division of Wickmann-Werke. The Company licenses several of its automotive fuse designs to Bussmann. In the electrical market, the Company's major competitors include Cooper Bussmann and Ferraz Shawmut. The Company believes that it competes on the basis of innovative products, the breadth of its product line, the quality and design of its products and the responsiveness of its customer service in addition to price. BACKLOG The Company does not consider backlog to be a predictive measure of results due to the Company's short delivery time. The Company manufactures high volume products based on its demand forecasts and manufactures low volume products 7 based on customer orders. Generally, orders which request delivery within three weeks of the date of the order are filled on time from available stock or current production. EMPLOYEES During 2001, the Company employed an average of 3,374 persons. Approximately 50 employees in Des Plaines, 56 employees in Korea, 400 employees in Mexico and 180 employees in Ireland are covered by collective bargaining agreements. The Des Plaines agreement expires March 31, 2002, the Korea agreement expires March 31, 2003, the Mexico agreement expires January 31, 2003 and the Ireland agreement expires April 1, 2002. The Company is currently negotiating with the unionized employees in Korea related to the announced restructuring of that facility. The Company has not encountered any interruption of business due to issues with the union, and only a small portion of production is dependent on the Korea plant. Overall, the Company has historically maintained satisfactory employee relations and many of its employees have long experience with the Company. The Company emphasizes employee training and development and has established Quality Improvement Process (QIP) training for its employees worldwide to promote product quality and customer satisfaction. ENVIRONMENTAL REGULATION The Company is subject to numerous federal, state and local regulations relating to air and water quality, the disposal of hazardous waste materials, safety and health. Compliance with applicable environmental regulations has not significantly changed the Company's competitive position, capital spending or earnings in the past and the Company does not presently anticipate that compliance with such regulations will change its competitive position, capital spending or earnings for the foreseeable future. The Company employs an environmental engineer to monitor regulatory matters and believes that it is currently in compliance in all material respects with applicable environmental laws and regulations, except with respect to its facility located in Ireland. This facility was acquired in October 1999 in connection with the acquisition of the Harris suppression products division. Corrective steps are being taken to bring this facility into compliance with Irish environmental laws, and the Company received an indemnity from Harris Corporation with respect to these matters. RISKS AND UNCERTAINTIES The Company's business is subject to several risks and uncertainties, including: (a) the highly competitive nature of the Company's industry and the impact that competitors' new products and pricing may have upon the Company, (b) risks associated with the Company's ability to manufacture and deliver products in a manner that is responsive to its customers' needs, (c) risks of business interruption resulting from labor disputes and (d) the likelihood that revenues may vary significantly from one accounting period to another due to a variety of factors, including customers' buying decisions, the Company's product mix and general market and economic conditions. Such factors, as well as shortfalls in the Company's results of operations as compared with analysts' expectations, capital market conditions and general economic conditions, may also cause substantial volatility in the market price of the Company's common stock. 8 ITEM 2. PROPERTIES LITTELFUSE FACILITIES The Company's operations are located in 20 owned or leased facilities worldwide, representing an aggregate of approximately 918,000 square feet. The U.S. headquarters and principal fabrication and distribution facility is located in Des Plaines, Illinois, supported by two additional plants in Illinois and one in Mexico. European headquarters and the primary European distribution center is in Utrecht, The Netherlands, with manufacturing plants in England, Ireland and Switzerland. Asia operations include distribution centers located in Singapore and Japan, with manufacturing plants in Korea, China and the Philippines. The Company does not believe that it will encounter any difficulty in renewing its existing leases upon the expiration of their current terms. Management believes that the Company's facilities are adequate to meet its requirements for the foreseeable future. The following table provides certain information concerning the Company's facilities:
Lease Size Lease/ Expiration Location Use (sq.ft.) Own Date Primary Product - -------- --- -------- --- ------- --------------- Des Plaines, Illinois Administrative, 340,000 Owned -- Auto, Electronic, Engineering, Electrical Manufacturing, Testing and Research Centralia, Illinois Manufacturing 45,200 Owned -- Electronic Arcola, Illinois Manufacturing 36,000 Owned -- Electrical Piedras Negras, Mexico Manufacturing 50,031 Leased 2003 Auto, Electronic, Electrical
Lease Size Lease/ Expiration Location Use (sq.ft.) Own Date Primary Product - -------- --- -------- --- ------- --------------- Piedras Negras, Mexico Manufacturing 12,594 Leased 2003 Electronic and Electrical Piedras Negras, Mexico Manufacturing, 22,711 Leased 2002 Electronic and Warehousing Electrical Piedras Negras, Mexico Warehousing 9,413 Leased 2002 Electronic and Electrical
9
Lease Size Lease/ Expiration Location Use (sq.ft.) Own Date Primary Product - -------- --- -------- --- ------- --------------- Washington, England Manufacturing, 60,000 Owned -- Electronic Sales and Distribution Utrecht, The Netherlands Sales, 34,642 Owned -- Auto and Electronic Administrative and Distribution Grenchen, Switzerland Manufacturing 11,000 Owned -- Auto Singapore Sales and 19,022 Leased 2003 Electronic Distribution Seoul, Korea Sales and 29,175 Owned -- Electronic and Auto Manufacturing Philippines Manufacturing 58,127 Owned -- Electronic Suzhou, China Manufacturing 40,000 Owned -- Electronic Hong Kong, China Sales 3,079 Leased 2002 Electronic
Lease Size Lease/ Expiration Location Use (sq.ft.) Own Date Primary Product - -------- --- -------- --- ------- --------------- Taipei, Taiwan Sales 2,583 Leased 2003 Electronic Yokohama, Japan Sales 6,243 Leased 2002 Electronic Yokohama, Japan Distribution 17,858 Leased 2004 Electronic Sao Paulo, Brazil Sales 800 Leased 2002 Electronic Dundalk, Ireland Manufacturing 120,000 Owned -- Electronic
ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any legal proceedings that it believes will have a material adverse effect upon the conduct of its business or its financial position. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the Company's stockholders during the fourth quarter of fiscal 2001. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are as follows: Name Age Position ---- --- -------- Howard B. Witt 61 Chairman, President and Chief Executive Officer Kenneth R. Audino 58 Vice President, Organizational Development and Total Quality Management William S. Barron 59 Vice President and General Manager Electronics Business Unit Philip G. Franklin 50 Vice President, Treasurer and Chief Financial Officer Hans Ouwehand 55 Vice President, European Operations Mary S. Muchoney 56 Secretary Officers of Littelfuse are elected by the Board of Directors and serve at the discretion of the Board. Howard B. Witt was elected as the Chairman of the Board of the Company in May, 1993. He was promoted to President and Chief Executive Officer of the Company in February, 1990. Prior to his appointment as President and Chief Executive Officer, Mr. Witt served in several other key management positions since joining the Company as Operations Manager in 1979. Mr. Witt serves as a Director of Franklin Electric Co., Inc. and Material Sciences Corporation and is a member of the Electronic Industries Alliance Board of Directors and the Board of Governors of the National Electrical Manufacturers Association. He also serves as a director of the Artisan Mutual Fund. Kenneth R. Audino, Vice President, Organizational Development and Total Quality Management, is responsible for the Company's overall quality, reliability and environmental compliance, quality systems, human resources and training efforts. Mr. Audino joined Littelfuse as a Control Technician in 1964. From 1964 to 1977, he progressed through several quality and reliability positions to Manager of Reliability and Standards. In 1983, he became Managing Director of the European 11 Headquarters and later was named Corporate Director of Quality Assurance and Reliability. He was promoted to his current position in 1998. William S. Barron, Vice President and General Manager Electronic Business Unit, is responsible for the electronic products business. Mr. Barron joined Littelfuse in March 1991. From August 1981 to March 1991, Mr. Barron served as Director of Sales and Marketing of Cinch Manufacturing, a division of TRW, and the General Manager of one of its domestic divisions. Philip G. Franklin, Vice President, Treasurer and Chief Financial Officer, has responsibility for the treasury, investor relations, accounting, information systems and global supply chain functions of the Company. Mr. Franklin joined the Company in 1998 from OmniQuip International, a $450 million construction equipment manufacturer which he helped take public. Hans Ouwehand, Vice President, European Operations, has responsibility for all sales, marketing and engineering activities in Europe. Mr. Ouwehand joined Littelfuse in 1984 as Sales Manager, Europe, Electronics Division. He was later promoted to the position of European Sales and Marketing Manager for all Littelfuse products and in 1986 to the position of General Manager-European Operations. Prior to joining Littelfuse, his industrial background included research and development work with Sperry Rand and sales and product management with Lameris Medical Instruments. Mary S. Muchoney has served as Corporate Secretary since 1991, after joining Littelfuse in 1977. She is responsible for providing all secretarial and administrative functions for the President and Littelfuse Board of Directors. Ms. Muchoney is a member of the American Society of Corporate Secretaries. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under "Quarterly Stock Prices" on page 32 of the Annual Report to Stockholders is incorporated herein by reference. As of March 8, 2002, there were 212 holders of record of the Company's Common Stock and approximately 5,000 beneficial holders of its Common Stock. Since September 22, 1992, shares of the Common Stock have been traded under the symbol "LFUS" on The Nasdaq Stock Market. The Company has not paid any cash dividends in its history. Future dividend policy will be determined by the Board of Directors based upon their evaluation of earnings, cash availability and general business prospects. Currently, there are restrictions on the payment of dividends contained in the Company's bank credit agreement which relate to the maintenance of certain restricted payment ratios. 12 ITEM 6. SELECTED FINANCIAL DATA The information set forth under "Selected Financial Data - Five Year Summary" on page 32 of the Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 13 through 17 of the Annual Report to Stockholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The information set forth under "Market Risk" on page 16 of the Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Auditors and the Consolidated Financial Statements and notes thereto of the Company set forth on pages 17 through 31 of the Annual Report to Stockholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement is incorporated herein by reference. Please also refer to the information set forth under "Executive Officers of the Registrant" in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION The information set forth under "Compensation of Executive Officers" in the Proxy Statement is incorporated herein by reference, except for the sections captioned "Reports of the Compensation Committee on Executive Compensation" and "Company Performance." 13 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under "Ownership of Littelfuse, Inc. Common Stock" in the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under "Certain Relationships and Related Transactions" in the Proxy Statement is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Schedules (1) Financial Statements. The following financial statements included in the Annual Report to Stockholders are incorporated herein by reference. (i) Report of Independent Auditors (page 17). (ii) Consolidated Statements of Financial Condition as of December 29, 2001 and December 30, 2000 (page 18). (iii) Consolidated Statements of Income for the years ended December 29, 2001, December 30, 2000 and January 1, 2000 (page 19). (iv) Consolidated Statements of Cash Flows for the years ended December 29, 2001, December 30, 2000 and January 1, 2000 (page 20). (v) Consolidated Statements of Shareholders' Equity for the years ended December 30, 2001, December 30, 2000 and January 1, 2000 (page 21). (vi) Notes to Consolidated Financial Statements (pages 22-31). (2) Financial Statement Schedules. The following financial statement schedule is submitted herewith for the periods indicated therein. (i) Schedule II-Valuation and Qualifying Accounts and Reserves All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 14 (3) Exhibits See Exhibit Index on pages 17-19. (b) Reports on Form 8-K There were no reports on Form 8-K filed with the SEC during the fourth quarter of 2001. LITTELFUSE, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS)
Additions Balance at Charged to Balance at Beginning Costs and Deductions End of Description Of Year Expenses (A) Year ----------- ---------- ---------- ---------- ------- Year ended December 29, 2001 Allowance for losses on accounts receivable............ $ 1,230 $ 332 $ 318 $ 1,244 ======= ======= ======= ======= Reserves for sales discounts and allowances................. $ 7,948 $ -- $ 1,673 $ 6,275 ======= ======= ======= ======= Year ended December 30, 2000 Allowance for losses on accounts receivable............ $ 1,570 $ 275 $ 615 $ 1,230 ======= ======= ======= ======= Reserves for sales discounts and allowances................. $ 5,551 $ 2,397 $ -- $ 7,948 ======= ======= ======= ======= Year ended January 1, 2000 Allowance for losses on accounts receivable............ $ 1,103 $ 614 $ 147 $ 1,570 ======= ======= ======= ======= Reserves for sales discounts and allowances................. $ 4,782 $ 769 $ -- $ 5,551 ======= ======= ======= =======
(A) Write-off of uncollectible accounts, net of recoveries and foreign currency translation. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Littelfuse, Inc. By /s/ Howard B. Witt ------------------------------ Howard B. Witt, Chairman, President and Chief Executive Officer Date: March 22, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 22, 2002. /s/ Howard B. Witt Chairman of the Board, President - ----------------------------- and Chief Executive Officer Howard B. Witt /s/ John P. Driscoll Director - ----------------------------- John P. Driscoll /s/ Anthony Grillo Director - ----------------------------- Anthony Grillo /s/ Bruce A. Karsh Director - ---------------------------- Bruce A. Karsh /s/ John E. Major Director - ----------------------------- John E. Major /s/ John J. Nevin Director - ---------------------------- John J. Nevin /s/ Philip G. Franklin Vice President, Treasurer - -------------------------- and Chief Financial Officer Philip G. Franklin (Principal Financial Officer) 16 LITTELFUSE INC. INDEX TO EXHIBITS Number Description of Exhibit - ------ ---------------------- 2.1 Plan of Reorganization under Chapter 11 of the Bankruptcy Code of Old Littelfuse (filed as exhibit 2.1 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.1 Certificate of Incorporation, as amended to date (filed as 3.1 to the Company's Form 10K for the fiscal year ended January 3, 1998 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.1A Certificate of Designations of Series A Preferred Stock (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 1, 1995 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.2 Bylaws, as amended to date (filed as exhibit 3.2 to the Company's Form 10-Q for the quarterly period ended September 30, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.1 Second amended restated bank credit agreement among Littelfuse, Inc., as borrower, the lenders named therein and the First National Bank of Chicago, as agent, dated as of September 1, 1998. (filed as exhibit 4.1 to the Company's Form 10K for the fiscal year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.3 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended (filed as exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.4 Littelfuse, Inc. Retirement Plan dated January 1, 1992, as amended and restated. 4.5 Littelfuse, Inc. 401(k) Savings Plan (filed as exhibit 4.8 to the Company's Form 10K for the fiscal year ended December 31, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.6 Littelfuse Rights Plan Agreement, dated as of December 15, 1995, between Littelfuse, Inc. and LaSalle National Bank, as Rights Agent, together with Exhibits thereto, as amended (filed as exhibit 4.10 to the Company's Form 10-Q for the quarterly period ended October 3, 1998 (1934 Act File No. 0-20388) and incorporated herein by reference.) 17 Number Description of Exhibit - ------ ---------------------- 4.7 Note Purchase Agreement dated as of September 1, 1998, relating to $60,000,000 principal amount of Littelfuse, Inc. 6.16% Senior Notes due September 1, 2005. (filed as exhibit 4.11 to the Company's Form 10K for the fiscal year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.8 Form of Restricted Share Agreement (filed as exhibit 4.12 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.3 Patent License Agreement, dated as of July 28, 1995, between Littelfuse, Inc. and Pacific Engineering Company, Ltd.(filed as exhibit 10.3 to the Company's Form 10K for the year ended December 28, 1996 (1934 Act File No. 0-20388) and incorporated herein by reference) 10.4 MINI(R)and MAXITM License Agreement, dated as of June 21, 1989, between Littelfuse, Inc. and Cooper Industries, Inc. (filed as exhibit 4.6 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.5 Patent License Agreement, dated as of January 1, 1987, between Littelfuse, Inc. and Cooper Industries, Inc. (filed as exhibit 4.6 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.6 1993 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended (filed as exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.7 Littelfuse, Inc. Supplemental Executive Retirement Plan (filed as exhibit 10.10 to the Company's Form 10K for the year ended December 31, 1993 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.8 Littelfuse Deferred Compensation Plan for Non-employee Directors, as amended (filed as exhibit 10.8 to the Company's Form 10K for the year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.9 Littelfuse Executive Loan Program (filed as Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended June 30, 1995 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.10 Employment Agreement dated as of November 2, 2001 between Littelfuse, Inc. and Howard B. Witt 18 Number Description of Exhibit - ------ ---------------------- 10.11 Change of Control Employment Agreement dated as of November 2, 2001 between Littelfuse, Inc. and Howard B. Witt 10.12 Form of change of Control Employment Agreement dated as of September 1, 2001 between Littelfuse, Inc. and Messrs. Barron, Franklin, Ouwehand and Ms. Muchoney (filed as exhibit 10.12 to the Company's Form 10-Q for the quarterly period ended September 29, 2001 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.13 Form of change of Control Employment Agreement dated as of September 1, 2001 between Littelfuse, Inc. and Mr. Kenneth Audino (filed as exhibit 10.13 to the Company's Form 10-Q for the quarterly period ended September 29, 2001 (1934 Act File No. 0-20388) and incorporated herein by reference.) 13.1 Portions of Littelfuse Annual Report to Stockholders for the fiscal year ended December 29, 2001. 22.1 Subsidiaries. 23.1 Consent of Independent Auditors. 19 EX-4.4 3 c68111ex4-4.txt RETIREMENT PLAN EXHIBIT 4.4 ================================================================================ LITTELFUSE, INC. RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997 LITTELFUSE, INC. ================================================================================ TABLE OF CONTENTS
SECTION HEADING PAGE SECTION 1. DEFINITIONS; PARTICIPATION.............................................................2 Section 1.1. Definitions............................................................................2 Section 1.2. Participation.........................................................................17 Section 1.3. Leave of Absence and Termination of Service...........................................19 Section 1.4. Reemployment..........................................................................20 Section 1.5. Transfer to or from Status as an Eligible Employee....................................24 Section 1.6. Participation and Benefits for Current and Former Leased Employees....................27 Section 1.7. Rights of Other Employees to Participate..............................................27 SECTION 2. NORMAL AMOUNT AND PAYMENT OF RETIREMENT INCOME........................................29 Section 2.1. Normal Retirement and Retirement Income...............................................29 Section 2.2. Early Retirement and Retirement Income................................................31 Section 2.3. Disability Retirement and Retirement Income...........................................35 Section 2.4. Benefits Other Than on Retirement.....................................................35 Section 2.5. Benefits Paid at Committee's Discretion...............................................40 SECTION 3. SPECIAL PROVISIONS REGARDING PAYMENT OF BENEFITS......................................40 Section 3.1. Optional Forms of Retirement Income...................................................40 Section 3.2. Lump-Sum Payment of Small Retirement Income...........................................44 Section 3.3. Benefits Applicable to Participant Who Has Been or Is Employed by Two or More Employers.........................................................................45 Section 3.4. No Duplication of Benefits............................................................46 Section 3.5. Funding of Benefits Through Purchase of Life Insurance Contract or Contracts..........46 SECTION 4. GOVERNMENTAL REQUIREMENTS AFFECTING BENEFITS..........................................46 Section 4.1. Special Provisions Regarding Amount and Payment of Retirement Income..................46 Section 4.2. Limitations on Benefits Required by the Internal Revenue Service......................57 Section 4.3. Benefits Nonforfeitable if Plan is Terminated.........................................58 Section 4.4. Merger of Plan........................................................................59 Section 4.5. Termination of Plan and Distribution of Trust Fund....................................59 Section 4.6. Special Provisions That Apply If Plan Is Top-Heavy....................................61 SECTION 5. MISCELLANEOUS PROVISIONS REGARDING PARTICIPANTS.......................................66 Section 5.1. Participants to Furnish Required Information..........................................66 Section 5.2. Beneficiaries.........................................................................67 Section 5.3. Contingent Beneficiaries..............................................................68 Section 5.4. Participants' Rights in Trust Fund....................................................69 Section 5.5. Benefits Not Assignable...............................................................69
-i- Section 5.6. Benefits Payable to Minors and Incompetents...........................................69 Section 5.7. Conditions of Employment Not Affected by Plan.........................................70 Section 5.8. Notification of Mailing Address.......................................................70 Section 5.9. Written Communications Required.......................................................70 Section 5.10. Benefits Payable at Office of Trustee.................................................70 Section 5.11. Appeal to Committee...................................................................71 Section 5.12. Credit for Qualified Military Service.................................................72 SECTION 6. MISCELLANEOUS PROVISIONS REGARDING THE EMPLOYER.......................................72 Section 6.1. Contributions.........................................................................72 Section 6.2. Employer's Contributions Irrevocable..................................................72 Section 6.3. Forfeitures...........................................................................73 Section 6.4. Amendment of Plan.....................................................................73 Section 6.5. Termination of Plan...................................................................74 Section 6.6. Expenses of Administration............................................................75 Section 6.7. Formal Action by Employer.............................................................75 SECTION 7. ADMINISTRATION........................................................................75 Section 7.1 Administration by Committee...........................................................75 Section 7.2. Officers and Employees of Committee...................................................76 Section 7.3. Action by Committee...................................................................76 Section 7.4. Rules and Regulations of Committee....................................................76 Section 7.5. Powers of Committee...................................................................77 Section 7.6. Duties of Committee...................................................................77 Section 7.7. Indemnification of Members of Committee...............................................78 Section 7.8. Actuary...............................................................................78 Section 7.9. Fiduciaries...........................................................................78 Section 7.10. Applicable Law........................................................................79 SECTION 8. TRUST FUND............................................................................80 Section 8.1. Purpose of Trust Fund.................................................................80 Section 8.2. Benefits Supported Only by Trust Fund.................................................80 Section 8.3. Trust Fund Applicable Only to Payment of Benefits.....................................80
FIRST SUPPLEMENT -ii- LITTELFUSE, INC. RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997 INTRODUCTION The Retirement Plan for Non-Exempt Employees of Tracor, Inc., and Its Affiliates, the Retirement Plan for Exempt Employees of Tracor, Inc., and Its Affiliates and the Retirement Trust for Employees of Tracor, Inc., and Its Affiliates, were adopted by Littelfuse, Inc., an Illinois corporation, effective as of January 1, 1976 as an amendment and restatement of the retirement plan that was previously maintained on behalf of certain of its employees as set forth in a group annuity contract that was issued by Continental Assurance Company effective January 1, 1961. The said Retirement Plan for Non-Exempt Employees of Tracor, Inc., and Its Affiliates and Retirement Plan for Exempt Employees of Tracor, Inc., and Its Affiliates were subsequently amended and restated in their entirety effective as of January 1, 1989 and consolidated into one plan instrument which has been known on and after January 1, 1989 as the Retirement Plan for Employees of Tracor, Inc., and Its Affiliates. Such plan had been administered and maintained as a separate plan with respect to Littelfuse, Inc., an Illinois corporation, and its eligible employees. The operating assets of Littelfuse, Inc., an Illinois corporation ("Predecessor Littelfuse") were sold to Littelfuse, Inc., a Delaware corporation ("Successor Littelfuse") effective as of December 27, 1991, and the employees of Predecessor Littelfuse were transferred to Successor Littelfuse. As a result of such sale, Successor-Littelfuse and the other employers participating in the Retirement Plan for Employees of Tracor, Inc., and Its Affiliates were no longer members of the same controlled group of corporations. Successor Littelfuse had provided for the continuation of the retirement plan and trust that were being maintained on behalf of the eligible employees of Predecessor Littelfuse but desired that on and after January 1, 1992 the provisions of the retirement plan and trust agreement which applied to its eligible employee be set forth in instruments that were separate and distinct from the instruments that applied to the other employers that had been participating in the Retirement Plan for Employees of Tracor, Inc., and Its Affiliates and the Retirement Trust for Employees of Tracor, Inc., and Its Affiliates. In order to effectuate such desire of Successor Littelfuse, the aforementioned Retirement Plan for Employees of Tracor, Inc., and Its Affiliates, insofar as it applied to Successor Littelfuse and its employees, was amended and was restated in its entirety effective as of January 1, 1992 and was renamed the LITTELFUSE, INC. RETIREMENT PLAN, and the aforementioned Retirement Trust for Employees of Tracor, Inc., and Its Affiliates, insofar as it applied to Successor Littelfuse and its employees, was amended and was restated in its entirety effective as of January 1, 1992, and titled LITTELFUSE, INC. RETIREMENT TRUST. In order to conform to changes required by the Uniformed Service Employment and Reemployment Rights Act, the Uruguay Round Agreements Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, and the Internal Revenue Service Restructuring Act of 1998 and other applicable laws, regulations and administrative authority, the Littlefuse, Inc. Retirement Plan is being amended and restated in its entirety effective as of January 1, 1997, except as otherwise stated in the Plan. SECTION 1. DEFINITIONS; PARTICIPATION. Section 1.1. Definitions. (A) The following terms as used herein shall have the meanings stated below unless a different meaning is plainly required by the context: (1) "Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date" shall mean the monthly retirement income, payable in the manner described in Section 2.1(C) hereof commencing at the Participant's Normal Retirement Date, which he has accrued as of a given date and shall be equal to the product of: (a) the monthly retirement income to which the Participant would have been entitled on his Normal Retirement Date in accordance with the provisions of Section 2.1(B) hereof (before applying the maximum restrictions imposed by Section 415 of the Internal Revenue Code) if his employment continued uninterrupted after such given date until his Normal Retirement Date and using his Final Average Monthly Compensation and Monthly Covered Compensation determined as of such given date in lieu of the corresponding amounts determined as of his Normal Retirement Date, multiplied by (b) the fraction in which the numerator is the Credited Service that he has accrued to such given date and the denominator is the Credited Service that he would accrue on his Normal Retirement Date if he continued in fulltime service of the Employer after such given date until his Normal Retirement Date; provided, however, that the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which a Participant has accrued as of a given date shall not exceed an amount that is actuarially equivalent as of such given date to that amount which would cause the monthly retirement income payable to or on behalf of the Participant under the Plan to be in excess of the maximum amount of retirement income permitted under Section 415 of the Internal Revenue Code; and provided further, however, that the provisions of Section 4.6 hereof shall apply in determining the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date of a Participant who has accrued Vesting Service during any Plan Year that the Plan is top-heavy. -2- (2) "Annuity Starting Date" shall have the meaning assigned in Section 417(f) of the Internal Revenue Code and regulations issued with respect thereto and shall be the first day of the first period for which an amount is payable (not the actual date of payment) as an annuity or any other form. Unless otherwise qualified by the context, the regularly scheduled Annuity Starting Date of a Participant shall be: (a) in the case of the benefit payable under Section 2.1 or 2.2 in the event of his normal or early retirement, the first day of the month coincident with or next following the date of his retirement; and (b) in the case of the benefit payable under Section 2.4(A) in the event of termination of service with a vested benefit, the Participant's Normal Retirement Date or, if applicable, the first day of the month prior to his Normal Retirement Date that the Participant has elected in accordance with the provisions of Section 2.4(A) to start receiving the benefits to which he is entitled under such section; provided, however, if the Participant elects pursuant to the provisions of Section 3.1 hereof a later commencement date, his Annuity Starting Date shall be such later date of commencement specified in his election, or, if the Participant continues in the service of the Employer beyond his Required Beginning Date, his Annuity Starting Date shall be his Required Beginning Date. (3) "Beneficiary" shall mean the person or persons on whose behalf benefits may be payable under the Plan after a Participant's death in accordance with the provisions hereof. (4) "Break in Service" shall mean: (a) in determining the right of an employee to participate in the Plan following a termination of his service, a Plan Year which immediately follows the Plan Year in which his date of termination of service occurs, during which the employee does not receive credit for any Hours of Service; and (b) in determining the right to the reinstatement of an employee's Credited Service and Vesting Service following a termination of his service, a period of severance of 12 consecutive months or longer that immediately follows an employee's date of termination of service and immediately precedes the date, if any, on which he next performs an Hour of Service. (5) "Committee" shall mean the Retirement Committee appointed from time to time to administer the Plan pursuant to the provisions of Section 7.1 hereof. -3- (6) "Company" shall mean Littelfuse, Inc., a Delaware corporation, and its successor or successors. (7) "Compensation" shall mean the sum of: (a) the amount of base pay or wages actually paid during a calendar year to an employee by the Employer for services rendered, based upon the regularly scheduled work week of the employee; by way of illustration and not by way of limitation, the base pay or wages of an employee shall include sales commissions, shift differential payments, piece-meal premiums, team leader, group leader and working supervisor premiums and flight pay; and the base pay or wages of an employee shall exclude any pay or wages that he receives for hours worked that are in excess of his regularly scheduled number of hours of work during any given work week and shall also exclude all completion bonuses, management bonuses, Christmas bonuses, referral bonuses, and all other bonuses, overtime pay, severance pay paid in a lump sum at termination, unused vacation pay paid in a lump sum at termination, cost-of-living allowances, taxable tuition reimbursements and all other extraordinary compensation; plus (b) amounts, if any, that would have been includable in the employee's Compensation under (a) above for such calendar year if they had not been deferred by the employee through a plan of deferred compensation under Section 401(k) of the Internal Revenue Code or under a salary reduction agreement pursuant to Section 125 of said Code; plus (c) effective for Plan Years beginning after December 31, 1997, amounts, if any, that would have been includable in the employee's Compensation under (a) above for such calendar year if they had not been deferred by the employee through a plan of deferred compensation under Sections 403(b) and 457 of the Internal Revenue Code or under a salary reduction agreement pursuant to Section 132 of said Code; provided, however, that the annual Compensation of a Participant for any given calendar year or other specified 12-consecutive-month period, which is taken into account with respect to contributions to the Plan and to benefits accruing under the Plan on and after January 1, 1989, shall not exceed the maximum annual compensation that may be taken into account under Section 401(a)(17) of the Internal Revenue Code and regulations issued with respect thereto (the "IRC Section 401(a)(l7) Annual Compensation Limit"). The IRC Section 401(a)(17) Annual Compensation Limit with respect to any given calendar year or other specified 12-consecutive-month period shall be equal to $200,000 or such increased or decreased amount, as the case may be, that applies as of the January 1 coincident with or immediately preceding the beginning of such given calendar year or other specified 12-consecutive-month period, pursuant to the provisions of -4- Section 401(a)(17) of the Internal Revenue Code, as amended, and rules and regulations issued with respect thereto. In the event that Compensation under the Plan is determined based on a period of time that contains fewer than 12 calendar months, the IRC Section 401(a)(17) Annual Compensation Limit for that period of time shall be equal to the IRC Section 401(a)(17) Annual Compensation Limit for the calendar year during which such period of time begins multiplied by the fraction in which the numerator is the number of full months in such period of time and the denominator is 12. In determining the IRC Section 401(a)(17) Annual Compensation Limit of an individual who is a member of the family of a 5-percent owner or of a Highly Compensated Employee who is in the group consisting of the 10 Highly Compensated Employees paid the greatest compensation during the year, the rules of Section 414(q)(6) of the Internal Revenue Code shall apply, except that in applying such rules for the purposes of this section, the term `family' shall include only the spouse of the employee and any lineal descendants who have not attained the age of 19 years before the close of such year. If the total Compensation of the affected family members exceeds the IRC Section 401(a)(17) Annual Compensation Limit, then the IRC Section 401(a)(17) Annual Compensation Limit that applies to each individual family member shall be determined (except for the purpose of determining the portion of his Compensation which is under the integration level) by multiplying the IRC Section 401(a)(17) Annual Compensation by the fraction in which the numerator is the Compensation prior to the application of the IRC Section 401(a)(17) Annual Compensation Limit of such individual family member and the denominator is the sum of the Compensation prior to the application of the IRC Section 401(a)(17) Annual Compensation Limit of all of the affected family members. For Plan Years beginning after December 31, 1996, this paragraph shall be deleted from the Plan. Any provisions herein to the contrary notwithstanding, a Participant's accrued benefit as of December 31, 1993 shall not be reduced due to the IRC Section 401(a)(17) Annual Compensation Limit imposed effective as of January 1, 1994 on the amount of his Compensation. In the event that the IRC Section 401(a)(17) Annual Compensation Limit is reduced effective as of any date subsequent to January 1, 1994, a Participant's accrued benefit immediately prior to the date that such reduction becomes effective shall not be reduced due to the reduction in such limit. (8) "Controlled Group Member" shall mean: (a) the Employer; (b) any division of the Employer which is not geographically located at the principal place of business of such Employer and which has not adopted and is not participating in the Plan in accordance with the provisions of Section 1.7 hereof; (c) any subsidiary of the Employer which has not adopted and is not participating in the Plan in accordance with the provisions of Section 1.7 hereof; -5- (d) any other corporation or association that is a member of a controlled group of corporations (within the meaning of Section 1563(a) of the Internal Revenue Code, determined without regard to Section 1563(a)(4) and Section 1563(e)(3)(C) of said Code, except that, for the purposes of applying the limitations on benefits and contributions that are required under Section 415 of the Internal Revenue Code and are described in Section 4.1(A) hereof, such meaning shall be determined by substituting the phrase "more than 50%" for the phrase "at least 80%" each place that it appears in Section 1563(a)(1) of said Code) with respect to which the Employer is a member; (e) any trade or business (whether or not incorporated) that is under common control with the Employer as determined in accordance with Section 414(c) of the Internal Revenue Code and regulations issued thereunder; (f) any service or other organization that is a member of an affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) with respect to which the Employer is a member; and (g) any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Internal Revenue Code. (9) "Credited Service" shall mean the total period of an employee's service with the Employer, computed in completed months, during the period beginning on his Last Date of Commencement of Service and ending on the date of his retirement or termination of service or, where applicable, ending on such other date as is specified hereunder; provided, however, that the following provisions shall apply with respect to any period of such an employee's service that would be included in his Credited Service in accordance with the provisions above: (a) any complete calendar month that the employee is absent from the service of the Employer will be excluded from his Credited Service unless he receives regular Compensation from the Employer for all or any portion of such calendar month and except as otherwise provided below; (b) any absence due to the employee's engagement in military service will, except as provided below, be included in his Credited Service if such absence is covered by a leave of absence granted by the Employer or is by reason of compulsory military service and provided that such employee returns from such absence within the period of time prescribed in Section 1.3 hereof; (c) any period of an employee's service prior to the Effective Date of the Plan that was either included with or excluded from the service used to determine his accrued retirement income under the Superseded Plan for any reason specified under the terms of the Superseded Plan as in effect on the day immediately preceding the Effective Date of the Plan shall be included with or excluded from, as the case may be, his Credited Service under the provisions of the Plan; and -6- (d) the provisions of Section 1.4 hereof shall apply in the case of an employee who is reemployed with a reinstatement of Credited Service accrued prior to his Last Date of Commencement of Service and the provisions of Section 1.5 hereof shall apply in the case of an employee who is transferred to or from his status as an eligible Employee. (10) "Designated Nonparticipating Employer" shall mean: (a) any Controlled Group Member that is not an Employer as defined herein; and (b) any other corporation, association, proprietorship, partnership or other business organization that (i) is not an Employer as defined herein and (ii) the Company, by formal action on its part in the manner described in Section 6.7 hereof, designates on the basis of a uniform policy applied without discrimination as a "Designated Nonparticipating Employer" for the purposes of the Plan. (11) "Earliest Annuity Commencement Date" is: (a) the first day of the month coincident with or next following the date of termination of the Participant's service if he has satisfied the age and service requirements to be eligible for a normal or early retirement benefit under the provisions hereof as of such termination date; or (b) the earliest date as of which the Participant could elect to start receiving retirement income payments under the provisions of Section 2.4(A) hereof if his service were terminated and he had not satisfied the age and service requirements to be eligible for a normal or early retirement benefit under the provisions hereof as of such termination date. (12) "Effective Date of the Plan" shall mean January 1, 1992 or such later date as of which the Plan first became effective with respect to the particular Employer concerned. (13) "Eligibility Computation Period" shall mean the 12-consecutive-month period that is used for the purpose of determining a year of service for eligibility to participate in the Plan. Initially, the Eligibility Computation Period shall be the 12-consecutive-month period beginning on the Employee's Last Date of Commencement of Service and ending with the first anniversary of his Last Date of Commencement of Service; provided, however, if the Employee fails to complete 1,000 Hours of Service in such initial Eligibility Computation Period, the Eligibility Computation Period shall mean the Plan Year, and the first of such Plan Year Eligibility Computation Periods shall be the Plan Year that overlaps the first anniversary of the Employee's Last Date of Commencement of Service. (14) "Employee" shall mean any person on the payroll of the Employer whose wages from the Employer are subject to withholding for the purposes of Federal income -7- taxes and for the purposes of the Federal Insurance Contributions Act; provided, however, that such term shall not include: (a) any such person who is employed at any division or branch of any Employer that is formed or acquired by or merged into the Employer after the Effective Date of the Plan unless the Employer, by formal action on its part in the manner described in Section 6.7 hereof, provides that such persons who are employed at such division or branch shall, subject to the provisions of (b) and (c) below, be eligible for participation in the Plan in accordance with the provisions hereof; (b) any such person who is a participant and is accruing benefits (or who, upon his satisfaction of any age and service requirements specified thereunder as a condition of participation, will be eligible to become a participant and accrue benefits) under any other qualified defined benefit pension plan maintained by the Employer or to which the Employer makes contributions on his behalf based upon his employment with the Employer; or (c) any such person who is included in a unit of persons employed by the Employer who are covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Employer if retirement benefits were the subject of good faith bargaining between such employee representatives and the Employer and such persons are not required by that agreement to be covered in the Plan. (15) "Employer" shall mean, collectively or distributively as the context may indicate, the Company and any other corporations, associations, joint ventures, proprietorships, partnerships or other business organizations that have adopted and are participating in the Plan in accordance with the provisions of Section 1.7 hereof; provided, however, such term shall not include any division of any Employer which is not geographically located at the principal place of business of such Employer and shall not include any subsidiary of any Employer, unless said division or subsidiary has adopted and is participating in the Plan in accordance with the provisions of Section 1.7 hereof. If the Plan is adopted on behalf of the Employees of one or more, but less than all, divisions of an employer, the term "Employer" shall apply only to the division or divisions on behalf of whose Employees the Plan has been adopted. (16) "Final Average Monthly Compensation" shall mean the Participant's average monthly rate of Compensation from the Employer for the five successive calendar years, out of the 10 completed calendar years immediately preceding the first day of the month coincident with or next following the date on which his service terminates for any reason (or, where applicable, immediately preceding such other date as is specified hereunder), that give the highest average monthly rate of Compensation for the Participant. The Participant's average monthly rate of Compensation will be determined by dividing the total Compensation received by him during such five-calendar-year period by the number of months for which he received Compensation from the Employer in such -8- five-calendar-year period. The number of months for which he received Compensation from the Employer may be computed, to the extent he was paid on other than a monthly basis, by determining the number of pay periods ending within such five-calendar-year period for which he received Compensation from the Employer and converting such pay periods into months by dividing the number thereof, if weekly, by 4-1/3, if biweekly, by 2-1/6, and, if semi-monthly, by 2. In computing Final Average Monthly Compensation for a Participant who has returned to the active service of the Employer following a full calendar year or calendar years during which he did not receive any regular Compensation from the Employer because of a leave of absence granted by the Employer or because of his reemployment with a reinstatement of his prior Vesting Service and Credited Service as described in Section 1.4 hereof, such full calendar year or calendar years during which he did not receive any regular Compensation from the Employer shall be ignored or excluded in determining the 10 calendar years and the five successive calendar years to be used in determining the Participant's Final Average Monthly Compensation at a subsequent date. (17) "Highly Compensated Employee" shall mean an employee who is a "highly compensated employee" within the meaning of Section 414(q) of the Internal Revenue Code and regulations issued with respect thereto. For Plan Years beginning after December 31, 1996, for purposes of this definition, the Employee will be a Highly Compensated Employee only if he was in the top-paid group for the preceding Plan Year. The term "top-paid group" includes all employees who are among the highest paid 20%, but excluding the following employees unless the Employer elects not to exclude them: (i) employees who have not completed six months of service; (ii) employees who normally work less than 17-1/2 hours per week; (iii) employees who normally work not more than six months a year; (iv) employees who are included in a unit of employees covered by a collective bargaining agreement, except as otherwise provided in the regulations; (v) employees who have not attained the age of 21; and (vi) employees who are nonresident aliens and receive no U.S.-source earned income from the Employer. (18) "Hour of Service" shall mean each hour for which an employee is directly or indirectly paid, or is entitled to payment, by the Employer (including any predecessor business of an Employer conducted as a corporation, partnership or proprietorship) for (a) the performance of duties or (b) reasons other than the performance of duties, including but not limited to vacation, holidays, sickness, disability, paid layoff and similar paid periods of nonworking time. Such Hours of Service shall be credited to the employee for the period in which such duties were performed or in which occurred the period during which no duties were performed. An Hour of Service also includes each hour, not credited above, for which backpay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer. These Hours of Service shall be credited to the employee for the period to which the award or agreement pertains. The number of Hours of Service to be credited to an employee for any period shall be governed by Sections 2530.200b-2(b) and 2530.200b-2(c) of Part 2530 of Subchapter C of Chapter XXV of Title 29 of the Code of Federal Regulations (Department of Labor regulations relating to minimum, standards for employee pension benefit plans). -9- (19) "Initial Vesting Date" shall mean the earlier to occur of the following dates: (a) the date on which the Participant has completed five years of Vesting Service; or (b) the date on which the Participant attains his Normal Retirement Age; provided, however, that the provisions of Section 4.6 hereof shall apply in determining the Initial Vesting Date of a Participant who has accrued Vesting Service during any Plan Year that the Plan is top-heavy; and provided further that the Initial Vesting Date of a Participant shall not be earlier than the Effective Date of the Plan. (20) "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as now or hereafter amended from time to time. (21) "Last Date of Commencement of Service" shall mean: (a) if the employees service has not been previously terminated in accordance with the provisions hereof, the date on which he first performs an Hour of Service; or (b) if the employee's service has been previously terminated in accordance with the provisions hereof, the first day following his last termination of service on which he performs an Hour of Service; provided, however, that the provisions of Section 1.4(A) hereof shall apply in determining the Last Date of Commencement of Service of any employee whose service is terminated and who is reemployed on or after the Effective Date of the Plan and prior to his incurring a Break in Service. An Employer may at the time of its initial adoption of the Plan provide, with respect to all or any specified classification of its employees, that the Last Date of Commencement of Service for the purposes of determining the Credited Service and Vesting Service of such employees shall not be earlier than a specified date, which is later than the otherwise applicable date described above but is not later than the date as of which the Plan first became effective with respect to such Employer, and may provide that such specified date will be different for the purposes of determining the eligibility to participate in the Plan, the Credited Service and the Vesting Service of such employees; provided, however, that the date established to determine the Vesting Service of such employees shall not be later than the date as of which such Employer became a Controlled Group Member of any other Employer participating in the Plan or, if later, the date as of which the Plan or Superseded Plan became effective with respect to such other Employer. -10- The Last Date of Commencement of Service of an employee by a predecessor or acquired business shall not be earlier than the date of such merger or acquisition unless the Employer provides that a uniformly applied earlier date or dates will be used for the purposes of the Plan. (22) "Monthly Covered Compensation" shall be equal to one-twelfth of the "covered compensation," within the meaning of Section 401(1)(5)(E) of the Internal Revenue Code and regulations and rulings issued pursuant thereto, that applies to the Participant based upon his year of birth. Any changes in the amount of "covered compensation" that become effective after the January 1st immediately preceding the date of the Participant's retirement or termination of service shall be ignored. (23) "Normal Retirement Age" shall mean the older of: (a) age 65 years; or (b) the Participant's age on the fifth anniversary of the date of commencement of his Vesting Service. (24) "Normal Retirement Date" shall mean the first day of the month coincident with or next following the date on which the Participant attains his Normal Retirement Age. (25) "Participant" shall mean: (a) any active Employee who has satisfied the requirements of Section 1.2 hereof; (b) any former Employee who has satisfied the requirements of Section 1.2 hereof, whose service has not been terminated but who has subsequently been transferred from his status as an eligible Employee as described in Section 1.5 hereof; and (c) any retired or terminated Employee who has vested rights to benefits under the provisions of the Plan; (26) "Plan" shall mean the Littelfuse, Inc. Retirement Plan, as amended and restated effective as of January 1, 1997 as set forth in this document and as it may hereafter be amended from time to time. (27) "Plan Year" shall mean the calendar, policy or fiscal year on which the records of the Plan are kept as reported from time to time by the plan administrator to the Internal Revenue Service. The Plan Year, unless subsequently changed in accordance with rules or regulations issued by the Internal Revenue Service or Department of Labor, shall be the 12-month period beginning January 1st of each calendar year. -11- (28) "Post Payment Recalculation Date" shall have the meaning assigned in Section 2.1(D) hereof. (29) "Qualified Joint and Survivor Annuity" means an annuity that (a) is payable for the life of the Participant with a survivor annuity payable for the life of his spouse which is not less than 50% and is not greater than 100% of the amount of the annuity which is payable during the joint lives of the Participant and his spouse and (b) is the actuarial equivalent of the monthly retirement income payable to the Participant for life under the provisions of the Plan. (30) "Qualified Joint and 50% Survivor Annuity Option" shall have the meaning assigned in Option 4 in Section 3.1 hereof. (31) "Qualified Preretirement Survivor Annuity" shall mean the minimum death benefit, if any, described in Section 4.1(D) hereof that may be payable to the spouse of a Participant who dies prior to his Annuity Starting Date. (32) "Required Beginning Date" shall have the meaning assigned in Section 401(a)(9) of the Internal Revenue Code and shall mean: (a) if the Participant had not attained the age of 70-1/2 years as of January 1, 1988, (i) April 1 of the calendar year that next follows the calendar year in which he attains or will attain the age of 70-1/2 years or (ii) April 1, 1990, whichever is later; and (b) if the Participant had attained the age of 70-1/2 years before January 1, 1988, April 1 of the calendar year that next follows the calendar year in which he retires or his service is terminated; provided, however, that the Required Beginning Date of any Participant who is a 5-percent owner (within the meaning of Section 416 of the Internal Revenue Code) and of any Participant who had retired or whose service had been terminated prior to January 1, 1989 shall not be later than his required beginning date as determined under the provisions of Section 401(a)(9) of the Internal Revenue Code as such section applied with respect to tax years beginning before January 1, 1989. Notwithstanding anything in this paragraph (32) or the Plan to the contrary, for calendar years beginning after December 31, 2001, the Required Beginning Date of a Participant is the later of April 1 of the calendar year in which the Participant attains age 70-1/2 or retires, except that a 5-percent owner must commence distributions by the April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2. A Participant's accrued benefit is actuarially increased to take into account the period after age 70-1/2 in which the Participant does not receive any benefits under the -12- Plan. The actuarial increase begins on the April 1 following the calendar year in which the Participant attains age 70-1/2 (January 1, 1997 in the case of a Participant who attained age 70-1/2 prior to 1996), and ends on the date on which benefits commence after retirement in an amount sufficient to satisfy Section 401(a)(9) of the Internal Revenue Code. The amount of actuarial increase payable as of the end of the period for actuarial increases must be no less than the actuarial equivalent of the Participant's retirement benefits that would have been payable as of the date the actuarial increase must commence plus the actuarial equivalent of additional benefits accrued after that date, reduced by the actuarial equivalent of any distributions made after that date. The actuarial increase is generally the same as, and not in addition to, the actuarial increase required for that same period under Section 411 of the Internal Revenue Code to reflect the delay in payments after normal retirement, except that the actuarial increase required under Section 401(a)(9)(C) of the Internal Revenue Code must be provided even during the period during which a Participant is in Section 203(a)(3)(B) of the Employee Retirement Income Security Act of 1974 service. For purposes of Section 411(b)(1)(H) of the Internal Revenue Code, the actuarial increase will be treated as an adjustment attributable to the delay in distribution of benefits after the attainment of Normal Retirement Age. Accordingly, to the extent permitted under Section 411(b)(1)(H) of the Internal Revenue Code, the actuarial increase required under Section 401(a)(9)(C)(iii) of the Internal Revenue Code may reduce the benefit accrual otherwise required under Section 411(b)(1)(H)(i) of the Internal Revenue Code, except that the rules on the suspension of benefits are not applicable. (33) "Social Security Retirement Age" shall have the meaning given such term by Section 415(b)(8) of the Internal Revenue Code and shall be: (a) age 65 years for a Participant whose date of birth is prior to January 1, 1938; (b) age 66 years for a Participant whose date of birth is on or after January 1, 1938 and is prior to January 1, 1955; and (c) age 67 years for a Participant whose date of birth is on or after January 1, 1955. (34) "Superseded Plan" shall mean, collectively or distributively, as the context may indicate, the qualified retirement plan, if any, that was maintained by an Employer for its eligible employees prior to the Effective Date of the Plan and that the Plan represents an amendment and restatement thereof. Such term specifically shall include, but shall not be limited to, the Retirement Plan for Employees of Tracor, Inc., and Its Affiliates as in effect from January 1, 1989 through December 31, 1991, the Retirement Plan for Non-Exempt Employees of Tracor, Inc., and Its Affiliates as in effect from January 1, 1976 through December 31, 1988, the Retirement Plan for Exempt Employees of Tracor, Inc., and Its Affiliates as in effect from January 1, 1976 through December 31, 1988 and the retirement plan maintained from January 1, 1961 through December 31, -13- 1975 by Littelfuse, Inc. on behalf of certain of its employees as set forth in that group annuity contract providing a group annuity fund that was issued by the Continental Assurance Company effective January 1, 1961. References to the Superseded Plan as of any given date shall refer to the provisions as set forth under the terms of the applicable document describing such qualified retirement plan as amended and in effect on such given date prior to the Effective Date of the Plan. (35) "Supplement" shall mean any supplement that is attached to and made a part of the Plan and that describes provisions of the Plan that apply only to employees of an Employer or Employers specified in such Supplement. (36) "Trust" and "Trust Fund" shall mean the trust fund established pursuant to the terms of the Trust Agreement. (37) "Trust Agreement" shall mean the Littelfuse, Inc. Retirement Trust, as set forth in the trust agreement of that title, and as such trust agreement may be amended from time to time. (38) "Trustee" shall mean the corporate trustee or trustees or the individual trustee or trustees, as the case may be, appointed from time to time pursuant to the provisions of the Trust Agreement to administer the Trust Fund maintained for the purposes of the Plan. (39) "Vested Percentage" shall mean the percentage specified in Section 2.4(A)(1) hereof in which the Participant has a nonforfeitable right to his accrued benefit attributable to Employer contributions, based upon his number of years of Vesting Service and his age as of the date that such percentage is being determined; provided, however, that the Vested Percentage of a Participant who has accrued Vesting Service during any Plan Year that the Plan is top-heavy shall be subject to the provisions of Section 4.6 hereof. (40) "Vesting Service" shall mean the total period of elapsed time, computed in years and days, during the period beginning on the employee's Last Date of Commencement of Service and ending on his date of retirement or termination of service (or, where applicable, ending on such other date as is specified hereunder); provided, however, that: (a) the first 12 months of any continuous absence during such period will be included in the employee's Vesting Service but the portion, if any, of such absence that is in excess of 12 months will be excluded from his Vesting Service, except that any period of such absence that is included in his Credited Service will also be included in his Vesting Service; (b) the provisions of Section 1.3 hereof shall apply in the case of an employee who has a maternity or paternity absence, the provisions of Section 1.4 hereof shall apply in the case of an employee who is reemployed with a reinstatement of Vesting Service accrued prior to his Last Date of Commencement of Service, the provisions of Section 1.5 hereof shall apply in the case of an -14- employee who is transferred to or from his status as an eligible Employee and the provisions of Section 1.6 hereof shall apply in the case of an employee who has previously been employed as a leased employee; and (c) with respect to any Participant in the Plan whose Vesting Service includes service accrued prior to January 1, 1989 while in the employment of the Company, the Vesting Service attributable to his employment prior to January 1, 1990 shall not be less than the "Vesting Service" that he would have accrued prior to January 1, 1990 under the terms of the Superseded Plan if the terms of the Superseded Plan as in effect on December 31, 1988 had continued without change until January 1, 1990. (B) The terms "actuarially equivalent," "equivalent actuarial value," "actuarial equivalent" and similar terms as used herein mean equality in value of the aggregate amounts expected to be received under different forms of payment based upon the same mortality and interest rate assumptions, which shall be determined as follows: (1) Unless specifically provided otherwise under the provisions hereof, the mortality and interest rate assumptions used in computing benefits payable on behalf of a Participant upon his retirement or termination of employment and upon the exercise of optional forms of retirement income under the Plan shall be as follows: (a) the mortality assumptions shall be based upon the "Unisex Pension Mortality Table Projected to 1984" (UP-1984 Mortality Table); and (b) the interest rate assumption shall be 6%; provided, however, that for the purposes of determining the retirement income permitted under the provisions of Section 415 of the Internal Revenue Code, the mortality and interest rate assumption used to determine actuarial equivalence for early retirement shall be the assumptions that would produce the early retirement adjustment factors that apply under the provisions hereof in the event of early retirement. (2) Any of the provisions of Subsection (1) above to the contrary notwithstanding, if payment to any Participant (or his Beneficiary) is either (i) an actuarially equivalent lump-sum distribution or (ii) any other actuarially equivalent form of distribution that provides payments in the form of a decreasing annuity or that provides payments for a period less than the life of the Participant (or, in the case of a preretirement death benefit payable to the Beneficiary of a Participant prior to the commencement of retirement income payments to the Participant, for a period less than the life of such Beneficiary), the monthly income payable to such Participant (or Beneficiary) under the applicable provisions of the Plan (or Supplement hereto) shall first be determined (using, if necessary to determine the -15- amount of such monthly income, the mortality and interest assumptions specified in Subsection (1)(a) and Subsection (1)(b) above). Such monthly income shall then be converted to such actuarially equivalent lump-sum distribution or such other actuarially equivalent form of distribution that provides payments in the form of a decreasing annuity or that provides payments for a period that may be less than the life of the recipient, whichever form of distribution is applicable, using the following mortality and interest assumptions: (a) the mortality assumptions shall be based upon the "Unisex Pension Mortality Table Projected to 1984" (UP-1984 Mortality Table); and (b) the interest rate assumption shall be equal to the rate of interest that was being used by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump-sum distribution on plan termination (as determined under Sections 411(a)(11) and 417 of the Internal Revenue Code and regulations issued pursuant thereto) as of the first day of the Plan Year during which the Annuity Starting Date occurs; provided, however, that the amount of any such distribution to or on behalf of any Participant who was a participant in the Superseded Plan as of October 31, 1991 and whose Credited Service includes service which was accrued prior to November 1, 1991 shall not be less than the actuarial equivalent, computed using the Unisex Pension Mortality Table Projected to 1984 (UP-1984 Table) and 6% interest, of the benefit which would have been payable on his behalf under the provisions of the Superseded Plan as in effect on October 31, 1991 if (i) the provisions of the Superseded Plan as in effect on such date had continued without change and (ii) the "Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date" or, if the date of his retirement or termination of service is on or after his Normal Retirement Date, the accrued monthly normal retirement income, whichever is applicable, that is used to compute such benefit under such provisions were equal to the "Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date" or, if his Normal Retirement Date was on or prior to November 1, 1991, the monthly normal retirement income, as the case may be, that he had accrued as of October 31, 1991 under the provisions of the Superseded Plan as in effect on such date. (3) For the purposes of Subsection (2) above, a joint and survivor annuity form of payment which may decrease upon the death of the Participant or his joint pensioner shall be deemed to be a non-decreasing annuity. (4) Notwithstanding the foregoing, for Plan Years beginning after December 31, 2001, the lump sum actuarial equivalence shall be calculated based on the applicable mortality table and applicable interest rate prescribed pursuant to Section 417(e) of the Internal Revenue Code and the regulations promulgated thereunder. -16- The applicable interest rate to be utilized is the annual interest rate as described in Section 417(e) of the Internal Revenue Code for the second calendar month preceding the first day of the Plan Year. The period for which the applicable interest rate remains constant is hereby designated as the Plan Year. (5) For the 2000 and 2001 Plan Years, actuarial equivalence shall be calculated using either the mortality and interest rate assumption in paragraph (B)(1) or paragraph (B)(4), whichever paragraph produces the greatest benefit to the Participant. (C) The term "single-sum value" as used herein shall mean the actuarially computed present value, as of a given date, of the retirement income payments for which it is determined based upon the interest and mortality assumptions specified in the provisions of the Plan. Unless specifically provided otherwise under the provisions hereof, the single-sum value as of a given date of a Participant's accrued benefit that is scheduled to commence at a later date shall be discounted for both interest and mortality from such scheduled commencement date to such given date. (D) The terms "herein," "hereof," "hereunder" and similar terms refer to this document, including the Trust Agreement of which this document is a part, unless otherwise qualified by the context. (E) The pronouns "he," "him" and "his" used in the Plan shall also refer to similar pronouns, of the feminine gender unless otherwise qualified by the context. Section 1.2. Participation. (A) Continuation of Participation of Superseded Plan Participants and Retroactive Amendments to Superseded Plan. Each person who was a participant in the Superseded Plan, if any, of the Employer as of the day immediately preceding the Effective Date of the Plan will become a Participant in the Plan on the Effective Date of the Plan; provided, however, that any such Participant who had retired or whose service had been terminated prior to the Effective Date of the Plan and who is not an active employee of an Employer or in the employment of a Designated Nonparticipating Employer or on a leave of absence granted by an Employer or Designated Nonparticipating Employer as of the Effective Date of the Plan shall be entitled on and after the Effective Date of the Plan to only those benefits, if any, to which he is entitled on and after the Effective Date of the Plan under the provisions of the Superseded Plan, and he and his Beneficiaries shall not be entitled to any additional benefits under the Plan as set forth herein unless he reenters the service of an Employer after the Effective Date of the Plan or unless the Plan is amended on or after the Effective Date of the Plan specifically to provide otherwise; provided further, however, that: (1) the provisions of the Plan governing the availability and payment of optional forms of settlement and governing the payment of small retirement incomes shall be applied with respect to such persons in the same manner as though the Superseded Plan had been amended to incorporate similar provisions, and those forms of payment that are available under the provisions of the Plan shall be the only forms of payment that are available on and after January 1, 1992 to such persons and their beneficiaries, except, with -17- respect to such benefits accrued prior to the Effective Date of the Plan, (i) if a form of payment could be elected under the provisions of the Superseded Plan at the sole discretion of the participant or his beneficiary, such form of payment shall be available to him on and after the Effective Date of the Plan and (ii) if a form of payment had been duly elected and duly approved and is in effect on December 31, 1988 under the provisions of the Superseded Plan, such elected form of payment will continue in effect unless it is or has been subsequently revoked or changed on or after January 1, 1989 (a change of beneficiaries under the election will not be considered to be a revocation or change in such election so long as the change in beneficiaries does not alter, directly or indirectly, the period over which distributions are to be made under such elected form of payment) and provided that such form of payment complies with the provisions of Section 401(a)(9) of the Internal Revenue Code and regulations and rulings issued with respect thereto; and (2) if the benefits that are payable on behalf of any such Participant under the provisions of the Superseded Plan require modification in order to comply with any qualified domestic relations order under Section 414(p) of the Internal Revenue Code or to comply with any other provisions of said Code, the terms and benefits of the Superseded Plan will be considered to have been modified with respect to the Participant affected to the extent necessary to comply with such required modification. (B) Participation of Other Employees. Each Employee who does not become a Participant in accordance with the provisions of Section 1.2(A) above and who is in the service of the Employer on or after the Effective Date of the Plan will become a Participant in the Plan on the later to occur of the following dates: (1) the date that immediately follows the first Eligibility Computation Period during which he completes at least 1,000 Hours of Service; or (2) the Effective Date of the Plan; provided, however, that any such Employee whose service has not been terminated but who is absent from the active service of the Employer on such date that he is first eligible to become a Participant in the Plan as described above will become a Participant hereunder as of the date of his return to active service with the Employer. (C) Participation Following Reemployment. The above provisions of this Section 1.2 describe the date on which an eligible Employee win initially become a Participant in the Plan. In the event that an Employees service is terminated and he subsequently reenters the service of the Employer, the date on or after the date of his reentry as of which he will become a Participant in the Plan is subject to the provisions of Section 1.4 hereof. Section 1.3. Leave of Absence and Termination of Service. Any absence from the active service of the Employer by reason of an approved absence granted by the Employer because of accident, illness, layoff with the right of recall or military service, or for any other reason on the basis of a uniform policy applied by the Employer without discrimination, will be considered a leave of absence for the purposes of the Plan and will not terminate an employee's service provided he returns to the active service of the Employer at or prior to the expiration of his leave -18- or, if not specified therein, within the period of time which accords with the Employer's policy with respect to permitted absences. Absence from the active service of the Employer because of voluntary or involuntary engagement in military service will not terminate the service of an employee and will be treated under the Plan as a leave of absence granted by the Employer if both (1) he is entitled under applicable Federal law to reemployment by the Employer upon his discharge from active duty and (2) he returns to the active service of the Employer within the period of time during which time he has reemployment rights under any applicable Federal law or within 60 days from and after discharge or separation from such engagement if no Federal law is applicable. No provision of this section or in the Plan shall require reemployment of any employee whose active service with the Employer was terminated by reason of military service. If the employee does not return to the active service of the Employer at or prior to the expiration of his leave of absence as above defined, his service will be considered terminated as of the earliest to occur of (i) the date on which his leave of absence expired, (ii) the first anniversary of the date on which his leave of absence began or (iii) the date of his resignation, quit, discharge or death; provided, however, that if any such employee, who is on a leave of absence and who was a Participant in the Plan or Superseded Plan on the date on which his leave began, is prevented from his timely return to the active service of the Employer because of his death, he shall, nevertheless, be entitled, if he meets the requirements necessary to qualify therefor, to a death benefit as provided in Section 2.4 hereof, determined as though he returned to active service immediately preceding the date of his death. If an employee has an absence from the service of the Employer which begins on or after January, 1985 and is due to the pregnancy of the employee, the birth of a child of the employee or the placement of a child with the employee in connection with the adoption of such child by such employee or is for the purpose of caring for such child for a period beginning immediately following such birth or placement, the rights of such employee under the Plan shall not be less favorable to the employee than those rights that he would have had if he had been granted a one-year leave of absence beginning on the date on which his absence began. If the service of such employee is terminated during such absence, the date of termination of such employee for purposes of determining his accrued Vesting Service shall be deemed to be the first anniversary of the date on which such absence began and the rights of such employee under Section 1.4 hereof to a reinstatement of his previous Credited Service and Vesting Service upon his reemployment shall not be less favorable to the employee than those corresponding rights that he would have under such section if the date of termination of his service had been the second anniversary of the date on which his absence began and if the length of such employee's Break in Service were based on that termination date. In determining the right of such employee under Section 1.4 hereof to resume participation in the Plan following his reemployment, the length of his Break in Service shall exclude the Plan Year following the date on which his absence began. -19- In the event that an employee's service with the Employer is interrupted because of any absence from the active service of the Employer which is not deemed a leave of absence as defined above, his service will be considered terminated as of the date of his retirement, quit, discharge, resignation or death or, if earlier, as of the first anniversary of the date of such interruption for any other reason. Transfers of an employee's service among the Employers and Designated Nonparticipating Employers shall not be deemed interruptions of his service and shall not constitute a termination of service for the purposes of the Plan. Section 1.4. Reemployment. (A) Reemployment Prior to Incurring a Break in Service. If any employee, whose service is terminated on or after the Effective Date of the Plan, reenters the active service of the Employer and performs an Hour of Service within the 12-month period immediately following the date of termination of his service, the Credited Service which he had accrued as of the date of termination of his service shall be reinstated. On and after such reentry, any such employee shall be treated in determining his eligibility to participate in the Plan and in determining the Vesting Service that he accrues under the Plan in the same manner as though he had been on an unpaid leave of absence granted by the Employer during the period between such date that his service was previously terminated and such date of reentry. However, if any such employee was entitled to a benefit under Section 2.1, 2.2 or 2.4(A) hereof prior to his reentry, his rights under the Plan on and after his date of reentry shall be determined under Section 1.4(B), 1.4(C) or 1.4(D) below, whichever is applicable, except that his reinstated Vesting Service shall not be less than that determined under the above provisions of this Section 1.4(A). (B) Reemployment of Vested Terminated Participant Prior to Commencement of Payments. If a Participant's service is terminated on or after his Initial Vesting Date for a reason other than his normal retirement or early retirement as described in Sections 2.1 and 2.2 hereof, respectively, and he subsequently reenters Annuity Starting Date, he shall become a Participant upon the date of such reentry and the following provisions shall apply: (a) If the date of his reentry is prior to his Required Beginning Date, subject to the provisions of Sections 1.4(C)(2) and 2.1(D) hereof, no retirement income payments shall be made during the period of such reemployment. Upon the subsequent retirement or termination of Service of such a Participant, his benefit under the Plan shall be determined in the same manner as that of a vested terminated Participant whose retirement income payments have not commenced and who subsequently reenters the service of the Employer as described in Section 1.4(B) above, except that the benefit payable under the Plan to or on behalf of such Participant upon his subsequent retirement or termination of service shall be reduced on an actuarially equivalent basis by an amount equal to the sum of the retirement income payments that he received under the provisions of Section 2.1, 2.2, 2.4(A) or 3.1 hereof, whichever is applicable, prior to such reentry into the service of -20- the Employer; provided, however, that the monthly retirement income payable to any such Participant on and after the date of his subsequent retirement shall not be less than the retirement income that would have been payable on and after such date if he had not reentered the service of the Employer but had continued to receive his retirement income payments during the period of his reemployment; and provided further, however, if any such Participant reenters the active service of the Employer on or after his Normal Retirement Date, the monthly retirement income payable on behalf of such Participant in accordance with the provisions of Section 2.1 upon his subsequent retirement shall not be less than the amount that can be provided on an actuarially equivalent basis by the single-sum value required, as of such date of reentry, to provide the retirement income that otherwise would have been payable on his behalf after such date of reentry, accumulated with interest from such date of reentry to the date of his subsequent retirement or termination of service. (b) If the date of his reentry is on or after his Required Beginning Date, he shall continue to receive the benefits to which he is entitled on and after such date, and any future benefits that he accrues after his Required Beginning Date shall be determined in accordance with the provisions of Section 411(b)(l)(H) of the Internal Revenue Code and regulations issued with respect thereto in a manner similar to that described in Section 2.1(D) hereof. (2) In lieu of having his retirement income payments discontinued and his benefit payable upon his subsequent retirement or termination determined in accordance with the provisions of Section 1.4(C)(1) above, any such Participant, whose Vested Percentage at the date of his retirement or termination of service was 100%, who is receiving retirement income payments under the Plan and who reenters the active service of the Employer on less than a full-time basis, may, upon such reentry elect in writing filed with the Committee to continue to receive his retirement income payments after his reemployment in the same manner as though he had not reentered the service of the Employer. Any such Participant whose retirement income payments are continued in accordance with the provisions above shall be treated as if he then first entered the service of the Employer except that: (a) upon the date after his reentry that he satisfies the requirements to become a Participant in the Plan, he shall become a Participant, retroactively, as of the date of his reentry; provided, however, if the date of his reentry is during the Plan Year in which the date of his retirement or termination of service occurred or is during the next following Plan Year, he shall become a Participant as of the date of his reentry; (b) upon his becoming a Participant, he shall be entitled to a reinstatement of the Vesting Service that he had accrued as of the date of his previous retirement, or termination of service; and (c) he shall not accrue any additional Credited Service during any "reemployment benefit accrual computation period" that he is credited with less than 1,000 Hours of Service. The "reemployment benefit accrual computation period" of any such Participant shall mean the 12-month period beginning on the date of his reentry and on each anniversary of such date. -21- The benefit which any such Participant accrues after the date of his reentry, which is payable to such Participant or his Beneficiary upon his subsequent retirement or termination of service, shall be limited to the amount that can be provided by the actuarial equivalent of the monthly retirement income, if any, that he accrues subsequent to such date of reentry based upon his Credited Service and Final Average Monthly Compensation determined in the same manner as though he first entered the service of the Employer on the date on or after his reentry that he commences to accrue additional Credited Service; provided, however, that such income that such a Participant accrues subsequent to his date of reentry shall not cause the actuarial equivalent of the total income payable on behalf of the Participant under the Plan to exceed the amount that would have been payable if he had not elected to continue to receive his retirement income after his reemployment and if the Credited Service that he accrues after his reentry were restricted as provided in (c) above. The retirement income that is continued during the period of reemployment of any such Participant who is reemployed on less than a full-time basis shall be discontinued if the Participant is employed on a full-time basis at any time after his reentry. If the retirement income of any such Participant is subsequently discontinued, his benefit under the Plan shall be determined under this Section 1.4(C)(C) (and not under Section 1.4(A) above) as though his service had been terminated on the date that his retirement income was discontinued and as though he had reentered the service of the Employer immediately thereafter. (D) Reemployment after Full Settlement. If a Participant's service has been terminated on or after the Effective Date of the Plan for any reason and he was entitled, upon such termination, to a monthly retirement income under the provisions of Section 2.1, 2.2 or 2.4(A)(1) hereof and he reenters the active service of the Employer after the full actuarial equivalent value of such retirement income has been paid on his behalf, he shall become a Participant on the date of his reentry and shall be entitled to a reinstatement of the Vesting Service and Credited Service that he had accrued as of such previous date of termination, but the benefit payable under the Plan to or on behalf of such Participant upon his subsequent retirement or termination of service shall be reduced by the actuarially equivalent value of such retirement income that has been previously paid on his behalf. (E) Reemployment of Other Employees. Any other former employee who is not included under the provisions of Section 1.4(A), 1.4(B), 1.4(C), or 1.4(D) above and who subsequently reenters the active service of the Employer following his termination of service will be treated as though he then first entered the service of the Employer; provided, however, that: (1) with respect to any such employee whose service is terminated on or after the Effective Date of the Plan, if the number of years and days included in his Break in Service is less than either five years or the number of years and days of Vesting Service that he had accrued as of the date of termination of his service, such employee, upon the date immediately following the first Eligibility Computation Period after his reentry during, which he completes at least 1,000 Hours of Service, shall (i) become a Participant in the Plan retroactively to the first day of such Eligibility Computation Period and (ii) be entitled to a reinstatement of the Credited Service and Vesting Service that he had accrued as of such previous date of termination of service; provided, however, if any such employee reenters the active service of the Employer as an Employee prior to his incurring a Break in Service, the date on which he will become a Participant in the Plan following the date of his reentry shall not be later than the date on which he would have become a Participant if -22- he had been on a leave of absence during the period between the date of his previous termination of service and the date of his reentry; (2) with respect to any such employee whose service was terminated prior to the Effective Date of the Plan (while the Superseded Plan was in effect with respect to the Employer by which he was employed at the date of termination of his service) and who had reentered the active service of the Employer prior to the Effective Date of the Plan or who reenters the active service of the Employer on or after the Effective Date of the Plan, his rights under the Plan with respect to the period of his service prior to such date of reentry into the service of the Employer shall be determined under the applicable provisions of the Superseded Plan as in effect on the date of his prior termination of service; and (3) with respect to any such employee, who (i) is not included in (1) above and whose service is or has been terminated either before, on or after the Effective Date of the Plan, (ii) had completed at least two years of Credited Service as of the date of termination of his service, (iii) had reentered or reenters the service of the Employer on or after January 1, 1985, and (iv) completes at least 10 years of Credited Service after the date of his reentry, such employee shall be entitled, as of the date after his reentry on which he completes 10 years of Credited Service, to a reinstatement of the Credited Service that he had accrued on the date of such previous termination of his service and to a reinstatement of Vesting Service equal to the number of years of Credited Service which are reinstated as of such date in accordance with the above provisions. (F) Reemployment of Employee Who Does Not Qualify as an "Employee." The rights of any terminated employee of the Employer who was not an Employee as defined herein on the date of termination of his service and who is reemployed in a status in which he qualifies as an Employee as defined herein shall be determined in accordance with the provisions of the Plan in the same manner as though he had been an Employee as defined herein on the date of termination of his service. The rights of any terminated employee of an Employer who is reemployed by the Employer in a status in which he does not qualify as an Employee as defined herein shall be determined in accordance with the provisions of the Plan as though he had been reemployed by the Employer as an Employee as defined herein and had immediately thereafter been transferred from his status as an Employee as defined herein. A Participant shall not accrue any benefits under the Plan or Superseded Plan solely because of the assumption that he was an Employee as defined herein (when he was not) on the date of termination of his service or the date of his reemployment, as the case may be. (G) Employment of Terminated Employee of Designated Nonparticipating Employer by an Employer and Employment of Terminated Employee of Employer by Designated Nonparticipating Employer. The rights of any terminated employee of a Designated Nonparticipating Employer who was not an Employee as defined herein on the date of termination of his service and who is subsequently employed by an Employer in a status in which he qualifies as an Employee as defined herein shall be determined in accordance with the provisions of the Plan in the same manner as though he had been an Employee as defined herein on the date of termination of his service. The rights of any terminated Employee of an Employer who is subsequently employed by a Designated Nonparticipating Employer shall be determined in accordance with the provisions of the Plan in the same manner as though he had been reemployed -23- by the Employer as an Employee as defined herein and had immediately thereafter been transferred to such Designated Nonparticipating Employer. A Participant shall not accrue any benefits under the Plan or Superseded Plan solely because of the assumption that he was an Employee as defined herein on the date of termination of his service or the date of his employment, as the case may be, with a Designated Nonparticipating Employer. (H) Employment with Former Employer or Former Designated Nonparticipating Employer. In determining the rights under the Plan of any employee who was previously employed (either before, on or after the Effective Date of the Plan) by an employer, which was formerly an Employer participating in the Plan or Superseded Plan or was formerly a Designated Nonparticipating Employer but which is not currently an Employer or Designated Nonparticipating Employer, the period of such employee's employment with such employer while it was an Employer or Designated Nonparticipating Employer, as the case may be, shall be recognized in determining the Vesting Service of such employee in the same manner as though such employment during such period had been with a current Employer or Designated Nonparticipating Employer, but any period of employment with such employer after the date that it ceased to be an Employer or Designated Nonparticipating Employer shall not be recognized and his service shall be deemed to have been terminated during such period that such employer is not an Employer or Designated Nonparticipating Employer. Section 1.5. Transfer to or from Status as an Eligible Employee. An employee will be deemed to be transferred from his status as an eligible Employee in the event that he remains in the service of the Employer but has a change in his employee status so that he no longer qualifies as an Employee as defined herein or in the event that he is transferred to and becomes an employee of a Designated Nonparticipating Employer. Conversely, an employee of an Employer who is not an Employee as defined herein will be deemed to be transferred to the status of an eligible Employee in the event that he remains in the service of the Employers but has a change in his employee status so that he becomes an Employee as defined herein or, if he was an employee of a Designated Nonparticipating Employer, in the event that he is transferred to an Employer from such Designated Nonparticipating Employer and becomes an Employee as defined herein. The service of such a person described above shall not be considered to be interrupted by reason of any such transfer, and service with the Designated Nonparticipating Employer or with the Employer while not qualified as an Employee as defined herein shall be terminated in the same manner as service with the Employer while qualified as an Employee as defined herein is terminated. Any provisions of Section 2.1, 2.2 or 2.4 hereof to the contrary notwithstanding, the benefits of any such Participant who has been transferred to or from the status as an eligible Employee on or after the date on which he met the requirements to become a Participant in the Plan or Superseded Plan shall (unless agreement to the contrary is made, in writing, by and between the Employer and such employees authorized bargaining representative with respect to the entire bargaining unit of such employee) be determined in accordance with the following provisions of this Section 1.5. (A) Eligibility for Benefits. In determining the eligibility of such an employee to whom the provisions of this Section 1.5 are applicable for participation in the Plan and in determining his eligibility for the benefits provided under the Plan, his Vesting Service and Hours of Service shall be determined in the same manner as though his service with the Designated Nonparticipating Employers and with the Employers while not qualified as an Employee as defined herein had been accrued with the Employers while qualified as an Employee as defined herein. Any such -24- employee who is transferred to the status of an Employee as defined herein shall become a Participant in the Plan on the date that he becomes an Employee as defined herein if he has otherwise satisfied the requirements to become a Participant in the Plan as described in Section 1.2 hereof prior to such date that he becomes an Employee as defined herein. (B) Computation of Benefits for Transferred Participant Who Is Not in Service of Employers at Date of Retirement or Termination. A Participant to whom the provisions of this Section 1.5 are applicable who has been transferred to or from his status as an Employee as defined herein and who is not in the service of the Employers as of the date of his retirement or termination of service shall be entitled upon his retirement or termination of service (or his Beneficiary shall be entitled in the event his service is terminated by reason of his death), if he meets all requirements necessary to qualify for a benefit under the provisions of Section 2.1, 2.2 or 2.4 hereof or under the provisions of any applicable Supplement hereto, as the case may be, to a benefit payable in accordance with the provisions of Section 2.1, 2.2 or 2.4 hereof or in accordance with the provisions of any applicable Supplement hereto, whichever is applicable, but the amount of the monthly retirement income or other benefit which is payable on his behalf under the Plan shall be determined under the provisions of the Plan or Superseded Plan, as the case may be, as in effect as of such date of transfer and shall be based upon his Credited Service, Final Average Monthly Compensation and Monthly Covered Compensation (or, if applicable, their corresponding terms as defined under the Superseded Plan) determined as of such date of transfer. (C) Computation of Benefits for Transferred Participant Who Is in Service of Employers at Date of Retirement or Termination. A Participant to whom the provisions of this Section 1.5 are applicable who has been transferred to or from his status as an Employee as defined herein and who is in the service of the Employers as of the date of his retirement or termination of service shall be entitled upon his retirement or termination of service (or his Beneficiary shall be entitled in the event his is terminated by reason of his death), if he meets all requirements necessary to qualify for a benefit under the provisions of Section 2.1, 2.2 or 2.4 hereof or under the provisions of any applicable Supplement hereto, as the case may be, to a benefit payable in accordance with the provisions of Section 2.1, 2.2 or 2.4 hereof or in accordance with the Provisions of any applicable Supplement hereto, whichever is applicable, but the amount of the monthly retirement income which is payable on his behalf under the Plan shall, subject to the provisions of Section 1.5(D) below, be equal to the product of: (1) the monthly retirement income which would have been payable on behalf of such Participant under the Provisions of Section 2.1, 2.2 or 2.4 hereof or under the provisions of any Supplement hereto, as the case may be, if his service accrued with the Designated Nonparticipating Employers and with the Employers while not qualified as an Employee as defined herein were included with his Credited Service accrued with the Employers while qualified as an Employee as defined herein; multiplied by (2) the fraction in which the numerator is the Participant's Credited Service that he accrued while in the service of the Employers hereunder while qualified as an Employee as defined herein and the denominator is the total Credited Service that he would have accrued if his service accrued with the Designated Nonparticipating -25- Employers and with the Employers while not qualified as an Employee as defined herein were included with his Credited Service accrued with the Employers while qualified as an Employee as defined herein. (D) Special Provisions Applicable to Benefits. The monthly income computed under this Section 1.5 shall be subject to the following: (1) there shall be no duplication of service in computing benefits under the Plan and under any other qualified pension or annuity plan to which any Employer or Designated Nonparticipating Employer makes contributions on behalf of its employees who are not Employees as defined herein, and, if service accrued while qualified as an Employee as defined herein is used in determining the accrued benefit of the Participant under any such other qualified pension or annuity plan, then the portion of the benefit payable under the Plan based on such duplicated service shall be reduced (but not so as to produce a negative amount) by the actuarially equivalent amount of the benefit payable under such other qualified pension or annuity plan based on such duplicated service; (2) all compensation that a Participant, who is an Employee as defined herein on the date of his retirement or termination of service, received from the Designated Nonparticipating Employers and from the Employers while not qualified as an Employee as defined herein shall be treated in determining his Final Average Monthly Compensation in the same manner as though such compensation had been received from the Employer while qualified as an Employee as defined herein; and (3) all compensation that a Participant, who is not an Employee as defined herein on the date of his retirement or termination of service, received after the date on which he last qualified as an Employee as defined herein from the Designated Nonparticipating Employers and from the Employers while not qualified as an Employee as defined herein shall be ignored or excluded in determining his Final Average Monthly Compensation and the period during which he received such compensation shall be ignored or excluded in determining the 10 calendar years and the five successive calendar years that are used in determining his Final Average Monthly Compensation. (E) Payments from One Trust Fund. In lieu of the payment of retirement income or other benefits to such a Participant from the trust fund of more than one qualified pension plan of the Designated Nonparticipating Employers and the Employers, the administrators of the pension plans may, by mutual agreement, provide for payment of the entire monthly income or other benefit from one trust fund with appropriate reimbursement to the trustee of the trust fund from which the benefits are to be paid by transfer of funds equal to the single-sum value of the benefits payable under the other plan (or plans) to the trust fund from which benefits actually will be paid. Section 1.6. Participation and Benefits for Current and Former Leased Employees. A "leased employee" (within the meaning of Section 414(n) of the Internal Revenue Code) of an Employer or Designated Nonparticipating Employer shall not be deemed for any purposes of the Plan to be an employee of such Employer or Designated Nonparticipating Employer. However, in the event that any such former leased employee qualifies as an Employee as defined herein on or after the Effective Date of the Plan, unless the Plan is otherwise excluded by applicable regulations from the requirements of Section 414(n) of the Internal Revenue Code, the total -26- period that he provided services to the Employer or Designated Nonparticipating Employer as a leased employee shall be treated under the Plan in determining his nonforfeitable right to his accrued benefits and his eligibility to become a Participant in the Plan in the manner described in Section 1.5(A) hereof as though he had been an employee of a Designated Nonparticipating Employer during such period of service (but such service shall not be included in the service that is used to calculate any benefits that he accrues under the Plan). Section 1.7. Rights of Other Employees to Participate. Any division of any Employer which is not geographically located at the principal place of business of such Employer, any subsidiary of any Employer and any other corporation, association, joint venture, proprietorship, partnership or other business organization may, in the future, adopt the Plan on behalf of all or certain of its employees by formal action on its part in the manner described in Section 6.7 hereof provided that the Company, by formal action on its part in the manner described in Section 6.7 hereof, and the Committee both approve such participation. The administrative powers and control of the Company, as provided in the Plan, shall not be deemed diminished under the Plan by reason of the participation of any other Employers in the Plan, and such administrative Powers and control specifically granted herein to the Company with respect to the appointment Of the Committee, amendment of the Plan and other matters shall apply only with respect to the Company. The Plan is a single plan with respect to all Employers unless the Company, by formal, action on its part in the manner described in Section 6.7 hereof, specifically provides that the Plan shall be a separate plan with respect to any specified Employer or to any specified division of any Employer or with respect to any specified group of Employers and/or divisions. In the event that the Plan does not represent a single plan with respect all divisions of any Employer, the division or divisions with respect to which the Plan represents a separate plan shall be considered for the purposes of this section and treated under the Plan as one Employer and its other division or divisions shall be considered for the purposes of this section and treated under the Plan as a separate Employer or, if applicable, as separate Employers. The contributions of any Employer that is a member of a group of Employers with respect to which the Plan represents a single plan shall be available to provide benefits on behalf of any Participants who are employees of any other Employers that are members of such group but shall not be available to provide benefits on behalf of any Participants who are employees of any Employers that are not members of such group. The contributions of any Employer with respect to which the Plan represents a single plan for only that Employer shall be available to provide benefits on behalf of Participants who are its employees but shall not be available to provide benefits on behalf of Participants who are employees of any other Employers. Any Employer may withdraw from the Plan at any time by formal action on its part, in the manner described in Section 6.7 hereof specifying its determination to withdraw. Any such withdrawing Employer shall furnish the Committee and the Trustee with evidence of the formal -27- action of its determination to withdraw. Any such withdrawal may be accompanied by such modifications to the Plan as such Employer shall deem proper to continue a retirement plan for its Employees separate and distinct from the retirement plan herein set forth. Withdrawal from the Plan by any Employer shall not affect the continued operation of the Plan with respect to the other Employers; provided, however, in the event of the withdrawal of an Employer that is a member of a group of Employers with respect to which the Plan represents a separate plan and in the event that provision is made for the continuation of a retirement plan for its Employees separate and distinct from the retirement plan herein set forth, the share, if any, of the assets of the Trust Fund allocable to such group of Employers that is transferred on behalf of such withdrawing Employer to such other retirement plan shall be equal to the assets, if any, that would have been allocated on behalf of the employees of such withdrawing Employer under the provisions of Section 4.5 hereof if such withdrawing Employer had terminated its participation in the Plan on the date of such withdrawal; provided, however, that the Company may, in its absolute discretion, direct that an additional amount of assets be transferred on behalf of such withdrawing Employer to such other retirement plan provided that the transfer of such additional amount of assets would not lower the amount of the distributions that would be made on behalf of the Participants who are employees of the other Employers that are members of such group of Employers with respect to which the Plan represents a separate plan if the Plan were terminated as of the effective date of such transfer with respect to all of the Employers that are members of such group of Employers. The Company, by formal action on its part in the manner described in Section 6.7 hereof may in its absolute discretion terminate any Employer's participation in the Plan at any time, and the provisions of the Plan shall be applied with respect to such Employer in the same manner as though it had voluntarily withdrawn as a participating Employer. SECTION 2. NORMAL AMOUNT AND PAYMENT OF RETIREMENT INCOME. Section 2.1. Normal Retirement and Retirement Income. Normal retirement under the Plan is retirement from the service of the Employer on or after the date that the Participant attains his Normal Retirement Age. No provision of this section or the Plan shall require the retirement of a Participant upon his attainment of his Normal Retirement Age, but actual retirement shall be governed by the policy of the Employer. In the event of normal retirement, payment of retirement income will be governed, subject to the provisions of Section 4 hereof, by the following provisions of this Section 2.1. (A) Normal Retirement Date. The Normal Retirement Date of each Participant will be the first day of the month coincident with or next following the date on which he attains his Normal Retirement Age. Any Participant who retires after attaining his Normal Retirement Age -28- but prior to his Normal Retirement Date and who is surviving on his Normal Retirement Date shall be considered for the purposes of the Plan to have retired on his Normal Retirement Date. (B) Amount of Retirement Income. The monthly retirement income payable in the manner described in Section 2.1(C) hereof to a Participant who retires on or after his Normal Retirement Date shall be an amount equal to the sum of: (1) 1.00% of his Final Average Monthly Compensation multiplied by his number of years of Credited Service that are in excess of one year; plus (2) 0.50% of that portion, if any, of his Final Average Monthly Compensation that is in excess of the Monthly Covered Compensation that applies to him multiplied by his number of years of Credited Service that are in excess of one year; provided, however, that such product shall not exceed 22.5% of that portion, if any, of his Final Average Monthly Compensation that is in excess of the Monthly Covered Compensation that applies to him. The monthly amount of retirement income payable to a Participant who retires after his Normal Retirement Date, however, shall not be less than that amount that can be provided on a actuarially equivalent basis by the sum of (i) the single-sum value as of his Normal Retirement Date of the normal monthly retirement income that would have been payable to him in accordance with the provisions above if he had retired on his Normal Retirement Date (based upon his Credited Service, Final Average Monthly Compensation and Monthly Covered Compensation determined as though he had actually retired on his Normal Retirement Date) and, in the event that the above provisions of this section have been amended after his Normal Retirement Date, if the above provisions of this Section 2.1(B) had been in effect on his Normal Retirement Date, and (ii) the amount of interest on such single-sum value in (i) above, where the interest shall be compounded annually from the Participant's Normal Retirement Date to his actual retirement date. All computations to determine such minimum monthly retirement income payable to or on behalf of such a Participant (including any computations to convert such minimum monthly retirement income to an actuarially equivalent retirement income that may be payable on his behalf under Section 3.1 hereof) shall be on the basis of the interest and mortality assumptions that were being used as of his Normal Retirement Date to determine actuarially equivalent monthly retirement incomes. (C) Payment of Retirement Income. The monthly retirement income payable in the event of normal retirement will be payable on the first day of each month. The first payment will be made on the Participant's Normal Retirement Date, or, if the Participant retires after his Normal Retirement Date, the first payment will be made on the first day of the month coincident with or next following the date of his actual retirement. The last payment will be the payment due immediately preceding the retired Participant's death. (D) Special Provisions Applicable to Participants Who Receive Retirement Income Payments While Continuing in Employment of Employer after Required Beginning Date. With respect to those Participants who have reached their Required Beginning Date prior to January 1, 2002 and 5-percent owners, any of the above provisions of this Section 2.1 to the contrary -29- notwithstanding, but subject to the provisions of Section 4.1 hereof, a Participant who continues in the employment of the Employer beyond his Required Beginning Date (for purposes of this paragraph, the term "Required Beginning Date" shall refer to such term as it was defined prior to January 1, 2002) shall start receiving monthly retirement income payments commencing as of his Required Beginning Date. Such monthly retirement income payments shall be determined and payable in the same manner as though the Participant had actually retired on his Required Beginning Date. The retirement income payable to such a Participant shall thereafter be subject to adjustment as of the first day of each calendar year which begins after his Required Beginning Date and prior to the date of his actual retirement and shall be subject to adjustment as of the first day of the month coincident with or next following the date of his actual retirement (each such adjustment day is herein referred to as a "Post Payment Recalculation Date") to reflect the additional accruals, if any, that such Participant is entitled to receive because of his employment after his Required Beginning Date. The additional retirement income, if any, payable to any such Participant on and after an applicable Post Payment Recalculation Date shall be determined in accordance with the provisions of Section 411(b)(1)(H) of the Internal Revenue Code and regulations issued with respect thereto, and the actuarial equivalent of the retirement income payments that the Participant has received under the provisions of this Section 2.1 on and after his Required Beginning Date and prior to the applicable Post Payment Recalculation Date shall be used as an offset in the determination of such additional income, but such offset shall not result in the retirement income payable to the Participant being reduced below the amount that was payable on his behalf immediately prior to such Post Payment Recalculation Date. The additional amount of monthly retirement income, if any, that a Participant accrues after his Required Beginning Date shall be converted to an actuarially equivalent amount of monthly retirement income that is payable in the same manner and form as the monthly retirement income that is payable on his behalf immediately prior to the applicable Post Payment Recalculation Date, and such additional actuarially equivalent income shall be payable to the Participant commencing as of the applicable Post Payment Recalculation Date. Section 2.2. Early Retirement and Retirement Income. Early retirement under the Plan is retirement from the service of the Employer prior to the Participant's Normal Retirement Date and on or after the date as of which he has both attained the age of 55 years and completed 10 years of Vesting Service. In order to retire under the provisions of this section, the written consent of the Participant must be filed with the Committee within 90 days of the date as of which his retirement income payments are to commence. In the event of early retirement, payment of retirement income will be governed, subject to the provisions of Section 4 hereof, by the following provisions of this Section 2.2. (A) Early Retirement Date. The Early Retirement Date will be the first day of the month coincident with or next following the date a Participant retires from the service of the Employer under the provisions of this Section 2.2 prior to his Normal Retirement Date. (B) Amount of Retirement Income. The monthly amount of retirement income payable in the manner described in Section 2.2(C) hereof to a Participant who retires prior to his Normal Retirement Date under the provisions of this Section 2.2 shall be equal to the product of: (1) the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which the Participant has accrued as of his Early Retirement Date; multiplied by (2) the factor specified in the schedule below based upon the Social Retirement Age of such Participant and upon his attained age (to the nearest month) at his Early Retirement Date (straight line interpolation between the next higher age and the next lower age shall be used to determine the factor that applies to a Participant whose attained age to the nearest month on his Early Retirement Date is not a whole number of years): -30-
ATTAINED AGE ON EARLY EARLY RETIREMENT REDUCTION FACTOR IF RETIREMENT DATE SOCIAL SECURITY RETIREMENT AGE IS 65 YEARS 66 YEARS 67 YEARS 62 or older 1.000 1.000 1.000 61 .933 .933 .933 60 .867 .867 .867 59 .833 .833 .833 58 .800 .800 .800 57 .760 .760 .750 56 .700 .700 .688 55 .640 .640 .632
(C) Payment of Retirement Income: The retirement income payable in the event of early retirement will be payable on the first day of the month. The first payment will be made on the Participant's Early Retirement Date and the last payment will be the payment due immediately preceding the retired Participant's death. (D) Temporary Supplemental Monthly Retirement Income. A Participant who retires from the service of the Employer under the provisions of this Section 2.2 prior to his Normal Retirement Date and on or after both January 1, 1993 and the date as of which he has both attained the age of 62 years and completed 10 years of Vesting Service shall be entitled, in addition to the monthly retirement income described above in this Section 2.2, to a temporary supplemental monthly retirement income, in the amount determined under Subsection (1) below, that is payable in the manner described in Subsection (4) below. (1) Amount of Income. The amount of the temporary supplemental monthly retirement income payable under this Section 2.2(D) during an applicable calendar year shall, subject to the provisions of Subsection (3) below, be equal to the sum of: (a) $350; plus (b) the accumulated increments that have been added to such figure each calendar year after December 31, 1993 for increases in cost-of-living pursuant to the provisions of Subsection (2) below. (2) Cost-of-Living Adjustments. Commencing January 1, 1994 and as of each January 1 thereafter, the amount determined under Subsection (1) above shall be increased, if applicable, to reflect changes in the Consumer Price Index and/or the medical trend during the preceding calendar year. The incremental amount, if any, which is to be added as of January 1 of a given calendar year under Subsection (1) shall be determined by multiplying the amount that applied under Subsection (1) for the immediately preceding calendar year by the smallest of the following percentages: (a) the percentage equal to the excess, if any, of (i) the percentage, computed to the nearest tenth of one percent, that is determined by dividing (aa) the average of the Consumer's Price Index for the 12-month period ending with the last August 31 preceding the applicable January 1st on which the adjustment is -32- to be made (such average shall be computed by adding the Consumer's Price Indices for such 12 months and dividing the total by 12 and rounding the result to the nearest tenth of one percent) by (bb) the average of the Consumer's Price Index for the 12-month period ending with the penultimate August 31 preceding the applicable January 1st on which the adjustment is to be made (such Consumer's Price Index shall be on the same base as used in (aa) above and shall be computed by adding the Consumer's Price Indices for such 12 months and dividing the total by 12 and rounding the result to the nearest tenth of one percent) over (ii) 100.0%; (b) the percentage equal to one-half of the excess, if any, of (i) the percentage, computed to the nearest tenth of one percent, that is determined by dividing (aa) the average of the medical care component of the Consumer's Price Index for the 12-month period ending with the last August 31 preceding the applicable January 1st on which the adjustment is to be made (such .average shall be computed by adding the medical care component of the Consumer's Price Indices for such 12 months and dividing the total by 12 and rounding the result to the nearest tenth of one percent) by (bb) the average of the medical care component of the Consumer's Price Index for the 12-month period ending with the penultimate August 31 preceding the applicable January 1st on which the adjustment is to be made (such Consumer's Price Index shall be on the same base as used in (aa) above and shall be computed by adding the medical care component of the Consumer's Price Indices for such 12 months and dividing the total by 12 and rounding the result to the nearest tenth of one percent) over (ii) 100.0%; or (c) 5%. The temporary supplemental monthly retirement income payable under this Section 2.2(D) shall be adjusted as of each January 1 after the Participant's Early Retirement Date and prior to his Normal Retirement Date, if applicable, to reflect the cost-of-living increase provided under this Subsection (2). For the purposes of this section, `Consumer's Price Index' means the latest Consumer Price Index, All Urban Consumers (CPI-U), U.S. City Average, All Items, prepared by the U. S. Department of Labor, Bureau of Labor Statistics, or, if there is no such National Consumer's Price Index at the time of determination, then `Consumer's Price Index' shall mean the index which, in the opinion of the Committee, is the successor or most nearly comparable index successor. (3) Maximum Amount of Income. The amount of the temporary supplemental monthly retirement income payable under this Section 2.2(D) during an applicable calendar year shall not exceed the smaller of: (a) $600; or -33- (b) the monthly old-age insurance benefit, determined as of the Participant's Early Retirement Date under the provisions of the Social Security Act as in effect on the January 1st immediately preceding his Early Retirement Date, that would be payable to him at his Normal Retirement Date assuming that he will not receive after his Early Retirement Date any income that would be treated as wages for the purposes of the Social Security Act; the determination of the amount of such old-age insurance benefit shall be made by the Committee based on available salary information for prior years, and, for prior years that salary information is not available, it shall be assumed that the Participant's wages had increased each calendar year at the same rate as the average of the total wages (as specified in Section 215(b)(3)(A)(ii) of the Social Security Act) for such calendar years. Any automatic cost-of-living or other specified increases in benefit levels under the Social Security Act that become effective after the January 1 immediately preceding the Participant's Early Retirement Date shall be ignored. (4) Payment of Retirement Income. The temporary supplemental monthly retirement income payable to a Participant under the provisions of this Section 2.2(D) shall be payable on the first day of the month. The first payment will be made on the Participant's Early Retirement Date, and the last payment will be the payment due on his Normal Retirement Date or on the first day of the month coincident with or immediately preceding the date of his death, whichever is earlier. Any provisions hereof to the contrary notwithstanding, the provisions of Section 3.1 hereof pertaining to optional forms of payment shall not apply to the temporary supplemental monthly retirement income payable under this Section 2.2(D). (E) Post-Retirement Death Benefit Payable to Surviving Spouse. In the event of the death of a Participant who has retired under the provisions of this Section 2.2 on or after both January 1, 1993 and the date as of which he has both attained the age of 62 years and completed 10 years of Credited Service, there shall be payable to his surviving spouse, if any, a post-retirement death benefit provided (a) the Participant and such surviving spouse were married to each other at the Participant's Early Retirement Date and at the date of his death and (b) the retired Participant's death occurs within five years after his Early Retirement Date and prior to his surviving spouse's having attained the age of 65 years. Such post-retirement death shall be in addition to any other benefits payable after the Participant's death under the provisions hereof and shall be payable in monthly installments in the amounts determined under Subsection (1) below and in the manner described in Subsection (2) below: (1) Amount of Monthly Installments. The amount of the monthly installment payment under this Section 2.2(E) for any month that a payment is due under this Section 2.2(E) shall be equal to 60% of the temporary supplemental monthly retirement income that is payable for such month under the provisions of Section 2.2(D) above to a retired Participant who is eligible for such an income under the provisions of Section 2.2(D). (2) Payment of Monthly Installments. The monthly installment payments to the Participant's surviving spouse under this Section 2.2(E) shall be payable on the first day of the month. The first payment will be made on the first day of the month next following the date of the Participant's death. The last payment will be the payment due on -34- the first day of the month immediately preceding (a) the date of the surviving spouse's death, (b) the fifth anniversary of the Participant's Early Retirement Date or (c) the date on which the surviving spouse attains the age of 65 years, whichever is earliest. Section 2.3. Disability Retirement and Retirement Income. No provision is made under the Plan for disability retirement from the service of the Employer. Section 2.4. Benefits Other Than on Retirement. (A) Benefit on Termination of Service and on Death after Termination of Service. (1) In the event that a Participant's service is terminated prior to his Normal Retirement Date and on or after his Initial Vesting Date for any reason other than his death or early retirement as described in Section 2.2 hereof, he will be entitled to a monthly retirement income to commence on his Normal Retirement Date or, if he so requests in writing filed with the Committee at least 30 but not more than 90 days prior to the effective date thereof, to commence on the first day of any month which is prior to his Normal Retirement Date and is on or after the date on which he attained the age of 55 years. Such monthly retirement income payable in the manner described in Section 2.4(A)(2) hereof to a Participant under the provisions of this Section 2.4(A) shall be equal to that amount which can be provided on an actuarially equivalent basis by: (a) if the Participant has not both attained the age of 55 years and completed 10 years of Vesting Service as of the date of termination of his service, an amount equal to the product of: (i) the single-sum value, determined as of the date of termination of his service, of the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that he has accrued to the date of termination of his service, accumulated with interest from the date of termination of his service to the date as of which his monthly retirement income payments are to commence in accordance with the provisions above; multiplied by (ii) his Vested Percentage, which shall be equal to the percentage specified in the schedule below, based upon his number of years (ignoring fractions) of Vesting Service as of the date of termination of his service: YEARS OF VESTING SERVICE VESTED PERCENTAGE Less than 5 0% 5 or more 100%; provided, however, that the Vested Percentage of any Participant who has attained his Normal Retirement Age as of the date of termination of his service shall be 100%; or (b) if the Participant has both attained the age of 55 years and completed 10 years of Vesting Service as of the date of termination of his service, the single-sum value, determined as of the date of termination of his service, of the monthly early retirement -35- income that would have been payable to him in accordance with the provisions of Section 2.2 hereof if he had retired under the provisions of such section on the date of termination of his service, accumulated with interest from the date of termination of his service to the date as of which his monthly retirement income payments are to commence in accordance with the provisions above. All computations to determine the monthly retirement income payable to or on behalf of such a terminated Participant (including any computations to determine the monthly retirement income payable on his behalf under Section 2.4(A)(3) or 3.1 hereof) shall be on the basis of the interest and mortality assumptions that are being used as of the date of termination of his service to determine actuarial]y equivalent monthly retirement incomes. (2) The retirement income payable under Section 2.4(A)(1) above will be payable on the first day of each month. The first payment will be made, if the Participant shall then be living, on his Normal Retirement Date or, if he has elected an earlier commencement date in accordance with the provisions of Section 2.4(A)(1) above, on the first day of such earlier month as of which he has elected to commence receiving his retirement income payments. The last payment will be the payment due immediately preceding his death. (3) In the event that the terminated Participant dies prior to the date as of which his retirement income payments are to commence as described above (without his having waived, in accordance with the provisions of Section 2.4(A)(4) below, the benefit provided under this Section 2.4(A)(3) and without his having received, prior to his death, the actuarially equivalent value of the benefit provided on his behalf under Section 2.4(A)(1) above), his Beneficiary will receive the monthly retirement income, beginning on the first day of the month coincident with or next following the date of the terminated Participant's death, which can be provided on an actuarially equivalent basis by the single-sum value of the benefit determined in accordance with Section 2.4(A)(1) above to which the terminated Participant was entitled as of the date of termination of his service, accumulated with interest from such date to the date of his death. The monthly retirement income payments under this Section 2.4(A)(3) shall, subject to the provisions of Section 2.4(B)(4) hereof, be payable for the life of the Beneficiary designated or selected under Section 5.2 to receive such benefit, and, in the event of such Beneficiary's death within a period of 10 years after the Participant's death, the same monthly amount that was payable to the Beneficiary shall be payable for the remainder of such 10-year period in the manner and subject to the provisions of Section 5.3; provided, however, in lieu of payment of such benefit in the form of monthly income described above, the single-sum value of such benefit may be paid on an actuarially equivalent basis to the Participant's designated Beneficiary in such other manner and form permitted under Section 2.4(B) hereof and commencing on such other date permitted under Section 2.4(B) hereof as the Participant may elect in writing filed with the Committee or, in the event that an election has not been made by the Participant and filed with the Committee prior to his death, as the Beneficiary may elect in writing filed with the Committee. (4) A terminated Participant may elect with the consent of his spouse, if any, at any time prior to the date as of which his retirement income payments are scheduled to commence, to waive the death benefit provided under Section 2.4(A)(3) above and, in lieu thereof, an increased retirement income, which reflects on an actuarially equivalent basis the period that the death benefit coverage under Section 2.4(A)(3) is waived, will be payable to the Participant under the -36- provisions of Section 2.4(A)(1) if he shall be living on the date on which his payments are to commence in accordance with the provisions of Section 2.4(A)(1). Within one year after the date of termination of service of a Participant who is entitled to a benefit under the provisions of this Section 2.4(A), or as soon thereafter as is administratively practicable, the Committee shall furnish the Participant with written notification informing him of his right to waive the death benefit provided under Section 2.4(A)(3) above and the consequences of such a waiver. Any Participant who has waived the death benefit provided under Section 2.4(A)(3) may subsequently revoke such waiver at any time prior to the date as of which his retirement income payments are to commence by filing written notice of such revocation with the Committee prior to the date on which such revocation is to become effective. Any Participant who has waived the death benefit provided under Section 2.4(A)(3) and who subsequently marries or remarries after such waiver and prior to the commencement of his retirement income shall automatically be deemed to have revoked his prior waiver of such death benefit effective as of the first anniversary of the date of such marriage or remarriage unless his spouse (following such marriage or remarriage) consents to the waiver of such death benefit. (5) Any Participant, who is entitled to a benefit under the provisions of Section 2.4(A)(1) above and who is married on the date as of which retirement income payments are due to commence under Section 2.4(A)(1) above or who is married on the date of his death and on whose behalf a benefit is payable under Section 2.4(A)(3) above, shall be assumed for the purposes of this Section 2.4(A) to have been married for the total period of time after the date of termination of his service and prior to the date as of which such retirement income payments are due to commence or the date of his death, whichever is earlier, except for such portions, if any, of such period of time for which evidence is furnished to the Committee which, in the opinion of the Committee, satisfactorily proves that the Participant was not married. (6) The provisions of Sections 3.1 and 4 hereof are applicable to the benefits provided under this Section 2.4(A). (7) Except as specifically provided otherwise in any Supplement hereto and unless specifically provided otherwise in the Plan, the Participant whose service is terminated prior to his Initial Vesting Date shall not be entitled to any benefit under the Plan whatever, and the value of such Participant's accrued benefit shall be forfeited as of the date of termination of his service and used to reduce Employer contributions. (B) Benefit Payable in Event of Death While in Service. (1) If the service of a Participant is terminated by reason of his death on or after his Initial Vesting Date and prior to his Required Beginning Date, there shall be payable to the Participant's designated Beneficiary the monthly retirement income, beginning on the first day of the month coincident with or next following the date of the Participant's death, that can be provided on an actuarially equivalent basis by the greater of: (a) if the Participant's service is terminated by reason of his death prior to his Normal Retirement Date and prior to the date as of which he will have both attained the age of 55 years and completed 10 years of Vesting Service, the single-sum value, determined as of the date of his death, of the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that the as accrued to the date of his death; or -37- (b) if the Participant's service is terminated by reason of his death on or after the date as of which he has both attained the age of 55 years and completed 10 years of Vesting Service or on or after his Normal Retirement Date, the single-sum value, determined immediately prior to the Participant's death, of the monthly retirement income that the Participant would have been entitled to receive under the provisions of Section 2.1 or 2.2 hereof, whichever would have applied, if he had retired from the service of the Employer on the date of his death. (2) Except as provided in Section 2.4(B)(3) below and subject to the provisions of Section 2.4(B)(4) below, the monthly retirement income payments under this Section 2.4(B) shall be payable for the life of the Beneficiary designated or selected under Section 5.2 hereof to receive such benefit, and, in the event of such Beneficiary's death within a period of 10 years after the Participant's death, the same monthly amount that was payable to the Beneficiary shall be payable for the remainder of such 10-year period in the manner and subject to the provisions of Section 5.3 hereof. (3) A Participant may elect, or, in the event that an election has not been made by the Participant and filed with the Committee prior to his death, his designated Beneficiary may elect in writing filed with the Committee, that in lieu of payment of the benefit provided under this Section 2.4(B) (or, if applicable, under Section 2.4(A)(3) hereof) in the manner described above, such benefit will be paid on an actuarially equivalent basis to the designated Beneficiary on the first day of any month that is on or after the date of the Participant's death and is on or prior to the Participant's Required Beginning Date and is payable in accordance with one of the options described below: OPTION A: A monthly retirement income in equal amounts that is payable to the Beneficiary for his lifetime. OPTION B: A monthly retirement income in equal amounts that is payable to the Beneficiary for a period certain of 60 months or 120 months, whichever number of months is specified by the Participant or his Beneficiary, as the case may be, in his written election filed with the Committee. In the event of the Beneficiary's death prior to the expiration of such specified period certain, the same monthly amount shall be payable for the remainder of the specified period certain in the manner and subject to the provisions of Section 5.3 hereof. provided, however, that payment of any such benefit shall be subject to the provisions of Section 2.4(B)(4) below. (4) Any form of payment applicable to the death benefit provided under this Section 2.4(B) (or, if applicable under Section 2.4(A)(3) hereof), which has been designated by a Participant prior to January 1, 1984 under the terms of the Superseded Plan and which satisfies the transitional rule in Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248), will continue in effect on and after the Effective Date of the Plan with respect to the death benefits provided under this Section 2.4(B) (or, if applicable, under Section 2.4(A)(3) hereof) unless such designated form of payment has been or is subsequently revoked or changed (a change of Beneficiaries under the designation will not be considered to be a revocation or change of such form of payment so long as the change in Beneficiaries does not alter, directly or -38- indirectly, the period over which distributions are to be made under such form of payment); provided, however, if a Participant, whose death occurs on or after his Initial Vesting Date, had been married to his spouse throughout the one-year period immediately preceding his death and he had designated a person other than his spouse as his Beneficiary and such spouse has not consented to such other person being designated, the provisions of Section 4.1(D) hereof shall apply with respect to payments due his surviving spouse, if any. Subject to the preceding sentence and except to the extent otherwise permissible under Section 401(a)(9) of the Internal Revenue Code and regulations issued pursuant thereto, the benefit payable under this Section 2.4(B) (or, if applicable, under Section 2.4(A)(3) hereof) on behalf of any Participant must be payable in a manner that satisfies the restrictions of Section 401(a)(9) of the Internal Revenue Code and must: (a) commence not later than the Participant's Required Beginning Date; provided, however, if the Beneficiary is not the Participant's spouse, distribution must commence not later than one year after the date of the Participant's death or, if the Participant's surviving spouse was his Beneficiary and such surviving spouse dies prior to the commencement of benefit payments, distribution must commence not later than one year after the date of such surviving spouses death; and (b) be distributed to the Participant's Beneficiary over one or a combination of the following periods: (i) the life of his Beneficiary; or (ii) a period certain not extending beyond the life expectancy of the Beneficiary; provided, however, if the Participant has no designated Beneficiary or if the designated Beneficiary is not a living person, such benefit must be distributed in its entirety to the Beneficiary not later than the fifty anniversary of the date of (i) the Participant's death or (ii) the death of the Participant's spouse, whichever death is the later to occur. Any amount payable to a child of the Participant shall be treated for the purposes of this Section 2.4(B)(4) as if it had been payable to the surviving spouse of the Participant if such amount that is payable to the child will become payable to such surviving spouse upon such child's reaching majority (or upon the occurrence of such other designated event permitted under regulations issued with respect to Section 401(a)(9) of the Internal Revenue Code). In the event that the Beneficiary to receive the death benefit payable under Section 2.4(A)(3) or 2.4(B) hereof on behalf of a Participant whose death occurs prior to his Normal Retirement Date is his surviving spouse, the retirement income payable to such surviving spouse under Section 2.4(A)(3) or 2.4(B) hereof shall be deferred and be payable on an actuarially equivalent basis to such surviving spouse commencing on the Participant's Normal Retirement Date, if such surviving spouse is then living, unless (i) the surviving spouse consents or elects in writing to receive such benefit commencing as of a date that is prior to the Participant's Normal Retirement Date and is on or after the date of the Participant's death, (ii) the date of death of the Participant is prior to his Initial Vesting Date, (iii) the Participant had not been married to his surviving spouse throughout the one-year period immediately preceding his death or (iv) a lump-sum payment is payable to his surviving spouse under the provisions of Section 3.2 hereof. -39- (5) If the service of a Participant is terminated by reason of his death on or after his Required Beginning Date, no benefit will be payable to his Beneficiary under the provisions of this Section 2.4(B). Additional retirement income payments may be payable, however, after the Participant's death to his joint pensioner or other Beneficiary, depending upon the form of payment of the retirement income that the Participant was receiving immediately prior to his death and taking into account the increase, if any, that would have applied under the provisions of Section 2.1(D) hereof to the amount of retirement income payable to the Participant commencing as of the first day of the month coincident with or next following the date of the Participant's death if the Participant had retired immediately prior to his death and had survived to such day. Section 2.5. Benefits Paid at Committee's Discretion. Benefits under this Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them. SECTION 3. SPECIAL PROVISIONS REGARDING PAYMENT OF BENEFITS. Section 3.1. Optional Forms of Retirement Income. In lieu of the amount and form of retirement income payable in the event of normal retirement, early retirement or termination of service, as specified in Sections 2.1, 2.2 and 2.4(A) hereof and as subjected to the provisions of Section 4.1 hereof a Participant, upon written request to the Committee, may elect to receive a retirement income or benefit of equivalent actuarial value payable in accordance with one of the options described below commencing on the date as of which such retirement income is due under the provisions of Section 2.1, 2.2 or 2.4(A) hereof, whichever is applicable, or commencing on such later date, which shall not be later than his Required Beginning Date, as the Participant may specify in his written request to the Committee. OPTION 1: A retirement income of smaller monthly amount that is payable in equal monthly amounts to the Participant for his lifetime, and, in the event of his death within a period of 10 years after the date as of which his retirement income payments first commenced, the same monthly amount that was payable to the Participant will be payable for the remainder of the 10-year period to a Beneficiary designated by him. OPTION 2: A retirement income of modified monthly amount that is payable in equal monthly amounts to the participant during the joint lifetime of the participant and a joint pensioner designated by him, and, following the death of either of them, 66-2/3% of such modified monthly amount will be payable to the survivor for the lifetime of the survivor. OPTION 3: A retirement income of smaller monthly amount that is payable in equal monthly amounts to the Participant during the joint lifetime of the Participant and a joint pensioner designated by him, and, following the death of either of them, 100% of such modified monthly amount will be payable to the survivor for the lifetime of the survivor. OPTION 4: A retirement income of smaller monthly amount that is payable to the Participant for his lifetime, and, in the event that the Participant predeceases his spouse (to whom he married on his Annuity Starting Date), 60% of such modified monthly -40- amount will be payable after the death of the Participant to such surviving spouse for the lifetime of such surviving spouse. The amount of retirement income determined under any of the above optional forms of payment must satisfy the requirements of Sections 401(a)(4) and 401(1) of the Internal Revenue Code and rulings and regulations issued with respect thereto, and, any provisions hereof to the contrary notwithstanding, any optional form of payment which would otherwise be permitted under the provisions of this Section 3.1 shall not be available to a Participant if the amount of retirement income payable under such option would result in the amount of retirement income payable on behalf of such Participant under the Plan being increased by a percentage that would cause the disparity in the rate of employer-derived benefits under the Plan to exceed the maximum disparity permitted under Sections 401(a)(4) and 401(1) of the Internal Revenue Code and rulings and regulations issued with respect thereto. Any optional form of payment designated by a Participant prior to January 1, 1984, which satisfies the transitional rule in Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248), will continue in effect on and after the Effective Date of the Plan unless such optional form of payment has been or is subsequently revoked or changed (a change of Beneficiaries under the designation will not be considered to be a revocation or change of such optional form of payment so long as the change in Beneficiaries does not alter, directly or indirectly, the period over which distributions are to be made under such form of payment); provided, however, that the provisions of Section 4.1(C) hereof shall apply if the Participant has a spouse at the date on which his initial payment under such optional form is due and his spouse does not consent to such optional form of payment. Subject to the preceding sentence but notwithstanding any other provision of this Section 3.1 to the contrary, any option elected under this Section 3.1 must provide that the entire interest of the Participant will be expected to be distributed to the Participant and his Beneficiaries and joint pensioners, in a manner that satisfies the restrictions of Section 401(a)(9) of the Internal Revenue Code, over one or a combination of the following periods: (a) the life of the Participant; (b) the lives of the Participant and his designated Beneficiary or joint pensioner; (c) a period certain not extending beyond the life expectancy of the Participant; or (d) a period certain not extending beyond the joint life and last survivor expectancy of the Participant and his designated Beneficiary or joint pensioner. Any amount that is payable to the child of a Participant under an optional form of payment hereunder shall be treated for the purposes of satisfying the requirements of this paragraph as if it had been payable to the surviving spouse of the Participant if such amount that is payable to the child will become payable to such surviving spouse upon such child's reaching majority (or upon the occurrence of such other designated event permitted under regulations issued with respect to Section 401(a)(9) of the Internal Revenue Code). A Participant who is not permitted to elect an optional form of payment otherwise permitted under the provisions of this Section 3.1 because of the limitations imposed by Section 401(a)(9) and/or Section 401(1) of the Internal Revenue Code may elect in accordance with the provisions above to receive an actuarially equivalent form of payment which is similar in form to the non-permissible option but which is modified by increasing or decreasing, as the case may be, the period certain for which payments will be made and/or the percentage of income payable to the survivor so that the requirements of Sections 401(a)(9) and 401(1) of the Internal Revenue Code are satisfied. The Participant upon electing any option of this section will designate the joint pensioner or Beneficiary to receive the benefit, if any, payable under the Plan in the event of his death and will have the power to change such designation at any time prior to the commencement of his retirement income payments, subject to the provisions of this section. Any such designation will name a Joint pensioner or one or more primary Beneficiaries where applicable. If a Participant is receiving payments under a form in which a Beneficiary is involved, he may change his designated Beneficiary (but not his designated joint pensioner) after his retirement income payments have commenced. The Committee shall require the consent of the Participant's spouse, if any, before any such change in Beneficiary or joint pensioner under an option in which the spouse is not the primary Beneficiary or joint pensioner may become effective, unless, to the extent permitted by law, such spouse has previously consented to and acknowledged that the Participant may change Beneficiaries or joint pensioners without the further consent of said spouse. Each such designation will be made in writing on a form prepared by the Committee. In the event that no -41- designated Beneficiary survives the Participant, such benefits as are payable in the event of the death of the Participant subsequent to his retirement shall be paid as provided in Section 5.2 hereof. Retirement income payments will be made under the option elected in accordance with the provisions of this section and will be subject to the following limitations: (A) If a Participant's service is terminated by reason of his death prior to this Annuity Starting Date, no benefit will be payable on his behalf in accordance with the provisions of Section 2.4(B) hereof. (B) If a terminated Participant dies after the date of termination of his service and prior to his Annuity Starting Date, no benefit will be payable under the option to any person, but a benefit may be payable on his behalf under the provisions of Section 2.4(A)(3) hereof. (C) In the case of a Participant who is married and who elects an option under which the commencement of payment of his retirement income is deferred beyond his regularly scheduled Annuity Starting Date, the option elected by such Participant must provide that a monthly lifetime income equal to or greater than a qualified preretirement survivor annuity (within the meaning of Section 417(c) of the Internal Revenue Code) will be payable to his surviving spouse in the event of his death after such regularly scheduled Annuity Starting Date and prior to his elected Annuity Starting Date unless his spouse consents to the option not providing such an income. (D) If the designated Beneficiary or joint pensioner dies before the Participant's Annuity Starting Date, the option elected will be cancelled automatically and the retirement income payable to the Participant will be paid in the applicable form described in Section 2 hereof unless a new election is made in accordance with the provisions of this section or unless a new Beneficiary or joint pensioner is designated by the Participant prior to the date that his retirement income commences under the Plan and within 90 days after the death of the prior Beneficiary or joint pensioner. (E) If the Participant and, if applicable, his joint pensioner and his designated Beneficiary all die after the Participant's Annuity Starting Date but before the full payment has been effected under any option providing for payments for a period certain and if the commuted value of the remaining payments is equal to or less than the maximum amount that is permissible as an involuntary cashout of accrued benefits under Sections 411(a)(11) and 417(e) of the Internal Revenue Code and regulations issued with respect thereto, the commuted value of the remaining payments shall, subject to the provisions of Section 3.2 hereof, be paid in a lump sum in accordance with the provisions of Section 5.3 hereof. (F) If the Participant dies after his Annuity Starting Date, payment of his remaining interest, if any, shall be distributed, to the extent required by Section 401(a)(9) of the Internal Revenue Code and regulations issued with respect thereto, at least as rapidly as provided under the method of payment in effect prior to his death. -43- With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under Section 401(a)(9) that were proposed in January 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. Section 3.2. Lump-Sum Payment of Small Retirement Income. Notwithstanding any provision of the plan to the contrary, if the service of a Participant is terminated prior to the date of termination (or partial termination if applicable to the Participant involved) of the Plan and either (a) the single-sum value, determined as of the date of the Participant's retirement or termination of service, of the retirement income or other benefit payable to any person entitled to any benefit hereunder is equal to or less than (i) $10,000 or (ii) the maximum amount that is permissible as an involuntary cash-out of accrued benefits under Sections 411(a)(11) and 417(e) of the Internal Revenue Code and regulations issued with respect thereto, whichever is greater or (b) either (i) the amount of the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that the Participant has accrued as of the date of his retirement or termination of service or (ii) the amount of the monthly retirement income payable to the Participant on the Annuity Starting Date (or to his Beneficiary on the Annuity Starting Date in the event of the Participant's death prior to such date) is equal to or less than $200, the following provisions shall apply. (A) Involuntary Cash-Out. If the single-sum value of the benefit payable to or on behalf of the Participant does not exceed, and, only with respect to distributions made prior to October 17, 2000, has never exceeded at the time of any prior distribution, the maximum amount that is permissible as an involuntary cash-out of accrued benefits under Sections 41l(a)(11) and 417(e) of the Internal Revenue Code and regulations issued with respect thereto ($3,500 as of Plan Years beginning before August 6, 1997 and, as of Plan Years beginning after August 5, 1997, $5,000) and such benefit is payable on or prior to the Participants Annuity Starting Date, the actuarial equivalent of such benefit shall be paid in a lump sum. For the purposes of the Plan, a payment shall not be considered to occur after the Annuity Starting Date merely because actual payment is reasonably delayed for calculation of the benefit amount if all payments due are actually made. (B) Voluntary Cash-Out. If the single-sum value of the benefit payable to or on behalf of the Participant is greater than the maximum amount that is permissible as an involuntary cash-out of accrued benefits under Sections 411(a)(11) and 417(e) of the Internal Revenue Code and regulations issued with respect thereto or if such benefit is payable after the Annuity Starting Date, such person may elect to receive: (1) the actuarial equivalent (determined using the interest and mortality assumptions that are being used as of the date as of which such benefit is payable to determine actuarially equivalent lump-sum distributions) of such benefit in a lump-sum distribution; or (2) to the extent required by Section 417 of the Internal Revenue Code and regulations issued with respect thereto, the actuarial equivalent (determined using the -44- interest and mortality assumptions that are being used as of the date of termination of the Participant's service to determine actuarially equivalent non-decreasing annuities) of such benefit payable in the form of a Qualified Joint and 50% Survivor Annuity if he is married or in the form of a monthly retirement me payable for life if he is not married. Such election must be in writing and must be filed with the Committee within 90 days after the date as of which the Committee informs him in writing of the actuarially equivalent value of such benefits. If a lump-sum distribution is elected and the Participant is married, the consent of the Participant's spouse must also be filed with the Committee within such election period. Payment of the elected benefit must be made or commence within 90 days after such election and, if applicable, such consent have been received by the Committee. (C) Lump-Sum Cash-Out of Zero Accrued Benefits. For the purposes of the Plan, if the present value of the vested accrued benefit of any Participant whose service is or has been terminated (either before, on or after January 1, 1989) is zero, the Participant shall be deemed to have received a distribution of such vested accrued benefit as of the date of termination of his service. Section 3.3. Benefits Applicable to Participant Who Has Been or Is Employed by Two or More Employers. In the event that a Participant's service is terminated for any reason and such Participant has been or is employed by any two or more Employers who are Controlled Group Members of the same group, his retirement or termination benefit, if any, accrued with those Employers who are Controlled Group Members of the same group shall be computed by applying the benefit formulas as if all of the Employers who are Controlled Group Members of the same group were a single Employer; provided, however, if the Plan does not represent a single plan with respect to all such Employers, there must be a proper allocation (taking into account the Credited Service and Compensation applicable to each such Employer or group of such Employers with respect to which the Plan represents a single plan) of the costs of the resulting benefits among such Employers (with respect to which the Plan does not represent a single plan) by which such Participant has been or is employed. In the event that a Participant's service is terminated for any reason and such Participant has, been or is employed by two or more Employers that are not Controlled Group Members of the same group, his retirement or termination benefit if any, shall be computed in accordance with the provisions of the paragraph above with respect to each Employer or group of Employers, as the case may be, who are Controlled Group Members of the same group, taking into account the Credited Service and Compensation applicable to that group only. The total benefit payable to the Participant under the Plan shall be the sum of the amounts determined for each group of Controlled Group Members (where any such group of Controlled Group Members may be comprised of only one Employer). Section 3.4. No Duplication of Benefits. Unless the context clearly provides otherwise, there shall be no duplication of benefits under the Plan or under any Supplement hereto, and the benefits payable under any section of the Plan to or on behalf of a Participant shall be inclusive of the benefits, if any, concurrently payable to or on behalf of the same Participant under all other sections of the Plan and under any Supplement hereto. -45- Section 3.5. Funding of Benefits Through Purchase of Life Insurance Contract or Contracts. In lieu of paying benefits from the Trust Fund to a Participant or his Beneficiary, upon direction of the Committee with specific prior authorization in writing from the Employer, the Trustee shall enter into a contract or contracts, or an agreement or agreements, with one or more legal reserve life insurance companies for the purchase, with funds in the Trust, of a retirement annuity or other form of life insurance contract which, as far as possible, provides benefits equal to (or actuarially equivalent to) those provided in the Plan for such Participant or Beneficiary, but provides no optional form of retirement income or benefit which would not be permitted under Section 3.1 hereof, whereupon such contract shall thereafter govern the Payment of the amount of benefit, if any, represented by such contract, which is payable under the Plan upon the Participant's retirement or termination of service, and the liability of the Trust Fund and of the Plan will cease and terminate with respect to such benefits that are purchased and for which the premiums are duly paid. Any policy or contract issued under this section shall be subject to the provisions hereof pertaining to the Qualified Joint and 50% Survivor Annuity Option and to the Qualified Preretirement Survivor Annuity. Any policy or contract issued under this section prior to the termination of the Plan or prior to the distribution of the policy or contract to a Participant or Beneficiary hereunder shall provide that the Trustee shall retain all rights of ownership at all times except the right, unless such policy or contract provides otherwise, to designate the Beneficiary to receive any benefits payable upon the death of the Participant and shall further provide that all dividends or experience rating credits shall be paid to the Trustee and applied to reduce future Employer contributions to the Plan. Any annuity contract distributed by the Trustee to a Participant or Beneficiary hereunder shall contain a provision to the effect that the contract may not be sold, assigned, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, to any person other than the issuer thereof. SECTION 4. GOVERNMENTAL REQUIREMENTS AFFECTING BENEFITS Section 4.1. Special Provisions Regarding Amount and Payment of Retirement Income. The amount and payment of retirement income determined under Sections 2.1, 2.2 and 2.4 hereof shall be subjected to the following provisions of this Section 4.1. (A) Limitations Imposed by Section 415 of Internal Revenue Code. (1) Maximum Amount of Retirement Income. Any provisions herein to the contrary notwithstanding, in no event shall the monthly retirement income that is payable on or after the first day of the limitation year beginning in 1987 to a Participant hereunder exceed the maximum amount of retirement income for defined benefit plans as specified in Section 415 of the Internal Revenue Code and regulations and rulings issued pursuant thereto; provided, however, that: -46- (a) the maximum amount of retirement income applicable to a Participant who was a participant in the Superseded Plan, if any, before the limitation year beginning in 1983 and whose Credited Service includes service that was accrued prior to such limitation year, shall not be less than his current accrued benefit within the meaning of Section 235(g)(4) of the Tax Equity and Fiscal Responsibility Act of 1982; and (b) such maximum amount of retirement income applicable to a Participant who was a participant in the Superseded Plan, if any, before the limitation year beginning in 1987 and whose Credited Service includes service that was accrued prior to such limitation year, shall not be less than his current accrued benefit within the meaning of Section 1106(i)(3)(B) of the Tax Reform Act of 1986; and provided further, however, only for Plan Years beginning before January 1, 2000, in the event that the sum of the defined benefit plan fraction and defined contribution plan fraction of a Participant, who is a participant in both a defined benefit plan and a defined contribution plan maintained by any Controlled Group Members, would exceed 1.0, the monthly retirement income payable on his behalf under the defined benefit plans shall be reduced to the amount that will result in such sum being equal to 1.0. In determining the maximum monthly retirement income payable on behalf of any Participant, all defined benefit plans (whether or not terminated) of the Controlled Group Members are to be treated as one defined benefit plan; and all defined contribution plans (whether or not terminated) of the Controlled Group Members are to be treated as one defined contribution plan. The proportion of the maximum monthly retirement income applicable to all such defined benefit plans of the Controlled Group Members shall be determined on a pro rata basis depending upon the actuarially equivalent amount of retirement income otherwise accrued under each such defined benefit plan. (2) Actuarial Assumptions. The mortality and interest assumptions that are used to compute the actuarially equivalent maximum amounts of retirement income permitted under the provisions of this Section 4.1(A) shall be the same as those that are used in computing actuarially equivalent benefits payable on behalf of a Participant upon his retirement or termination of service and upon the exercise of optional forms of retirement income under the Plan except that: (a) the interest rate assumption shall not be less than 5% for the purposes of converting the maximum retirement income to a form other than a straight life annuity (with no ancillary benefits); (b) the interest rate assumption shall not be greater than 5% for the purposes of adjusting the maximum retirement income payable to a Participant who is over the social security retirement age within the meaning of Section 415(b)(8) of the Internal Revenue Code (or age 65 in the case of a governmental plan or a plan maintained by a tax exempt organization) so that it is actuarially equivalent to such a retirement income commencing at the social -47- security retirement age (or age 65 in the case of a governmental plan or a plan maintained by a tax exempt organization); and (c) the factor for adjusting the maximum permissible retirement income to a Participant who is less than age 62 years so that it is actuarially equivalent to such a retirement income commencing at age 62 years shall be equal to (i) the factor for determining actuarially equivalence for early retirement under the Plan or (ii) an actuarially computed reduction factor determined using an interest rate assumption of 5% and the mortality assumptions that apply in determining actuarially equivalent monthly retirement incomes under the Plan (except that the mortality decrement shall be ignored if a death benefit at least equal to the single-sum value of the Participant's Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date would be payable under the Plan on behalf of the Participant if he remained in the service of the Employer and his service were to be terminated by reason of his death prior to his Normal Retirement Date), whichever factor will provide the greater reduction. The factor for determining actuarial equivalence for early retirement under the Plan for any given age below age 62 years shall be determined by dividing (aa) the early retirement adjustment factor that applies under the Plan at such given age by (bb) the early retirement adjustment factor that applies under the Plan at age 62 years (where such actuarial conversion factors used in (aa) and (bb) above shall be determined in accordance with the provisions of this Section 4.1(A). If more than one formula applies in determining the Participant's accrued retirement income and the same early retirement adjustment factors do not apply under all of the formulas, the early retirement adjustment factor that applies under the Plan for the purposes of this Section 4.1(A) shall refer to the factor that applies under the applicable formula used to compute the amount of his accrued retirement income under the Plan. (3) Cost-of-Living Adjustments. In the event that the maximum amount of retirement income permitted under Section 415 of the Internal Revenue Code is increased after the date of commencement of a Participant's retirement income due to any cost-of-living adjustment announced by the Internal Revenue Service pursuant to the provisions of Section 415(d) of the Internal Revenue Code, the amount of monthly retirement income payable under the Plan to a Participant whose retirement income is restricted due to the provisions of such section of the Internal Revenue Code shall be increased, effective as of January 1st of the calendar year for which such increase becomes effective or, if applicable, as of such other date as the Secretary of the Treasury or his delegate may prescribe as the date on which such increase shall become effective, to reflect the increase in the amount of retirement income that may be payable under the Plan as a result of such cost-of-living adjustment; provided, however, if the Employer maintains an "excess benefit plan" (within the meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974) solely for the purpose of providing benefits for certain Participants in excess of the limitations on contributions and benefits imposed by Section 415 of the Internal Revenue Code and if the Participant or his Beneficiary receives or has received a benefit or benefits under such excess benefit plan and a portion of such benefit or benefits would be duplicated by the cost-of-living adjustment provided under this paragraph, then such cost-of-living adjustment that would represent a duplication of -48- benefits shall not apply to the Participant or Beneficiary unless the value of the benefit payable from the excess benefit plan that would cause such duplication of benefits under this Plan is returned to the Employer by the Participant or Beneficiary within 60 days of the effective date of such cost-of-living adjustment or the date that such cost-of-living adjustment is announced by the Internal Revenue Service, whichever date is later; and provided further, however, that such 60-day period may be extended by the Committee if, in its opinion, reasonable cause exists for such an extension. (4) IRC Section 415 Definitions. Following are certain terms that are used herein for the purposes of the limitations under Section 415 of the Internal Revenue Code and that shall have the meanings assigned to them in Section 415 of said Code and regulations and rulings issued with respect thereto: (a) The term "defined benefit plan" shall have the meaning assigned in Section 414(j) of the Internal Revenue Code. (b) For Plan Years beginning before January 1, 2000, the term "defined benefit plan fraction" is the fraction in which the numerator is the Participant's projected annual benefit (determined as of the end of the limitation year) under all defined benefit plans of the Controlled Group Members and the denominator is the lesser of (i) 1.25 multiplied by the dollar limitation in effect under Section 415(b)(1)(A) of the Internal Revenue Code (as modified by the provisions of Section 415(d) of said Code) for such limitation year or (ii) 1.4 multiplied by the amount that may be taken into account under Section 415(b)(1)(B) of the Internal Revenue Code for such limitation year. (c) The term "defined contribution plan" shall have the meaning assigned in Section 414(i) of the Internal Revenue Code. (d) For Plan Years beginning before January 1, 2000, the term "defined contribution plan fraction" is, subject to any transition adjustments allowed by law and adopted by the Committee, the fraction in which the numerator is the sum of the actual annual additions (where such annual additions shall have the meaning assigned in Section 415(c) of the Internal Revenue Code and regulations and rulings issued with respect thereto) to the Participant's accounts in such limitation year and for all prior limitation years under all defined contribution plans of the Controlled Group Members and the denominator is the sum of the lesser of the following amounts determined for each limitation year during such Participant's employment (assuming for this purpose that Sections 415(c) and 415(d) of the Internal Revenue Code had been in effect during all prior limitation years of such Participant's employment): (i) 1.25 multiplied by the dollar limitation in effect under Section 415(c) of the Internal Revenue Code (as modified by the provisions of Section 415(d) of said Code) for the applicable limitation year and (ii) 1.4 multiplied by 25% of the Participant's IRC 415 Compensation for the applicable limitation year. (e) The term "IRC 415 Compensation" shall include (i) wages, salaries, fees for professional services, and other amounts received (without regard to -49- whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer to the extent that the amounts are includable in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements and expense allowances), (ii) earned income (as described in Section 401(c)(2) of the Internal Revenue Code and the regulations thereunder), (iii) amounts described in Sections 104(a)(3), 105(a) and 105(h) of the Internal Revenue Code, but only to the extent that these amounts are includable in the gross income of the Participant, (iv) amounts paid or reimbursed by the Employer for moving expenses incurred by the Participant, but only to the extent that these amounts are not deductible by the Participant under Section 217 of the Internal Revenue Code, (v) the value of a non-qualified stock option granted to the Participant by the Employer, but only to the extent that the value of the stock option is includable in the gross income of the Participant for the taxable year in which granted, (vi) the amount includable in the gross income of the Participant upon making the election described in Section 83(b) of the Internal Revenue Code and (vii) any amounts received by the Participant pursuant to an unfunded non-qualified plan in the year such amounts are includable in the gross income of the Participant. The amounts described in (i) and (ii) above shall include foreign earned income as defined in Section 911(b) of the Internal Revenue Code, whether or not excludable from gross income under Section 911 of said Code. Such compensation shall exclude (1) contributions by the Employer to a plan of deferred compensation which are not included in the Participant's gross income for the taxable year in which contributed, (2) contributions by the Employer under a simplified employee pension plan to the extent such contributions are deductible by the Participant, (3) any distribution from a plan of deferred compensation, (4) amounts realized from the exercise of a non-qualified stock option, (5) amounts realized when restricted stock (or property) held by the Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture, (6) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option, (7) other amounts which received special tax benefits and (8) contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Internal Revenue Code (whether or not the amounts are actually excludable from the gross income of the Participant). For Plan Years beginning after December 31, 1997, Compensation shall include amounts deferred pursuant to Sections 401(k), 403(b) and 457 of the Internal Revenue Code or contributed pursuant to Sections 125 and 132(f)(4) of the Internal Revenue Code. (f) The term "limitation year" is the 12-month period which is used for application of the limitations under Section 415 of the Internal Revenue Code and, unless a different 12-month period has been elected by the Employer in accordance with rules or regulations issued by the Internal Revenue Service or the Department of Labor, shall be the calendar year. -50- (B) Minimum Benefits on Normal or Early Retirement. Any provisions of Section 2.1 or Section 2.2 hereof to the contrary notwithstanding, in the event of the normal retirement or early retirement of a Participant in accordance with the provisions of Section 2.1 or 2.2 hereof, his monthly retirement income determined in accordance with the provisions of Section 2.1(B) or 2.2(B) hereof, whichever is applicable, shall not be less than the monthly retirement income, if any, determined in accordance with the provisions of Section 2.1(B) or 2.2(B) hereof that such Participant would have received as of any earlier date of retirement if he had retired under the provisions of Section 2.1 or 2.2 at any time prior to his actual date of retirement. (C) Minimum Benefits on Normal or Early Retirement. The Committee shall provide each Participant, during the period beginning 90 days before his Annuity Starting Date and ending 30 days before his Annuity Starting Date (or as soon after the expiration of such period as is administratively practicable), written notification of the terms and conditions of payment under Sections 2.1(C), 2.2(C) and 2.4(A)(2) hereof and, if the Participant is married, the terms and conditions of payment provided under the Qualified Joint and 50% Survivor Annuity Option and the relative financial effect on the Participant's retirement income under such forms of payment. Any provisions of Section 2.1(C), 2.2(C), 2.4(A)(2) or 3.1 hereof to the contrary notwithstanding, if a Participant does not elect, in writing filed with the Committee during the election period described below, to receive the retirement income payable on his behalf either (i) under the form of payment specified in Section 2.1(C), 2.2(C) or 2.4(A)(2), whichever is applicable, or (ii) under an optional form of payment described in and subject to the provisions of Section 3.1 hereof, such Participant shall be deemed to have elected, and his retirement income shall automatically be payable in accordance with the provisions of, either (a) if he does not have a spouse at his Annuity Starting Date, the form of payment specified in Section 2.1(C), 2.2(C) or 2.4(A)(2), whichever is applicable, or (b) if he has a spouse at his Annuity Starting Date, the Qualified Joint and 50% Survivor Annuity Option. Any Participant may make an election under this section at any time (and any number of times) during the period beginning on the date which is 90 days prior to his Annuity Starting Date and ending on the latest to occur of (i) his Annuity Starting Date, (ii) the date which is 90 days after the date on which he was provided with the general written explanation described above or (iii) the date which is 90 days after the date on which he was provided with any specific detailed information concerning the payment of his retirement income that is required to be furnished due to the request of the Participant. If any such Participant does not file his election with the Committee prior to the expiration of the election period described above, the commencement of his retirement income will be delayed until the end of such election period or until such earlier date as of which he files his election with the Committee, but he will be entitled to a retroactive payment with respect to those retirement income payments which were delayed. If any Participant has elected a form of payment other than the automatic form provided above, he may subsequently revoke such election, in writing filed with the Committee within the election period described above, in order to receive his retirement income payable in accordance with the automatic form provided above. Any provisions of Section 3.1 hereof to the contrary notwithstanding, if any Participant is not provided with the written notification described in the first sentence of this section at least 30 days before his Annuity Starting Date but he files his election with the Committee, and his retirement income or other benefit commences, prior to the date which is 30 days after the date on which he was provided with such written notification, he may subsequently, in writing filed with the Committee prior to the expiration of such 30-day period, revoke such election and elect to receive his retirement income payable under any other form of payment that was available to him on his Annuity Starting Date; provided, however, in order for such revocation and new election to -51- become effective, he shall be required to return immediately to the Trust Fund the portion, if any, of the payments that he has received that is in excess of the payments due under his newly elected form of payment, or, at the option of the Participant, future payments due under such newly elected form of payment may be reduced, over a period not to exceed 36 months, until such excess has been recovered. Any provisions herein to the contrary notwithstanding, the consent of the Participant's spouse during the applicable election period shall be required in order for the Participant to receive his retirement income in a form other than that provided under Qualified Joint and Survivor Annuity. The annuity starting date for a distribution may be less than 30 days after receipt of the written explanation described in the preceding paragraph provided: (a) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and 50% Survivor Annuity Option and elect (with spousal consent) to a form of distribution other than a Qualified Joint and 50% Survivor Annuity Option; (b) the Participant is permitted to revoke any affirmative distribution election at least until the annuity starting date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and 50% Survivor Annuity Option is provided to the Participant; and (c) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant. (D) Qualified Preretirement Survivor Annuity. If a deceased Participant, whose death occurs on or after his Initial Vesting Date and prior to this Annuity Starting Date had been married to his spouse throughout the one-year period immediately preceding his death and he had designated a person other than his spouse as his Beneficiary and such spouse has not consented to such other person being designated as the Beneficiary, the Participant shall be deemed to have: (1) revoked his prior designation of Beneficiary; (2) designated such spouse as his Beneficiary to receive a portion of the death benefit payable on his behalf under Section 2.4(A)(3) or 2.4(B), whichever is applicable; (3) specified that the portion of the benefit provided under Section 2.4(A)(3) or 2.4(B) that is payable to his surviving spouse will be payable as an actuarially equivalent monthly income payable on the first day of each month with the first payment being due (only if said spouse is then living) on the Participant's Normal Retirement Date of the first day of the month coincident with or next following the date of the Participant's death, whichever is later, and with the last payment being the payment due immediately preceding such spouse's death; (4) specified that the portion of the benefit provided under Section 2.4(A)(3) or 2.4(B) that is payable to the surviving spouse shall have an actuarially equivalent single-sum value, determined as of the date of his death, equal to the single-sum value, determined as of the date of his death, of the monthly retirement income that would be payable to his surviving spouse, commencing on the Participant's Earliest Annuity Commencement Date, under the Qualified Joint and 50% Survivor Annuity Option if: -52- (a) the Participant's service had been terminated on the date of his death for a reason other than death (or, if the Participant is a vested terminated Participant entitled to a benefit under Section 2.4(A) hereof, he had survived to the Earliest Annuity Commencement Date); (b) the Participant had (for the purposes of determining the amount of such monthly retirement income commencing at his Earliest Annuity Commencement Date) waived the death benefit coverage under Section 2.4(A)(3) hereof, if applicable, during the period beginning on the date of his death and ending on his Earliest Annuity Commencement Date; and (c) the Participant had died immediately after such commencement of payments (one-half of the initial payment which would have been due the Participant on his Earliest Annuity Commencement Date shall be included in the determination of such single-sum value); and (5) designated such other person (or persons) that was named as his Beneficiary under such revoked designation as the Beneficiary to receive the remaining portion of such benefit payable on his behalf under and in accordance with the provisions of Section 2.4(A)(3) or 2.4(B) hereof. In lieu of the payment of such benefit to the surviving spouse of a Participant in the form of the monthly income described in Section 4.1(D)(3) above commencing at the Participant's Normal Retirement Date, such benefit may be paid on an actuarially equivalent basis to the Participant's spouse in such other manner and form permitted under Section 2.4(B) hereof and commencing on such other date permitted under Section 2.4(B) hereof as the surviving spouse may elect in writing filed with the Committee. If a deceased Participant, whose death occurs on or after his Initial Vesting Date and prior to his Annuity Starting Date, had been married to his spouse throughout the one-year period immediately preceding his death and he had designated a person other than his spouse as his Beneficiary and such spouse has consented prior to the Participant's attainment of the age of 35 years to such other person being designated as the Beneficiary but has not consented to such designation on or after either the Participant's attainment of such age or his separation from service, unless it is otherwise permissible under the provisions of Section 417 (or any other applicable section) of the Internal Revenue Code or regulations or rulings issued pursuant thereto for such a spouse to elect to waive his or her right to the qualified preretirement survivor annuity, such consent of such spouse shall be invalid and the benefit payable on behalf of such Participant shall be determine and payable in the manner described above as though the Participant's spouse had not consented to such other person being designated as the Beneficiary of the Participant. The Committee shall provide each Employee, who is a Participant in the Plan, within the one-year period immediately following the date on which he attains the age of 35 years or on which he becomes a Participant in the Plan, whichever is later, or, if his service is terminated on or after his Initial Vesting Date and prior to his attaining the age of 35 years, the date of termination -53- of his service, or as soon thereafter as if administratively practicable, with written notification of (i) the terms and conditions upon which the Qualified Preretirement Survivor Annuity described above will be payable to his surviving spouse, (ii) the Participant's right to designate at any time prior to his death a person other than his spouse as his Beneficiary and the effect that such a designation will have on the Qualified Preretirement Survivor Annuity, (iii) the rights of the Participant's spouse in the event that the spouse does not consent to such designation and (iv) the right of the Participant to change his Beneficiary designation in accordance with the provisions of Sections 5.2 hereof at any time prior to his death and the effect that such a change will have upon the Qualified Preretirement Survivor Annuity. If the Beneficiary of a Participant is his spouse but the Participant elects, pursuant to the provisions of Section 2.4(A)(3) or 2.4(B) hereof, whichever is applicable, an actuarially equivalent form of payment of the benefit provided under such applicable section that does not provide for monthly payments during the lifetime of his spouse in an amount at least as great as the actuarially equivalent income, if any, that would have been payable to such spouse under the provisions of the Qualified Joint and 50% Survivor Annuity Option if the Participant had retired under the provisions of Section 2.1 or 2.2 hereof or his retirement income payments due under Section 2.4(A) hereof had commenced, whichever is applicable, on the day before his death while said option was in effect and he had died immediately thereafter, the Committee shall inform such Participant that such election will constitute an election not to receive a benefit which has the effect of a Qualified Preretirement Survivor Annuity provided under a qualified joint and survivor annuity as described in Section 417 of the Internal Revenue Code, and the consent of Participant's spouse shall be required in order for such an election to become effective. There shall be no duplication between the benefits provided under Sections 2.4(A)(3) and 2.4(B) and under the Qualified Preretirement Survivor Annuity described in this Section 4.1(D), but the benefits under each shall be inclusive of the benefits under the other. (E) Spousal Consent Requirement and Waiver. Any provisions herein to the contrary notwithstanding, if the consent of the spouse of the Participant is required for any reason under the provisions hereof, such consent in order to be effective must be in writing and witnessed by a Plan representative or a notary public. In the event that such consent is with respect to the election of a form of payment other than a Qualified Joint and Survivor Annuity or the designation of a person other than the spouse as the Participant's Beneficiary, such consent must acknowledge the specific form of payment that has been elected or the person who has been designated as Beneficiary, as the case may be, and must acknowledge the effect of such consent. Any of the above to the contrary notwithstanding, such spousal consent for any reason hereunder shall, unless otherwise required by the Committee or by applicable law, be waived for the purposes of the Plan if: (1) the spouse has previously consented to such specified action in accordance with the provisions above and such previous consent (a) permits changes with respect to -54- such specified action without any requirement of further consent by such spouse and (b) acknowledges the effect of such consent by the spouse; or (2) it is established to the satisfaction of the Committee that such consent may not be obtained because there is no spouse, because the spouse cannot be located or because of such other circumstances as the Secretary of the Treasury or his delegate may prescribe by regulations as reasons for waiving the spousal consent requirement. (F) Latest Date of Commencement of Payments. Except to the extent otherwise permissible under rules or regulations issued by the Internal Revenue Service, distribution of the accrued benefit to which a Participant has a nonforfeitable interest must commence on a date not later than the earlier to occur of: (1) his Required Beginning Date, regardless of whether or not his service has been terminated; or (2) the later of: (a) the date that is no later than the 60th day after the close of the Plan Year during which (i) his service is terminated for any reason, (ii) he attains the age of 65 years or (iii) the tenth anniversary of the date on which he initially commenced participation in the Plan or Superseded Plan, whichever is latest, occurs; or (b) the date that the Participant elects in accordance with the provisions of Section 3.1 hereof as the date of commencement of his retirement income; provided, however, if an election of a form of payment has been made by a Participant prior to January 1, 1984 that provides for the commencement of his benefit at a date later than the date applicable under (1) or (2) above and such election both (i) satisfies the transitional rule in Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) and (ii) has not been subsequently revoked or changed (a change of Beneficiaries under the designation will not be considered to be a revocation or change of such form of payment so long as the change in Beneficiaries does not alter, directly or indirectly, the period over which distributions are to be made under such form of payment), distribution of the Participant's accrued benefit shall not be required to commence prior to the date of commencement specified in such election. (G) No Benefit Reduction Due to Post Termination Social Security Changes. Benefits under the Plan shall not be decreased by reason of any increase in the benefit levels payable under Title II of the Social Security Act or by reason of any increase in the wage base under such Title II, if such increase takes place after September 2, 1974 or (if later) the earlier of the date of -55- first receipt of such benefits or the date of the Participants separation from service, as the case may be. (H) Minimum Preserved Benefit Due to Certain Amendments. In the event that the Plan or Superseded Plan has been or is amended effective as of a date on or after January 1, 1989 to eliminate or reduce a retirement type subsidy or an early retirement benefit or to change the actuarial assumptions used to determine actuarially equivalent benefits payable thereunder, the monthly retirement income or other benefit, if any, payable under the provisions of Section 2.1, 2.2 or 2.4 (and Section 3.1 if an optional form of payment is applicable) to a Participant, who was a participant in the Plan or Superseded Plan as of the day immediately preceding the date that the elimination, reduction or change becomes effective (herein referred to as the "Preservation Date") and who retires or whose service is terminated after the Preservation Date, shall be at least equal to the corresponding amount of the monthly retirement income or other benefit, if any, payable to him under the provisions of such applicable section of the Plan (or, if applicable, the section of the Superseded Plan that corresponds to such applicable section of the Plan) as in effect on the Preservation Date computed using his Credited Service, Final Average Monthly Compensation and Monthly Covered Compensation (or, if applicable, their corresponding terms under the Superseded Plan) determined as of the Preservation Date under the provisions of the Plan (or, if applicable, the Superseded Plan) as in effect on such date and using if applicable, the mortality table and interest rate assumptions that applied under the provisions of the Plan (or, if applicable, the Superseded Plan) as in effect on the Preservation Date to compute actuarially equivalent benefits payable to a participant who retired or whose service was terminated on the Preservation Date. (I) Direct Rollover Options for Eligible Rollover Distributions. This section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The following definitions apply to this section: (1) Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: (a) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more; (b) any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code; (c) the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and -56- (d) any other exception permitted by law or rules or regulations of the Internal Revenue Service. (2) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in Section 408(a) of the Internal Revenue Code, an individual retirement annuity described in Section 408(b) of said Code, an annuity plan described in Section 403(a) of said Code, or a qualified trust described in Section 401(a) of said Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (3) Distributee. A distributee includes an employee or former employee. In addition, the employees or former employee's surviving spouse and the employee or former employee's spouse or former spouse who is the alternate payee under qualified domestic relations order, as defined in Section 414(p) of the Internal Revenue Code, are distributees with regard to the interest of the spouse or former spouse. (4) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. Any options set forth in this section shall automatically become inoperative and of no effect upon a ruling by the Treasury Department that the options set forth herein are no longer required. Section 4.2. Limitations on Benefits Required by the Internal Revenue Service. (A) Limitation in the Event of Plan Termination. In the event that the Plan is terminated, the benefit of any Participant who is a Highly Compensated Employee (or a highly compensated former employee) shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Internal Revenue Code and regulations issued with respect thereto. (B) Limitation on Annual Payments. (1) The provisions of this Section 4.2(B) shall apply during each Plan Year beginning after January 1, 1992 to those Participants who during such Plan Year ()a are among the 25 highest-paid Participants (including former Participants) in the Plan (determined with respect to each Employer or group of Employers with respect to which the Plan represents a separate single plan) and (b) are Highly Compensated Employees (or highly compensated former employees) and whose annual payments under the Plan must be restricted due to the provisions of Section 401(a)(4) of the Internal Revenue Code and regulations issued with respect thereto. (2) To the extent required by Section 401(a)(4) of the Internal Revenue Code and regulations issued with respect thereto, the annual benefit payable under the Plan to any such Participant to whom the provisions of this Section 4.2(B) are applicable shall not exceed an amount equal to the payments that would be made on his behalf under a single life annuity that is the actuarial equivalent of the sum of his accrued benefit and his other benefits under the Plan; provided, however, that such restriction shall not apply if: -57- (a) after payment of the "benefits" (as defined below) to the Participants to whom the provisions of this Section 4.2(B) are applicable, the remaining value of Plan assets equals or exceeds 110% of the value of current liabilities within the meaning of Section 412(1)(7) of the Internal Revenue Code and regulations issued with respect thereto; (b) the value of the "benefits" (as defined below) for such Participant is less than 1% of the value of current liabilities within the meaning of Section 412(1)(7) of the Internal Revenue Code and regulations issued with respect thereto; (c) an agreement, which is expressly permitted under Section 401(a)(4) of the Internal Revenue Code or regulations or ruling issued with respect thereto, is entered into with the Trustee, adequately secured in conformity with the requirements of said Code section, regulations or rulings, which provides for the repayment, if applicable and to the extent required under said Code section, regulations or rulings, to the Trust Fund of any part of the distribution which is restricted under the provisions of said Code section, regulations or rulings; or (d) in the event of the termination of the Plan, there are sufficient assets to satisfy all benefit liabilities of the Plan to Participants and their Beneficiaries. (3) For the purposes of this Section 4.2(B), the term "benefit" shall have the meaning assigned in Treasury Regulation 1.401(a)4)-5(c) and shall include loans in excess of the amounts set forth in Section 72(p)(2)(A) of the Internal Revenue Code, any periodic income, any withdrawal values payable to a living employee, and any death benefits not provided for by insurance on the employee's life. Section 4.3. Benefits Nonforfeitable if Plan is Terminated. In the event of the termination or partial termination of the Plan, the rights of each affected Participant in the Plan to benefits accrued to such date of termination, to the extent then funded, shall be nonforfeitable, where such benefits shall be determined and distributed as provided in Section 4.5 hereof, provided, however, if the participation in the Plan of one or more but not all Employers that are members of a group of Employers with respect to which the Plan represents a single plan is terminated, the Plan shall not be considered to have been terminated for the purposes of this Section 4.3 (although a partial termination of the Plan may result because of such termination of participation). Unless specifically required otherwise by law or by rules or regulations of the Internal Revenue Service, the nonforfeitable rights granted to Participants under the provisions of this section shall not apply with respect to (i) any benefits (or portions thereof) that have been cashed out, whether voluntarily or involuntarily, under the provisions hereof and that have not been reinstated (by repayment or by the reinstatement of Credited Service accrued prior to the date of such cashout) in accordance with the provisions hereof prior to the date of the termination or partial termination of the Plan or (ii) any nonvested benefits that are deemed cashed out and forfeited at the date of termination of service of a terminated or retired Participant whose service was terminated prior to the date of termination or partial termination of the Plan. -58- Section 4.4. Merger of Plan. In the case of the merger or consolidation of the Plan with, or the transfer of assets or liabilities to, another qualified retirement plan, each Participant must be entitled to receive a benefit, upon termination of such other retirement plan after such merger, consolidation or transfer, which is at least equal to the benefit which he would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had been terminated at that time. Section 4.5. Termination of Plan and Distribution of Trust Fund. Upon termination of the Plan in accordance with the provisions hereof, the share of the assets of the Trust Fund available for distribution to the affected Participants and Beneficiaries shall be allocated and distributed in accordance with the following procedure. (A) The Committee shall determine the date of distribution and the share in the value of the assets of the Trust Fund that is attributable to each Employer or group of Employers with respect to which the Plan represents a single plan. (B) The distribution of the asset value will be provided by the purchase of insured annuities for each class of Participants and other persons entitled to benefits under the Plan,, as specified in (C) below, except that, in lieu of the purchase of an annuity, a lump-sum distribution shall be made to or on behalf of a Participant if (i) the actuarially equivalent single-sum value of the benefit (payable as a lump-sum settlement) to be distributed to him or on his behalf under the provisions of this Section 4.5 is equal to or less than $3,500 in Plan Years beginning prior to August 6, 1997 or $5,000 in Plan Years beginning after August 5, 1997, or is equal to or less than such larger amount that is permitted as an involuntary cashout of benefits under rules and regulations of the Internal Revenue Service and Pension Benefit Guaranty Corporation, and (ii) such distribution may be made without the necessity of having the consent of the recipient under any applicable rules or regulations of the Internal Revenue Service or Pension Benefit Guaranty Corporation. Any annuities purchased pursuant to the provisions of this Section 4.5 will be subject to the provisions hereof pertaining to the Qualified Joint and 50% Survivor Annuity Option and to the Qualified Preretirement Survivor Annuity. (C) The Committee shall determine the asset value available for distribution on behalf of each Employer or group of Employers with respect to which the Plan represents a single plan after taking into account the expenses of such distribution. After having determined such asset value available for distribution to each such Employer or group of Employers, as the case may be, and subject to the applicable provisions of any Supplement hereto pertaining to the distribution of assets upon the termination of the Plan, the Committee shall allocate such asset value (allocated to the particular Employer or group of Employers) as of the date of termination of the Plan in accordance with Section 4044 of the Employee Retirement Income Security Act of 1974, as amended. (D) In the event that there be asset value remaining after the satisfaction of all liabilities of the Plan to Participants and their Beneficiaries, such residual assets shall be allocated and distributed as follows: (1) the portion, if any, of the residual assets attributable to mandatory employee contributions, if any, shall be determined by multiplying such residual assets by the fraction in which the numerator is the present value of the portions of the accrued -59- benefits of all eligible Participants which are derived from such Participant's mandatory employee contributions and the denominator is the present value of all benefits (exclusive of the portion, if any, of an individual's accrued benefit which is derived from the Participant's contributions to the Plan or Superseded Plan which were not mandatory contributions) with respect to which assets have been allocated under (C) above, and such portion of the residual assets attributable to mandatory employee contributions shall be allocated among the eligible Participants in proportion to the present value of the portion of the accrued benefit of each such eligible Participant which is derived from his mandatory employee contributions; and (2) the excess of such residual assets over the portion thereof attributable to mandatory employee contributions as determined under (1) above shall be distributed to the Employer; provided, however, in the case of a group of Employers with respect to which the Plan represents a single plan, the residual assets shall remain in the Trust Fund if the Plan is not being terminated with respect to all of such Employers. For the purposes of (1) above, an eligible Participant includes each Participant in the Plan as of the date of termination of the Plan and each former Participant who has received, during the three-year period ending with the date of termination of the Plan, a distribution from the Plan of such individual's entire nonforfeitable benefit in the form of a single-sum distribution in accordance with Section 203(e) of the Employee Retirement Income Security Act of 1974, as amended, or in the form of irrevocable commitments purchased by the Plan from an insurer to provide such nonforfeitable benefit. (E) The order of priorities for, and the amounts and methods of, the distributions set forth above and the rights of Participants and their Beneficiaries to benefits under the Plan shall be subject (i) to the distribution rules set forth in the Plan and to the distribution rules and regulations of the Pension Benefit Guaranty Corporation, (ii) to the limitations provided by Section 4.2 of the Plan, (iii) to any changes, including the recapture of any prior distributions to Participants, as may be ordered by the Pension Benefit Guaranty Corporation and (iv) to any changes required by the Internal Revenue Service as a condition for issuing a favorable determination letter stating that the distribution of assets will not adversely affect the continued qualified status of the Plan under Section 401(a) of the Internal Revenue Code Section 4.6. Special Provisions That Apply If Plan Is Top-Heavy. The provisions of this Section 4.6 shall apply if the Superseded Plan was or the Plan is a "top-heavy plan" within the meaning of Section 416(g) of the Internal Revenue Code with respect to any Plan Year beginning after December 31, 1983. (A) Determination of Plan Years in Which Plan Is Top-Heavy. The Plan shall be top-heavy with respect to an applicable Plan Year if: (1) either: -60- (a) any Participant, former Participant or Beneficiary in the Plan is a "key employee" within the meanings of Section 416 of the Internal Revenue Code (hereinafter referred to in this Section 4.6 as "Key-Employees"); or (b) the Plan is required to be combined with any other plan, which is included in the Aggregation Group (as defined below) and which has a participant who is a Key Employee, in order to enable such other plan to meet the requirements of Section 401(a)(4) or Section 410 of the Internal Revenue Code; and (2) the ratio (determined in accordance with Section 416 of the Internal Revenue Code) as of the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such first Plan Year (such day, whether applicable to the first Plan Year or to subsequent Plan Years, is hereinafter referred to in this Section 4.6 as the "Determination Date") of: (a) the sum of (i) the present value of the cumulative accrued benefits for all Key Employees under all defined benefit plans included in the Aggregation Group plus (i) the aggregate of the individual accounts of all Key Employees under all defined contribution plans included in such Aggregation Group; to (b) a similar sum determined for all Participants, former Participants and Beneficiaries excluding any such Participant or former Participant (or his Beneficiary) who was a Key Employee for any prior Plan Year but who is not currently a Key Employee and also excluding, for Plan Years beginning after December 31, 1984, any Participant or former Participant (or his Beneficiary) who has not at any time during the five-year period ending on the Determination Date performed services for any employer maintaining a plan included in the Aggregation Group under all defined benefit plans and defined contribution plans included in such Aggregation Group; is greater than 60%. For the purposes of this Section 4.6, the Aggregation Group shall mean the Plan plus all other defined benefit plans and defined contribution plans (including any such plans that terminated during the five-year period ending on the Determination Date), if any, maintained by the Controlled Group Members; provided, however, that any defined benefit plan or defined contribution plan of any Controlled Group Member that (i) does not have any participant who is a Key Employee and (ii) is not required to be combined with any other plan, which is included in the Aggregation Group and which has a participant who is a Key Employee, in order to enable such other plan to meet the requirements of Section 401(a)(4) or Section 410 of the Internal Revenue Code, shall be included in the Aggregation Group only if such defined benefit plan or defined contribution plan, together with the other plans that are included in the Aggregation Group, as a -61- combined group satisfy the requirements of Sections 401(a)(4) and 410 of the Internal Revenue Code. The present value of an accrued benefit under the Plan shall, for the purposes of this Section 4.6, be determined as of the most recent valuation date that (i) is used for the Plan Year for computing Plan costs for minimum funding purposes (regardless of whether a valuation is actually performed for that Year) and (ii) is within the 12 month period ending on the applicable Determination Date (such valuation date is herein referred to in this Section 4.6 as the "Valuation Date"). Such present value of accrued benefits under the Plan shall be computed using 5% interest and the mortality table used for such Plan Year for computing Plan costs for minimum funding purposes. The present value of the cumulative accrued benefits under the other defined benefit plans included in the Aggregation Group and the aggregate of the individual accounts under the defined contribution plans included in such Aggregation Group shall be determined separately for each such plan in accordance with Section 416 of the Internal Revenue Code and regulations issued with respect thereto as of the "determination date" that is applicable to each such separate plan and that falls within the same calendar year that the Determination Date applicable to the Plan falls. Unless required otherwise under Section 416 of the Internal Revenue Code and regulations issued thereunder, a Participant's (or Beneficiary's) accrued benefit under the Plan shall be equal to the sum of: (a) an amount equal to either: (i) if his service has not been terminated and he has not reached his Normal Retirement Date as of the Valuation Date, the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that he has accrued as of the Valuation Date; (ii) if his service has not been terminated and he has reached his Normal Retirement Date as of the Valuation Date, the monthly retirement income to which he would have been entitled under the normal retirement provisions of the Plan if he had retired on the Valuation Date; or (iii) if his service has been terminated as of the Valuation Date, the amount of retirement income or other benefit that is payable on his behalf under the Plan On and after the Valuation Date; plus -62- (b) the aggregate distributions made on his behalf during the five-year period ending on the Determination Date; provided, however, that his estimated accrued benefit between the Valuation Date and Determination Date applicable to the first Plan Year shall be included as part of his accrued benefit with respect to the first Plan Year only. Any provisions hereof to the contrary notwithstanding and solely for the purpose of determining if the Plan is top-heavy with respect to an applicable Plan Year beginning after December 31, 1986, the accrued benefit of any employee who is not a Key Employee shall be determined under the method which is used for accrual purposes for all defined benefit plans included in the Aggregation Group or, if a single method is not used for all such defined benefit plans, the accrued benefit of such employee shall be determined as though it accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rule of Section 411(b)(l)(C) of the Internal Revenue Code. (B) Minimum Vesting Provisions If Plan Becomes Top-Heavy. Any other provision of the Plan to the contrary notwithstanding, the Initial Vesting Date of a Participant in the Plan, who has accrued an Hour of Service during any Plan Year that is subsequent to the last Plan Year that the Plan was not top-heavy, for the purpose of determining his eligibility for the benefit provided under Section 2.4(A) hereof during any plan Year that is subsequent to the last Plan Year that the Plan was not top-heavy, shall not be later than (i) the date as of which he completes two years of Vesting Service or (ii) the first day of the Plan Year immediately following the last Plan Year that the Plan was not top-heavy, whichever is later, but the Vested Percentage of the Participant for the purposes of Section 2.4(A)(1) shall be 100% with respect to the portion of his Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that is attributable to his own contributions, if any, and shall not be less than the percentage specified in the schedule below, based upon the Participant's number of years (ignoring fractions) of Vesting Service as of the date of termination of his service, with respect to the portion of his Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that is attributable to employer contributions: YEARS OF VESTED VESTING SERVICE PERCENTAGE Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or More 100% In the event that the Plan ceases to be top-heavy with respect to any subsequent Plan Year, the following provisions will apply with respect to the minimum benefits to which such a Participant is entitled under Section 2.4(A) hereof during such subsequent Plan Years that the Plan is not top-heavy: -63- (1) if the participant had not completed at least two Years of Vesting Service as of the last day of the last Plan Year during which the Plan was top-heavy, his nonforfeitable right to the benefits to which he is entitled under Section 2.4(A) hereof shall be determined as though the Plan had never been top-heavy; (2) if the Participant had completed at least two but had not completed at least three years of Vesting Service as of the last day of the last Plan Year during which the Plan was top-heavy, he shall be eligible for a minimum benefit payable under Section 2.4(A) hereof; such minimum benefit provided under Section 2.4(A)(1) shall be based upon (a) 100% of the portion of his Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that he has accrued as of the date of termination of his service that is attributable to his own contributions, if any, plus (b) the product of (i) the portion of the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that he had accrued as of the date of termination of his service that is attributable to employer contributions multiplied by (ii) his Vested Percentage determined as of the last day of the last Plan Year during which the Plan was top-heavy; (3) if the Participant had completed at least three years of Vesting Service as of the last day of the last Plan Year during which the Plan was top-heavy, he shall be eligible for the benefit provided under Section 2.4(A) hereof, but the Participant's Vested Percentage shall be determined in the same manner as though the Plan had remained top-heavy; and (4) the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that a Participant, whose Vesting Service includes service that was accrued on or prior to the last day of the last Plan Year that the Plan was top-heavy, has accrued as of any given date shall not be less than the actuarial equivalent of (a) the benefit provided on his behalf under Section 4.6(C)(1) below as of such given date plus (b) the benefit provided on his behalf under Section 4.6(C)(2)(a) below as of the last day of the last Plan Year during which the Plan was top-heavy less (c) the amount of the benefit provided on his behalf under Section 4.6(C)(2)(b) below as of such given date. (C) Minimum Benefit if Plan Becomes Top-Heavy. In the event that the service of a Participant, who is not a Key Employee, is terminated on or after his Initial Vesting Date for any reason, the retirement income payable to the Participant under the provisions of Section 2.1, 2.2 or 2.4(A) hereof or, if the service of the Participant is terminated by reason of his death, the retirement income which he has accrued as of the date of his death that is used to determine the benefit payable on his behalf under the provisions of Section 2.4(B) hereof, whichever is applicable, shall not be less than that amount of retirement income which is actuarially equivalent (based upon the interest and mortality assumptions that are being used under the Plan as of the date of his retirement or termination of service to determine actuarially equivalent monthly retirement incomes) to an amount equal to: (1) 100% of the portion of his Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date that he has accrued as of the date of his retirement or termination of service that is attributable to his own contributions, if any; plus -64- (2) the excess, if any, of: (a) a monthly retirement income payable to the Participant for life (with no ancillary benefits) commencing at his Normal Retirement Date in an amount equal to (i) 2% of his "IRC 416 Final Average Monthly Compensation" multiplied by (ii) his number of years of Vesting Service, not in excess of 10 years, that were accrued during those Plan Years in which the Plan was top-heavy, with the resulting product of (i) and (ii) multiplied by (iii) his Vested Percentage at the date of his retirement or termination of service; provided, however, if the Participant retires after his Normal Retirement Date, the amount of the monthly retirement income determined under this Subparagraph (a) shall not be less than the actuarial equivalent of the monthly retirement income determined in accordance with this subparagraph that would have been payable to the Participant if he had retired on his Normal Retirement Date; over (b) the monthly retirement income payable to the Participant for life (with no ancillary benefits) commencing at his Normal Retirement Date in an amount equal to the sum of: (i) such amount of income, if any, that he has a nonforfeitable right to receive and that is attributable to employer contributions and is payable to the Participant under the other defined benefit plans, if any, which are included in the Aggregation Group; plus (ii) such amount of income that can be provided on an actuarially equivalent basis (based upon the interest and mortality assumptions that are being used under the Plan as of the date of his retirement or termination of service to determine actuarially equivalent monthly retirement incomes) by the amounts, if any, that he has a nonforfeitable right to receive and that are attributable to employer contributions and forfeitures that are credited to his account under the defined contribution plans, if any, included in the Aggregation Group; provided, however, if the Aggregation Group includes one or more defined contribution plans and if, with respect to each Plan Year that the Plan is top-heavy, the Participant has received an allocation of employer contributions and forfeitures to his account under such defined contribution plan or plans which is equal to or greater than 5% of the IRC 415 Compensation that he received during such Plan Year from the employers maintaining plans included in the Aggregation Group, the minimum benefit described above in this Section 4.6(C) shall not apply to such Participant. For the purposes of this Section 4.6(C), a Participant's IRC 416 Final Average Monthly Compensation" shall be equal to his average monthly rate of IRC 415 Compensation for the five consecutive calendar years, which are prior to the January 1st immediately following (i) the date of the Participant's retirement or termination of service or (ii) the close of the last Plan Year in which the Plan is top-heavy, whichever is earlier, during which he received the highest -65- aggregate ERC 415 Compensation. Such average monthly rate will be determined by dividing the total of such IRC 415 Compensation that he received during such five-consecutive-calendar year period from the employers maintaining plans included in the Aggregation Group by the product equal to 12 times the number of years of Vesting Service which he accrued during such five-calendar-year period. In the event that the Participant does not receive both IRC 415 Compensation and Vesting Service during a calendar year or calendar years, such calendar year or calendar years during which he did not receive both IRC 415 Compensation and Vesting Service shall be ignored and excluded in determining the five consecutive calendar years during which he received the highest aggregate IRC 415 Compensation. (D) Restriction of Section 416(h) of the Internal Revenue Code if Plan is Top-Heavy. Any provision of Section 4.1(A) hereof to the contrary notwithstanding, in any Plan Year that the Plan is top-heavy, 100% shall be substituted for 125% in paragraphs (2)(B) and (3)(B) of Section 415(e) of the Internal Revenue Code. This paragraph shall not apply to Plan Years commencing after December 31, 1999. SECTION 5. MISCELLANEOUS PROVISIONS REGARDING PARTICIPANTS. Section 5.1. Participants to Furnish Required Information. Each Participant, his spouse and his Beneficiaries and joint pensioners will finish to the Committee such information as the Committee considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant's, Beneficiary's or joint pensioner's furnishing promptly such true, full and complete information as the Committee may request. Each Participant will submit proof of his age and marital status and proof of the age and continued life of each Beneficiary and joint pensioner designated or selected by him to the Committee at such time as required by the Committee. The Committee will, if such proof of age, marital status or continued life is not submitted as required, use as conclusive evidence thereof, such information as is deemed by it to be reliable, regardless of the source of such information. Any adjustment required by reason of lack of proof or the misstatement of the age of persons entitled to benefits hereunder, by the Participant or otherwise, will be in such manner as the Committee deems equitable. Any notice or information which, according to the terms of the Plan or the rules of the Committee, must be filed with the Committee, shall be deemed so filed at the time that it is actually received by the Committee. The Employer, the Committee, and any person or persons involved in the administration of the Plan shall be entitled to rely upon any certification, statement, or representation made or evidence furnished by an employee, Participant, Beneficiary or joint pensioner with respect to his age or other facts required to be determined under any of the provisions of the Plan and shall not be liable on account of the payment of any monies or the doing of any act or failure to act in reliance thereon. Any such certification, statement, representation or evidence, upon being duly made or furnished, shall be conclusively binding upon the Person furnishing same; but it shall not be binding upon the Employer, the Committee, or any other person or persons involved in the administration of the Plan, and nothing herein contained shall be construed to prevent any of such parties from contesting any such certification, statement, representation or evidence or to relieve the Employee, Participant, Beneficiary or joint pensioner from the duty of submitting satisfactory proof of any such fact. -66- Section 5.2. Beneficiaries. Subject to the provisions of the following paragraphs of this section, each Participant may, on a form provided for that purpose, signed and filed with the Committee, designate a Beneficiary to receive the benefit, if any, which may be payable to his Beneficiary under the Plan in the event of his death, and each designation may be revoked by such Participant by signing and filing with the Committee a new designation of Beneficiary form. If a deceased Participant, who has been married to his spouse throughout the one-year period immediately Preceding his death, has designated a person other than his spouse as his Beneficiary and such spouse has not consented in accordance with the provisions of Section 4.1(E) hereof, either after the date of the Participant's separation from service or on or after the date that the Participant attained the age of 35 years, to such other person being designated as the Beneficiary, the provisions of Section 4.1(D) hereof, relating to the qualified preretirement survivor annuity payable to his surviving spouse, will apply in the event of his death on or after his Initial Vesting Date, and the Participant will automatically be deemed to have changed his designation of Beneficiary to the extent necessary to comply with the provisions of Section 4.1(D). If a deceased Participant who had a spouse at the date of his death failed to designate a Beneficiary in accordance with the provisions of this section, he shall be deemed to have designated his spouse as his Beneficiary. If a deceased Participant who had no spouse at the date of his death failed to designate a Beneficiary in accordance with the provisions of this section or if a deceased Participant (whether or not he has a surviving spouse at the date of his death) had previously designated a Beneficiary but no designated Beneficiary is surviving at the date of his death, the death benefit, if any, that may be payable under the Plan with respect to such deceased Participant may be paid, in the discretion of the Committee but subject to the provisions of Sections 4.1(D) and 4.1(E) hereof if the spouse of such deceased Participant is surviving, either to: (a) any one or more of the persons comprising the group consisting of the Participant's spouse, the Participant's descendants, the Participant's parents or the Participant's heirs-at-law, and the Committee may direct the payment of the entire benefit to any member of such group or the apportionment of such benefit among any two or more of them in such shares as the Committee, in its sole discretion, shall determine; or (b) the estate of such deceased Participant; or in the event the Committee does not so direct any of such payments, the Committee may elect to have a court of applicable jurisdiction determine to whom a payment or payments shall be paid. Any payment made to any person pursuant to the provisions of this Section 5.2 shall operate as a complete discharge of all obligations under the Plan with respect to such deceased Participant and shall not be subject to review by anyone but shall be final, binding and conclusive on all persons ever interested hereunder. -67- Section 5.3. Contingent Beneficiaries. In the event of the death of a Beneficiary who survives the Participant and who, at the Beneficiary's death, is receiving benefits pursuant to the provisions of the Plan within any certain period specified under the Plan with respect to which death benefits are payable under the Plan after the Participant's death, the same amount of monthly retirement income that the Beneficiary was receiving shall be payable for the remainder of such specified certain period to a person designated by the Participant (in the manner provided in Section 5.2) to receive the remaining death benefits, if any, payable in the event of such contingency or, if no person was so named, then to a person designated by the Beneficiary (in the manner provided in Section 5.2) of the deceased Participant to receive the remaining death benefits, if any, payable in the event of such contingency; provided, however, that if no person so designated be living upon the occurrence of such contingency, then the remaining death benefits, if any, shall be payable for the remainder of such specified certain period, in the discretion of the Committee, either to: (a) all or any one or more of the persons comprising the group consisting of the Participant's spouse, the Beneficiary's spouse, the Participant's descendants, the Beneficiary's descendants, the Participant's parents, the Beneficiary's parents, the Participant's heirs-at-law or the Beneficiary's heirs-at-law, and the Committee may direct the payment of the entire benefit to any member of such group or the apportionment of such benefit among any two or more of them in such shares as the Committee, in its sole discretion, shall determine; or (b) the estate of such deceased Beneficiary; or in the event the Committee does not so direct any of such payments, the Committee may elect to have a court of applicable jurisdiction determine to whom a payment or payments shall be paid. Any payments made to any person pursuant to the provisions of this Section 5.3 shall operate as a complete discharge of all obligations under the Plan with respect to such deceased Beneficiary and shall not be subject to review by anyone but shall be final, binding and conclusive on all persons ever interested hereunder. Section 5.4. Participants' Rights in Trust Fund. No Participant or other person shall have any interest in or any right in, to or under the Trust Fund, or any part of the assets held thereunder, except as to the extent expressly provided in the Plan. Section 5.5. Benefits Not Assignable. Except to the extent required to comply with a qualified domestic relations order as described in Sections 401(a)(13) and 414(p) of the Internal Revenue Code, no benefits, rights or accounts shall exist under the Plan which are subject in any manner to voluntary or involuntary anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be null and void; nor shall any such benefit, right or account under the Plan be in any manner liable for or subject to the debts, contracts, liabilities, engagements, torts or other obligations of the person entitled to such benefit, right or account; nor shall any benefit, right or account under the Plan constitute an asset in case of the bankruptcy, receivership or divorce of any person entitled to a benefit under the Plan; and any such benefit, right or account under the Plan shall be payable only directly to the Participant or Beneficiary, as the case may be. Where a qualified domestic relations order has been received by the Committee, the terms and benefits of the Plan will be considered to have been modified with respect to the -68- Participant affected to the extent that such order requires benefits to be paid to specified individuals other than the Participant. Section 5.6. Benefits Payable to Minors and Incompetents. Whenever any person entitled to payments under the Plan shall be a minor or under other legal disability or in the sole judgment of the Committee shall otherwise be unable to apply such payments to his own best interest and advantage (as in the case of illness, whether mental or physical, or where the person not under legal disability is unable to preserve his estate for his own best interest), the Committee may in the exercise of its discretion direct all or any portion of such payments to be made in any one or more of the following ways unless claim shall have been made therefor by an existing and duly appointed guardian, tutor, conservator, committee or other duly appointed legal representative, in which event payment shall be made to such representative: (A) directly to such person unless such person shall be an infant or shall have been legally adjudicated incompetent at the time of the payment; (B) to the spouse, child, parent or other blood relative to be expended on behalf of the person entitled or on behalf of those dependents as to whom the person entitled has the duty of support; or (C) to a recognized charity or governmental institution to be expended for the benefit of the person entitled or for the benefit of those dependents as to whom the person entitled has the duty of support. The decision of the Committee will, in each case, be final and binding upon all persons, and the Committee shall not be obliged to see to the proper application or expenditure of any payments so made. Any payment made pursuant to the power herein conferred upon the Committee shall operate as a complete discharge of the obligations of the Trustee and of the Committee. Section 5.7. Conditions of Employment Not Affected by Plan. The establishment and maintenance of the Plan will not be construed as conferring any legal rights upon any Participant to the continuation of his employment with the Employer, nor will the Plan interfere with the right of the Employer to discipline, lay off or discharge any Participant. The adoption and maintenance of the Plan shall not be deemed to constitute a contract between the Employer and any employee or to be a consideration for, inducement to, or condition of employment of any person. Section 5.8. Notification of Mailing Address. Each Participant and other person entitled to benefits hereunder shall file with the Committee from time to time, in writing, his post office address and each change of post office address, and any check representing payment hereunder and any communication addressed to a Participant, a former Participant, a Beneficiary or a pensioner hereunder at his last address filed with the Committee (or, if no such address has been filed, then at his last address as indicated on the records of the Employer) shall be binding on such person for all purposes of the Plan, and neither the Committee nor the Trustee shall be obliged to search for or ascertain the location of any such person. -69- If the Committee, for any reason, is in doubt as to whether retirement income payments are being received by the person entitled thereto, it may, by registered mail addressed to such person and to such person's designated Beneficiary, if any, at their address last known to the Committee, notify such person and his Beneficiary that all unmailed and future retirement income payments shall be henceforth withheld until the Committee is provided with evidence of such person's continued life and his proper mailing address or with evidence of such person's death. In the event that (i) such notification is mailed to such person and his designated Beneficiary, (ii) the Committee is not furnished with evidence of such person's continued life and proper mailing address or with evidence of his death within three years of the date such notification was mailed and (iii) the Committee is unable to find any person to whom payment is due under the provisions of the Plan within three years of the date such notification was mailed, all retirement income and other benefit payments due shall be forfeited at the end of such three-year period following the date such notification was mailed; provided, however, if claim for any forfeited benefit is subsequently made by any such person to whom payment is due under the Plan, such forfeited benefits due such person shall be reinstated. Section 5.9. Written Communications Required. Any notice, request, instruction, or other communication to be given or made hereunder shall be in writing and may be delivered to the addressee personally, may be delivered to the addressee by a commercial delivery service at the last address for notice shown on the Committee's records, or may be deposited in the United States mail fully postpaid and properly addressed to such addressee at the last address for notice shown on the Committee's records. Section 5.10. Benefits Payable at Office of Trustee. All benefits hereunder, and installments thereof, shall be payable at the office of the Trustee. Section 5.11. Appeal to Committee. A Participant or Beneficiary who feels he is being denied any benefit or right provided under the Plan must file a written claim with the Committee. All such claims shall be submitted on a form provided by the Committee which shall be signed by the claimant and shall be considered filed on the date the claim is received by the Committee. Upon the receipt of such a claim and in the event the claim is denied, the Committee shall, within 90 days after its receipt of such claim, provide such claimant a written statement which shall be delivered or mailed to the claimant by certified or registered mail to his last known address, which statement shall contain the following: (A) the specific reason or reasons for the denial of benefits; (B) a specific reference to the pertinent provisions of the Plan upon which the denial is based; (C) a description of any additional material or information that is necessary; and (D) an explanation of the review procedure provided below; -70- provided, however, in the event that special circumstances require an extension of time for processing the claim, the Committee shall provide such claimant with such written statement described above not later than 180 days after receipt of the claimant's claim, but, in such event, the Committee shall furnish the claimant, within 90 days after its receipt of such claim, written notification of the extension explaining the circumstances requiring such extension and the date that it is anticipated that such written statement will be furnished. Within 60 days after receipt of a notice of a denial of benefits as provided above, if the claimant disagrees with the denial of benefits, the claimant or his authorized representative must request, in writing, that the Committee review his claim and may request to appear before the Committee for such review. In conducting its review, the Committee shall consider any written statement or other evidence presented by the claimant or his authorized representative in support of his claim. The Committee shall give the claimant and his authorized representative reasonable access to all documents which the Committee deems pertinent and necessary for the preparation of his claim. Within 60 days after receipt by the Committee of a written application for review of his claim, the Committee shall notify the claimant of its decision by delivery or by certified or registered mail to his last known address; provided, however, in the event that special circumstances require an extension of time for processing such application, the Committee shall so notify the claimant of its decision not later than 120 days after receipt of such application, but, in such event, the Committee shall furnish the claimant, within 60 days after its receipt of such application, written notification of the extension explaining the circumstances requiring such extension and the date that it is anticipated that its decision will be furnished. The decision of the Committee shall be in writing and shall include the specific reasons for the decision presented in a manner calculated to be understood by the claimant and shall contain reference to all relevant Plan provisions on which the decision was based. The decision of the Committee shall be final and conclusive. Section 5.12. Credit for Qualified Military Service. Notwithstanding any provision of this Plan to the contrary, effective as of December 12, 1994, as required by the Uniformed Service Employment and Reemployment Rights Act, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Internal Revenue Code. SECTION 6. MISCELLANEOUS PROVISIONS REGARDING THE EMPLOYER. Section 6.1. Contributions. No contributions shall be required of or permitted to be made by any Participant. The Employer intends, but does not guarantee, to make annual contributions in amounts at least equal to the amounts, if any, required to meet the minimum funding requirements of Section 412 of the Internal Revenue Code, as specified in the actuary's valuation reports for the applicable periods of time. Subject to applicable provisions of law, neither the Employer nor any of its officers, agents or employees, nor any member of its board of -71- directors, nor any partner or sole proprietor, guarantees, in any manner the payment of benefits under the Plan. Section 6.2. Employer's Contributions Irrevocable. The Employer shall have no right, title or interest in the Trust Fund or in any part thereof, and no contributions made thereto shall revert to the Employer except such part of the Trust Fund, if any, that remains therein after the satisfaction of all liabilities to persons entitled to benefits under the Plan and except as provided in the following paragraph. All contributions to the Plan are made subject to the qualification of the Plan under Section 401 of the Internal Revenue Code and to their deductibility under Section 404 of said Code. In the event that the Plan represents a newly established retirement plan (and not an amendment of an existing retirement plan) with respect to an Employer and such qualification of the Plan is denied, the total contributions of the Employer, adjusted for any earnings or losses of the Trust Fund attributable thereto, shall be returned to the Employer within one year of the date of denial of qualification. In the event that a contribution either is made by a good faith mistake of fact or is disallowed as a tax deductible expense under Section 404 of the Internal Revenue Code, the excess of the amount contributed over either the amount that would have been contributed if there had not been such a mistake or the amount that is allowed as a tax deductible expense, as the case may be, with such excess reduced by the net losses, if any, of the Trust Fund attributable thereto (but without any increase due to the net earnings, if any, of the Trust Fund attributable thereto), shall be returned to the Employer within one year of the date of the mistaken payment or the disallowance of the deduction, as the case may be. Section 6.3. Forfeitures. Forfeitures shall not be used to increase the benefits that any Participant would otherwise receive under the Plan at any time prior to the termination of the Plan but shall be anticipated in determining the costs under the Plan. Section 6.4. Amendment of Plan. The Plan may be amended from time to time in any respect whatever by formal action on the part of the Company in the manner described in Section 6.7 hereof, or by the Committee upon authorization of the Board of Directors of the Company, subject only to the following limitations: (A) Under no condition shall such amendment result in or permit the return or repayment to any Employer of any property held or acquired by the Trustee hereunder or the proceeds thereof or result in or permit the distribution of any such property for the benefit of anyone other than the Participants and their Beneficiaries or joint pensioners, except to the extent provided by Section 4.5 and Section 6.6 hereof with respect to termination of the Plan and expenses of administration, respectively. (B) Under no condition shall such amendment change the duties or responsibilities of the Trustee hereunder without its written consent. (C) No amendment shall be effective to the extent it eliminates or reduces any Plan benefits or rights that are protected under Section 41l(d)(6) of the Internal Revenue -72- Code unless such protected benefits or rights are preserved with respect to benefits accrued to the date of such amendment or unless such reduction or elimination is otherwise permitted by the Internal Revenue Service. Except to the extent permissible to comply with any laws or regulations of the United States or of any state to qualify this as a tax-exempt plan and trust, no amendment may be made that would result in a slower rate of vesting under the Plan for any Participant who has completed at least three years of Vesting Service as of the effective date of such amendment or, if later, as of the date such amendment is adopted, unless such amendment provides that each such Participant may elect, during the period described below, to retain the rate of vesting in effect under the Plan prior to such amendment in lieu of the new rate of vesting. The period during which the election described in the preceding sentence may be made shall begin no later than the date the Plan amendment is adopted and shall end no earlier than 60 days after (i) the date the amendment is adopted, (ii) the effective date of such amendment or (iii) the date the Participant is notified in writing of the amendment by the Committee, whichever is the latest date to occur. Subject to the foregoing limitations, any amendment may be made retroactively which, in the judgment of the Committee, is necessary or advisable provided that such retroactive amendment does not deprive a Participant, without his consent, of a right to receive benefits hereunder which have already vested and matured in such Participant, except such modification or amendment as shall be necessary to comply with any laws or regulations of the United States or of any state to qualify this as a tax-exempt plan and trust. The participation in the Plan of Employers other than the Company shall not limit the power of the Company and of the Committee under the foregoing provisions, and all amendments by the Company or the Committee to the Plan shall be binding upon all other Employers. Each Employer may, with the consent of the Committee, modify the provisions of the Plan as it pertains only to its own employees by the adoption, by formal action on its part in the manner described in Section 6.7 hereof, of a Supplement to the Plan specifying such modifications that shall pertain only to its employees. Any Supplement to the Plan adopted by an Employer or Employers shall apply only to the employees of the Employer or Employers adopting such Supplement and shall not affect the continued operation of the Plan with respect to any other Employers. Section 6.5. Termination of Plan. The Plan may be terminated by the Employers at any time by formal action, in the manner described in Section 6.7 hereof, on the part of each Employer then a party to the Plan specifying (a) that the Plan is being terminated and (b) the date as of which the termination is to be effective. In the event the Plan is to be terminated, the Employer shall notify the Committee and the Trustee of such termination. -73- The Plan or participation in the Plan may be terminated in the manner described above with respect to one, but less than all, of the Employers theretofore parties hereto and the Plan continued for the remaining Employer or Employers. The Plan or participation in the Plan shall automatically terminate as to a particular Employer upon dissolution of such Employer or upon its liquidation, merger or consolidation without provisions being made by its successor, if any, for the continuation of the Plan. In the event of the liquidation, dissolution, merger or consolidation of the Employer under such circumstances that there shall be a successor person, firm or corporation continuing and carrying on all or a substantial part of its business, such successor may be substituted for the Employer under the terms of the Plan by formal action on the part of such successor in the manner described in Section 6.7 hereof specifying its election to continue the Plan. Any provisions herein to the contrary notwithstanding, in the event of termination of the Plan, the death benefits provided under Sections 2.4(A)(3) and 2.4(B) (or under any Supplements hereto) shall not be payable on behalf of any Participant whose death occurs on or after the date of termination of the Plan, provided, however, if the death of the Participant occurs after the date of termination of the Plan and prior to (a) the date as of which an annuity is purchased on his behalf to provide the benefit to which he is entitled as a result of the termination of the Plan or (b) the date as of which distribution is made on his behalf in some other manner as a result of the termination of the Plan, as the case may be, the amount required to provide the distribution to which he is entitled as a result of termination of the Plan shall, subject to the provisions hereof relating to the qualified preretirement survivor annuity, be used to provide a benefit to his Beneficiary; and provided further, however, the minimum qualified preretirement survivor annuity required under Section 417 of the Internal Revenue Code shall be provided on behalf of any such Participant who is married and whose death occurs prior to his Annuity Starting Date and on or after the date on which an annuity has been purchased to provide the benefit to which he is entitled as a result of termination of the Plan. Section 6.6. Expenses of Administration. The Employer may pay all expenses incurred in the establishment and administration of the Plan, including expenses and fees of the Trustee, but it shall not be obligated to do so, and any such expenses not so paid by the Employer shall be paid from the Trust Fund. Section 6.7. Formal Action by Employer. Any formal action herein permitted or required to be taken by an Employer shall be: (a) if and when a partnership, by written instrument executed by one or more of its general partners or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by one or more general partners as having authority to take such action; (b) if and when a proprietorship, by written instrument executed by the proprietor or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by the proprietor as having authority to take such action; -74- (c) if and when a corporation, by resolution of its board of directors or other governing board, or by written instrument executed by a person or group of persons who has been authorized by resolution of its board of directors or other governing board as having authority to take such action; or (d) if and when a joint venture, by formal action on the part of the joint venturers in the manner described above. SECTION 7. ADMINISTRATION. Section 7.1 Administration by Committee. The Plan will be administered by the Retirement Committee appointed by the Company by formal action on its part in the manner described in Section 6.7 hereof. Such Committee will consist of (a) a chairman and at least two additional members or (b) a single individual. Each member may, but need not, be a director, proprietor, partner, officer or employee of any Employer, and each such member shall be appointed by the Company to serve until his successor shall be appointed in like manner. Any member of the Committee may resign by delivering his written resignation to the Company and to the other members, if any, of the Committee. The Company by formal action on its part in the manner described in Section 6.7 hereof may remove any member of the Committee by so notifying the member and other Committee members, if any, in writing. Vacancies on the Committee shall be filled by formal action on the part of the Company in the manner described in Section 6.7 hereof. The Committee, in its discretion, may delegate all or any part of its responsibilities of administering the provisions of the Plan with respect to any Employer or group of Employers to an administrative committee which will be appointed by such Employer or group of Employers by formal action on its or their part in the manner described in Section 6.7 hereof. In such event, references to the "Committee" in any provisions hereof which apply with respect to such delegated responsibilities shall refer to such administrative committee instead of the Retirement Committee. Section 7.2. Officers and Employees of Committee. The Committee may appoint a secretary who may, but need not, be a member of the Committee and may employ such agents, clerical and other services, legal counsel, accountants and actuaries as may be required for the purpose of administering the Plan. Any person or firm so employed may be a person or firm then, theretofore or thereafter serving the Employer in any capacity. The Committee and any individual member of the Committee and any agent thereof shall be fully protected when relying in good faith upon the advice of the following professional consultants or advisors employed by the Employer or the Committee: any attorney insofar as legal matters are concerned, any certified public accountant insofar as accounting matters are concerned and any enrolled actuary insofar as actuarial matters are concerned. Section 7.3. Action by Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business and shall have full power to act hereunder. The Committee may act either at a meeting at which a quorum is present or by a writing subscribed by at least a majority of the members of the Committee then serving. Any written -75- memorandum signed by the secretary or any member of the Committee who has been authorized to act on behalf of the Committee shall have the same force and effect as a formal resolution adopted in open meeting. Minutes of all meetings of the Committee and a record of any action taken by the Committee shall be kept in written form by the secretary appointed by the Committee or, if no secretary has been appointed by the Committee, by an individual member of the Committee. The Committee shall give to the Trustee any order, direction, consent or advice required under the terms of the Trust Agreement, and the Trustee shall be entitled to rely on any instrument delivered to it and signed by the secretary or any authorized member of the Committee as evidencing the action of the Committee. A member of the Committee may not vote or decide upon any matter relating solely to himself or vote in any case in which his individual right or claim to any benefit under the Plan is particularly involved. If, in any case in which any Committee member is so disqualified to act, the remaining members cannot agree or if there is only one individual member of the Committee, the Company, by formal action on its part in the manner described in Section 6.7 hereof, will appoint a temporary substitute member to exercise all of the powers of a qualified member concerning the matter in which the disqualified member is not qualified to act. Section 7.4. Rules and Regulations of Committee. The Committee shall have the authority to make such rules and regulations and to take such action as may be necessary to carry out the provisions of the Plan and will, subject to the provisions of the Plan, decide any questions arising in the administration, interpretation and application of the Plan, which decisions shall be conclusive and binding on all parties. The Committee may allocate or delegate any part of its authority and duties as it deems expedient. Section 7.5. Powers of Committee. In order to effectuate the purposes of the Plan, the Committee shall have the full power and authority to construe and interpret any and all provisions of the Plan, to reconcile any inconsistencies and resolve any ambiguities in the terms of the Plan, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan, and all such actions or determinations made by the Committee in good faith shall not be subject to review by anyone. The Committee is given the power to appoint, in its discretion, one or more Investment Managers to manage, including the power to acquire or dispose of, all or any portion of the assets of the Plan and Trust Fund. The Committee is also given the power to serve as paying agent for the Trust Fund, if it so desires, or to appoint, in its discretion, a paying agent or agents to disburse the benefits payable from the Trust Fund and to authorize and direct the Trustee to make distribution to the Committee as paying agent or to such other paying agent as the Committee shall direct in writing. Section 7.6. Duties of Committee. The Committee shall, as a part of its general duty to supervise and administer the Plan: (A) determine all facts and maintain records with respect to any Employee's age, amount of Compensation, length of service, Hours of Service, Vesting Service, Credited Service and date of initial coverage under the Plan, and by application of the facts so determined and any other facts deemed material, determine the amount, if any, of benefit payable under the Plan on behalf of a Participant; -76- (B) establish, carry out and periodically review a funding policy and method consistent with the objectives of the Plan and the applicable lawful requirements of Title I of the Employee Retirement Income Security Act of 1974; provided, however, that any decisions pertaining to the amount and timing of contributions by the Employer to the Trust Fund are delegated to the Employer; (C) give the Trustee specific directions in writing with respect to: (1) the making of distribution payments, giving the names of the payees, the amounts to be paid and the time or times when payments shall be made; and (2) the making of any other payments which the Trustee is not by the terms of the Trust Agreement authorized to make without a direction in writing of the Committee; (D) furnish the Trustee with such information (including information relative to the liquidity needs of the Plan) as is deemed necessary for the Trustee to carry out the purposes of the Trust Agreement; (E) comply with all applicable lawful reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974; (F) comply (or transfer responsibility for compliance to the Trustee) with all applicable Federal income tax withholding requirements for distribution payments imposed by the Tax Equity and Fiscal Responsibility Act of 1982; (G) engage on behalf of all Plan Participants an independent qualified public accountant to examine the financial statements and other records of the Plan for the purposes of an annual audit and opinion as to whether the financial statements and schedules in the annual report of the Plan are presented fairly in conformity with generally accepted accounting principles, unless such audit is waived by the Secretary of Labor or his delegate or unless such audit is otherwise not required; and (H) engage on behalf of all Plan Participants an enrolled actuary to prepare required actuarial statements, unless this requirement is waived by the Secretary of Labor or his delegate or unless such actuarial statements are otherwise not required. The foregoing list of express duties is not intended to be either complete or conclusive, and the Committee shall, in addition, exercise such other powers and perform such other duties as it may deem necessary, desirable, advisable or proper for the supervision and administration of the Plan. Section 7.7. Indemnification of Members of Committee. To the extent not covered by insurance or if there is a failure to provide full insurance coverage for any reason and to the extent permissible under corporate by-laws and other applicable laws and regulations, the Employers agree to hold harmless and indemnify the members of the Committee against any and all claims -77- and causes of action by or on behalf of any and all parties whomsoever, and all losses therefrom, including, without limitation, costs of defense and attorneys' fees, based upon or arising out of any act or omission relating to or in connection with the Plan and Trust Agreement other than losses resulting from any such person's fraud or willful misconduct. Section 7.8. Actuary. The actuary will do such technical and advisory work as the Committee or the Employer may request, including analysis of the experience of the Plan from time to time, the preparation of actuarial tables for the making of computations thereunder, and the submission of actuarial reports to the Company or the Committee, which reports shall contain an actuarial valuation showing the financial condition of the Plan, a statement of the contributions to be made by the Employers and such other information as may be required by the Committee. The actuary shall be appointed by the Committee with the approval of the Company to serve as long as it is agreeable to the Committee, the Company and the actuary. Section 7.9. Fiduciaries. The Trustee is the named fiduciary hereunder with respect to the powers, duties and responsibilities of investment of the Trust Fund, and the Committee is the plan administrator and is the named fiduciary hereunder with respect to the other powers, duties and responsibilities of the administration of the Plan; provided, however, that certain powers, duties and responsibilities of each of said named fiduciaries are specifically delegated to others under the provisions of the Plan and Trust Agreement, and other powers, duties and responsibilities of any fiduciaries may be delegated by written agreement to others to the-extent permitted under the provisions of the Plan and Trust Agreement. The powers and duties of each fiduciary hereunder, whether or not a named fiduciary, shall be limited to those specifically delegated to each of them under the terms of the Plan and Trust Agreement. It is intended that the provisions of the Plan and Trust Agreement allocate to each fiduciary the individual responsibilities for the prudent execution of the functions assigned to each fiduciary. None of the allocated responsibilities or any other responsibilities shall be shared by two or more fiduciaries unless such sharing shall be provided by a specific provision in the Plan or the Trust Agreement. If any of the enumerated responsibilities of a fiduciary are specifically waived by the Secretary of Labor, then such enumerated responsibilities shall also be deemed to be waived for the purposes of the Plan and Trust Agreement. Whenever one fiduciary is required by the Plan or the Trust Agreement to follow the directions of another fiduciary, the two fiduciaries shall not be deemed to have been assigned a share of any responsibility, but the responsibility of the fiduciary giving the directions shall be deemed to be his sole responsibility and the responsibility of the fiduciary receiving those directions shall be to follow same insofar as such instructions on their face are proper under applicable law. Any fiduciary may employ one or more persons to render advice with respect to any responsibility such fiduciary has under the Plan or Trust Agreement. Each fiduciary may, but need not, be a director, proprietor, partner, officer or employee of the Employer. Nothing in the Plan shall be construed to prohibit any fiduciary from: (a) serving in more than one fiduciary capacity with respect to the Plan and Trust Agreement; -78- (b) receiving any benefit to which he may be entitled as a Participant or Beneficiary in the Plan, so long as the benefit is computed and paid on a basis that is consistent with the terms of the Plan as applied to all other Participants and Beneficiaries; or (c) receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred in the performance of his duties with respect to the Plan, except that no person so serving who already receives full-time pay from an Employer shall receive compensation from the Plan, except for reimbursement of expenses properly and actually incurred. Each fiduciary shall be bonded as required by applicable law or statute of the United States, or of any state having appropriate jurisdiction, unless such bond may under such law or statute be waived by the parties to the Trust Agreement. The Employer shall pay the cost of bonding any fiduciary who is an employee of the Employer. Section 7.10. Applicable Law. The Plan will, unless superseded by federal law, be construed and enforced according to the laws of the State of Illinois, and all provisions of the Plan will, unless superseded by federal law, be administered according to the laws of the said state. SECTION 8. TRUST FUND. Section 8.1. Purpose of Trust Fund. The Trust Fund has been created and will be maintained for the purposes of the Plan, and the moneys thereof will be invested in accordance with the terms of the agreement and declaration of trust which forms a part of the Plan. All contributions will be paid into the Trust Fund, and all benefits under the Plan will be paid from the Trust Fund, except to the extent provided by Section 3.5 hereof. Section 8.2. Benefits Supported Only by Trust Fund. Subject to applicable provisions of law, any person having any claim under the Plan will look solely to the assets of the Trust Fund for satisfaction. Section 8.3. Trust Fund Applicable Only to Payment of Benefits. The Trust Fund will be used and applied only in accordance with the provisions of the Plan, to provide the benefits thereof, and no part of the corpus or income of the Trust Fund will be used for, or diverted to, purposes other than for the exclusive benefit of Participants and other persons thereunder entitled to benefits, except to the extent provided in Section 4.5 and Section 6.6 hereof with respect to termination of the Plan and expenses of administration, respectively. IN WITNESS WHEREOF, LITTELFUSE, INC. has caused this instrument to be executed by its duly authorized officers on this ____ day of __________, 200_, effective as of January 1, 1997. (CORPORATE SEAL) ATTEST: LITTELFUSE, INC. By: ---------------------------------- ---------------------------------- Secretary Title: ---------------------------------- -79- FIRST SUPPLEMENT TO LITTELFUSE, INC. RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997 (A) FIRST SUPPLEMENT A PART OF PLAN. (1) This FIRST SUPPLEMENT TO LITTELFUSE, INC. RETIREMENT PLAN (herein referred to as the "First Supplement") forms a part of the LITTELFUSE, INC. RETIREMENT PLAN as in effect on and after January 1, 1992. (2) All terms used in this First Supplement shall have the meanings assigned to them in the provisions of the Plan unless otherwise qualified by the context. There shall be no duplication of benefits between the Plan and this First Supplement, and the actuarially equivalent benefits payable under one shall be inclusive of the actuarially equivalent benefits payable under the other unless specifically provided otherwise in the provisions of the Plan or this First Supplement. (B) MODIFICATIONS IN BENEFITS PAYABLE UNDER PLAN TO CERTAIN LITTELFUSE, INC. EMPLOYEES The provisions of this Section (B) shall apply only to those Participants in the Plan who were employees of Littelfuse, Inc. prior to January 1, 1976, whose Credited Service under the Plan commenced prior to January 1, 1976 and who were participants prior to January 1, 1976 in the Littelfuse, Inc. Profit Sharing Trust (such profit sharing plan as in effect prior to January 1, 1976 is herein referred to as the `Littelfuse profit sharing plan') and/or who were participants prior to January 1, 1976 in that group annuity contract providing a group annuity fund for certain employees of Littelfuse, Inc., issued by the Continental Assurance Company, Chicago, Illinois, effective January 1, 1961 (such retirement plan as in effect prior to December 31, 1975 is herein referred to as the `Littelfuse superseded retirement plan'). All of the provisions of the Plan shall apply to the Participants to whom the provisions of this Section (B) are applicable except as provided otherwise in the following subsections of this Section (B). (1) Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent. The `Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent' determined as of any given date specified in this Section (B) shall mean the monthly amount of retirement income, payable as a straight life annuity commencing on such given date, which is equal to the quotient of: (a) an amount equal to the sum of: (i) the sum of (aa) the amount of employer contributions, forfeitures and funds attributable thereto which were credited to such Employee's accounts as of December 31, 1975 under the Littelfuse profit sharing plan as determined from the records maintained with respect to the Littelfuse profit sharing plan and (ii) interest on such amount in (i) above at the rate of 6% per annum compounded annually from January 1, 1976 to such given date; and (ii) if the Employee received a distribution under the Littelfuse profit sharing plan prior to December 31, 1975 but his Credited Service as defined in the Plan includes service accrued prior to the date of such distribution, the sum of (i) the amount of such distribution which he received under the Littelfuse profit sharing plan prior to December 31, 1975 and (ii) interest on such amount in (i) above at the rate of 6% per annum compounded annually from the date of such distribution to such given date; divided by (b) the factor specified in the schedule below based upon the Employee's attained age (to the nearest month) at such given date: ATTAINED AGE ON GIVEN DATE FACTOR 65 or older 120.000 64 125.865 63 131.649 62 137.339 61 142.924 60 148.392 59 153.737 58 158.951 57 164.028 56 168.964 55 173.756 54 178.402 53 182.901 52 187.250 51 191.448 50 195.496 49 199.395 48 203.146 47 206.752 46 210.213 -1- ATTAINED AGE ON GIVEN DATE FACTOR 45 213.532 44 216.714 43 219.759 42 222.674 41 225.461 40 228.124 39 230.669 38 233.098 37 235.416 36 237.627 35 239.736 Straight line interpolation between the next higher age and the next lower age shall be used to determine the factor that applies to a Participant whose attained age (to the nearest month) at such given date is not a whole number of years. (2) Littelfuse Superseded Retirement Plan Monthly Normal Retirement Benefit. The term `Littelfuse Superseded Retirement Plan Monthly Normal Retirement Benefit' as used in this Section (B) shall mean the monthly amount of retirement income, payable as a straight life annuity, commencing on the Employee's Normal Retirement Date, which is equal to the monthly normal retirement benefit, if any, being provided on behalf of the Participant under the terms of the Littelfuse superseded retirement plan as of December 31, 1975. (3) Normal Retirement Income. Notwithstanding the provisions of Section 2.1 of the Plan, but subject to the provisions of Section 4.1 of the Plan, the monthly amount of retirement income determined under Section 2.1(B) of the Plan which is payable as a straight life annuity in the manner described in Section 2.1(C) of the Plan on behalf of a Participant to whom the provisions of this Section (B) are applicable, upon his normal retirement under the Plan at any time on or after January 1, 1992, shall be equal to the excess of: (a) an amount equal to the sum of: (i) the monthly retirement income equal to the greater of: (1) the sum of the Participant's Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent determined as of his Normal Retirement Date and his Littelfuse Superseded Retirement Plan Monthly Normal Retirement Benefit; or (2) the monthly retirement income to which such Participant would have otherwise been entitled as determined under the provisions of Section 2.1(B) of the Plan (ignoring the minimum monthly retirement income described in such section of the Plan that applies to a Participant who retires after his Normal Retirement Date) multiplied by the fraction in which the numerator is his number of years of Credited Service, if any, 2 which were accrued prior to January 1, 1976 and which are in excess of one year and the denominator is his total number of years of Credited Service which are in excess of one year; plus (ii) the monthly retirement income to which such Participant would have otherwise been entitled as determined under the provisions of Section 2.1(B) of the Plan (ignoring the minimum monthly retirement income described in such section of the Plan that applies to a Participant who retires after his Normal Retirement Date) multiplied by the fraction in which the numerator is his number of years of Credited Service, exclusive of the greater of (1) one year or (2) his number of years of Credited Service which were accrued prior to January 1, 1976, and the denominator is his total number of years of Credited Service which are in excess of one year; over (b) the Participant's Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent determined as of his Normal Retirement Date; provided, however, that such monthly amount of retirement income payable to any such Participant who retires after his Normal Retirement Date shall not be less than that amount which can be provided on an actuarially equivalent basis by the sum of (i) the single-sum value as of his Normal Retirement Date of the normal monthly retirement income which would have been payable to the Participant in accordance with the above provisions of this Section (B)(3) if he had retired on his Normal Retirement Date (using his number of years of Credited Service and Final Average Monthly Compensation determined as of his Normal Retirement Date instead of as of his actual retirement date) and (ii) the amount of interest on such single-sum value in (i) above, where the interest shall be compounded annually from the Participant's Normal Retirement Date to his actual retirement date. The actuarial computations to determine such monthly retirement income payable under the Plan on behalf of a Participant who retires after his Normal Retirement Date shall be on the basis of the interest and mortality assumptions which were being used as of the Participant's Normal Retirement Date to determine actuarially equivalent monthly retirement incomes. (4) Early Retirement Income. Notwithstanding the provisions of Section 2.2 of the Plan, but subject to the provisions of Section 4.1 of the Plan, the monthly amount of retirement income determined under Section 2.2(B) of the Plan which is payable as a straight life annuity in the manner described in Section 2.2(C) of the Plan on behalf of a Participant to whom the provisions of this Section (B) are applicable, upon his early retirement under the Plan shall be equal to the excess of: (a) an amount equal to the sum of: (i) the monthly retirement income equal to the greater of: 3 (1) the sum of: (aa) the Participant's Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent determined as of his Early Retirement Date; plus (bb) his Littelfuse Superseded Retirement Plan Monthly Normal Retirement Benefit multiplied by the Early Retirement Reduction Factor specified in Section 2.2(B)(2) of the Plan that applies at his Early Retirement Date; or (2) the monthly early retirement income to which such Participant would have otherwise been entitled as determined under the provisions of Section 2.2(B) of the Plan multiplied by the fraction in which the numerator is his number of years of Credited Service, if any, which were accrued prior to January 1, 1976 and which are in excess of one year and the denominator is his total number of years of Credited Service which are in excess of one year; plus (ii) the monthly early retirement income to which such Participant would have otherwise been entitled as determined under the provisions of Section 2.2(B) of the Plan multiplied by the fraction in which the numerator is his number of years of Credited Service, exclusive of the greater of (1) one year or (2) his number of years of Credited Service which were accrued prior to January 1, 1976, and the denominator is his total number of years of Credited Service which are in excess of one year; over (b) the Participant's Littelfuse Profit Sharing Plan Retirement Income Equivalent determined as of his Early Retirement Date. (5) Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date. Notwithstanding the provisions of Section 1.1(A) of the Plan, the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which a Participant to whom the provisions of this Section (B) are applicable has accrued under the Plan as of any given date prior to his Normal Retirement Date shall be equal to the monthly retirement income, payable to the Participant for life commencing at his Normal Retirement Date, if he shall then be living, which is the actuarial equivalent of an amount of monthly retirement income, payable to the Participant for life commencing at such given date, equal to: (a) an amount equal to the sum of: 4 (i) the monthly retirement income equal to the greater of: (1) the sum of: (aa) the Participant's Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent determined as of such given date; plus (bb) his Littelfuse Superseded Retirement Plan Monthly Normal Retirement Benefit multiplied by a factor that will convert such monthly retirement income payable to the Participant for life commencing on his Normal Retirement Date to an actuarially equivalent monthly retirement income payable to him for life commencing on such given date; or (2) the product of: (aa) the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which such Participant would have otherwise accrued as of such given date as determined under the provisions of Section 1.1(A) of the Plan multiplied by the fraction in which the numerator is his number of years of Credited Service, if any, at such given date which were accrued prior to January 1, 1976 and which are in excess of one year and the denominator is his total number of years of Credited Service at such given date which are in excess of one year; multiplied by (bb) a factor that will convert such monthly retirement income payable to the Participant for life commencing on his Normal Retirement Date to an actuarially equivalent monthly retirement income payable to him for life commencing on such given date; plus (ii) the product of: (1) the Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which such Participant would have otherwise accrued as of such given date as determined under the provisions of Section 1.1(A) of the Plan multiplied by the fraction in which the numerator is his number of years of Credited Service at such given 5 date, exclusive of the greater of (1) one year or (2) his number of years of Credited Service which were accrued prior to January 1, 1976, and the denominator is his total number of years of Credited Service at such given date which are in excess of one year; multiplied by (2) a factor that will convert such monthly retirement income payable to the Participant for life commencing on his Normal Retirement Date to an actuarially equivalent monthly retirement income payable to him for life commencing on such given date; over (b) the Participant's Littelfuse Profit Sharing Plan Monthly Retirement Income Equivalent; provided, however, that such Accrued Deferred Monthly Retirement Income Commencing at Normal Retirement Date which such a Participant has accrued as of a given date shall not exceed an amount that is actuarially equivalent as of such given date to that amount which would cause the monthly retirement income payable to or on behalf of the Participant under the Plan to be in excess of the maximum amount of retirement income permitted under Section 415 of the Internal Revenue Code. (C) RIGHT TO AMEND OR TERMINATE FIRST SUPPLEMENT. The powers reserved in the Plan with respect to amendment and termination thereof (Sections 6.4 and 6.5, respectively) shall apply with equal force to 6 EX-10.10 4 c68111ex10-10.txt EMPLOYMENT AGREEMENT EXHIBIT 10.10 EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL EMPLOYMENT AGREEMENTS ENTERED INTO WITH EXECUTIVE OFFICERS The Company entered into an employment agreement dated November 2, 2001, with Howard B. Witt, the Chairman, President and Chief Executive Officer of the Company. His employment agreement has a term ending on December 31, 2003, and provides that Mr. Witt will receive an annual salary of no less than $475,000, plus bonuses to be determined from time to time by the Board of Directors of the Company. To the extent he is otherwise eligible during the term of his Employment Agreement, Mr. Witt will participate in and receive the benefits of any and all stock options, pension, retirement, vacation, profit sharing, health, disability insurance and other benefit plans, programs and policies maintained by the Company. Mr. Witt's employment agreement provides that during its term, but subject to election and removal by the Board of Directors of the Company, Mr. Witt will serve as Chairman, President and Chief Executive Officer of the Company. In the event that the Company were to terminate Mr. Witt's employment without Cause (as defined in his employment agreement), or Mr. Witt were to terminate his employment for Good Reason (as defined in his employment agreement), he would continue to be paid the compensation he would otherwise have earned for the remaining balance of the term of his employment agreement plus monthly payments of $20,833.33 for twenty-four months commencing January 1, 2004, in lieu of the compensation which would have been paid to Mr. Witt by the Company under his consulting agreement described below. Mr. Witt has agreed that he will not compete with the Company for a period of two years after any termination of his employment during the term of his employment agreement, unless the Company shall terminate his employment without Cause or Mr. Witt terminates his employment for Good Reason. In the event Mr. Witt continues as an employee of the Company for the entire term of his employment agreement, the Company and he have agreed to enter into a two-year consulting agreement which will pay Mr. Witt $250,000 per year and which will require him to provide certain consulting services to the Company. If so requested by the Board of Directors of the Company and elected by the stockholders of the Company, Mr. Witt has agreed to serve as a Director of the Company during the two-year term of his consulting agreement. The Company entered into change of control employment agreements dated November 2, 2001, with Mr. Witt and dated September 1, 2001, with Kenneth R. Audino, William S. Barron and Philip G. Franklin. These change of control employment agreements are designed to provide these individuals with certain employment and compensation protection in the event that there was a Change of Control (as defined in these agreements) with respect to the Company at any time prior to January 1, 2004, with respect to Mr. Witt, and prior to September 1, 2006, with respect to the others. If such a Change of Control were to occur and any of these individual's employment with the Company was terminated at any time during the two-year period thereafter, other than for Cause (as defined in these agreements), or if during these time periods any of these individuals were to terminate his employment for Good Reason (as defined in these agreements), then the Company would be obligated to make the payments described below for the benefit of these individuals. Under Mr. Witt's change of control employment agreement, and in order to compensate Mr. Witt for the compensation he would have received under his consulting agreement, Mr. Witt's annual base salary would be increased by $250,000 and the Company would pay him his compensation which had accrued prior to the date of termination, including an annualized bonus, plus an amount equal to the product of two times the sum of Mr. Witt's annual base salary plus bonus. Additionally, the Company would contribute on behalf of Mr. Witt to the Company's Supplemental Executive Retirement Plan (the "SERP") an amount equal to the amount which would have been credited to Mr. Witt's account under the SERP if Mr. Witt had continued in the employment of the Company for an additional two years after the date of termination and Mr. Witt's SERP account balance would no longer be subject to forfeiture in the event he were to be employed by a competitor of the Company. In the event any payments received by Mr. Witt upon a Change of Control would require him to pay the 20% excise tax imposed by Section 4999 of the Internal Revenue Code, the Company would make an additional payment to Mr. Witt in an amount such that, after payment by Mr. Witt of such excise tax, Mr. Witt would retain the same amount of the payments made by the Company to him which he would have retained if he had not paid the excise tax. With respect to the other individuals, under their change of control employment agreements they will be paid their accrued compensation and annualized bonus, and will receive an amount equal to two times the sum of their annual salary plus bonus, two additional years of crediting under the SERP and two years of continuing medical insurance benefits. They will also receive the excise tax "gross-up" payment described above. Additionally, if any individual were to terminate his employment with the Company for Good Reason (as defined in these agreements) or be terminated by the Company other than for Cause (as defined in these agreements) during the two-year period following a Change of Control the individual's account balance under the SERP would not be subject to forfeiture in the event he were to work for a competitor of the Company. 1 Unless the Company were to terminate Mr. Witt's employment for Cause or Mr. Witt were to terminate his employment with the Company without Good Reason, upon any termination of Mr. Witt's employment with Littelfuse (either during the term of his employment agreement or his change of control employment agreement) he will receive the following benefits: (1) the maturity date of any outstanding loans made by the Company to Mr. Witt under the Littelfuse Executive Loan Program would be extended until the first anniversary of any such termination; (2) all of Mr. Witt's outstanding stock options would vest and he would have three years after any such termination to exercise these stock options; and (3) Mr. Witt and his spouse would continue to receive for ten years after any such termination life insurance and medical insurance benefits comparable to those which were being provided to Mr. Witt and his spouse immediately prior to such termination. 2 EX-10.11 5 c68111ex10-11.txt CHANGE OF CONTROL EMPLOYMENT AGREEMENT EXHIBIT 10.11 CHANGE OF CONTROL EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into as of the 2nd day of November, 2001, by and between LITTELFUSE, INC., a Delaware corporation (hereinafter referred to as the "Company"), and HOWARD B. WITT (hereinafter referred to as the "Executive"); W I T N E S S E T H: WHEREAS, the Board of Directors of the Company (hereinafter referred to as the "Board") has determined that it is in the best interests of the Company and its stockholders to provide the Executive with certain protections against the uncertainties usually created by a Change of Control (as such term is hereinafter defined); and WHEREAS, the Board believes that the protections provided to the Executive in connection with a Change of Control will better enable the Executive to devote his full time, attention and energy to the business of the Company prior to and after a Change of Control, thereby benefitting the Company and its stockholders; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Company and the Executive hereby agree as follows: Section 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b) hereof) on which a Change of Control (as defined in Section 2 hereof) occurs. Notwithstanding anything to the contrary contained in this Agreement, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the direct or indirect request of a third party who theretofore had taken any steps intended to effect a Change of Control or (ii) otherwise arose in connection with or in anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on December 31, 2003. 1 Section 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition in one or more transactions by any individual, entity or group (hereinafter referred to collectively as a "Person") within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (hereinafter referred to as the "Exchange Act"), of beneficial ownership (within the meaning of, and calculated in accordance with, Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (hereinafter referred to as the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (hereinafter referred to as the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2 or (v) any acquisition by Oaktree Capital Management, LLC, a California limited liability company, or any of its Affiliates or Associates (as used herein, the terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act); or (b) Individuals who, as of the date hereof, constitute the Board (hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (hereinafter referred to as a "Business Combination") unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company 2 Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company within one year after a Business Combination. Section 3. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to remain as an employee of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). Section 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 20 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (hereinafter referred to as the "Annual Base Salary"), which shall be paid at a monthly rate, equal to the sum of (i) at least twelve times the highest monthly base 3 salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs, plus (ii) $250,000. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as used in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (hereinafter referred to as the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's incentive bonus program or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (hereinafter referred to as the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 4 (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. Section 5. Termination of Employment. (a) Disability. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give written notice to the Executive of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after delivery of such notice to the Executive (the "Disability Effective Date"), provided that, within the 30 days after such delivery, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: 5 (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties and such failure is not cured within sixty (60) calendar days after receipt of such written demand; or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, any act or failure to act on the part of the Executive in violation or contravention of any order, resolution or directive of the Board of Directors of the Company shall be considered "willful" unless such order, resolution or directive is illegal or in violation of the certificate of incorporation or by-laws of the Company; provided, however, that no other act or failure to act on the part of the Executive, shall be considered "willful," unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the Executive is not elected, or is removed, as the Chairman, President or Chief Executive Officer of the Company; (ii) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position, authority, duties or responsibilities as contemplated by Section 4(a) hereof, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) any failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 6 (iv) the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; or (v) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of delivery of such notice, specifies the termination date (which date shall be not more than 30 days after the delivery of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of delivery of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is terminated by the Executive without Good Reason, the last day of employment of the Executive with the Company. Section 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate his employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, plus (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full 7 months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being hereinafter referred to as the "Highest Annual Bonus") multiplied by (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 plus (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) are hereinafter referred to as the "Accrued Obligations"); and B. an amount equal to the product of (1) two multiplied by (2) the sum of (x) the Executive's Annual Base Salary plus (y) the Highest Annual Bonus; (ii) the Company shall credit as of the Date of Termination the Account of the Executive under the Littelfuse, Inc. Supplemental Executive Retirement Plan (hereinafter referred to as the "SERP") with an amount equal to the sum of the two respective amounts which would be credited to the Account of the Executive under the SERP on the two Valuation Dates (as such term is defined in the SERP) next succeeding the Date of Termination assuming (A) the Executive would continue to be employed by the Company up to and including said second Valuation Date (hereinafter said period from the Date of Termination until said second Valuation Date is referred to as the "Assumed Employment Period"), (B) the Compensation (as such term is defined in the SERP) of the Executive during each fiscal year during the Assumed Employment Period would be equal to the amount of the Compensation of the Executive during the most recently ended Plan Year (as such term is defined in the SERP) prior to the Date of Termination, and (C) the Company would continue the SERP up to and including said second Valuation Date; (iii) until December 31, 2013, the Company shall continue to provide medical and life insurance benefits to the Executive and/or the Executive's spouse at least equal to those which would have been provided to them in accordance with the medical and life insurance benefits described in Section 4(b)(iv) hereof if the Executive's employment had not been terminated; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical benefits under another employer-provided plan, the medical insurance benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; (iv) for a period of up to two (2) years after the Date of Termination, the Company shall provide outplacement services to the Executive for the purpose of assisting the Executive seek new employment at a cost to the Company not to exceed fifteen percent (15%) of the Executive's Annual Base Salary, payable directly to an outplacement service provider; provided, however, that the Company shall have no further obligations to pay for any such outplacement services once the Executive has accepted employment with any third party; (v) notwithstanding anything to the contrary set forth in any stock option plans pursuant to which the Executive has been granted any stock options or other rights to acquire securities of the Company or its Affiliates (the "Plans"), any option or right 8 granted to the Executive under any of the Plans shall be exercisable by the Executive until the earlier of (x) the date on which the option or right terminates in accordance with the terms of its grant, or (y) the third anniversary of the Date of Termination; (vi) the maturity of any loans made by the Company to the Executive under the Littelfuse Executive Loan Program shall be extended to the first anniversary of the Date of Termination; and (vii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall hereinafter be referred to collectively as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations by the Company to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations by the Company to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) his Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates his employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate 9 without further obligations of the Company to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination and the Company shall timely pay or provide the Other Benefits to the Executive. In no event shall the Executive be liable to the Company for any damages caused by such voluntary termination by the Executive nor shall the Executive be in any way restricted from being employed by any other party after such voluntary termination. (e) Waiver of Certain Restrictions Affecting Executive. Notwithstanding anything to the contrary contained in any employment agreement, benefit plan or other document, in the event that the Executive's employment shall be terminated during the Employment Period for any reason whatsoever (i) the Executive shall not forfeit his Account balance under the SERP even if his employment was terminated for "Cause" as such term is defined under the SERP and (ii) on and after the Date of Termination the Executive shall not be bound or prejudiced by any non-competition agreement benefitting the Company or its subsidiaries, and any provisions contained in the SERP which would penalize the Executive for being employed by a competitor, including, without limitation, Section 3.6(c) thereof, shall not apply in any respect to the Executive and, effective as of the Date of Termination, the Company waives any right to enforce any such provisions against the Executive. Section 7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f) hereof, shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Section 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the fullest extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others in which the Executive is the prevailing party and which involves or relates to the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment from the due date thereof until paid at the prime rate from time to time reported in The Wall Street Journal during said period. 10 Section 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (hereinafter referred to collectively as a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c) hereof, all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young LLP or such other independent certified public accounting firm as may be designated by the Executive (hereinafter referred to as the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (hereinafter referred to as the "Underpayment") consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: 11 (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. The Company's control of any such contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) hereof, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c) hereof, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 12 Section 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. The provisions of this Section 10 shall survive any termination of this Agreement or any termination of the employment of the Executive with the Company. Section 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. Section 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) Each notice, request, demand, approval or other communication which may be or is required to be given under this Agreement shall be in writing and shall be deemed to have been properly given when delivered personally at the address set forth below for the intended party during normal business hours at such address, when sent by facsimile or other electronic transmission to the respective facsimile transmission numbers of the parties set forth below with telephone confirmation of receipt, or when sent by recognized overnight courier or by the United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 13 If to the Company: Littelfuse, Inc. 800 E. Northwest Highway Des Plaines, Illinois 60016 Attention: President (unless the Executive is the President, in which case the communication should be to the attention of all of the Directors of the Company other than the Executive) Facsimile: (847) 824-3864 Confirm: (847) 391-0304 If to the Executive: Howard B. Witt 93-A Bateman Road Barrington Hills, Illinois 60010 Facsimile: ______________ Confirm: (847) 382-5821 Notices shall be given to such other addressee or address, or both, or by way of such other facsimile transmission number, as a particular party may from time to time designate by written notice to the other party hereto. Each notice, request, demand, approval or other communication which is sent in accordance with this Section shall be deemed given and received for all purposes of this Agreement as of two business days after the date of deposit thereof for mailing in a duly constituted United States post office or branch thereof, one business day after deposit with a recognized overnight courier service or upon confirmation of receipt of any facsimile transmission. Notice given to a party hereto by any other method shall only be deemed to be given and received when actually received in writing by such party. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to promptly assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) hereof, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof and/or any other written agreement between the Executive and the Company, prior to the Effective Date the Executive's employment and/or this Agreement may be terminated by either 14 the Executive or the Company at any time prior to the Effective Date upon written notice to the other party, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (g) This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one and the same agreement. Section 13. Post-Employment Benefits. (a) Upon any termination of the employment of the Executive with the Company during the Employment Period as a result of the Death or Disability of the Executive, or upon the termination of the employment of the Executive with the Company at the expiration of the Employment Period, (i) the Company shall amend any documents which govern any unexercised stock options which were held by the Executive immediately prior to any such termination of employment to provide that all such unexercised stock options, to the extent not then exercisable, shall become immediately exercisable and not forfeited as a result of such termination of employment, and that all such unexercised stock options shall continue to be exercisable by the Executive during the period of time from the date of such termination of employment to and including the earlier to occur of the respective dates on which such stock options terminate in accordance with the terms of their grant or the third anniversary of any such termination of employment; (ii) during the ten-year period following the date of any such termination of employment, the Company shall provide the Executive and his spouse with substantially the same medical and life insurance benefits which were being provided by the Company to the Executive and his spouse immediately prior to such termination of employment and (iii) the maturity of any loans made by the Company to the Executive under the Littelfuse Executive Loan Program shall be extended to the first anniversary of such termination of employment. (b) Common Stock Transactions. The Company agrees to consider (but shall not be obligated to accept) any reasonable proposals made by the Executive after the second anniversary of the date of this Agreement, to (i) repurchase some or all of the shares of common stock of the Company owned by the Executive or (ii) allow the Executive to repay with shares of the common stock of the Company, in whole or in part, any outstanding loans made by the Company to the Executive under the Littelfuse Executive Loan Program. IN WITNESS WHEREOF, the parties hereto have executed this Change of Control Employment Agreement as of the day and year first above written. ----------------------------------------- Howard B. Witt LITTELFUSE, INC. By Its -------------------------------------- 15 EX-13.1 6 c68111ex13-1.txt PORTIONS OF LITTELFUSE ANNUAL RPT. TO STOCKHOLDERS Exhibit 13.1 Selected Financial Data (In thousands, except per share data) Five Year Summary
Year Ended 2001 2000 1999 1998 1997 Net sales $272,149 $371,920 $296,367 $269,540 $275,165 Gross profit 91,907 150,648 117,255 100,199 111,131 Operating income 8,540 61,748 44,624 34,096 43,768 Net income 4,070 37,298 25,220 19,885 25,342 Net income per share - Diluted 0.19 1.69 1.16 0.86 1.07 Net working capital 59,439 74,503 60,008 46,685 41,548 Total assets 272,272 274,378 275,698 250,544 221,885 Long-term debt 30,402 41,397 55,460 70,061 40,385
QUARTERLY RESULTS OF OPERATIONS (unaudited)
Year Ended 2001 2000 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q Net sales $60,851 $66,711 $68,996 $75,590 $82,883 $96,362 $97,356 $95,319 Gross profit 18,265 21,509 25,199 26,935 33,329 38,739 39,350 39,230 Operating income (4,102) 1,491 5,456 5,695 11,545 16,271 16,730 17,202 Net income (2,804) 474 3,284 3,116 6,710 9,728 10,647 10,213 Net income per share: Basic (0.14) 0.02 0.17 0.16 0.34 0.49 0.54 0.51 Diluted (0.13) 0.02 0.15 0.14 0.31 0.44 0.48 0.46
Quarterly Stock Prices
Year Ended 2001 2000 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q High 27.81 29.67 31.58 30.56 33.88 51.13 50.63 39.50 Low 19.78 19.37 19.81 22.50 24.38 29.00 30.50 21.50 Close 26.17 22.13 26.79 25.13 28.63 29.69 49.00 36.69
1 Management's Discussion and Analysis of Financial Condition and Results of Operation The following discussion provides an analysis of the information contained in the consolidated financial statements and accompanying notes beginning on page 18 for the three fiscal years ended December 29, 2001, December 30, 2000 and January 1, 2000, respectively. Results of Operations -- 2001 Compared with 2000 Sales decreased 27% to $272.1 million in 2001 from $371.9 million in 2000. Electronic sales decreased $86.4 million or 37% to $146.3 million in 2001 compared to $232.7 million in 2000. The decrease in electronic sales reflected weak global demand for electronic products compared to record sales performance in 2000. Additionally, inventory corrections at customers and in the distribution channel reduced sales of electronic products in 2001. Automotive sales decreased $8.9 million or 9% to $91.1 million in 2001 compared to $100.0 million in 2000, primarily due to a reduction in North American vehicle production and continued weakness in automotive aftermarket sales. Decreases in North American and Asia sales of automotive products more than offset an increase in European automotive product sales. Electrical product sales decreased $4.5 million or 11% to $34.7 million in 2001 compared to $39.2 million in 2000 due to continued weakness in the electrical market driven by reduced industrial activity and commercial construction. International sales decreased 22% to $141.3 million or 51.9% of net sales in 2001 from $180.1 million or 48.4% of net sales in 2000. The primary cause of lower international sales in 2001 was reduced demand for electronic products in Asia and Europe. Gross profit was $91.9 million or 33.8% of sales for 2001 compared to $150.6 million or 40.5% of sales for 2000. The gross profit was negatively affected in 2001 by lower sales demand, lower factory utilization, declining average sell prices and employee separation costs. The Company took steps in 2001 to reduce the cost structure and decrease inventories to bring them in-line with current market demand. These included actions to reduce worldwide headcount by approximately 25% and increase the focus on material, labor and process cost reductions. Selling, general and administrative expenses decreased $8.9 million, representing 22.9% of sales in 2001 compared to 19.1% of sales in 2000. Overall, expenses decreased due to lower sales and effective cost reduction actions taken during the year. Expenses as a percentage of sales increased, however, due to the decline in sales. Research and development costs decreased $2.3 million to $8.9 million, representing 3.3% of sales in 2001 as compared to 3.0% of sales in 2000. Amortization of reorganization value and other intangibles was $6.0 million or 2.2% of sales for 2001 compared to $6.7 million or 1.8% of sales for the prior year. Total operating expenses, including intangible amortization and restructuring expense, were 30.6% of sales in 2001, compared to 23.9% of sales in 2000. Excluding restructuring expense, total operating expenses were 28.3% of sales in 2001. Operating income for 2001 decreased 86% to $8.5 million or 3.1% of sales compared to $61.7 million or 16.6% of sales for the prior year due to the reduced sales demand and profitability as discussed above. Also contributing to the decrease in operating income in 2001 were $6.3 million of restructuring charges related to a program to rationalize the Company's worldwide manufacturing operations. This program includes plans to close three manufacturing facilities located in the U.S., England and Korea and to consolidate production into existing lower cost sites in the Philippines, China and Mexico. The restructuring expense consists primarily of separation cost for approximately 512 employees as well as a write-down of impaired manufacturing machinery and equipment. Additional restructuring charges related to this program are expected to be recorded in the first half of 2002. The restructuring program is expected to be completed by the middle of 2003. Interest expense was $3.3 million for 2001 compared to $4.7 million for 2000 due to lower average debt levels in 2001. Other income, net, consisting of interest income, royalties, minority interest and foreign currency items was $1.1 million compared to other income, net, of $1.9 million for the prior year. 2 Income before taxes was $6.4 million in 2001 compared to $59.0 million in 2000. Income tax expense was $2.3 million in 2001 compared to $21.7 million the prior year. Net income for the year was $4.1, million compared to $37.3 million for the prior year. The Company's effective tax rate was 36.0 % in 2001 compared to 36.8 % in 2000. Diluted earnings per share decreased 89% to $0.19 in 2001 compared to $1.69 in 2000. Results of Operations-- 2000 Compared with 1999 Sales increased 25% to $371.9 million in 2000 from $296.4 million in 1999. Electronic sales increased $78.6 million or 51% to $232.7 million in 2000 compared to $154.1 million in 1999. The strong electronics market, driven by communications demand and continued strength in the Asia-Pacific region, was the primary factor in the record electronic sales growth. Automotive sales decreased $1.3 million or 1% to $100.0 million in 2000 compared to $101.3 million in 1999 reflecting continued aftermarket weakness and the unfavorable translation effects of a weak Euro, partially offset by increases in North American OEM sales. Electrical sales decreased $1.8 million or 4% to $39.2 million in 2000 compared to $41.0 million in 1999. Led by Asia-Pacific and European electronic sales growth, international sales increased 32.0% to $180.1 million or 48.4% of net sales in 2000 from $136.5 million or 46.1% of net sales in 1999. Gross profit was $150.6 million or 40.5% of sales for 2000 compared to $117.3 million or 39.6% of sales for 1999. The gross profit increase resulted from successful worldwide cost reductions, increasing unit volumes during the year and an improved pricing environment as compared to the prior year. Selling, general and administrative expenses increased $15.0 million, representing 19.1% of sales in 2000 compared to 18.9% of sales in 1999, due primarily to higher sales and marketing expenses to support growth in the electronics market. Research and development costs increased $1.7 million to $11.2 million, representing 3.0% of sales in 2000 as compared to 3.2% of sales in 1999, due to continued focus on development of new products. Amortization of reorganization value and other intangibles was $6.7 million or 1.8% of sales for 2000 compared to $7.1 million or 2.4% of sales for the prior year. Total operating expenses, including intangible amortization, were 23.9% of sales in 2000, compared to 24.5% of sales in 1999. Operating income for 2000 increased 38% to $61.7 million or 16.6% of sales compared to $44.6 million or 15.1% of sales for the prior year as a result of the factors discussed above. Interest expense was $4.7 million for 2000 compared to $5.3 million for 1999 due to lower average debt levels. Other income, net, consisting of interest income, royalties, minority interest and foreign currency items was $1.9 million compared to other income of $1.3 million for the prior year. The increase in other income was due to foreign currency gains and a gain from the sale of a non-core product line. Income before taxes was $59.0 million in 2000 compared to $40.7 million in 1999. Income tax expense was $21.7 million in 2000 compared to $15.5 million the prior year. Net income for the year was $37.3 million, compared to $25.2 million for the prior year. The Company's effective tax rate was 36.8 % in 2000 compared to 38.0 % in 1999. The lower effective tax rate in 2000 was due to the increase in foreign earnings as a percent to total earnings. Diluted earnings per share increased 45% to $1.69 in 2000 compared to $1.16 in 1999. Liquidity and Capital Resources The Company has historically financed capital expenditures through cash flows from operations. Management expects that cash flows from operations and available lines of credit will be sufficient to support both its operations and its debt obligations for the foreseeable future. The Company has a domestic unsecured revolving credit line of $55.0 million, which matures on August 31, 2003. At December 29, 2001, there were no borrowings against this credit line. The Company's subsidiaries in the Netherlands, 3 Japan and Korea also have unsecured credit lines of Euro 4.0 million, Yen 1.1 billion and Won 3.0 billion, respectively. At December 29, 2001, the Euro credit line was unused and Won 2.5 billion was drawn on the credit line in Korea. The Yen credit line was fully utilized at year-end 2001. The Company's bank credit agreement requires maintenance of certain financial ratios and a minimum net worth level. At December 29, 2001, the Company was in compliance with these covenants. If the Company were to default on any of the bank agreement debt covenants, and were unable to obtain a waiver from the lenders, the debt would be callable by the lenders. The Company believes that default of any of the debt covenants is unlikely for the foreseeable future since it expects the results of operations to be within the minimum levels to continue to be in compliance with the debt covenants. The Company started 2001 with $5.5 million of cash. Net cash provided by operations was $40.3 million for the year. Cash used in investing activities included $14.3 million in property, plant and equipment. Cash provided by financing activities included cash proceeds from the exercise of stock options and conversion of warrants of $10.5 million, offset by repurchase of the Company's common stock for $1.3 million and net payments of long-term debt of $6.0 million. The effect of exchange rate changes decreased cash by $0.2 million. The net cash provided by operations and financing activities, less investing activities plus the effect of exchange rates, resulted in a $29.0 million net increase in cash. This left the Company with a cash balance of $34.5 million at the end of 2001. Decreases in net working capital provided $18.2 million of cash flow in 2001. The major factors contributing to lower working capital were a decrease in inventory of $11.9 million and a $10.6 million reduction in accounts receivable, partially offset by a $4.2 million reduction in accounts payable and accrued expenses. Net working capital (working capital less cash and the current portion of long-term debt) as a percent of sales was 21.8% at year-end 2001 compared to 20.0% at year-end 2000 and to 20.2% at year-end 1999. Net working capital as a percent of sales increased as the decreases in accounts receivable and inventory were more than offset by lower sales. The days sales outstanding in accounts receivable increased to approximately 61 days at year-end 2001 compared to 58 days at year-end 2000 and 68 days at year-end 1999. Days inventory outstanding was 99 days at year-end 2001 compared to 109 days at year-end 2000 and 94 days at year-end 1999. The ratio of current assets to current liabilities was 2.2 to 1 at year-end 2001 compared to 2.0 to 1 at year-end 2000 and 1.5 to 1 at year-end 1999. The ratio of long-term debt to equity was 0.2 to 1 both at year-end 2001 and at year-end 2000 and 0.4 to 1 at year-end 1999. The Company started 2000 with $1.9 million of cash. Net cash provided by operations was $48.7 million for the year. Cash used in investing activities included $22.0 million in property, plant and equipment. Cash used in financing activities included net payments of long-term debt of $16.8 million. This left the Company with $55.0 million of borrowing capability under it's revolving credit line as of December 30, 2000. The repurchase of the Company's common stock for $11.2 million was partially offset by cash proceeds from the exercise of stock options and conversion of warrants of $5.8 million. The effect of exchange rate changes decreased cash by $0.9 million. The net cash provided by operations, less investing activities, less financing activities, plus the effect of exchange rates, resulted in a $3.6 million net increase in cash. This left the Company with a cash balance of $5.5 million at the end of 2000. Increases in net working capital resulted in a $14.2 million use of cash in 2000. The major factors contributing to higher working capital were a $10.8 million increase in inventory and an $8.5 million decrease in accounts payable and accrued expenses, partially offset by a $5.0 million reduction in accounts receivable. The inventory increase was primarily the result of increased sales in 2000. The reduction in accounts receivable was the result of improved collections performance. The Company's capital expenditures were $14.1 million in 2001, $22.0 million in 2000 and $20.0 million in 1999. The Company expects that capital expenditures in 2002 will be similar to the levels in 2001. The primary purposes for capital expenditures in 2002 will be for new product tooling and production equipment. As in 2001, the Company expects to finance capital expenditures in 2002 through cash flow from operations. 4 The Company decreased total debt by $6.0 million in 2001, after decreasing debt by $16.8 million in 2000 and $9.1 million in 1999. The Company is required to repay $10.0 million of senior note debt in 2002. Separately, the Company has $10.3 million in renewable foreign credit facilities coming due in 2002. The Company's Board of Directors has authorized the Company to repurchase shares of its common stock, from time to time, depending on market conditions. The Company repurchased 50,000 common shares for $1.3 million in 2001, 369,000 common shares for $11.2 million in 2000 and 707,500 common shares for $12.8 million in 1999. As of December 29, 2001, the Company had 1,000,000 shares remaining for repurchase under the Board of Directors authorization expiring in May of 2002. Market Risk The Company is exposed to market risk from changes in interest rates, foreign exchange rates and commodities. The Company had long-term debt outstanding at December 29, 2001 in the form of Senior Notes at fixed interest rates and foreign lines of credit at variable rates. Since nearly 80% of this debt has fixed interest rates, the Company's interest expense is not materially sensitive to changes in interest rate levels. A portion of the Company's operations consists of manufacturing and sales activities in foreign countries. The Company has manufacturing facilities in Mexico, U.K., Ireland, Switzerland, South Korea, China and the Philippines. During 2001, sales exported from the United States or manufactured abroad accounted for 51.9% percent of total sales. Substantially all sales in Europe are denominated in Euros and British Pound Sterling, and substantially all sales in the Asia-Pacific region are denominated in United States Dollars, Japanese Yen and South Korean Won. The Company's identifiable foreign exchange exposures result from the purchase and sale of products from affiliates, repayment of intercompany trade and loan amounts and translation of local currency amounts in consolidation of financial results. As international sales were slightly more than half of total sales, a significant portion of the resulting accounts receivable is denominated in foreign currencies. Changes in foreign currency exchange rates or weak economic conditions in the foreign countries in which it manufactures and distributes products could affect the Company's sales, accounts receivable values and financial results. The Company does not use any material derivative financial instruments to mitigate its foreign currency risk at the present time. However, netting and offsetting intercompany account management techniques are utilized to reduce known foreign currency exposures. The Company uses various metals in the production of its products, including zinc, copper and silver. The Company's earnings are exposed to fluctuations in the prices of these commodities. The Company does not currently use derivative financial instruments to mitigate this commodity price risk. Outlook Sales for 2002 are expected to start slowly, as weakness in the electronics and electrical markets is expected to continue through at least the first half of the year. Sales are expected to improve in the second half of 2002 driven by increased electronics market demand and reduced distributor inventory levels. Additionally, sales are expected to be positively impacted by the introduction of new products and increased market penetration of recently introduced products. To offset the current lower profitability levels and the expectation of continued price pressure, the Company will continue to emphasize implementation of cost reduction opportunities and the restructuring and consolidation of manufacturing operations in 2002. The Company's long-term growth strategy emphasizes development of new circuit protection products and providing customers with solutions and technical support in all major regions of the world. The Company is working to expand its market share in the overvoltage circuit protection market through introduction of an expanded line of ESD products to complement its complete line of overcurrent products. The Company remains committed to investing in new product development and technical resources to provide customers with overcurrent and overvoltage circuit protection expertise. 5 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 The statements in this section, the letter to shareholders and in the other sections of this report which are not historical facts contained in this report are forward-looking statements that involve risks and uncertainties, including, but not limited to, product demand and market acceptance risks, the effect of economic conditions, the impact of competitive products and pricing, product development and patent protection, commercialization and technological difficulties, capacity and supply constraints or difficulties, exchange rate fluctuations, actual purchases under agreements, the effect of the Company's accounting policies, labor disputes, restructuring costs in excess of expectations and other risks which may be detailed in the Company's Securities and Exchange Commission filings. REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Littelfuse, Inc. We have audited the accompanying consolidated statements of financial condition of Littelfuse, Inc. and subsidiaries as of December 29, 2001 and December 30, 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 29, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Littelfuse, Inc. and subsidiaries as of December 29, 2001 and December 30, 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the Unites States. [SIGNATURE] Ernst & Young LLP Chicago, Illinois January 29, 2002 6
Consolidated Statements of Financial Condition (In Thousands) December 29, 2001 December 30, 2000 Assets Current assets: Cash and cash equivalents $ 34,527 $ 5,491 Accounts receivable, less allowances (2001 - $7,519; 2000 - $9,178) 40,969 53,152 Inventories 46,208 59,272 Deferred income taxes 10,870 4,664 Prepaid expenses and other current assets 3,608 4,115 --------- --------- Total current assets 136,182 126,694 Property, plant, and equipment: Land 9,669 8,687 Buildings 33,481 29,650 Equipment 176,185 174,837 219,335 213,174 Accumulated depreciation (132,734) (120,501) --------- --------- 86,601 92,673 Intangible assets, net of amortization: Reorganization value in excess of amounts allocable to identifiable assets 28,066 30,913 Patents and licenses 56 2,087 Distribution network 5,102 5,440 Trademarks 2,522 2,775 Other 12,775 13,698 --------- --------- 48,521 54,913 Other assets 968 98 --------- --------- Total assets $ 272,272 $ 274,378 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 7,881 $ 11,066 Accrued payroll 19,701 18,548 Accrued expenses 6,932 9,224 Accrued income taxes 7,702 7,862 Current portion of long-term debt 21,026 17,070 --------- --------- Total current liabilities 63,242 63,770 Long-term debt, less current portion 30,402 41,397 Deferred income taxes 835 2,153 Other long-term liabilities 124 331 Shareholders' equity: Preferred stock, par value $.01 per share: 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, par value $.01 per share: 34,000,000 shares authorized; shares issued and outstanding, 2001 - 21,873,416; 2000 - 19,849,894 219 198 Additional paid-in capital 70,641 60,223 Notes receivable - Common stock (3,448) (3,353) Accumulated other comprehensive loss (10,265) (7,874) Retained earnings 120,522 117,533 --------- --------- Total shareholders' equity 177,669 166,727 Total liabilities and shareholders' equity $ 272,272 $ 274,378
See accompanying notes. 7 S Consolidated Statements of Income
(In Thousands, Except per Share Amounts) Year Ended December 29, 2001 December 30, 2000 January 1, 2000 Net sales $ 272,149 $ 371,920 $ 296,367 Cost of sales 180,242 221,272 179,112 Gross profit 91,907 150,648 117,255 Selling, general and administrative expenses 62,197 71,083 56,098 Research and development expenses 8,883 11,152 9,455 Amortization of intangibles 5,972 6,665 7,078 Restructuring expense 6,315 -- -- Operating income 8,540 61,748 44,624 Interest expense 3,291 4,652 5,253 Other income (1,112) (1,940) (1,306) Income before income taxes 6,361 59,036 40,677 Income taxes 2,291 21,738 15,457 Net income $ 4,070 $ 37,298 $ 25,220 Net income per share: Basic $ 0.20 $ 1.88 $ 1.29 Diluted $ 0.19 $ 1.69 $ 1.16 Weighted-average shares and equivalent shares outstanding: Basic 19,951 19,834 19,572 Diluted 21,731 22,118 21,751
See accompanying notes. 8 Consolidated Statements of Cash Flows
(In Thousands) Year Ended December 29, 2001 December 30, 2000 January 1, 2000 Operating activities Net income $ 4,070 $ 37,298 $ 25,220 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,710 20,074 18,461 Amortization of intangibles 5,972 6,665 7,078 Provision for bad debts 308 275 614 Deferred income taxes (7,531) (1,810) (3,922) Other (435) 337 (225) Changes in operating assets and liabilities: Accounts receivable 10,573 4,978 (14,323) Inventories 11,873 (10,802) (8,850) Accounts payable and accrued expenses (3,710) (8,514) 14,915 Prepaid expenses and other (520) 186 (117) Net cash provided by operating activities 40,310 48,687 38,851 Investing activities Purchases of property, plant, and equipment, net (14,121) (21,958) (19,975) Purchase of business, net of cash acquired (168) -- (24,754) Other -- (60) (56) Net cash used in investing activities (14,289) (22,018) (44,785) Financing activities Proceeds from long-term debt 15,855 53,811 21,515 Payments of long-term debt (21,887) (70,630) (30,647) Proceeds from exercise of stock options and warrants 10,519 5,831 1,645 Purchases of common stock and redemption of warrants (1,256) (11,203) (12,833) Net cash provided by (used in) financing activities 3,231 (22,191) (20,320) Effect of exchange rate changes on cash (216) (875) 181 Increase (decrease) in cash and cash equivalents 29,036 3,603 (26,073) Cash and cash equivalents at beginning of year 5,491 1,888 27,961 Cash and cash equivalents at end of year $ 34,527 $ 5,491 $ 1,888
See accompanying notes. 9 Consolidated Statements of Shareholders' Equity
Notes Additional Receivable- Other Common Paid-In Common Comprehensive Retained Stock Capital Stock Income/Loss Earnings Total Period from January 2, 1999 to December 29, 2001 Balance at January 2, 1999 $200 $ 55,537 $ (2,772) $ (3,726) $ 75,285 $ 124,524 Comprehensive income: Net income for the year -- -- -- -- 25,220 25,220 Foreign currency translation adjustment -- -- -- (1,916) -- (1,916) Comprehensive income 23,304 Stock options and warrants exercised 2 2,172 (137) -- -- 2,037 Purchase of 707,500 shares of common stock (7) (2,468) -- -- (10,358) (12,833) Balance at January 1, 2000 $195 $ 55,241 $ (2,909) $ (5,642) $ 90,147 $ 137,032 Comprehensive income: Net income for the year -- -- -- -- 37,298 37,298 Foreign currency translation adjustment -- -- -- (2,232) -- (2,232) Comprehensive income 35,066 Stock options and warrants exercised 7 6,269 (444) -- -- 5,832 Purchase of 369,000 shares of common stock (4) (1,287) -- -- (9,912) (11,203) Balance at December 30, 2000 $198 $ 60,223 $ (3,353) $ (7,874) $117,533 $ 166,727 Comprehensive income: Net income for the year -- -- -- -- 4,070 4,070 Foreign currency translation adjustment -- -- -- (2,391) -- (2,391) Comprehensive income 1,679 Stock options and warrants exercised 21 10,593 (95) -- -- 10,519 Purchase of 50,000 shares of common stock -- (175) -- -- (1,081) (1,256) Balance at December 29, 2001 $219 $ 70,641 $ (3,448) $(10,265) $120,522 $ 177,669
See accompanying notes. 10 Notes to Consolidated Financial Statements December 29, 2001 and December 30, 2000 1. Summary of Significant Accounting Policies and Other Information Nature of Operations Littelfuse, Inc. and its subsidiaries (the Company) design, manufacture, and sell circuit protection devices for use in the automotive, electronic, and electrical markets throughout the world. Fiscal Year The Company's fiscal years ended December 29, 2001, December 30, 2000 and January 1, 2000, contained 52 weeks. Principles of Consolidation The consolidated financial statements include the accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash Equivalents All highly liquid investments, with a maturity of three months or less when purchased, are considered to be cash equivalents. Fair Value of Financial Instruments The Company's financial instruments include cash and cash equivalents, accounts receivable, and long-term debt. The carrying values of such financial instruments approximate their estimated fair values. Accounts Receivable The Company performs credit evaluations of customers financial condition and generally does not require collateral. Credit losses are provided for in the financial statements based upon specific knowledge of a customer's inability to meet its financial obligations to the Company. Historically, credit losses have consistently been within the management's expectations and have not been a material amount. The Company also maintains allowances against accounts receivable for the settlement of rebates and sales discounts to customers. These allowances are based upon specific customer sales and sales discounts as well as actual historical experience. Inventories Inventories are stated at the lower of cost (first in, first out method) or market, which approximates current replacement cost. The Company maintains excess and obsolete allowances against inventory to reduce the carrying value to the expected net realizable value. These allowances are based upon a combination of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory. Property, Plant, and Equipment Land, buildings, and equipment are carried at cost. Depreciation is provided under accelerated methods using useful lives of 21 years for buildings, 7 to 9 years for equipment, and 7 years for furniture and fixtures. Tooling and computer software are depreciated using the straight-line method over 5 years and 3 years, respectively. Intangible Assets Reorganization value in excess of amounts allocable to identifiable assets and trademarks are amortized using the straight-line method over 20 years. Patents are amortized using the straight-line method over their estimated useful lives, which average approximately 10 years. The distribution network is amortized using an accelerated method over 20 years. Licenses are amortized using an accelerated method over their estimated useful lives, which average approximately 9 years. Other intangible assets consist principally of goodwill that is being amortized over 10 to 20 years. Accumulated amortization of these intangible assets was $65.9 million at December 29, 2001 and was $59.9 million at December 30, 2000. If there are indicators that long-lived assets may be impaired, the Company assesses recoverability from future operations using undiscounted cash flows. Under this approach, the carrying value of the intangible asset would be reduced to a fair value if the Company's best estimate for expected undiscounted future cash flows of the related business would be less than the carrying amount of the intangible asset over its remaining amortization period. Revenue Recognition In accordance with the Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," issued in December 1999, sales and associated costs are recognized in accordance with customer shipping terms. The adoption of SAB 101 did not have a material impact on the Company's earnings or financial position. Advertising Costs The Company expenses advertising costs as incurred which amounted to $1.1 million in 2001, $2.1 million in 2000 and $2.6 million in 1999. Foreign Currency Translation The financial statements of foreign entities have been translated in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," and, accordingly, unrealized foreign currency translation adjustments are reflected as a component of shareholders' equity. Stock-Based Compensation Under the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), the Company accounts for stock option grants to employees and directors in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Generally, the Company grants stock options for a fixed number of shares with an exercise price equal to the market price of the underlying stock at the date of grant and, accordingly, does not recognize compensation expense. On certain occasions, the Company has granted stock options for a fixed number of shares with an exercise price below that of the underlying stock on the date of the grant and recognizes compensation expense accordingly. This compensation expense has not been material. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 11 Shipping and Handling Fees and Costs In September 2000, Emerging Issues Task Force (EITF) Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," concluded that all amounts billed to customers in a sales transaction represent fees earned for the goods provided and, accordingly, amounts billed related to shipping and handling should be classified as revenue. The Company has adopted EITF 00-10 and has classified amounts billed related to shipping and handling in revenue. Costs incurred for shipping and handling of $3.1 million, $3.9 million and $2.1 million in 2001, 2000 and 1999, respectively, are classified in Selling, General, and Administrative Expenses. Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." FAS 144 is effective for fiscal years beginning after December 15, 2001. The Company expects to adopt FAS 144 as of December 30, 2001 and it does not expect that the adoption of the Statement will have a significant impact on the Company's financial position and results of operations. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," which is effective for fiscal years beginning after June 15, 2002. The Statement requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company will adopt Statement 143 on December 29, 2002, and, based on current circumstances, does not believe that the impact of adoption of Statement 143 will have a material impact on the Company's financial position or results of operations. In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible Assets." Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, Statement 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized. The Company will apply Statement 142 beginning in the first quarter of 2002. Application of the nonamortization provisions of Statement 142 is expected to result in an increase in net income of $2.4 million ($0.11 per diluted share) in 2002. In addition, there is a scheduled drop off in 2002 of $1.3 million in amortization of patent and license intangible assets unrelated to application of Statement 142. The Company will test goodwill for impairment using the two-step process prescribed in Statement 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company expects to perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002 in the first quarter of 2002. Any impairment charge resulting from these transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the first quarter of 2002. The Company has not yet determined what the effect of these tests will be on the earnings and financial position of the Company but does not expect that the adoption of the Statement will have a significant impact on the Company's financial position or results of operations. Restructuring Costs In 1999, in connection with the acquisition of Harris Corporation's Suppression Products Group, the Company recorded certain reserves associated with the restructuring of the acquired business. The reserves associated with costs to be incurred related to the acquired business were recorded as a purchase accounting adjustment and did not affect 12 the operating results of the Company. Included in the Company's operating results for the year ended December 29, 2001 are restructuring charges of $6.3 million. These charges result from the Company's plans to close down a plant in the U.S. and the UK, workforce reductions in Korea and the write-down of manufacturing equipment. Restructuring charges for the closure of the US and the UK plants included $4.1 million of employee termination costs covering 462 technical, production, administrative and support employees. Restructuring of the Korea manufacturing operations included $1.1 million of employee termination costs covering 50 technical, production, administrative and support employees. The remaining $1.1 million of the restructuring expense relates to the non-cash writedown of manufacturing equipment. As of December 29, 2001, $0.5 million of severance costs have been paid. The remaining $4.7 million of severance costs, currently shown in accrued expenses, are expected to be paid by December 31, 2002. 2. Acquisition of Business and Liquidation On October 19, 1999, the Company acquired Harris Corporation's Suppression Products Group for $24.8 million in cash. The Suppression Products Group manufactures and markets a broad line of transient voltage suppression devices that provide circuit protection for products in numerous markets including consumer, computer, telecommunications, automotive, office equipment, industrial and power transmission. This acquisition has been accounted for through the use of the purchase method of accounting; accordingly, the accompanying financial statements include the results of its operations since the acquisition date. The purchase price has been allocated to the following net assets acquired based on fair value of such assets: accounts receivable of $7.4 million, inventory of $4.6 million, property, plant and equipment of $12.7 million, other assets of $0.4 million, goodwill of $4.8 million and liabilities assumed of $5.1 million. Purchase accounting liabilities recorded during 1999 consist of $0.5 million for transaction costs and $5.7 million for costs associated with exiting a product line and involuntary termination of employees in connection with the integration of the business. Assuming that this acquisition had occurred as of January 4, 1998, pro forma sales of Littelfuse, Inc. would have been $328.3 million in 1999 and pro forma results of operations would not have differed materially from reported results of operations. During fiscal 2000, the Company reduced its estimate of purchase accounting liabilities related to 1999 acquisitions by $1.6 million and, accordingly, goodwill was reduced by an equivalent amount. These changes primarily resulted from costs being less than originally anticipated. 3. Inventories The components of inventories are as follows at December 29, 2001, and December 30, 2000 (in thousands): 2001 2000 Raw materials $ 9,244 $14,488 Work in process 11,066 15,288 Finished goods 25,898 29,496 Total net inventory $46,208 $59,272 4. Long-Term Obligations The carrying amounts of long-term debt, which approximate fair value, are as follows at December 29, 2001, and December 30, 2000 (in thousands): 2001 2000 6.16% Senior Notes, maturing 2005 $40,000 $50,000 Other obligations 10,616 6,742 Capital lease obligations 812 1,725 51,428 58,467 Less: Current maturities 21,026 17,070 Total long-term obligations $30,402 $41,397 13 The Company has unsecured domestic financing arrangements consisting of Senior Notes with insurance companies and a credit agreement with banks that provides a $55.0 million revolving credit facility. The Senior Notes require minimum annual principal payments. No principal payments are required for borrowings against the revolving line of credit until the line matures on August 31, 2003. At December 29, 2001, the Company had available $55.0 million of borrowing capability under the revolving credit facility at an interest rate of LIBOR plus 0.38%. The bank credit agreement provides for letters of credit of up to $8.0 million as part of the available credit line. At December 29, 2001 the Company had $1.7 million of outstanding letters of credit. The Company also has unsecured bank lines of credit in the Netherlands, Japan and Korea that provide a Euro 4.0 million revolving credit facility at an interest rate of Euro Libor plus 0.85% in the Netherlands, a Yen 1.1 billion revolving credit facility at an interest rate of TIBOR plus 0.75% (0.83% as of December 29, 2001) and a Won 3.0 billion revolving credit facility at an interest rate of the 3-month Korea Negotiable Certificate of Deposit rate plus 0.85% (5.50% as of December 29, 2001). No principal payments are required for borrowings until the lines mature on December 31, 2002 in the Netherlands and Japan and on March 31, 2002 in Korea. At December 29, 2001 the Company had no borrowings outstanding on the Euro revolving credit line, an equivalent of $8.4 million outstanding on the Yen facility and the equivalent of $1.9 million outstanding on the Won credit line. The Senior Notes and bank credit agreement contain covenants that, among other matters, impose limitations on the incurrence of additional indebtedness, future mergers, sales of assets, payment of dividends, and changes in control, as defined. In addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage, working capital, leverage and net worth. At December 29, 2001 the Company was in compliance with these covenants. Aggregate maturities of long-term obligations at December 29, 2001, are as follows (in thousands): 2002 $21,026 2003 10,193 2004 10,060 2005 10,060 2006 and thereafter 89 Total debt $51,428 Interest paid on long-term debt approximated $3.1 million in 2001, $4.3 million in 2000 and $4.9 million in 1999. 5. Benefit Plans The Company has a defined-benefit pension plan covering substantially all of its North American employees. The amount of the retirement benefit is based on years of service and final average monthly pay. The plan also provides post-retirement medical benefits to retirees and their spouses if the retiree has reached age 62 and has provided at least ten years of service prior to retirement. Such benefits generally cease once the retiree attains age 65. The Company also has a defined-benefit pension plan covering most of its Ireland employees as a result of its acquisition of the suppression Products Group in October, 1999. The amount of the retirement benefit is based on years of service and final average monthly pay. The plan also provides death benefits to the plan participants. 14 The Company accounts for it's defined benefit pension plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions" which requires that amounts recognized in the financial statements be determined on an actuarial basis. A substantial portion of the Company's pension amounts relate to its defined benefit plan in the United States. The Company's contributions are made in amounts sufficient to satisfy ERISA funding requirements. The most significant element in determining the Company's pension expense in accordance with SFAS No. 87 is the expected return on assets. The Company has assumed that the expected long-term rate of return on plan assets will be 9.0%. Over the long-term, the Company's pension plan assets have earned in excess of 9.0%; therefore, the Company believes that its assumption of future returns is reasonable. Changes in actual return on pension plan assets are deferred and recognized over a period of three years. The deferral of actual gains and losses affects the calculated value of plan assets and therefore future pension expense. The plan assets have earned a rate of return less than 9.0% in the last three years and, should this trend continue, future pension expense would likely increase. Differences between total pension expense of $1.6 million, $1.2 million and $1.7 million in 2001, 2000 and 1999, respectively, were not material to the overall financial performance of the Company.
(In Thousands) U.S. 2001 U.S. 2000 Ireland 2001 Ireland 2000 Change in benefit obligation Benefit obligation at beginning of year $45,942 $44,104 $15,072 $ 14,942 Service cost 2,327 1,952 500 425 Interest cost 3,264 3,154 882 936 Plan participants' contributions -- -- 159 193 Actuarial gain (1,330) (1,068) -- -- Benefits paid (2,439) (2,200) (1,140) (329) Effects of exchange rate movements -- -- (943) (1,095) Benefit obligation at end of year $47,764 $45,942 $14,530 $ 15,072 Change in plan assets at fair value Plan assets at beginning of year $46,022 $47,511 $16,959 $ 16,566 Actual return (loss) on plan assets (445) 711 (92) 1,461 Employer contributions -- -- 658 314 Plan participant contributions -- -- 159 193 Benefits paid (2,438) (2,200) (1,140) (329) Effects of exchange rate movements -- -- (1,049) (1,246) Fair value of plan assets at end of year $43,139 $46,022 $15,495 $ 16,959 Funded (unfunded) status $ (4,625) $ 80 $ 965 $ 1,887 Unrecognized prior service cost 46 112 -- -- Unrecognized net actuarial loss (gain) 1,609 (1,687) 1,007 (210) Unrecognized transition asset -- -- (1,266) (1,435) Prepaid pension asset (obligation) $ (2,970) $ (1,495) $ 706 $ 242
(In Thousands) U.S. 2001 U.S. 2000 U.S. 1999 Ireland 2001 Ireland 2000 Weighted-average assumptions Discount 7.3% 7.5% 7.5% 6.0% 6.0% Expected return on plan assets 9.0% 9.0% 9.0% 7.0% 7.0% Salary growth rate 4.0% 4.0% 4.5% 4.0% 4.0% Components of net periodic benefit cost Service cost $ 2,327 $ 1,952 $ 2,264 $ 659 $ 618 Interest cost 3,264 3,154 3,015 882 936 Expected return on plan assets (4,182) (4,002) (3,648) (1,129) (1,223) Amortization of prior service cost 66 66 66 -- -- Amortization of transition asset -- -- -- (81) (96) Recognized net actuarial loss -- -- 50 -- -- Total cost of the plan for the year $ 1,475 $ 1,170 $ 1,747 $ 331 $ 235 Expected plan participants' contribution -- -- -- 159 193 Net periodic benefit cost $ 1,475 $ 1,170 $ 1,747 $ 172 $ 42
15 The Company provides additional retirement benefits for certain key executives through its unfunded defined contribution Supplemental Executive Retirement Plan. The charge to expense for this plan amounted to $1.9 million $0.6 million and $1.1 million in 2001, 2000 and 1999, respectively. The Company also maintains a 401(k) savings plan covering substantially all U.S. employees. The Company matches 50% of the employee's annual contributions for the first 4% of the employee's gross wages. Employees vest in the Company contributions after two years of service. Company matching contributions amounted to $0.6 million, $0.7 million and $0.6 million in 2001, 2000 and 1999, respectively. 6. Shareholders' Equity Stock Options The Company has stock option plans authorizing the granting of both incentive and nonqualified options and other stock rights of up to 3,400,000 shares of common stock to employees and directors. The stock options vest over a five-year period and are exercisable over a ten-year period commencing from the date of vesting. A summary of stock option information follows:
2001 2000 1999 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price Outstanding at beginning of year 1,692,075 $22.53 1,588,840 $18.02 1,428,910 $16.91 Options granted Option price equals market price 391,200 27.18 358,250 35.07 352,200 20.25 Option price less than market price 1,000 5.00 -- -- 15,000 5.00 Total options granted 392,200 27.12 358,250 35.07 367,200 19.63 Exercised (116,170) 16.42 (217,465) 10.15 (144,870) 9.34 Forfeited (65,200) 29.06 (37,550) 22.25 (62,400) 21.98 Outstanding at end of year 1,902,905 $23.63 1,692,075 $22.53 1,588,840 $18.02 Exercisable at end of year 938,623 794,450 765,960 Available for future grant 164,400 471,190 216,440 Weighted-average value of options granted during the year $18.31 $21.05 $12.04 Option price equals market price 18.29 21.05 11.79 Option price less than market price 20.72 -- 17.75
As of December 29, 2001, the Company had the following outstanding options: Weighted- Weighted- Average Average Options Exercise Remaining Options Exercise Price Outstanding Price Life Exercisable $ 3.69 to $ 5.00 36,800 4.52 3.05 28,000 $ 7.50 to $11.16 128,500 10.32 1.86 128,500 $11.63 to $16.50 170,720 15.16 3.06 170,720 $17.81 to $25.50 791,305 21.60 6.22 492,349 $26.63 to $35.50 775,580 30.67 8.56 119,054 Disclosure of pro forma information regarding net income and net income per share is required by SFAS 123 and has been determined as if the Company had accounted for its stock options granted in 2001, 2000 and 1999 under the fair value method using the Black-Scholes option pricing model. The following assumptions were utilized in the valuation: 2001 2000 1999 Risk-free interest rate 5.11% 5.16% 6.52% Expected dividend yield 0% 0% 0% Expected stock price volatility 58.6% 47.6% 41.0% Expected life of options 8 years 8 years 8 years Had compensation cost for the Company's stock options granted in 2001, 2000 and 1999 been determined based on the fair value at the dates of grant, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated: 2001 2000 1999 Pro forma net income (in thousands of dollars) $2,634 $35,792 $24,341 Pro forma basic net income per share $ 0.13 $ 1.81 $ 1.24 Pro forma diluted net income per share $ 0.12 $ 1.62 $ 1.12 Notes Receivable - Common Stock In 1995, the Company established the Executive Loan Program under which certain management employees may obtain interest-free loans from the Company to facilitate their exercise of stock options and payment of the related income tax liabilities. Such loans, limited to 90% of the exercise price plus related tax liabilities, have a five-year maturity, subject to acceleration for termination of employment or death of the employee. Such loans are classified as a reduction of shareholders' equity. 16 Preferred Stock The Board of Directors may authorize the issuance from time to time of preferred stock in one or more series with such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board may fix by resolution. In connection with the Rights Plan, the Board of Directors has reserved, but not issued, 200,000 shares of preferred stock. Rights Plan In December 1995, the Company adopted a shareholder rights plan providing for a dividend distribution of one preferred share purchase right for each share of common stock outstanding on and after December 15, 1995. The rights can be exercised only if an individual or group acquires or announces a tender offer for 15% or more of the Company's common stock and warrants. If the rights first become exercisable as a result of an announced tender offer, each right would entitle the holder to buy 1/200th of a share of a new series of preferred stock at an exercise price of $67.50. Once an individual or group acquires 15% or more of the Company's common stock, each right held by such individual or group becomes void and the remaining rights will then entitle the holder to purchase a number of common shares having a market value of twice the exercise price of the right. If the attempted takeover succeeds, each right will then entitle the holder to purchase a 17 number of the acquiring Company's common shares having a market value of twice the exercise price of the right. After an individual or group acquires 15% of the Company's common stock and before they acquire 50%, the Company's Board of Directors may exchange the rights in whole or in part, at an exchange ratio of one share of common stock or 1/100th of a share of a new series of preferred stock per right. Before an individual or group acquires 15% of the Company's common stock, or a majority of the Company's Board of Directors are removed by written consent, whichever occurs first, the rights are redeemable for $.01 per right at the option of the Company's Board of Directors. The Company's Board of Directors is authorized to reduce the 15% threshold to no less than 10%. Each right will expire on December 15, 2005, unless earlier redeemed by the Company. 7. Income Taxes Federal, state, and foreign income tax expense (benefit) consists of the following (in thousands): 2001 2000 1999 Current: Federal $ 5,187 $13,375 $ 10,078 State (637) 1,908 1,467 Foreign 4,980 8,265 6,180 Subtotal 9,530 23,548 17,725 Deferred: Federal (7,379) (1,827) (1,875) Foreign 140 17 (393) Subtotal (7,239) (1,810) (2,268) Provision for income taxes $ 2,291 $21,738 $ 15,457 Domestic and foreign income (loss) before income taxes is as follows (in thousands): 2001 2000 1999 Domestic $(10,030) $28,906 $22,846 Foreign 16,391 30,130 17,831 Income before income taxes $ 6,361 $59,036 $40,677 A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below (in thousands):
2001 2000 1999 Tax expense at statutory rate of 35% $2,226 $20,663 $14,237 State and local taxes (benefit), net of federal tax benefit (476) 1,179 904 Foreign income tax benefit (615) (1,437) (735) Foreign losses for which no tax benefit is available 47 63 82 Other, net 1,109 1,270 969 Provision for income taxes $2,291 $21,738 $15,457
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the Company's assets and liabilities. Significant components of the Company's deferred tax assets and liabilities at December 29, 2001 and December 30, 2000, are as follows (in thousands): 18 2001 2000 Deferred tax liabilities Tax depreciation and amortization in excess of book $ 2,238 $2,097 Prepaid expenses 231 (10) Other 1,390 989 Total deferred tax liabilities 3,859 3,076 Deferred tax assets Accrued expenses 10,907 5,586 Foreign tax credit carryforwards 2,987 -- Foreign net operating loss carryforwards 392 341 Gross deferred tax assets 14,286 5,927 Less: Valuation allowance (392) (340) Total deferred tax assets 13,894 5,587 Net deferred tax assets $10,035 $2,511 The deferred tax asset valuation allowance is related to deferred tax assets from foreign net operating losses. The net operating loss carryforwards have no expiration date. The Company paid income taxes of $8.1 million in 2001, $23.2 million in 2000 and $12.1 million in 1999. 8. Business Segment Information The Company designs, manufactures, and sells circuit protection devices throughout the world. The Company has three reportable geographic segments: The Americas, Europe, and Asia-Pacific. The circuit protection market in these geographical segments is categorized into three major product areas: electronic, automotive and electrical. The Company evaluates the performance of each geographic segment based on its net income or loss. The Company also accounts for intersegment sales as if the sales were to third parties. The Company's reportable segments are the business units where the revenue is earned and expenses are incurred. The Company has subsidiaries in The Americas, Europe, and Asia-Pacific where each region is measured based on its sales and operating income or loss. Information concerning the operations in these geographic segments for the year ended December 29, 2001, is as follows (in thousands):
The Asia- Combined Consolidated Americas Europe Pacific Total Corporate Reconciliation Total Revenues 2001 $144,899 $51,430 $75,820 $272,149 $ -- $ -- $272,149 2000 $214,907 $61,634 $95,379 $371,920 $ -- $ -- $371,920 Intersegment revenues 2001 54,440 46,660 9,926 111,026 -- (111,026) -- 2000 44,599 38,185 6,523 89,307 -- (89,307) -- Interest expense 2001 3,075 23 193 3,291 -- -- 3,291 2000 4,337 69 246 4,652 -- -- 4,652 Depreciation and 2001 12,176 4,035 1,723 17,934 7,748 -- 25,682 amortization 2000 11,563 2,810 4,213 18,586 8,153 -- 26,739 Other income (loss) 2001 635 688 (211) 1,112 -- -- 1,112 2000 2,754 (893) 79 1,940 -- -- 1,940 Income tax expense (benefit) 2001 (2,831) 2,871 2,251 2,291 -- -- 2,291 2000 12,290 4,546 4,902 21,738 -- -- 21,738 Net income (loss) 2001 5,426 7,363 5,347 18,136 (14,066) -- 4,070 2000 24,493 9,124 11,856 45,473 (8,175) -- 37,298 Identifiable assets 2001 191,626 35,568 41,643 268,837 83,048 (79,613) 272,272 2000 181,727 39,559 48,096 269,382 60,404 (55,408) 274,378 Capital expenditures, net 2001 5,126 5,318 3,677 14,121 -- -- 14,121 2000 13,929 1,875 6,154 21,958 -- -- 21,958
19 Intersegment revenues and receivables are eliminated to reconcile to consolidated totals. Restructuring charges are reflected in the corporate column for the net income segmentation. Corporate identifiable assets consist primarily of cash and intangible assets. The Company's revenues by product areas for the year ended December 29, 2001 and December 30, 2000, are as follows (in thousands): Revenues 2001 2000 1999 Electronic $146,342 $232,677 $154,141 Automotive 91,061 100,036 101,270 Electrical 34,746 39,207 40,956 Consolidated Total $272,149 $371,920 $296,367 Revenue from no single customer of the Company amounts to 10% or more. 9. Lease Commitments The Company leases certain office and warehouse space under non-cancelable operating leases, as well as certain machinery and equipment. Rental expense under these leases was approximately $1.8 in 2001, $1.5 million in 2000, and $0.9 million in 1999. Future minimum payments for all non-cancelable operating leases with initial terms of one year or more at December 29, 2001 are as follows (in thousands): 2002 1,032 2003 656 2004 148 2005 140 2006 and thereafter 83 Total lease commitments 2,059 10. Earnings per Share The following table sets forth the computation of basic and diluted earnings per share:
(In Thousands, except per share amounts) 2001 2000 1999 Numerator: Net income $ 4,070 $37,298 $25,220 Denominator: Denominator for basic earnings per share - Weighted-average shares 19,951 19,834 19,572 Effect of dilutive securities: Warrants 1,565 1,871 1,970 Employee stock options 215 413 209 Denominator for diluted earnings per share - Adjusted weighted-average shares and assumed conversions 21,731 22,118 21,751 Basic earnings per share $ 0.20 $ 1.88 $ 1.29 Diluted earnings per share $ 0.19 $ 1.69 $ 1.16
20 EX-22.1 7 c68111ex22-1.txt SUBSIDIARIES EXHIBIT 22.1 SUBSIDIARIES Littelfuse, S.A. de C.V. Littelfuse do Brasil Ltda. Littelfuse do Amazonia, Ltda. Watseka LF, Inc. Littelfuse, B.V. Littelfuse, A.G. Littelfuse Limited Littelfuse Ireland Development Co., Ltd. Littelfuse Ireland Limited Joyrush Investments Ltd. REMPAT Holding B.V. REMPAT Financial B.V. Littelfuse Far East Pte Ltd. Littelfuse HK Limited Suzhou Littelfuse OVS Ltd. Littelfuse KK Littelfuse Triad Inc. Littelfuse Phils Inc. Littelfuse S&L, Inc. 1 EX-23.1 8 c68111ex23-1.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Littelfuse, Inc. of our report dated January 29, 2002, included in the 2001 Annual Report to Shareholders of Littelfuse, Inc. Our audits also included the financial statement schedule of Littelfuse, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (No. 33-55942, 33-64442, 33-95020, 333-03260 and 333-64285) on Form S-8 of our report dated January 29, 2002, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule in this Annual Report (Form 10-K) of Littelfuse, Inc. Chicago, Illinois March 22, 2002 Ernst & Young LLP 1 -----END PRIVACY-ENHANCED MESSAGE-----