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NOTE 3 - RETIREMENT AND BENEFITS PLANS:

The Company has noncontributory-trusteed defined benefit retirement plans for sales, administrative, supervisory and certain other employees. The benefits under these plans are primarily based on years of service and compensation levels. The Company's funding policy is to contribute annually the maximum amount deductible for federal income tax purposes.

Net pension cost consisted of the following (in thousands):

The transition asset is being amortized using the straight-line method over 15.02 years, the average remaining service period of active plan participants. The discount rate and expected long-term rate of return used in determining the projected benefit obligation for fiscal years 1999, 1998 and 1997 was 7.75%. The assumed rate of future compensation increases for fiscal years 1999 and 1998 was 4% and for fiscal year 1997 was 6%.

Plan assets are primarily invested in marketable equity securities, corporate and government debt securities and real estate and are administered by an investment management company.

The funded status of the plan is as follows (in thousands):

In fiscal year 1991, the Company adopted a non-qualified supplemental retirement plan for certain key employees. Benefits provided under the plan are equal to 60% of the employee's final average earnings, less amounts provided by the Company's defined benefit pension plan and amounts available through Social Security. Total annual benefits are limited to $120,000 for each participant in the plan. Effective January 1, 1991 the Company adopted a deferred compensation savings plan for certain key employees. Under this arrangement, selected employees contribute a portion of their annual compensation to the plan. The Company contributes an amount to each participant's account by computing an investment return equal to Moody's Average Seasoned Bond Rate plus 2%. Employees receive vested amounts upon death, termination or retirement. Total benefit expense recorded under these plans for fiscal years 1999, 1998 and 1997 was $320,000, $303,000 and $348,000, respectively. Benefits payable related to these plans and included in other non-current liabilities in the accompanying financial statements were $4,384,000 and $3,594,000 at October 29, 1999 and October 30, 1998, respectively. In connection with this arrangement the Company is the beneficiary of life insurance policies on the lives of certain key employees. The aggregate cash surrender value of these policies, included in non-current assets, was $5,862,000 and $5,298,000 at October 29, 1999 and October 30, 1998, respectively.

The Company provides a deferred compensation plan for certain key executives, which is based upon the Company's pretax income and return on shareholders' equity. The payment of these bonuses is generally deferred over a five-year period. The total amount payable related to this arrangement was $5,823,000 and $4,598,000 at October 29, 1999 and October 30, 1998, respectively. Future payments are approximately $1,700,000, $1,434,000, $1,226,000, $942,000 and $521,000 for fiscal years 2000 through 2004, respectively.

Postretirement health care benefits in the approximate amount of $350,000 and $345,000 are included in non-current liabilities at October 29, 1999 and October 30, 1998, respectively.

The Company's 1999 Stock Incentive Plan ("the Plan") was approved by the Board of Directors on January 11, 1999 and 275,000 shares were granted on April 29, 1999. Under the Plan, the maximum aggregate number of shares which may be optioned and sold is 900,000 shares of common stock, subject to adjustment upon changes in capitalization or merger. Generally, options granted under the plan vest in annual installments over four years following the date of grant (as determined by the Board of Directors) subject to the optionee's continuous service. Options expire ten years from the date of grant with the exception of an incentive stock option granted to an optionee who owns stock representing more than 10% of the voting power of all classes of stock of the Company, in which case the term of the option is five years. Options generally terminate three months after termination of employment or one year after termination due to permanent disability or death. Options are generally granted at a fair market value determined by the Board of Directors subject to the following:

a.) With respect to options granted to an employee or service provider who, at the time of grant owns stock representing more than 10% of the voting power of all classes of stock of the Company, the per share exercise price shall be no less than 110% of the fair market value on the date of grant.

b.) With respect to options granted to an employee or service provider other than described in the preceding paragraph, the exercise price shall be no less than 100% for incentive stock options and 85% for non-statutory stock options of the fair market value on the date of grant. Stock option activity under the plan was as follows:

The Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 ("FAS 123"). As permitted by FAS 123, the Company measures compensation cost in accordance with APB 25. Therefore, the adoption of FAS 123 had no impact on the Company's financial condition or results of operations. Had compensation cost for the Company's Stock Option Plan been determined based on the fair value of the options consistent with FAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:

The fair value of compensatory stock options was estimated using the Black-Scholes option pricing model using the following weighted average assumptions: