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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1995 0-325
THE DURIRON COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 31-0267900
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Research Boulevard 45420
Dayton, Ohio (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (513) 476-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 par value
(Title of Class)
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 /checkmark/ No / /
(Continued)
2
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 or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
/checkmark/
At close of business on February 15, 1996:
Number of Shares of Common Stock,
$1.25 par value, outstanding ................. 24,427,973
Aggregate market value of shares of Common
Stock, $1.25 par value, held by
nonaffiliates of the Company ................. $583,769,664
INDEX TO EXHIBITS at page 54 of this Report
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DOCUMENTS INCORPORATED BY REFERENCE
1. The Duriron Company, Inc. Proxy Statement for its 1996 Annual
Meeting of Shareholders to be held on April 25, 1996 (the
"Proxy Statement"). Definitive copies of the Proxy Statement
will be filed with the Commission within 120 days of the end
of the Company's most recently completed fiscal year. Only
such portions of the Proxy Statement as are specifically
incorporated by reference under Part III of this Report shall
be deemed filed as part of this Report.
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PART I
ITEM 1. BUSINESS
The Duriron Company, Inc. was incorporated under the laws of
the State of New York on May 1, 1912. All references herein to the "Company" or
"Duriron" refer collectively to The Duriron Company, Inc. and its subsidiaries,
unless otherwise indicated by the context.
On November 30, 1995, the Company acquired Durametallic
Corporation ("Durametallic") in a tax-free exchange of common stock valued at
$150 million under the terms of the acquisition agreement. The Company issued
approximately 5.4 million new shares of common stock to complete this exchange
and thereby acquired this manufacturer of mechanical seals and sealing system
products. The transaction was accounted for as a pooling of interests, and the
Company's prior financial statements were restated to incorporate Durametallic's
financial results. Accordingly, all subsequent references to the Company also
include Durametallic, unless the context clearly requires otherwise.
Duriron is principally engaged in the design, manufacture and
marketing of fluid handling equipment, primarily pumps and valves and mechanical
seals for industries that utilize difficult to handle and often corrosive fluids
in manufacturing processes. The Company specializes in the development of
precision-engineered equipment that is capable of withstanding the severely
deteriorating effects associated with the flow of acids, chemical solutions,
slurries and gases.
Based upon its analysis of trade association data and other
market information, the Company considers itself a leading supplier of corrosion
resistant fluid movement and control equipment to the basic chemical industry.
The Company's materials expertise, design, engineering capabilities and
applications know-how have enabled it to develop product lines that are
responsive to the chemical process industries' desire to achieve manufacturing
efficiencies, avoid premature equipment failure and reduce maintenance cost.
The Company operates primarily in one business segment, fluid
movement and control equipment (primarily pumps, valves, mechanical seals and
related equipment). Included in Note 19 of the Financial Statements provided as
part of Item 8 of this Report and incorporated herein by this reference, is
information concerning the Company's revenues, operating profit and identifiable
assets by geographic area for each year in the three-year period ended December
31, 1995. With respect to a majority of its products, the Company's domestic
operations supply each other and the Company's foreign manufacturing
subsidiaries with components and subassemblies.
PRODUCTS
The Company's principal fluid movement and control equipment
products are pumps, valves, mechanical seals and related equipment, marketed
primarily under the trademarks "Durco," "Atomac," "Valtek," "Automax," "Accord,"
"Kammer," "Mecair," "Sereg," "Durametallic," "Dura Seal," "Pac-Seal" and "Metal
Fab." In many manufacturing processes, fluids must be moved by pumps, and flow
must be controlled by valves. The Company's pumps,
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valves and mechanical seals are designed to withstand the corrosive nature of
the fluids and the varying temperatures and pressures under which manufacturing
processes occur.
The Company manufactures, under the Durco trade name, several
lines of centrifugal pumps, including metallic and non-metallic pumps, varying
in size, capacity, material components and sealant specifications. Durco pumps
are used primarily to move liquids during processing activities as well as in
auxiliary services such as waste removal, water treatment and pollution control.
Critical elements in pump selection include the nature and volume of the fluids
to be handled, the height and distance the fluids are to be moved, the
temperature and pressure at which they are to flow, the presence of stray
elements or particles, and the toxicity of the fluids. The Company also
manufactures several lines of metering pumps under the Durco trade name which
are generally used to inject measured quantities of additives or catalysts into
a process stream.
The Company's valves are used to control the flow of liquids
and gases in industrial processing systems. The Company manufactures product
lines of plug and butterfly valves under the Durco trademark which are made of
various metals, alloys and plastics. The Company also produces a lined ball
valve under the Atomac trade name. Actuators and other control accessories
manufactured by the Company under the Automax and Accord trade names are either
sold independently or mounted on these valves to move them from open to closed
positions and to various specified positions in between.
The Company manufactures, under the Valtek, Kammer and Sereg
trade names, automatic control valves, valve actuators and related components.
Automatic control valves are important components in the automation of
manufacturing and processing systems since they are capable of modulating (that
is, automatically adjusting) the rate and amount of fluids moving in a
manufacturing production system. The Valtek product line includes high-pressure
valves, rotary valves, and anti-noise and anti-cavitation valves. Substantially
all of the Valtek valves are sold with an actuator. The Company also developed
and manufactures a Valtek automatic control valve (under the "StarPac" trade
name) with "on-board" sensor and microprocessor capabilities. The Kammer
automated control valves are primarily sold with actuators to chemical process
applications requiring alloy steel control valves of a smaller size than most of
the Valtek products. The Company sells control valves under the Valtek Sereg
trade name primarily in France and other European countries.
The Company's mechanical seals and sealing systems are used to
prevent the leakage of process fluids along the rotating shaft of industrial
pumps, mixing equipment and miscellaneous other rotating equipment used in
moving and otherwise handling process fluids during manufacturing operations.
Certain types of these mechanical seals and sealing systems, which are marketed
under the "Durametallic" and "Dura Seal" trade names, are used within the
centrifugal pumps manufactured by the Company. Durametallic mechanical seals
include a spring loaded design and a welded metal bellows design which both
offer fluid sealing protection while rotating with the shaft of pumps, mixers
and similar equipment in industrial operations. Mechanical seals sold under the
"Pac-Seal" trademark are primarily used in water pumps and other non-corrosive
applications.
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Finally, the Company also manufactures filtration products and
related spare parts under the Durco trade name and specialty welded metal
bellows products under the "Metal Fab" trade name.
MARKETING AND DISTRIBUTION
The Company's Durco pump and Durco quarter-turn valve products
are primarily marketed to end-users and engineering contractors through the
Company's own sales forces, regional service centers, a national parts
distribution center and independent distributors and representatives. The
Company sales personnel are divided, for the Durco pump and Durco valve
products, into separate organizations which specialize in the respective product
lines. The specialization of these two sales forces helps enable them to
maintain a high level of technical knowledge about their applicable products,
customer applications, in-plant installation and maintenance services. Both the
pump and quarter-turn valve sales organizations have field sales offices located
in principal industrial markets and resident sales personnel at additional
locations.
The Company also maintains regional service centers in the
greater Houston, Salt Lake City and metropolitan Philadelphia areas. These
centers stock a full array of critical pump parts and have machining and product
modification capabilities. A national pump parts distribution and service
center, located in Birmingham, Alabama, provides 24-hour assistance to customers
and ships critical replacement parts on an immediate need basis. The Company
also has licensed certain independent valve distributors located throughout the
United States to service and remanufacture its quarter-turn valve products.
Automax and Atomac products are distributed with Durco manual
valves by Company sales personnel and through a network of independent stocking
distributors. The Company's sales force provides training and technical
assistance to the Company's independent distributors, who also participate in
periodic training programs relating to Company products and customer
applications.
Durametallic and Pac-Seal products are sold through a
combination of direct sales personnel who specialize only in these products and
by independent sales representatives or distributors. The Company maintains
branch and service center facilities in the U.S. at the following locations
which specialize in Durametallic and Pac-Seal products: Baton Rouge, Louisiana,
Carson, California; Posen, Illinois; Bridgeport, New Jersey; Matthews, North
Carolina; Cincinnati, Ohio; Houston, Texas; and Vancouver, Washington.
Durametallic products are also marketed internationally through sales offices in
almost sixty (60) countries. The Company also markets Durametallic products
through foreign subsidiaries including operations established in Argentina,
Canada, Belgium, Mexico, Brazil, Australia, New Zealand and Singapore. The
Company maintains joint ventures in India, Korea, Saudi Arabia and Malaysia to
manufacture and sell mechanical seals utilizing Durametallic product technology
within those countries.
Valtek products are marketed through specialized sales offices
with sales engineers and service centers in Springville (Utah), Houston,
Philadelphia, Beaumont (Texas), Corpus Christi and Baton Rouge. In other
territories, Valtek products are sold on a commission basis through independent
manufacturers' representatives located in principal marketing centers in the
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United States. The Company provides extensive training in the sophisticated
Valtek products and customer applications for its sales representatives.
Kammer products are primarily marketed through a direct sales
force in Germany and through independent distribution in other countries. Kammer
products are marketed with Valtek products in certain U.S. locations, with a
Kammer product sales office located in Pittsburgh, Pennsylvania, supporting U.S.
marketing. Valtek Sereg products are generally sold through employees in France
and combined with other Valtek products for sale in the U.S. and elsewhere.
The Company maintains a subsidiary, Davco Equipment Inc., to
market its Durco pumps, Durco quarter-turn valves, Automax actuators and Valtek
control valves directly and on a consolidated basis through employees of this
subsidiary to customers in the Freeport, Texas, area. Formerly, the Company had
marketed these varying product lines through a variety of specialized
independent distributors and employees.
The Company's international sales include domestic export
sales and sales by the Company's foreign subsidiaries. Duriron Canada Inc.,
headquartered in Woodbridge, Ontario, manufactures and sells Durco pumps and
valves throughout eastern Canada. S.A. Durco Europe N.V. is headquartered in
Brussels, Belgium. This subsidiary manufactures pumps and valves in its Petit
Rechain, Belgium, facility and maintains selling organizations in Europe and
sales representatives in the Middle East. Atomac, of Ahaus, Germany, and a
division of Durco GmbH, engages in the manufacture and sale of lined ball valves
and associated equipment. The Company further maintains subsidiaries in the
United Kingdom, Italy, Spain, The Netherlands and France to provide sales and
service of Durco products in these countries.
A Singapore subsidiary, Durco Valtek (Asia Pacific) Pte. Ltd.,
services and prepares pumps, quarter-turn valves and control valves for sale in
the Asian market in a recently expanded facility.
An Italian subsidiary of the Company manufactures actuators
sold in the U.S. under the Automax trade name and elsewhere under the "Mecair"
trade name. The Company worked to standardize such worldwide marketing under the
Automax trade name over 1995.
The Company has manufacturing and marketing operations for
Valtek products in Australia and Canada. Valtek products are also manufactured
and marketed by licensees in the United Kingdom and Brazil under long-term
license arrangements. The Company has additionally entered into a joint venture
with Yokogawa Electric Corporation and Kitz Corporation, both of which are
Japanese companies, to manufacture and sell certain Valtek products within
Japan.
The Company has entered into licenses with local manufacturers
in Mexico, South Korea and India to permit them to manufacture and market pumps
and valves under the Durco trade name and pursuant to Company specifications in
those respective countries.
The Company maintains a strategic alliance agreement with A.
Ahlstrom, a Finnish company with significant world-wide sales to the pulp and
paper industry, to permit A. Ahlstrom to market and sell Durco pumps to this
industry. The Company also maintains an alliance with
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Elsag Bailey to market and sell Valtek control valves as part of the
computer-based process control systems of Elsag Bailey.
The Company also owns Sereg Vannes, S.A., a French company
which manufactures control valve product offerings for distribution in France
and other locations.
BACKLOG
The Company's backlog of orders was approximately $101.4
million, $78.2 million, and $69.7 million at December 31, 1995, 1994 and 1993,
respectively. Nearly all current backlog is expected to be shipped within the
next 12 months. Sales of the Company's products are not normally subject to
material seasonal fluctuations. Almost all of the Company's customers are in the
private sector, and the Company's backlog is thus not exposed to renegotiation
in any significant way at the election of a government customer.
COMPETITION AND CUSTOMERS
Based upon its analysis of trade association data and other
marketing data, the Company considers itself a leading supplier of
corrosion-resistant pumps, mechanical seals, valves, valve actuators and control
valves to the basic U.S. chemical industry, with generally a lesser market share
in other countries. No significant competitor of the Company manufactures pumps,
valves and mechanical seals or has as its single primary market the basic
chemical industry. However, the Company competes with companies which
manufacture either pumps, valves or mechanical seals, portions of whose product
lines are sold to the chemical process industries. The Company competes in
general on the basis of product design and quality, materials expertise,
delivery capability, price, application know-how, parts support and similar
factors. The Company believes that it is, in the aggregate, strong in these
areas. During 1995, no single customer or group of related customers accounted
for more than 10% of sales.
MANUFACTURING AND RAW MATERIALS
The Company is a vertically-integrated manufacturer. Certain
of the corrosion-resistant castings for Company products are manufactured at
its Dayton, Ohio, foundries, which include a highly automated precision foundry,
plus resin shell, no bake and centrifugal foundries. Ductile iron, gray iron,
steel and large alloy metal castings are purchased from outside sources. Other
Company manufacturing locations machine castings to precise specifications and
assemble Company products. The Company's commitment to Total Quality control
procedures and cellular manufacturing technologies is key to the efficient and
successful manufacture of its products.
The Company also produces most of its highly engineered
corrosion resistant plastic parts for its pump and valve product lines. This
includes rotomolding as well as injection and compression molding of a variety
of fluorocarbon and other plastic materials.
Basic manufacturing raw materials are purchased from various
foreign and domestic vendors. These materials include Teflon, nickel, chrome,
molybdenum, high silicon pig iron, ferro silicon, fused silica, epoxy resins and
fluorocarbon resins, tungsten carbide, silicon
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carbides and high grade tubing. In addition, bar stock, tubing, motors and other
necessary equipment for inclusion in the Company's finished products are
purchased from various suppliers. The supply of raw materials and components has
been, in general, sufficient and available without significant delivery delays.
RESEARCH AND DEVELOPMENT
The Company's research and development laboratories in Dayton,
Ohio, Cookeville, Tennessee, Ahaus, Germany, Springville, Utah, and Kalamazoo,
Michigan support the Company's manufacturing efforts by providing hydraulic test
facilities for the Company's fluid movement and control products as well as
facilities for the development of corrosion-resistant alloys and plastics.
The Company spent approximately $8.0 million, $8.6 million,
and $7.8 million on Company sponsored research and development activities in
1995, 1994 and 1993, respectively. The expenditures were primarily for new
product development.
PATENTS, TRADEMARKS AND LICENSES
The Company owns a number of trademarks, patents and patent
applications relating to the name and design of its products. While the Company
considers that, in the aggregate, its trademarks and patents are useful to its
operations, the Company believes that the successful manufacture and sale of its
products generally depend more upon its specialized materials, designs and
manufacturing methods developed over a period of time. The Company, in general,
is the owner of the rights to the products which it manufactures and sells, and
the Company is not dependent in any material way upon any licenses or franchises
in order to so operate.
PERSONNEL
At December 31, 1995, the Company employed approximately 3,900
persons, of whom about 2,600 were employed in the United States. Approximately
375 of the Company's employees, who are primarily located in the Company's pump,
foundry and filtration operations, are represented by either the United Steel
Workers of America or the International Union of Electronic, Electrical,
Technical Salaried & Machine Workers. The Company believes, in general, that it
has good relations with these unions and its nonunion employees. The Company's
three year collective bargaining agreement with the United Steel Workers
representing production workers at its pump and foundry operations in Dayton,
Ohio expires in October, 1996.
Information with regard to the directors and executive
officers of the Company is incorporated herein by reference to Item 10 of this
Report and the Proxy Statement.
ENVIRONMENTAL MATTERS
The Company completed projects in prior years relating to
compliance with federal, state and local environmental protection regulations.
At present, the Company has no plans for material capital expenditures for
environmental control facilities. However, the
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Company has experienced and continues to experience substantial operating costs
relating to environmental matters, although certain costs have been offset in
part by the Company's successful waste minimization programs.
FOREIGN OPERATIONS
The Company's foreign operations are affected by various
factors and subject to risks which may be different from or in addition to those
present in domestic operations. These may include currency exchange rate
fluctuations, restrictions on the Company's ability to repatriate funds to the
United States, and potential political and economic instability. As the Company
expands its international business, the factors and risks associated with
international operations will likely have a more significant impact on the
Company's results. However, the Company believes that, in general, the
geographical diversification of its business operations is of benefit in
expanding the size of its markets and in helping to partially offset the full
impact of normal business cycles in the U.S. market.
ITEM 2. PROPERTIES
The Company's headquarters and executive offices are located
in Dayton, Ohio, at a leased site in the Miami Valley Research Park. This site
encompasses approximately 40,000 square feet.
The location, size and products manufactured of the Company's
principal manufacturing facilities are as follows:
Square Products
Location Footage Manufactured
- -------- ------- ------------
Domestic:
Dayton, Ohio 600,000 Castings and Durco pumps
Cookeville, Tennessee 190,000 Durco valves
Springville, Utah 140,000 Valtek valves and actuators
Angola, New York 96,000 Durco filters, filtration systems
and metering pumps
Springboro, Ohio 50,000 Plastic components for pumps and
valves
Cincinnati, Ohio 35,000 Automax actuators
Provo, Utah 30,000 Valtek product components
Kalamazoo, Michigan 137,000 Durametallic mechanical seals
Burr Ridge, Illinois 25,000 Pac-Seal mechanical seals
Ormond Beach, Florida 40,000 Metal Fab specialty welded metal
bellows
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International:
Woodbridge, Ontario, Canada 32,000 Durco pumps and valves
Petit Rechain, Belgium 65,000 Durco pumps and valves
St. Thomas, Ontario, Canada 13,000 Durametallic mechanical seals
Edmonton, Alberta, Canada 35,000 Valtek valves and actuators
Melbourne, Australia 32,000 Valtek valves and actuators
Ahaus, Germany 68,000 Atomac valves
Essen, Germany 50,000 Kammer valves and actuators
Cormano, Italy 35,000 Automax actuators
Nova, Italy 44,000 Automax actuators
Thiers, France 33,000 Valtek Sereg valves and actuators
Tlaxcala, Mexico 18,000 Durametallic mechanical seals
Sao Paulo, Brazil 12,000 Durametallic mechanical seals
Gent, Belgium 21,500 Durametallic mechanical seals
Auckland, New Zealand 19,000 Durametallic mechanical seals
Singapore 12,000 Durametallic mechanical seals
All manufacturing facilities are owned with the exception of
the Cookeville, Tennessee, facility, the Cincinnati, Ohio, facility, the
Springboro facility, the Burr Ridge, Illinois facility, the Melbourne,
Australia, facility, the Italian facilities, the Gent facility and a portion of
the Brazilian site and the Angola, New York, facility. The Company also leases
space for district sales offices and service centers throughout the United
States, Canada, Europe, and Asia.
On the average, the Company utilizes roughly 85% of its
manufacturing capacity, although there is a variation in usage rate among the
facilities. The Company could, in general, increase its capacity through the
purchase of new or additional manufacturing equipment without obtaining
additional facilities.
ITEM 3. LEGAL PROCEEDINGS
Although the Company is involved in litigation arising from
its business operations, there are no legal proceedings involving the Company
which management believes are likely to have a material adverse impact on the
Company. For further information about such litigation, please see Footnote #11,
entitled "Contingencies," in the Company's "Financial Statements and
Supplementary Data" set forth in Item 8. Such footnote is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 30, 1995, a special meeting of shareholders of the
Company was held. At this meeting, shareholders approved the Company's
"Agreement and Plan of Merger" with Durametallic. The vote was 15,345,795 votes
for, 53,403 votes against, and 956,954 abstentions or non votes. Shareholders
also approved an amendment to the Company's Certificate of Incorporation which
increases the authorized common stock from 30 to 60 million. The vote on this
issue was 15,888,394 votes for, 430,250 votes against and 37,507 abstentions or
non votes.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The common stock of the Company (DURI) is traded in the
Over-the-Counter market and quotations are supplied by the National Association
of Securities Dealers through NASDAQ's National Market System.
In January 1996, Transfer Agent records showed 2,380 shareholders of
record. Based on these records plus requests from brokers and nominees listed as
shareholders of record, the Company estimates there are approximately 7,000
shareholders of its common stock. During 1995, the Company paid a dividend of
eleven and one-half cents per share each calendar quarter, and in 1994, a
dividend of ten and one-half cents per share was paid each calendar quarter.
On February 9, 1996, a 13% dividend increase was declared which will
raise the quarterly dividend to 13 cents per share.
Price Range of Duriron Common Stock
(high/low closing prices)
1995 1994
---- ----
1st Quarter $20.50/$17.25 $19.83/$14.83
2nd Quarter $23.50/$20.63 $18.00/$14.50
3rd Quarter $29.88/$22.38 $18.75/$15.00
4th Quarter $29.25/$22.88 $18.25/$15.63
Prices have been restated to reflect the March 25, 1994 stock dividend which had
the effect of a three-for-two stock split.
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FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA(a)
(dollars in thousands except for per share data)
ITEM 6
Results of Operations 1995 1994 1993 1992 1991
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Net sales $532,726 $460,507 $ 421,838 $ 403,984 $ 397,227
Cost of sales $317,306 $275,077 $ 249,779 $ 240,414 $ 234,282
Gross profit margin $215,420 $185,430 $ 172,059 $ 163,570 $ 162,945
Selling and administrative expense $137,346 $125,081 $ 114,679 $ 107,611 $ 100,052
Research, engineering and
development expense $ 14,972 $ 14,913 $ 13,872 $ 13,396 $ 15,074
Restructuring expense -- -- -- $ 5,965 --
Interest expense $ 5,179 $ 4,901 $ 4,552 $ 3,981 $ 4,234
Other expense, net $ 2,759 $ 1,964 $ 2,887 $ 623 $ 1,431
Merger transaction expenses $ 5,042 -- -- -- --
Earnings before income taxes $ 50,122 38,571 $ 36,069 $ 31,994 $ 42,154
Provision for income taxes $ 19,450 $ 14,175 $ 14,378 $ 12,201 $ 16,326
Earnings from continuing operations $ 30,672 24,396 $ 21,691 $ 19,793 $ 25,828
Loss on discontinued operation -- -- $ (2,938) $ (259) $ (340)
Cumulative effect of change in
accounting principle -- -- $ (945) $ (26,899) --
Net earnings (loss) $ 30,672 (b) $ 24,396 $ 17,808 $ (7,365) $ 25,488
Average shares outstanding 24,737 24,711 24,709 24,698 25,173
(thousands)
Net earnings (loss) per share $ 1.24 (b) $ 0.99 $ 0.72 $ (0.30) $ 1.01
Dividends paid $ 0.44 $ 0.41 $ 0.38 $ 0.37 $ 0.34
(on shares outstanding)
Incoming business $555,241 $466,398 $ 420,548 $ 415,164 $ 391,484
Ending backlog $101,407 $ 78,169 $ 69,723 $ 73,612 $ 62,996
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Performance Ratios (as a percent of net sales)
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Cost of sales 59.6% 59.7% 59.2% 59.5% 59.0%
Gross profit margin 40.4% 40.3% 40.8% 40.5% 41.0%
Selling and administrative 25.8% 27.2% 27.2% 26.6% 25.2%
Research, engineering and
development 2.8% 3.2% 3.3% 3.3% 3.8%
Earnings before income taxes 9.4% 8.4% 8.6% 7.9% 10.6%
Net earnings (loss) 5.8% (b) 5.3% 4.2% -1.8% 6.4%
- --------------------------------------------------------------------------------------------------------------------------
Financial Condition
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Cash and cash equivalents $ 19,434 $ 19,625 $ 26,253 $ 20,521 $ 24,705
Working capital $135,000 $114,417 $ 108,801 $ 97,528 $ 100,738
Net property, plant and equipment $103,723 $102,935 $ 93,732 $ 97,667 $ 87,393
Intangibles and other assets $ 66,928 $ 54,382 $ 46,112 $ 50,877 $ 23,400
Total assets $395,373 $344,266 $ 314,508 $ 319,251 $ 282,205
Capital expenditures $ 13,317 $ 14,363 $ 12,096 $ 18,140 $ 19,474
Depreciation and amortization $ 19,093 $ 18,313 $ 16,926 $ 15,123 $ 13,183
Long-term debt $ 51,756 $ 42,998 $ 35,285 $ 42,482 $ 28,722
Postretirement benefits and other
deferred items $ 58,123 $ 54,383 $ 51,508 $ 50,183 $ 11,707
Shareholders' equity $195,772 $174,353 $ 161,852 $ 153,407 $ 171,102
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Financial Ratios
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Return on average
shareholders' equity 16.6% (b) 14.5% 11.3% -4.5% 15.5%
Return on average net assets 11.5% (b) 10.4% 8.1% -2.1% 13.1%
Debt ratio 16.9% 15.8% 14.2% 17.3% 13.6%
Current ratio 2.5 2.6 2.7 2.3 2.4
Interest coverage ratio 10.7 8.9 8.9 9.0 11.0
Cash dividends as a percent of
beginning shareholders' equity 6.2% 6.1% 6.1% 5.4% 5.2%
Book value (on shares outstanding) $ 8.02 $ 7.16 $ 6.55 $ 6.26 $ 6.99
- --------------------------------------------------------------------------------------------------------------------------
(a) Historical financial information has been restated to reflect the merger
with Durametallic under the pooling of interests method of accounting. See
Note 3 to Consolidated Financial Statements.
(b) Net earnings for the year ended December 31, 1995 were $35.1 million, or
$1.42 per share, excluding transaction expenses of $4.4 million after tax,
or $.18 per share. See Note 3 to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In November 1995, the Company merged with Durametallic Corporation, a
global manufacturer of mechanical seals and sealing systems. Under the terms of
the merger agreement, Duriron acquired Durametallic through the issuance of
approximately 5.35 million shares in a tax-free exchange of common stock with
Durametallic's shareholders. The acquisition, valued at $150 million under the
merger agreement, was accounted for under the pooling of interests method of
accounting which requires all financial data presented in this report to be
restated for current and prior periods. See Note 3 to Consolidated Financial
Statements for additional discussion on the acquisition.
Net sales and earnings were at record levels in 1995 due to strong
capital spending by the Company's process industries customers. Compared with
1994, restated net sales increased 15.7% to $532.7 million and restated net
earnings increased 43.8% to $35.1 million, or $1.42 per share, excluding merger
transaction expenses of $4.4 million. The merger with Durametallic was accretive
to earnings by $.05 per share in 1995, excluding transaction expenses. The
financial condition of the Company remained strong after the merger as reflected
by a debt ratio of 16.9% and a cash balance of $19.4 million at December 31,
1995.
RESULTS OF OPERATIONS
Net sales for 1995 of $532.7 million were at a record level for the
ninth consecutive year reflecting increases of 15.7% over $460.5 million in 1994
and 26.3% over $421.8 million in 1993. The increase in sales in 1995 reflects
strong capital spending in the global markets served by the Company particularly
in North America, Europe and Asia-Pacific. The Company's sales mix contains both
major project activity and high levels of maintenance and replacement orders. In
addition, strengthening of the European currencies against the U.S. dollar,
moderate price increases and strategic acquisitions favorably impacted reported
net sales growth in 1995. The acquisitions favorably impacting 1995 sales were
Durametallic's acquisition of Pac-Seal, a manufacturer of mechanical seals
located in Burr Ridge, Illinois, in August of 1995 and Duriron's acquisitions of
Sereg Vannes, a manufacturer of automatic control valves located in Thiers,
France, in May of 1994. The 1994 sales compared with 1993 reflected stronger
capital spending in the North American and Asian markets and a recovering
European economy. Sales in 1993 were unfavorably impacted by weakness in the
international marketplace during that period. In addition, the 1994 acquisition
of Mecair SpA, a manufacturer of valve actuators located in Milan, Italy, and
Sereg Vannes contributed to the 1994 sales growth.
Incoming business for 1995 of $555.2 million was at a record level, up
19.1% over the previous year's record of $466.4 million in 1994 and up 32.0%
over $420.5 million in 1993. The 1995 incoming business volume reflected
aggressive capital spending by the worldwide process industries, strengthening
of the European currencies against the U.S. dollar, moderate price increases and
the impact of the aforementioned acquisitions. Asia-Pacific incoming business
which doubled and European incoming business which increased over 30% were
particularly strong throughout 1995. Strong incoming business in 1995 resulted
in an ending backlog of
13
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$101.4 million at December 31, 1995, an increase of $23.2 million over the 1994
ending backlog of $78.2 million.
International subsidiary contributions to consolidated net sales were
an historic high of 33.4% in 1995, compared to 30.5% and 25.4% in 1994 and 1993,
respectively. The majority of international sales are distributed through the
Company's international subsidiaries. Export sales from the United States were
$27.1 million in 1995, compared to $27.1 million and $37.0 million in 1994 and
1993, respectively. Export sales were unusually high in 1993 due to shipment of
the Malaysian liquified natural gas project from the Company's Valtek
Incorporated subsidiary. Total net sales to international customers, as a
percentage of net sales, were a record 38.5% in 1995, compared to 36.4% in 1994
and 34.1% in 1993. The improvement in international sales reflects the strength
in the Asia-Pacific and European markets in 1995, strengthening of the European
currencies and the acquisitions of Sereg Vannes and Mecair. The Company expects
the percent of international sales contributions to consolidated net sales to
increase in future years as management continues its strategic emphasis on
international sales and market development in the Asia-Pacific region.
Gross profit margins were 40.4% in 1995, compared with 40.3% and 40.8%
in 1994 and 1993, respectively. The 1995 gross profit margin was favorably
impacted by moderate price increases, improvements in burden absorption related
to higher levels of plant utilization and the continuing positive effects of
cost reduction and productivity improvement programs throughout the Company.
Partially offsetting these were one-time start-up problems related to transition
and training issues with the installation of a new computer system at Valtek
International in Springville, Utah which resulted in unfavorable variances of
$1.5 million during the third quarter of 1995. Valtek's fourth quarter 1995
gross profit margin was at its historical average level and Valtek's Customer
Oriented Reengineering Program which is supported by the new computer system
should have a favorable future impact on the gross profit margin. The 1993 gross
profit margin was unusually high due to the positive impact of a planned
reduction in inventories which favorably impacted the LIFO inventory pool
resulting in earnings of $.08 per share. Pricing throughout the three year
periods has been competitive, especially within the sealing systems and
automatic control valve businesses, and is expected to remain competitive. The
Company believes its emphasis on becoming the low total cost producer and
continued emphasis on improving customer service will have a favorable impact on
the gross profit margin in the future.
Selling and administrative expenses as a percent of net sales were
25.8% in 1995, compared to 27.2% and 27.2% in 1994 and 1993, respectively. The
leveraging of selling and administrative expense as a percent of net sales in
1995 compared with 1994 was planned. Selling and administrative expense in
dollars increased in 1995 from 1994 due to continued development and growth of
international markets, especially in the Asia-Pacific, the strength of the
European currencies against the U.S. dollar, the acquisitions of Pac-Seal and
Sereg Vannes and the impact of general wage increases. Selling and
administrative expense in dollars increased in 1994 from 1993 due predominately
to consolidation of the Mecair and Sereg Vannes expense. Excluding the 1994
acquisitions, selling and administrative expenses in 1994 were relatively flat
with 1993 without Durametallic, but up slightly with Durametallic. The Company
continues to invest resources in the development and growth of international
operations. While this has increased selling and service costs at the expense of
short-term profits, these programs are consistent with the Company's
longer-range goals. The Company expects to further leverage selling and
14
15
administrative expenses as a percent of net sales in 1996 through continued
emphasis on cost containment.
Research, engineering and development expenses (including research and
development expenses reported in Note 15 to Consolidated Financial Statements)
were $15.0 million in 1995, compared to $14.9 million and $13.9 million in 1994
and 1993, respectively. The spending level during 1995 reflects the Company's
continued investment in new products and production processes. Research,
engineering and development as a percent of net sales declined over the three
year period because of a planned reduction of expenses in manufacturing
engineering as the majority of the Company's transition to focused factory
(cellular) programs has been implemented. The Company believes that continued
investment in research, engineering and development will provide important new
products and processes that will benefit its customers and shareholders in
future years.
Other expense was $2.8 million in 1995 compared to $2.0 and $2.9
million in 1994 and 1993, respectively. The increase in expense in 1995 reflects
higher levels of incentive compensation expense related to the Company's long
and short term incentive plans since the Company achieved record financial
results and exceeded goals. In addition, severance costs associated with
personnel reductions in the Company's European operations were recognized in
1995. The 1994 expense included unusually high foreign currency losses offset in
part by a gain on the sale of a Durametallic service center facility. The 1993
expense included a $1.4 million write-off of impaired goodwill at Durametallic.
Merger transaction expenses of $5.0 million pretax were recognized in
1995 as a result of the merger with Durametallic. Approximately $3.3 million of
the expense was non-tax deductible and related to financial advisory, legal,
accounting, printing and other related services associated with the merger. The
remaining expense of $1.7 million was tax deductible and included severance fees
for certain Durametallic management who elected to retire under Executive
Severance Agreements assumed by the Company which became effective after the
change in control.
The Company discounts its postretirement health care and pension
obligations using a 7.5% interest rate. The rate used to discount Durametallic's
postretirement health care obligation was reduced in 1995 from 8.0% and the
rates used to discount Duriron's postretirement health care and pension
obligations were reduced from 8.0% in 1993. In addition, the Company in 1994
modified its postretirement health care benefit and pension plans. The net
effect of the aforementioned plan changes increased the accumulated pension and
postretirement health care obligations by less than 5% in aggregate.
Effective January 1 1993, the Company adopted the principles of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." Compliance with
this standard resulted in a cumulative after tax loss of $.9 million, or $.04
per share, which represents the accumulated postemployment benefit obligation as
of January 1, 1993. Compliance with SFAS No. 112 did not impact 1995 or 1994
earnings and is not expected to materially impact future earnings.
The effective tax rate was 38.8% in 1995, compared to 36.8% and 39.9%
in 1994 and 1993, respectively. The 1995 tax rate reflects the unfavorable
impact of the non-tax deductible merger transaction expenses which had the
effect of increasing the tax rate by 2.3%. The 1995
15
16
rate was favorably impacted by utilization of tax loss carryforwards generated
within the Company's European and Asia-Pacific operations. The 1994 rate
included the favorable impacts of the fourth quarter liquidation of a wholly
owned foreign entity, utilization of tax loss carryforwards generated within the
Company's European operations and resolution of a multi-year state tax issue.
The 1993 tax rate reflects losses in the Company's foreign operations due to
weak business conditions and non-tax deductible goodwill written-off by
Durametallic.
Record net earnings in 1995 reflect the third consecutive year of
earnings improvement. Excluding merger fees of $4.4 million after tax, net
earnings in 1995 improved 43.8% to $35.1 million, or $1.42 per share. This
compares with $24.4 million, or $.99 per share, and $17.8 million, or $.72 per
share in 1994 and 1993, respectively. The merger with Durametallic was accretive
to earnings by $.05 per share in 1995 (excluding transaction expenses) and $.09
per share in 1994. Including merger transaction fees, record net earnings were
still achieved at $30.7 million, or $1.24 per share. The increase in earnings
resulted from improved global business conditions which led to stronger North
American and European profits and the generation of profits in the Asia-Pacific
operations and the Company's focus on controlling costs. Excluding the impact of
the merger with Durametallic, earnings increased 53.9% to $26.4 million from
previously reported 1994 earnings of $17.2 million as operating costs were
effectively leveraged against the sales growth of 15.5%. Durametallic's earnings
increased 19.7% to $8.7 million from previously reported 1994 earnings of $7.2
million. The 1994 earnings growth reflected general economic improvements from
1993 earnings which were depressed due to weakness in the European economy.
CAPITAL RESOURCES AND LIQUIDITY
The Company's capital structure, consisting of long-term debt, deferred
items and shareholders' equity, continues to enable the Company to finance
short- and long-range business objectives. At December 31, 1995, long-term debt
was 16.9% of the capital structure, compared to 15.8% and 14.2% at December 31,
1994 and 1993, respectively. The increase in long-term debt in 1995 from 1994,
both as a percent of the capital structure and in absolute dollars, resulted
from the acquisition of Pac-Seal which was partially funded through external
borrowings, but it was partially offset by scheduled debt repayments.
The return on average net assets was 11.5% including merger transaction
expenses (13.0% excluding the merger transaction expenses). This compares to
10.4% in 1994 and 8.1% in 1993. In 1995, return on average shareholders' equity
was 16.6% (19.0% excluding merger transaction expenses), compared to 14.5% in
1994 and 11.3% in 1993. The change in the returns resulted from the improvements
in profitability over the three year period resulting from strong business
conditions and focus on cost management. Management continues to focus on
improving its performance in these areas.
Capital expenditures in 1995 were $13.3 million, compared to $14.4
million and $12.1 million in 1994 and 1993, respectively. The 1995 expenditures
were invested in equipment and process technology to enable the Company to
further progress toward its goal of being the highest quality and lowest total
cost producer in its market. In addition to manufacturing equipment, the 1994
expenditures included improved information systems associated with Valtek's
Customer Oriented Reengineering Program. The planned 1996 expenditures, expected
to be approximately
16
17
$17.5 million, will be invested in new and replacement products, international
market development and general manufacturing equipment upgrades.
Cash and cash equivalents were $19.4 million, compared to $19.6 million
and $26.3 million at December 31, 1994 and 1993, respectively. Cash flow from
operations over the past three years enabled the Company to fully fund all
capital expenditures, debt repayments and dividend payments and to partially
fund the acquisitions of Pac-Seal, Sereg Vannes and Mecair. Cash in excess of
current requirements was invested in high-grade, short-term securities. Cash and
amounts available under borrowing arrangements will be adequate to fund
operating needs and capital expenditures through the coming year.
The Company's liquidity position is reflected in a current ratio of 2.5
to 1 at December 31, 1995. This compares to 2.6 to 1 and 2.7 to 1 at December
31, 1994 and 1993, respectively. Working capital increased to $135.0 million in
1995, compared to $114.4 million and $108.8 million in 1994 and 1993,
respectively. Working capital as a percent of net sales was 25.3%, compared to
24.8% and 25.8% for 1994 and 1993, respectively.
NET SALES
$ Millions
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
$397.2 $404.0 $421.8 $460.5 $532.7
1995 reflects the ninth consecutive year of record sales.
INCOMING BUSINESS
$ Millions
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
$391.5 $415.2 $420.5 $466.4 $555.2
Record 1995 incoming business increased 19% over 1994.
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
1991 1992 1993 1994 1995*
------ ------ ------ ------ ------
1.03 0.80 0.88 0.99 1.42
Record 1995 earnings reflect the third consecutive year of improvements.
* Excludes merger transaction expenses
CAPITAL STRUCTURE
$ Millions
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
Total Capital $ 211.5 $ 246.1 248.6 $271.7 $305.7
Long-term debt 13.6% $17.3% $14.2% 15.8% 16.9%
Shareholders' Equity 80.9% 62.3% 65.1% 64.2% 64.1%
Deferrals 5.5% 20.4% 20.7% 20.0% 19.8%
Capital structure provides financial flexibility to finance
short-and-long range business objectives.
RETURN ON AVERAGE NET ASSETS
(based on earnings from continuing operations)
1991 1992 1993 1994 1995*
------ ------ ------ ------ ------
13.2% 9.4% 9.6% 10.4% 13.0%
Return on net assets reflects improvements in profitability over the
past three years.
* Excludes merger transaction fees
WORKING CAPITAL/CURRENT RATIO
$ Millions
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
Current Ratio 2.4 2.3 2.7 2.6 2.5
Working Capital $100.7 $ 97.5 $108.8 $114.4 $135.0
Current ratio remains strong as working capital increases.
RETURN ON AVERAGE SHAREHOLDERS' EQUITY
(based on earnings from continuing operations)
1991 1992 1993 1994 1995*
------ ------ ------ ------ ------
15.7% 12.2% 13.8% 14.5% 19.0%
1995 return on average shareholders' equity reflects record earnings.
* Excludes merger transaction fees
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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands except per share data)
Years ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Net sales $532,726 $460,507 $421,838
- -----------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 317,306 275,077 249,779
Selling and administrative 137,346 125,081 114,679
Research, engineering and development 14,972 14,913 13,872
Interest 5,179 4,901 4,552
Other, net 2,759 1,964 2,887
Merger transaction expenses 5,042 -- --
- -----------------------------------------------------------------------------------------------------------------------------
482,604 421,936 385,769
- -----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 50,122 38,571 36,069
Provision for income taxes 19,450 14,175 14,378
- -----------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
cumulative effect of change in accounting principle 30,672 24,396 21,691
- -----------------------------------------------------------------------------------------------------------------------------
Loss on disposal of discontinued operation -
net of tax of $362 -- -- (2,938)
- -----------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting principle 30,672 24,396 18,753
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in method of accounting for
postemployment benefits - net of tax of $560 -- -- (945)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings $ 30,672 $ 24,396 $ 17,808
- -----------------------------------------------------------------------------------------------------------------------------
Per share data:
Earnings per share from continuing operations before
cumulative effect of change in accounting principle $ 1.24 $ 0.99 $ 0.88
Loss on disposal of discontinued operation -- -- (0.12)
Cumulative effect of change in accounting principle -- -- (0.04)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 1.24 $ 0.99 $ 0.72
- -----------------------------------------------------------------------------------------------------------------------------
Average common and common equivalent shares
outstanding (in thousands of shares) 24,737 24,711 24,709
- -----------------------------------------------------------------------------------------------------------------------------
(See accompanying notes.)
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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(dollars in thousands except share data)
Foreign
currency Total
Capital in and other share-
Common excess of Retained equity holders'
stock par value Earnings adjustments equity
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 $ 22,863 $ 12,897 $ 119,053 $(1,406) $ 153,407
Net earnings -- -- 17,808 -- 17,808
Cash dividends -- -- (9,374) -- (9,374)
Stock retired (5,604) (9) (40) (6) -- (55)
Stock issued (190,520) under stock plans 292 1,396 -- 65 1,753
Foreign currency translation adjustment -- -- -- (1,660) (1,660)
Nonqualified pension plan adjustment -- -- -- 126 126
Net treasury stock activity,
7,137 shares held at cost -- -- -- (153) (153)
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 23,146 14,253 127,481 (3,028) 161,852
Net earnings -- -- 24,396 -- 24,396
Cash dividends -- -- (9,895) -- (9,895)
Stock retired (440,680) (708) (1,066) (3,145) -- (4,919)
Shares issued for three-for-two stock split 7,897 (7,897) -- -- --
Stock issued (66,938) under stock plans 92 287 -- 149 528
Foreign currency translation adjustment -- -- -- 2,026 2,026
Nonqualified pension plan adjustment -- -- -- 263 263
Net treasury stock activity,
3,500 shares held at cost -- -- -- 102 102
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 30,427 5,577 138,837 (488) 174,353
Net earnings -- -- 30,672 -- 30,672
Cash dividends -- -- (10,730) -- (10,730)
Retirement of common stock (6) (14) (21) -- (41)
Stock issued (61,750) under stock plans 85 459 (4) 117 657
Foreign currency translation adjustment -- -- -- 951 951
Nonqualified pension plan adjustment -- -- -- 61 61
Net treasury stock activity,
8,159 shares held at cost -- -- -- (151) (151)
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 30,506 $ 6,022 $ 158,754 $ 490 $ 195,772
===================================================================================================================
(See accompanying notes.)
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CONSOLIDATED BALANCE SHEET
(dollars in thousands)
December 31, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 19,434 $ 19,625
Accounts receivable 103,963 87,105
Inventories 93,155 73,802
Prepaid expenses 8,170 6,417
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 224,722 186,949
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 247,975 232,364
Less accumulated depreciation and amortization 144,252 129,429
- ------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 103,723 102,935
- ------------------------------------------------------------------------------------------------------------------------
Intangibles and other assets 66,928 54,382
- ------------------------------------------------------------------------------------------------------------------------
$ 395,373 $ 344,266
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 31,499 $ 25,069
Notes payable 3,723 5,905
Income taxes 3,448 1,365
Accrued liabilities 44,455 35,142
Long-term debt due within one year 6,597 5,051
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 89,722 72,532
- ------------------------------------------------------------------------------------------------------------------------
Long-term debt due after one year 51,756 42,998
- ------------------------------------------------------------------------------------------------------------------------
Postretirement benefits and other deferred items 58,123 54,383
- ------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Serial preferred stock, $1.00 par value,
no shares issued -- --
Common stock, $1.25 par value, 24,405,000
shares issued (24,342,000 in 1994) 30,506 30,427
Capital in excess of par value 6,022 5,577
Retained earnings 158,754 138,837
- ------------------------------------------------------------------------------------------------------------------------
195,282 174,841
Foreign currency and other equity
adjustments 490 (488)
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 195,772 174,353
- ------------------------------------------------------------------------------------------------------------------------
$ 395,373 $ 344,266
- ------------------------------------------------------------------------------------------------------------------------
(See accompanying notes.)
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CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
Years ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
- --------------------------------------------------------------------------------------------------
Operating activities:
Earnings before cumulative effect of
change in accounting principle $ 30,672 $ 24,396 $ 18,753
Cumulative effect of change in accounting principle -- -- (945)
- --------------------------------------------------------------------------------------------------
Net earnings 30,672 24,396 17,808
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 19,093 18,313 16,926
Loss (gain) on the sale of fixed assets 193 (345) (159)
Change in assets and liabilities net of
effects of acquisitions:
Accounts receivable (14,123) (4,841) (5,210)
Inventories (15,989) 2,908 3,835
Prepaid expenses (2,184) 1,163 2,023
Accounts payable and accrued liabilities 13,968 (706) (55)
Income taxes 2,031 (1,756) (3,757)
Postretirement benefits and other deferred items (200) (391) 5,468
- --------------------------------------------------------------------------------------------------
Net cash flows from operating activities 33,461 38,741 36,879
- --------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures (13,317) (14,363) (12,096)
Payment for acquisitions, net of cash acquired (12,217) (14,900) --
Other (1,623) (42) (2,907)
- --------------------------------------------------------------------------------------------------
Net cash flows from investing activities (27,157) (29,305) (15,003)
- --------------------------------------------------------------------------------------------------
Financing activities:
Net repayments under lines-of-credit (2,723) (4,873) (1,972)
Payments on long-term debt (6,188) (6,774) (6,653)
Proceeds from long-term debt 12,061 10,056 339
Proceeds from issuance of common stock 567 893 1,726
Purchase of common stock (41) (4,919) (55)
Dividends paid (10,730) (9,895) (9,374)
- --------------------------------------------------------------------------------------------------
Net cash flows from financing activities (7,054) (15,512) (15,989)
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes 559 (552) (155)
- --------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (191) (6,628) 5,732
Cash and cash equivalents at beginning of year 19,625 26,253 20,521
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 19,434 $ 19,625 $ 26,253
- --------------------------------------------------------------------------------------------------
(See accompanying notes.)
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UNAUDITED QUARTERLY FINANCIAL DATA (a)
(dollars in thousands except per share data)
Net Cost Net Earnings
sales of sales earnings per share
- -----------------------------------------------------------------------------------------
Quarter ended:
March 31, 1995 $122,664 $ 72,456 $ 7,658 $0.31
June 30, 1995 131,096 78,522 8,022 0.32
September 30, 1995 132,913 80,657 9,046 0.37
December 31, 1995 146,053 85,671 5,946 (b) 0.24 (b)
- -----------------------------------------------------------------------------------------
$532,726 $317,306 $30,672 (b) $1.24 (b)
- -----------------------------------------------------------------------------------------
Quarter ended:
March 31, 1994 $105,208 $ 62,564 $ 5,345 $0.22
June 30, 1994 114,358 68,445 5,856 0.24
September 30, 1994 120,065 72,125 6,490 0.26
December 31, 1994 120,876 71,943 6,705 0.27
- -----------------------------------------------------------------------------------------
$460,507 $275,077 $24,396 $0.99
- -----------------------------------------------------------------------------------------
(a) Historical financial information has been restated to reflect the merger
with Durametallic under the pooling of interests method of accounting. See
Note 3 to Consolidated Financial Statements.
(b) Net earnings in the fourth quarter of 1995 include transaction expenses of
$4.4 million after tax, or $.18 per share, related to the merger with
Durametallic. Excluding transaction expenses, 1995 fourth quarter net
earnings were $10.3 million, or $.42 per share, and net earnings for the
year ended December 31, 1995 were $35.1 million, or $1.42 per share. See
Note 3 to Consolidated Financial Statements.
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23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars presented in tables in thousands except per share data)
1. ORGANIZATION
The Duriron Company, Inc. (the "Company") was incorporated under the
laws of the State of New York on May 1, 1912. The Company, headquartered in
Dayton, Ohio, is principally engaged in the design, manufacture and marketing of
fluid handling equipment, primarily pumps, valves and mechanical seals, for
industries that utilize difficult to handle and often corrosive fluids in
manufacturing processes. Based upon its analysis of trade association data and
other market information, the Company considers itself a leading supplier of
corrosion resistant fluid movement and control equipment to the basic chemical
industry. The Company markets its products on a global basis. With respect to a
majority of its products, the Company's domestic operations supply each other
and the company's foreign manufacturing subsidiaries with components and
subassemblies.
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2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its wholly and
majority-owned subsidiaries. All significant intercompany transactions
have been eliminated. Investments in unconsolidated affiliated
companies, which represent all non-majority ownership interests, are
carried on the equity basis, which approximates the Company's equity in
their underlying net book value.
BUSINESS COMBINATIONS - Business combinations which have been
accounted for under the pooling of interests method of accounting
combine the assets, liabilities, and stockholders' equity of the
acquired entity with the Company's respective accounts at recorded
values. Prior period financial statements have been restated to give
effect to the merger.
Business combinations which have been accounted for under the
purchase method of accounting include the results of operations of the
acquired business from the date of acquisition. Net assets of the
companies acquired are recorded at their fair value to the Company at
the date of acquisition.
CASH EQUIVALENTS - Cash equivalents represent short-term
investments with an original maturity of three months or less when
purchased which are highly liquid with principal values that are not
subject to significant risk of change due to interest rate
fluctuations.
ACCOUNTS RECEIVABLE - Accounts receivable are stated net of the
allowance for doubtful accounts of $1,408,000 and $1,470,000 at
December 31, 1995 and 1994, respectively.
INVENTORIES - Inventories are stated at the lower-of-cost or
market. Cost is determined for all domestic inventories by the last-in,
first-out (LIFO) method and for foreign inventories by the first-in,
first-out (FIFO) method.
FINANCIAL INSTRUMENTS - Gains and losses on hedges of existing
assets or liabilities are included in the carrying amounts of those
assets or liabilities and are ultimately recognized in income as part
of those carrying amounts. Gains and losses related to hedges of
anticipated transactions are recognized in income as the transactions
occur.
The carrying amounts of the Company's financial instruments
approximate fair value as defined under SFAS No. 107. Fair value is
estimated by reference to quoted prices by financial institutions, as
well as through other valuation techniques.
RETIREMENT BENEFIT COSTS - Defined benefit pension expense and
postretirement benefit expense are based on independent actuarial
valuations assuming current and prior service costs are recognized over
employees' expected service periods.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant
and equipment is stated on the basis of cost. Depreciation is computed
by the straight-line method based on the estimated useful lives of the
depreciable assets for cost and by accelerated methods for income tax
purposes.
INTANGIBLES AND OTHER ASSETS - Excess cost over the fair value of
net assets acquired (or goodwill) generally is amortized on a
straight-line basis over 15-40 years. The carrying value of goodwill
will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's
carrying value of the goodwill will be reduced by the estimated
shortfall of cash flows. The Company has not early adopted the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, but believes the
impact of adopting the standard will be immaterial to the results of
operations.
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25
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the
Company's foreign affiliates, other than those located in highly
inflationary countries, are translated at current exchange rates, while
income and expenses are translated at average rates for the period. For
entities in highly inflationary countries, a combination of current and
historical rates is used to determine currency gains and losses
resulting from financial statement translation and those resulting from
transactions. Translation gains and losses are reported as a component
of stockholders' equity, except for those associated with highly
inflationary countries which are reported directly in the consolidated
statements of income.
USE OF ESTIMATES - The preparation of the 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.
DISCONTINUED OPERATIONS - In 1992, Durametallic negotiated the
sale of its 80 percent interest in Leap Technologies, Inc., for a note
receivable. Leap was engaged in the design, manufacture and sale of
injection molds and parts for the plastics industry. As part of the
sale agreement, Durametallic committed to contingently guaranty the
bank debt of the acquiring Company. The sale resulted in a pretax gain
in 1992, which was not recognized in the consolidated statement of
income due to concern for the significant financial leverage of the
acquiring company. During 1993, the acquiring company defaulted on its
payment of the bank loan and the loan guaranty was enforced by the
bank. Durametallic made full payment on the loan, and in addition, the
note receivable on the sale of Leap and the deferred gain were written
off. These transactions resulted in a loss in 1993 of $2.9 million, net
of tax of $.4 million.
25
26
3. MERGERS AND ACQUISITIONS
POOLING TRANSACTION - On November 30, 1995, Durametallic Corporation
was merged with and into a subsidiary of the Company. Durametallic, a privately
held corporation headquartered in Kalamazoo, Michigan, is a leading manufacturer
of mechanical seals and sealing systems. The Company exchanged 5,344,868 shares
of common stock for all outstanding shares of Durametallic. Additionally,
125,283 shares of the Company's common stock were reserved for outstanding stock
options issued by Durametallic and assumed by the Company. The merger was
accounted for under the pooling of interests method of accounting, and
accordingly, the accompanying consolidated financial statements have been
restated for all periods prior to the acquisition to include the financial
position, results of operations and cash flows of Durametallic. Net sales and
net earnings for the individual entities are as follows:
Nine months
ended
September 30,
(unaudited) Years ended December 31,
-------------- ------------------------------------------------
1995 1995 1994 1993
-------------- ------------------------------------------------
Total sales
Duriron $ 290,659 $ 398,994 $ 345,388 $ 313,920
Durametallic 97,139 135,999 116,557 109,138
Less intercompany sales (1,125) (2,267) (1,438) (1,220)
--------- ========= --------- ---------
$ 386,673 $ 532,726 $ 460,507 $ 421,838
========= ========= ========= =========
Net income from operations
Duriron $ 18,609 $ 26,410 $ 17,158 $ 16,492
Durametallic 6,117 8,661 7,238 5,199
Merger expenses -- (4,399) -- --
---------- ---------- ---------- ----------
$ 24,726 $ 30,672 $ 24,396 $ 21,691
========= ========= ========= =========
In connection with the merger of the Company and Durametallic, merger
transaction expenses of $4,399,000 after tax, or $.18 per share, were recognized
in 1995.
In 1992, the Company early complied with SFAS No. 106, "Employers
Accounting for Postretirement Benefits". Durametallic's financial results were
restated to reflect compliance with the accounting policy in 1992, compared with
compliance in 1993 as reported in financial statements issued prior to the
acquisition with Duriron.
Dividends per share were $.31 per share and $.29 per share for the nine
months ended September 30, 1995 and 1994, respectively.
PURCHASE TRANSACTIONS - On August 31, 1995, Durametallic purchased
Pac-Seal and two affiliated companies. Pac-Seal, located in Burr Ridge,
Illinois, is a manufacturer of mechanical seals used primarily in water pump
applications. The
26
27
acquisition was funded through the combination of internal cash and long-term
borrowings.
On April 28, 1994, the Company purchased Sereg Vannes S.A., an
automatic control valve company headquartered in Thiers, France. The acquisition
was funded with the combination of internal cash and long-term borrowings.
On January 5, 1994, the Company purchased the valve actuator business
of Mecair SpA in Milan, Italy, and its associated companies in Limburg, Germany;
Alton Hampshire, England; and Gennevilliers, France. The acquisition was funded
through the utilization of internal cash.
The aforementioned 1995 and 1994 purchase transactions were not
material, either individually or in the aggregate by year, therefore, no pro
forma information is presented for these acquisitions.
27
28
4. INVENTORIES
Inventories at December 31, 1995 and 1994 and the method of determining
cost were as follows:
Domestic Foreign
inventories inventories Total
(LIFO) (FIFO) inventories
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 1995:
Raw materials $ 2,642 $ 3,282 $ 5,924
Work in process
and finished goods 48,857 38,374 87,231
- ----------------------------------------------------------------------------------------------------------------------------
$ 51,499 $ 41,656 $ 93,155
============================================================================================================================
December 31, 1994:
Raw materials $ 1,933 $ 1,433 $ 3,366
Work in process
and finished goods 38,367 32,069 70,436
- ----------------------------------------------------------------------------------------------------------------------------
$ 40,300 $ 33,502 $ 73,802
============================================================================================================================
LIFO inventories at current cost were $36,127,000 and $34,991,000
higher than reported at December 31, 1995 and 1994, respectively. During 1993
certain inventory quantities were reduced which resulted in a liquidation of
LIFO inventory quantities carried at lower costs prevailing in prior years. The
effect of the 1993 liquidation was to increase net earnings by $2,792,000.
28
29
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1994 were as
follows:
1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
Land $ 4,538 $ 4,499
Buildings 56,818 56,964
Machinery and equipment 162,605 148,761
Furniture and fixtures 24,014 22,140
- -------------------------------------------------------------------------------------------------------------------------------
$ 247,975 $ 232,364
===============================================================================================================================
29
30
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets at December 31, 1995 and 1994 were as
follows:
1995 1994
- ------------------------------------------------------------------------------------------------------------
Cost in excess of fair value of
tangible net assets acquired $ 38,810 $ 31,418
Amortization of intangibles (4,253) (3,464)
Pension assets 7,885 6,417
Deferred tax assets 5,969 6,709
Investments in unconsolidated affiliates 4,582 3,782
Other 13,935 9,520
- ------------------------------------------------------------------------------------------------------------
$ 66,928 $ 54,382
============================================================================================================
30
31
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1994 were as follows:
1995 1994
- ---------------------------------------------------------------------------------------------------------------
Wages and other compensation $ 26,397 $ 19,486
Commissions 2,197 2,536
Other 15,861 13,120
- ---------------------------------------------------------------------------------------------------------------
$ 44,455 $ 35,142
===============================================================================================================
31
32
8. DEBT AND DIVIDEND RESTRICTIONS
Long-term debt, including capital lease obligations, at December 31,
1995 and 1994 were as follows:
1995 1994
---- ----
8.94% loan due annually
1995 through 2001 $ 24,529 $ 24,021
Floating rate revolving notes 20,820 7,747
7.45% loan due quarterly
1996 through 1999 6,743 6,180
9.50% promissory notes due
annually through 1997 4,000 6,000
Capital lease obligations 1,941 2,527
Other, various maturities and rates 320 1,574
-------- --------
58,353 48,049
Less amounts due within one year 6,597 5,051
======== ========
$ 51,756 $ 42,998
======== ========
Interest paid amounted to $4,957,000, $4,418,000 and $4,554,000 in
1995, 1994 and 1993, respectively.
Maturities of long-term debt, including capital lease obligation for
each of the four years subsequent to 1996, are as follows:
1997 $9,747
1998 $10,355
1999 $11,892
2000 $6,428
The 8.94% loan is a U.S. dollar private placement which was effectively
converted to a deutsche mark obligation through a currency swap agreement. The
currency swap is a hedge of the net investment in a German subsidiary.
Unrealized gains and losses on the hedge are not recognized in income, but are
shown in the cumulative translation adjustment account included in shareholders'
equity with the related amounts due to and from the counterparty included in
long-term debt. The maturity and repayment terms of the swap match precisely the
maturity and repayment term of the underlying debt.
Long-term debt agreements require the company to maintain specified
levels of tangible net worth and restrict the payment of cash dividends.
Approximately, $28,543,000 and $24,828,000 of consolidated retained earnings
were unrestricted for the payment of dividends at December 31, 1995 and 1994,
respectively. Dividends are limited to $15,000,000 plus common stock issued and
50% of defined net earnings subsequent to January 1, 1992.
At December 31, 1995 and 1994, the Company had short term credit
facilities available from banks under which it could borrow, at local market
rates up to $32,830,000 and $33,096,000, respectively. Under these facilities,
the Company had $3,723,000 and $5,905,000 in borrowings outstanding at December
31, 1995 and 1994, respectively . The weighted average interest rate on these
borrowings at December 31, 1995 and 1994, was 5.3% and 7.7%, respectively. In
both years, these borrowings were used primarily to support the operations of
foreign subsidiaries. Additionally, at December 31, 1995, the Company had
$18,035,000 available under revolving credit facilities.
32
33
9. POSTRETIREMENT BENEFITS AND OTHER DEFERRED ITEMS
Deferred postretirement benefits and other deferred items at December
31, 1995 and 1994 were as follows:
1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Postretirement benefits $ 47,185 $ 46,680
Other 10,938 7,703
- ----------------------------------------------------------------------------------------------------------------------
$ 58,123 $ 54,383
- ----------------------------------------------------------------------------------------------------------------------
33
34
10. LEASES AND RENTALS
Assets subject to capitalized leases and included in property, plant
and equipment at cost amounted to $7,320,000 in 1995 and $7,871,000 in 1994.
Accumulated amortization for the capitalized leases amounted to $6,019,000 in
1995 and $6,313,000 in 1994.
The minimum rental commitments as of December 31, 1995 for all
noncancelable leases were as follows:
Operating Capital
leases leases
- -------------------------------------------------------------------------------------------------------------------------
1996 $ 6,356 $ 747
1997 4,224 837
1998 2,285 575
1999 1,445 76
2000 1,027 --
2001 and subsequent 1,319 --
- -------------------------------------------------------------------------------------------------------------------------
Total minimum lease payments $ 16,656 2,235
- -------------------------------------------------------------------------------------------------------------------------
Less amount representing interest on capital leases 294
- -------------------------------------------------------------------------------------------------------------------------
Present value of minimum capital lease payments $ 1,941
- -------------------------------------------------------------------------------------------------------------------------
Total rental expense amounted to $8,490,000, $8,065,000 and $7,449,000
in 1995, 1994 and 1993, respectively.
34
35
11. CONTINGENCIES
The Company is involved as a "potentially responsible party"at five
former public waste disposal sites which may be subject to remediation under
pending government procedures. The sites are in various stages of evaluation by
federal and state environmental authorities. The projected cost of remediating
these sites, as well as the Company's alleged "fair share" allocation, is
uncertain and speculative until all studies have been completed and the parties
have either negotiated an amicable resolution or the matter has been judicially
resolved. At each site, there are many other parties who have similarly been
identified, and the identification and location of additional parties is
continuing under applicable federal or state law. Many of the other parties
identified are financially strong and solvent companies which appear able to pay
their share of the remediation costs. Based on the Company's preliminary
information about the waste disposal practices at these sites and the
environmental regulatory process in general, the Company believes that it is
likely that ultimate remediation liability costs for each site will be
apportioned among all liable parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes shown to
have been disposed of at the sites.
In 1995, the Company was successful in terminating the applicable
consent decree and completing all its remedial activities at its former foundry
landfill site at nominal additional expense. Additionally, the Company ended
involvement at nominal cost at two other waste disposal sites under governmental
remediation regulation.
The Company is a defendant in numerous pending lawsuits (which include,
in many cases, multiple claimants) which seek to recover damages for alleged
personal injury allegedly resulting from exposure to asbestos containing
products formerly manufactured and distributed by the Company. A high percentage
of these claims was assumed by the Company in 1995 as the result of the merger
with Durametallic Corporation. All such products were used within self-contained
process equipment, and management does not believe that there was any emission
of ambient asbestos fiber during the use of this equipment. The Company has
resolved numerous claims at an average of about $120 per claim, the cost of
which was fully paid by insurance. The Company continues to have a substantial
amount of available insurance from financially solvent carriers to cover the
cost of both defending and resolving the claims.
The Company is also a defendant in several other products liability
lawsuits which are insured, subject to the applicable deductibles, and certain
other non-insured lawsuits received in the ordinary course of business. The
Company has fully accrued the estimated loss reserve for each such lawsuit. No
insurance recovery has been projected for any of the insured claims because
management currently believes that all will be resolved within applicable
deductibles.
35
36
Although none of the aforementioned gives rise to any additional
liability that can now be reasonably estimated, it is possible that the Company
could incur additional costs in the range of $250,000 to $1,000,000 over the
upcoming five years to fully resolve these matters. Although the Company has
accrued the minimum end of this range as a precaution, management has no current
reason to believe that any such increase is probable or quantifiable. The
Company will continue to evaluate these contingent loss exposures and, if they
develop, recognize expense as soon as such losses can be reasonably estimated.
36
37
12. SHAREHOLDERS' EQUITY
In 1995, the Company increased its authorized $1.25 par value common
stock from 30,000,000 to 60,000,000 shares. At both December 31, 1995 and 1994,
1,000,000 shares of $1.00 preferred stock was authorized. During March of 1994,
the Company distributed a stock dividend which had the effect of a three-for-two
stock split. All per share and share data, where appropriate, have been restated
to reflect this stock split.
Each share of the Company's common stock contains a preferred stock
purchase right. These rights are not currently exercisable and trade in tandem
with the common stock. The rights, in general, become exercisable and trade
separately in the event of certain significant changes in common stock ownership
or on the commencement of certain tender offers which in either case, may lead
to a change of control of the Company. Upon becoming exercisable, the rights
provide shareholders the opportunity to acquire a new series of Company
preferred stock to be then automatically issued at a pre-established price. In
the event of certain forms of acquisition of the Company, the rights also
provide Company shareholders the opportunity to purchase shares of the acquiring
company's common stock from the acquirer at a 50% discount from the current
market value. The rights are redeemable for $.022 per right by the Company at
any time prior to becoming exercisable and will expire in August, 1996.
At December 31, 1995, approximately 1,395,000 shares of common stock
were reserved for exercise of stock options and for grants of restricted stock.
37
38
13. STOCK PLANS
The Company maintains shareholder approved stock option plans which
provide for the grant of options to purchase shares of the Company's common
stock. Options have been granted to officers and employees to purchase shares of
common stock at a price not less than the fair market value on the date of
grant. Generally, these options become exercisable over staggered periods, but
may not be exercised after 10 years from the date of the grant. The plan
provides than any option may include a stock appreciation right, however, none
have been granted since 1989. The impact of stock appreciation rights on
earnings for the three years ending on December 31, 1995, was not material.
During 1995, options for 212,537 shares became exercisable at an
average price of $13.57 . At December 31, 1995, 1994 and 1993, the aggregate
number of options exercisable were 570,601, 455,139 and 367,560, respectively.
Average
Stock option price
options per share
------- ---------
Outstanding at
December 31, 1992 855,805 $ 9.83
Options granted 145,478 14.37
Options exercised (190,991) 6.15
Options canceled (4,700) 12.18
---------
Outstanding at
December 31, 1993 805,592 11.50
Options granted 172,599 14.81
Options exercised (83,833) 7.18
Options canceled (36,071) 12.03
---------
Outstanding at
December 31, 1994 858,287 12.57
Options granted 121,364 27.05
Options exercised (75,976) 8.69
Options canceled (9,676) 11.77
---------
Outstanding at
December 31, 1995 893,999 $14.87
=========
The restricted stock plan was approved by shareholders in 1989. The
plan authorized the grant of up to 337,500 shares of the Company's common stock
as restricted shares to directors and employees of the Company. In general, the
shares cannot be transferred for a period of not less than one nor more than ten
years, and are subject to forfeiture during the restriction period. The market
value of the shares awarded under the plan is amortized to compensation expense
over the periods in which the restrictions lapse. Restricted stock grants of
4,100, 2,400 and 19,686 shares were made in 1995, 1994 and 1993, respectively,
at an average market value of $16.07 per share.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" was issued in October 1995 and is effective for years
beginning after December 15, 1995. The Statement establishes financial
accounting and reporting standards for stock based compensation plans. Companies
may elect to account for such plans under the fair value method or to continue
previous accounting and disclose proforma net earnings and earnings per share as
if the fair value method was applied. The Company has not reached any conclusion
regarding the adoption of this Statement.
38
39
14. INCOME TAXES
Earnings before income taxes consist of the following components:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes:
United States $33,394 $31,533 $30,209
Foreign 16,728 7,038 5,860
- ---------------------------------------------------------------------------------------------------------------------------
$50,122 $38,571 $36,069
===========================================================================================================================
Significant components of the provision for income taxes attributable
to continuing operations are as follows:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Current:
United States $13,887 $ 9,900 $ 9,945
Foreign 5,649 2,529 2,374
State and local 1,697 1,041 1,419
- ---------------------------------------------------------------------------------------------------------------------------
Total current 21,233 13,470 13,738
- ---------------------------------------------------------------------------------------------------------------------------
Deferred:
United States (1,629) 614 452
Foreign (41) 52 135
State and local (113) 39 53
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred (1,783) 705 640
- ---------------------------------------------------------------------------------------------------------------------------
$19,450 $14,175 $14,378
===========================================================================================================================
Income taxes paid amounted to $19,508,000, $13,476,000 and $19,167,000
during 1995, 1994 and 1993, respectively.
The reasons for the differences between the effective tax rate and the
U.S. federal income tax rate were as follows:
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
U.S. federal income tax rate 35.0% 35.0% 35.0%
Foreign tax differential (.5) .7 2.2
Merger transaction expenses 2.3 - -
Goodwill and other nondeductible expenses 1.1 1.7 2.8
State and local income taxes, net
of federal income tax benefit 2.2 1.8 2.6
Other net (none more than 1.75%) (1.3) (2.4) (2.7)
- ------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 38.8% 36.8% 39.9%
==============================================================================================================================
39
40
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of December
31, 1995 and 1994 were as follows:
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax assets related to:
Postretirement benefits $17,445 $17,271
Net operating loss carryforwards 5,530 6,099
Compensation accruals 3,381 1,684
Foreign tax credit carryforwards 1,344 1,601
Capital loss carryforwards 1,263 1,197
Other 4,648 4,647
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 33,611 32,499
Less valuation allowances 7,990 8,753
- ---------------------------------------------------------------------------------------------------------------------------
Net deferred tax assets 25,621 23,746
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities related to:
Depreciation 8,307 6,730
Pension benefits 2,466 2,172
Passive foreign investments - 1,612
Other 3,967 4,134
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 14,740 14,648
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax asset, net of liabilities $10,881 $ 9,098
===========================================================================================================================
The Company has recorded valuation allowances to reflect the estimated
amount of deferred tax assets which may not be realized due to the expiration of
net operating loss, foreign tax credit and capital loss carryforwards. The
change in the valuation allowances for the year ended December 31, 1995 were as
follows:
Net operating Foreign Capital
l o s s e s tax credits l o s s e s
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $ 5,955 $ 1,601 $ 1,197
Utilization of carryforwards (1,355) - -
Increase in expected nonutilization 884 153 66
Expiration of carryforwards (101) (410) -
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 5,383 $ 1,344 $ 1,263
===========================================================================================================================
Undistributed earnings of the Company's foreign subsidiaries amounted
to approximately $35,000,000 at December 31, 1995. These earnings are considered
to be indefinitely reinvested and, accordingly, no additional United States
income taxes or foreign withholding taxes have been provided.
40
41
15. RESEARCH AND DEVELOPMENT
Research and development expense amounted to $7,965,000, $8,642,000 and
$7,784,000 in 1995, 1994 and 1993, respectively.
41
42
16. RETIREMENT BENEFITS
The Company sponsors several noncontributory defined benefit pension
plans, covering approximately 40% of domestic employees, which provide benefits
based on years of service and compensation. Retirement benefits for all other
employees are provided through defined contribution pension plans and government
sponsored retirement programs. All defined benefit pension plans are funded
based on independent actuarial valuations to provide for current service and an
amount sufficient to amortize unfunded prior service over periods not to exceed
thirty years.
Net defined benefit pension income for 1995, 1994 and 1993 included the
following components:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Service cost - benefits earned
during the period $ 1,773 $ 1,660 $ 1,518
Interest cost on projected
benefit obligations 4,306 4,157 4,153
Actual loss (gain) on plan assets (15,164) 405 (8,346)
Net amortization and deferral 8,635 (6,297) 2,568
- ---------------------------------------------------------------------------------------------------------------------------
Net defined benefit pension income $ (450) $ (75) $ (107)
===========================================================================================================================
The following table presents defined benefit pension plan funded status
and amounts recognized in the Company's consolidated balance sheet at December
31, 1995 and 1994:
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefits $46,631 $44,061
Nonvested benefits 6,509 6,219
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 53,140 50,280
Projected future compensation increases 7,642 7,130
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 60,782 57,410
Less plan assets, at fair value 76,727 66,703
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligations 15,945 9,293
Unrecognized net transition asset (2,984) (3,569)
Unrecognized net gain (8,553) (2,425)
Unrecognized prior service cost 2,198 2,537
- ---------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 6,606 $ 5,836
===========================================================================================================================
The average discount rate and the assumed rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligations were 7.5% and 5.0%, respectively. The expected long-term rate of
return on plan assets was 8.0%. Plan assets include marketable equity
securities, corporate and government debt securities, insurance company
contracts and real estate.
42
43
The Company sponsors several defined contribution pension plans
covering substantially all domestic and Canadian employees and certain other
foreign employees. Employees may contribute to these plans and these
contributions are matched in varying amounts by the Company. The Company may
also make additional contributions to eligible employees. Defined contribution
pension expense for the Company was $5,966,000, $4,236,000 and $4,972,000 for
1995, 1994 and 1993, respectively.
The Company also sponsors several defined benefit postretirement health
care plans covering approximately 65% of future retirees and most current
retirees in the United States. These medical and dental benefits are provided
through insurance companies and health maintenance organizations, include
participant contributions, deductibles, co-insurance provisions and other
limitations, and are integrated with Medicare and other group plans. The plans
are funded as insured benefits and health maintenance organization premiums are
incurred.
Net postretirement benefit expense for 1995, 1994 and 1993 included the
following components:
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Service cost - benefits earned during the period $ 651 $ 666 $ 899
Interest cost on accumulated postretirement
benefit obligations 2,715 2,625 3,338
Net amortization and deferral (678) (679) -
- ---------------------------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 2,688 $ 2,612 $ 4,237
===========================================================================================================================
The following table presents postretirement benefit amounts recognized
in the Company's consolidated balance sheet at December 31, 1995 and 1994:
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Actuarial present value of accumulated
postretirement benefit obligations:
Retirees $19,048 $19,192
Active employees eligible to retire 4,169 4,024
Active employees not eligible to retire 15,264 13,734
- ---------------------------------------------------------------------------------------------------------------------------
Total 38,481 36,950
Unrecognized prior service cost 5,773 6,414
Unrecognized net gain (loss) 2,931 3,316
- ---------------------------------------------------------------------------------------------------------------------------
Deferred postretirement benefits $47,185 $46,680
===========================================================================================================================
The average discount rate used in determining accumulated
postretirement benefit obligations was 7.5%. The assumed annual rates of
increase in per capita costs were, for periods prior to Medicare, 9.5% for 1995
and 9% for 1996 with a gradual decrease to 6% for 2002 and future years and, for
periods after Medicare, 7.5% for 1995 and 7% for 1996 with a gradual decrease to
5% for 2000 and future years. Increasing the assumed rate of increase in
postretirement benefit costs by 1% in each year would increase net
postretirement benefit expense by approximately $362,000 and accumulated
postretirement benefit obligations by $3,441,000.
43
44
17. POSTEMPLOYMENT BENEFITS UNDER SFAS NO. 112
Effective January 1, 1993, the Company early adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", in accounting for workers'
compensation and health care continuation benefits. The cumulative effect as of
January 1, 1993 of this change in accounting principle was to decrease net
earnings by $945,000, or $.04 per share. Prior to January 1, 1993, the Company
recognized the cost of providing these benefits on a cash basis. Under the new
method of accounting, the Company accrues the benefits when it becomes probable
that such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid. As required by the Statement,
prior year financial statements have not been restated to reflect the change in
accounting principle. The effect of the change on 1995, 1994 and 1993 income
before the cumulative effect of the change was not material.
44
45
18. FOREIGN CURRENCY TRANSLATION
The foreign currency translation equity adjustments consist of the
following:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
Current year translation adjustment $ 951 $ 2,026 $ (1,575)
Income tax effect -- -- (85)
- ---------------------------------------------------------------------------------------------------------------------
951 2,026 (1,660)
Foreign currency translation
equity adjustment:
Beginning of year 332 (1,694) (34)
- ---------------------------------------------------------------------------------------------------------------------
End of year $ 1,283 $ 332 $ (1,694)
=====================================================================================================================
45
46
19. OPERATIONS IDENTIFIED BY GEOGRAPHIC AREA
The Company operates in predominately one business segment, fluid
movement and control equipment (pumps, valves, seals and related equipment).
Transfers between geographic areas are accounted for primarily at cost
plus a profit margin. Operating profit consists of revenues less certain costs
and expenses. In determining operating profit none of the following items have
been added or deducted: unallocated general corporate expense, interest expense
and income taxes. Identifiable assets are those assets of the Company that are
identifiable with the operations in each geographic area. Unallocated general
corporate assets principally reflect future tax benefits.
No individual country within the below listed geographic segments
represents 10% or more of the consolidated Company's revenues from sales to
unafilliated customers or its identifiable assets. The Other geographic segment
includes Canada, Latin and South America and the Asia Pacific.
Export sales from the United States to foreign unaffiliated customers
were $27,068,000, $27,143,000 and $37,014,000 in 1995, 1994 and 1993,
respectively.
Financial information by geographic area follows:
Years ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------
Revenues:
United States $ 354,547 $ 320,086 $ 314,852
Europe 106,997 83,654 53,776
Other 71,182 56,767 53,210
- ------------------------------------------------------------------------------------
Consolidated totals $ 532,726 $ 460,507 $ 421,838
- ------------------------------------------------------------------------------------
Inter-geographic transfers:
United States $ 36,276 $ 24,369 $ 18,898
Europe 19,516 11,662 5,893
Other 1,458 996 718
Eliminations & adjustments (57,250) (37,027) (25,509)
- ------------------------------------------------------------------------------------
Consolidated totals $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------
Total revenues & transfers:
United States $ 390,823 $ 344,455 $ 333,750
Europe 126,513 95,316 59,669
Other 72,640 57,763 53,928
Eliminations & adjustments (57,250) (37,027) (25,509)
- ------------------------------------------------------------------------------------
Consolidated totals $ 532,726 $ 460,507 $ 421,838
- ------------------------------------------------------------------------------------
Operating profit:
United States $ 45,979 $ 37,977 $ 40,643
Europe 10,485 4,857 308
Other 7,081 2,654 4,043
Eliminations & adjustments (774) 271 (1,911)
- ------------------------------------------------------------------------------------
Consolidated totals 62,771 45,759 43,083
Corporate expense 7,470 2,287 2,462
Interest expense 5,179 4,901 4,552
- ------------------------------------------------------------------------------------
Earnings before income taxes $ 50,122 $ 38,571 $ 36,069
- ------------------------------------------------------------------------------------
Identifiable assets:
United States $ 251,478 $ 217,138 $ 212,639
Europe 102,264 88,742 63,144
Other 51,094 44,996 42,926
Eliminations & adjustments (18,039) (13,250) (11,110)
- ------------------------------------------------------------------------------------
Consolidated totals 386,797 337,626 307,599
General corporate assets 8,576 6,640 6,909
- ------------------------------------------------------------------------------------
Total assets $ 395,373 $ 344,266 $ 314,508
- ------------------------------------------------------------------------------------
In 1995, 1994 and 1993 foreign currency transaction gains/(losses) of
approximately $217,000 ($1,150,000) and $152,000, respectively, were included in
earnings before income taxes.
46
47
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
The Duriron Company, Inc.
We have audited the accompanying consolidated balance sheet of The
Duriron Company, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Duriron Company, Inc. at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 17 to the consolidated financial statements,
effective January 1, 1993 the Company changed its method of accounting for
postemployment benefits.
Ernst & Young LLP
Dayton, Ohio
January 30, 1996
47
48
REPORT OF MANAGEMENT
The Company's management has prepared and is responsible for the
consolidated financial statements and information included in this Annual
Report. The financial statements were prepared in accordance with generally
accepted accounting principles and present fairly the Company's financial
position and results of operations. Such statements necessarily include amounts
based on judgements and estimates by management.
Internal accounting control systems have been designed and implemented
over the years and transactions are executed in accordance with management's
authorizations. These internal control systems provide reasonable assurance that
the financial statements and information included in this report properly
reflect transactions of the Company. The Company also maintains an internal
auditing function which evaluates and formally reports on the adequacy and
effectiveness of internal accounting controls, policies and procedures.
The Board of Directors has an Audit/Finance Committee composed of five
members who are non-employee Directors of the Company. The Audit/Finance
Committee met a total of three times during 1995. The Committee regularly meets
(jointly and separately) with representatives of the independent auditors, the
internal auditors and management.
The Company's consolidated financial statements have been audited by
Ernst & Young LLP, who have expressed their opinion with respect to the fairness
of these statements. Their audit included a review of internal controls and
testing of transactions and records that they consider necessary in the
circumstances.
William M. Jordan Bruce E. Hines
President and Chief Senior Vice President and
Executive Officer Chief Administrative Officer
48
49
ITEM 9. NOT APPLICABLE
49
50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Officers are, in general, appointed annually to their
respective positions at the April meeting of the Board of Directors. The
executive officers and other officers of the Company at February 1, 1996 were as
follows:
William M. Jordan, President and Chief Executive Officer,
Director
Bruce E. Hines, Senior Vice President and Chief Administrative
Officer
Curtis E. Daily, Group Vice President - Rotating Equipment
Group
Thomas E. Haan, Group Vice President - Fluid Sealing Group
George A. Shedlarski, Group Vice President - Industrial
Products Group
Mark E. Vernon, Group Vice President - Flow Control Group
Ronald F. Shuff, Vice President - Secretary and General
Counsel
Gregory L. Smith, Treasurer
Kathleen A. Giddings, Controller
WILLIAM M. JORDAN, 52, was elected President and Chief
Executive Officer in 1993 and a Director in 1991. In February, 1996, he was
additionally elected Chairman of the Board to become effective on April 25,
1996. Mr. Jordan became Executive Vice President in 1990 and President in 1991.
He was Chief Operating Officer from 1990 to 1993. From 1984 until 1991, Mr.
Jordan was the Group Vice President of International Operations, and he was the
Assistant Group Vice President - International Operations in 1983. From 1979 to
1983, he was Vice President and General Manager of Duriron Canada Inc. Mr.
Jordan joined the Company in 1972 as a sales engineer and held various sales
positions prior to 1979.
BRUCE E. HINES, 52, who rejoined the Company in 1989, was then
elected Senior Vice President and added the position of Chief Administrative
Officer in 1990. He previously had served as President of Vernay Labs, a
manufacturer of precision rubber components. Prior to joining Vernay Labs, Mr.
Hines had served in a variety of financial positions with the Company for
nineteen years. He also functions as Chief Financial Officer.
CURTIS E. DAILY, 52, was elected a Group Vice President in
1990. He is responsible for all the Company's worldwide pump operations and
certain foreign operations. He previously was the corporate Director of
International Operations in 1989 after serving as the resident President of the
Company's Belgian subsidiary, S.A. Durco Europe N.V. He joined the Company in
1965.
THOMAS E. HAAN, 46, was elected a Group Vice President
effective January 1, 1996. He is responsible for the global operations of the
Company's mechanical seal and sealing system products which are marketed under
the "Durametallic" trade name. In 1970, he joined Durametallic. He was elected
to the following Durametallic offices: a Vice President in 1985, Senior Vice
President in 1990 and Executive Vice President - Chief Operating Officer in
1993.
GEORGE A. SHEDLARSKI, 52, was elected a Group Vice President
in 1987 and is responsible for the Company's worldwide manual valve, actuator,
foundry and filtration products
50
51
and for certain foreign operations. From 1984 until becoming a Group Vice
President, Mr. Shedlarski was President of the Filtration Systems Division. From
1983 to 1984, he served as President and General Manager of Duriron Canada Inc.
Mr. Shedlarski joined the Company in 1972 as a filtration product specialist and
held various sales and managerial positions prior to 1983.
MARK E. VERNON, 43, was elected a Group Vice President in
1993. He is responsible for the worldwide operations of the Company's control
valve products which are marketed under the Valtek, Kammer and Sereg trade
names. He was President of the Company's Valtek Inc. subsidiary from 1991 to
1993 and Senior Vice President of Valtek from 1988 to 1990. Mr. Vernon joined
Valtek Incorporated in 1978.
RONALD F. SHUFF, 43, was elected Vice President - Secretary
and General Counsel of the Company in 1990. He joined the Company in 1988 as
General Counsel and Assistant Secretary and became General Counsel and Secretary
in 1989. Previously, he served as General Counsel and Secretary of AccuRay
Corporation (a manufacturer of process control equipment which subsequently
became a subsidiary of Asea Brown Boveri).
GREGORY L. SMITH, 42, was elected Treasurer in 1987. He joined
the Company in 1975. From 1985 until assuming his present position, he was
Assistant Treasurer and, prior to becoming Assistant Treasurer, he was Manager
of Corporate Tax.
KATHLEEN A. GIDDINGS, 33, was elected Controller in 1993. She
joined the Company in 1985. She has served the Company in a number of financial
management positions, including Director of Financial Reporting and Corporate
Controller in 1993, Manager Financial Accounting from 1990 to 1992, Supervisor
Financial Accounting in 1989 and Financial Accountant from 1985 to 1989.
Additional information required by this Item 10 is
incorporated herein by this reference from the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is set forth in the
Proxy Statement and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is set forth in the
Proxy Statement and is incorporated herein by this reference.
51
52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is set forth to the
extent applicable in the Proxy Statement and is incorporated herein by this
reference.
52
53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are
incorporated herein by this reference as part of this Report at Item 8 hereof.
Report of Independent Auditors
Consolidated Statement of Income for the years ended December 31, 1995,
1994 and 1993
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheet at December 31, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts (at
page 52 of this Report)
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a) (3) EXHIBITS
See INDEX to EXHIBITS
(b) REPORTS ON FORM 8-K
On December 14, 1995, the Company filed, on Form 8-K, its announcement
of the completion of its acquisition of Durametallic on November 30, 1995. As
part of this filing, the Company also submitted certain financial statements
covering Durametallic's financial results for the nine month period ended
September 30, 1995 and certain pro forma consolidated statements covering the
combined operations of Durametallic and the Company for the same period.
53
54
THE DURIRON COMPANY, INC.
Schedule II - Valuation and Qualifying Accounts
(dollars in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Deductions Balance at
beginning charged to from end of
Description of year earnings reserve year
---------- ---------- ---------- ----------
Year ended December 31, 1995:
Allowance for doubtful accounts (a): $1,470 $577 $ 639 $1,408
====== ==== ====== ======
Year ended December 31, 1994:
Allowance for doubtful accounts (a): $1,282 $665 $ 477 $1,470
====== ==== ====== ======
Restructuring inventory provision (b): $ 478 $ 0 $ 478 $ 0
====== ==== ====== ======
Restructuring fixed asset reserve (c): $ 100 $ 0 $ 100 $ 0
====== ==== ====== ======
Year ended December 31, 1993:
Allowance for doubtful accounts (a): $1,157 $614 $ 489 $1,282
====== ==== ====== ======
Restructuring inventory provision (b): $1,790 $ 0 $1,312 $ 478
====== ==== ====== ======
Restructuring fixed asset reserve (c): $ 840 $ 0 $ 740 $ 100
====== ==== ====== ======
(a) Deductions from reserve represent accounts written off, net of recoveries.
(b) Deductions from reserve represent inventory written off.
(c) Deductions from reserve represent fixed assets written off, and amounts
reclassified to the general restructuring reserve.
54
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, The Duriron Company, Inc. has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this 9th day of February, 1996.
THE DURIRON COMPANY, INC.
BY /S/ WILLIAM M. JORDAN
------------------
WILLIAM M. JORDAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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 Duriron Company, Inc. and in the capacities and on the dates indicated:
- --------------------------------------------------------------------------------------------------
NAME TITLE DATE
- --------------------------------------------------------------------------------------------------
/s/ William M. Jordan President and Chief February 9, 1996
- ----------------------- Executive Officer, Director
WILLIAM M. JORDAN
/s/ John S. Haddick Chairman of the February 9, 1996
- ----------------------- Board, Director
JOHN S. HADDICK
/s/ Bruce E. Hines Senior Vice President - February 9, 1996
- ----------------------- Chief Administrative Officer
BRUCE E. HINES (Principal Accounting and
Financial Officer)
/s/ Hugh K. Coble Director February 9, 1996
- -----------------------
HUGH K. COBLE
/s/ Ernest Green Director February 9, 1996
- -----------------------
ERNEST GREEN
/s/ Diane C. Harris Director February 9, 1996
- -----------------------
DIANE C. HARRIS
/s/ Richard L. Molen Director February 9, 1996
- -----------------------
RICHARD L. MOLEN
/s/ R. Elton White Director, Chairman February 9, 1996
- ----------------------- of Audit/Finance Committee
R. ELTON WHITE
55
56
INDEX TO EXHIBITS
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1* 1988 Restated Certificate of Incorporation of The
Duriron Company, Inc. was filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1988.
3.2* 1989 Amendment to Certificate of Incorporation
was filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989.
3.3* By-Laws of The Duriron Company, Inc.
(as restated) were filed with the Commission as Exhibit
3.2 to The Company's Annual Report on Form 10-K for the
year ended December 31, 1987.
3.4 1996 Certificate of Amendment of Certificate of
Incorporation.
3.5 Amendment No. 1 to Restated Bylaws.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.1+ Lease agreement, indenture of mortgage and
deed of trust, and guarantee agreement, all
executed on June 1, 1978 in connection with
9-1/8% Industrial Development Revenue Bonds,
Series A, City of Cookeville, Tennessee.
4.2+ Lease agreement, indenture of trust, and
guaranty agreement, all executed on June 1,
1978 in connection with 7-3/8% Industrial
Development Revenue Bonds, Series B, City of
Cookeville, Tennessee.
56
57
4.3* Lease agreement, indenture of mortgage and
agreement, lessee guaranty agreement, and
letter of representation and indemnity
agreement, all dated as of December 1, 1983
and executed in connection with the Industrial
Development Revenue Bonds (1983 The Duriron
Company, Inc. Project), Erie Company,
New York Industrial Development Agency
were filed with the Commission as Exhibit
4.4 to the Company's Report on Form 10-K
for the year ended December 31, 1983.
4.4* Form of Rights Agreement dated as of August 1,
1986 between The Duriron Company, Inc. and Bank
One, Indianapolis, National Association, as
Rights Agent was filed as an Exhibit to the
Company's Form 8-A dated August 13, 1986.
4.5* Loan Agreement, dated as of March 19, 1987,
between The Duriron Company, Inc. and
Metropolitan Life Insurance Company, including
the form of Promissory Note delivered in
connection therewith, was filed with the
Commission as Exhibit 7 to the Company's
Current Report on Form 8-K dated April 6, 1987.
4.6+ The Credit Agreement between The Duriron
Company, Inc. and Bank One, Dayton, N.A.,
dated as of November 30, 1989.
4.7* Interest Rate and Currency Exchange Agreement
between the Company and Barclays Bank dated
November 17, 1992 PLC in the amount of
$25,000,000 was filed as Exhibit 4.9 to
Company's Report of Form 10-K for year ended
December 31, 1992.
57
58
4.8* Loan Agreement in the amount of $25,000,000
between the Company and Metropolitan Life
Insurance Company dated November 12, 1992 was
filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992.
4.9+ Revolving Credit Agreement between the
Company and Fifth Third Bank dated
November 23, 1992 in the amount of
$10,000,000.
4.10+ Revolving Credit Agreement between the Company
and First of America Bank - Michigan, N.A. in the
amount of $20,000,000 and dated August 22,
1995.
(10) MATERIAL CONTRACTS: (See Footnote "a")
10.1* The Duriron Company, Inc. Incentive Compensation
Plan (the "Incentive Plan") for Senior Executives,
as amended and restated effective January 1, 1994,
was filed as Exhibit 10.1 to Company's Annual Report
on Form 10-K for the year ended December 31,
1993.
10.2 Amendment No. 1 to the Incentive Plan.
10.3* The Duriron Company, Inc. Supplemental Pension
Plan for Salaried Employees was filed with the Commission
as Exhibit 10.4 to the Company's Annual Report on Form
10-K for the year ended December 31, 1987.
10.4* The Duriron Company, Inc. amended and
restated Director Deferral Plan was filed as Attachment A
to the Company's definitive 1996 Proxy Statement filed
with the Commission on March 10, 1996.
58
59
10.5* Form of Employment Agreement ("Employment
Agreement") between The Duriron Company, Inc.
and each of the current officers was filed as
Exhibit 10.4 to the Company's Annual Report
on Form 10-K for year ended December 31, 1992.
10.6 Form of Amendment No. 1 to Employment Agreement.
10.7* The Duriron Company, Inc. First Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987.
10.8* Amendment #1 to the first Master Benefit Trust Agreement
dated October 1, 1987 was filed as Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
10.9* Amendment #2 to First Master Benefit Trust
Agreement was filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993.
10.10* The Duriron Company, Inc. Second Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987.
10.11* First Amendment to Second Master Benefit Trust
Agreement was filed as Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993.
10.12* The Duriron Company, Inc. Long-Term Incentive
Plan (the "Long-Term Plan"), as amended and restated
effective November 1, 1993 was filed as Exhibit 10.8 to
the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
59
60
10.13 Amendment No. 1 to the Long-Term Plan.
10.14* The Duriron Company, Inc. 1989 Stock Option Plan
as amended and restated April 23, 1991 was filed as
Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10.15* The Duriron Company, Inc. 1989 Restricted Stock
Plan (the "Restricted Stock Plan") as amended and
restated effective April 23, 1991, was filed as Exhibit
10.12 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.
10.16* Amendment #1 to the Restricted Stock Plan was
filed as Exhibit 10.20 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992.
10.17* Amendment #2 to the Restricted Stock Plan was
filed as Exhibit 10.27 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1994.
10.18 Amendment #3 to the Restricted Stock Plan.
10.19 Amendment #4 to the Restricted Stock Plan.
10.20* The Duriron Company, Inc. Retirement
Compensation Plan for Directors ("Director
Retirement Plan") was filed as Exhibit 10.15 on
the Company's Annual Report to Form 10-K for
the year ended December 31, 1988.
10.21 Amendment No. 1 to Director Retirement Plan.
10.22* The Company's Employee Protection Plan (which provides
severance benefits for certain employees after a change of
control of the Company) was filed as Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989.
60
61
10.23* The Company's Benefit Equalization Pension
Plan ("Equalization Plan") was filed as Exhibit
10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989.
10.24* Amendment #1 dated December 15, 1992 to the Equalization
Plan was filed as Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
10.25 The Company's Equity Incentive Plan as amended
and restated effective July 21, 1995.
10.26* Supplemental Pension Agreement between the
Company and William M. Jordan dated
January 18, 1993 was filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10.27* 1979 Stock Option Plan, as amended and restated April 23,
1991, and Amendment #1 thereto dated December 15, 1992,
was filed as Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.
10.28* Deferred Compensation Plan for Executives was
filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992.
10.29 Executive Life Insurance Plan of The Duriron
Company, Inc.
10.30 Executive Long-Term Disability Plan of The
Duriron Company, Inc.
10.31 Consulting Agreement between James S. Ware
and Durametallic Corporation dated April 21,
1991.
61
62
10.32 Senior Executive Death Benefit Agreement
between James S. Ware and Durametallic
dated April 12, 1991
10.33 Executive Severance Agreement between
James S. Ware and Durametallic Corporation dated
January 6, 1994
10.34 Agreement between James S. Ware and the Company
dated September 11, 1995
10.35* Agreement and Plan of Merger Among The Duriron Company,
Inc., Wolverine Acquisition Corporation and Durametallic
Corporation, dated as of September 11, 1995 was filed as
Annex A on the Form S-4 Registration Statement filed by
the Company on September 11, 1995
(22) SUBSIDIARIES:
The Duriron Company, Inc. has direct or indirect subsidiaries all of
which (i) are beneficially owned or controlled; (ii) do business under the name
under which they are organized and (iii) are included in the consolidated
financial statements of the Company.
22.1 Subsidiaries of the Company
62
63
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule (submitted for the SEC's
information)
_______________
"*" Indicates that the exhibit is incorporated by reference into this
Annual Report on Form 10-K from a previous filing with the Commission.
The Company's file number with the Commission is "0-325".
"+" Indicates that the document relates to a class of indebtedness that
does not exceed 10% of the total assets of the Company and subsidiaries
and that the Company will furnish a copy of the document to the
Commission upon request.
"a" The documents identified under Item 10 include all management contracts
and compensatory plans and arrangements required to be filed as
exhibits.
63
1
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
THE DURIRON COMPANY, INC.
under
SECTION 805 OF THE BUSINESS CORPORATION LAW
Pursuant to the provisions of Section 805 of the Business Corporation
Law, the undersigned, William M. Jordan, President, and Ronald F. Shuff,
Secretary, of THE DURIRON COMPANY, INC., a New York corporation (the
"Corporation"), do hereby certify as follows:
FIRST: The name of the corporation is The Duriron Company, Inc. The
name under which the corporation was formed was Duriron Castings Company.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on May 1, 1912.
THIRD: The amendments to the Certificate of Incorporation affected by
this Certificate are as follows:
Article THIRD of the Certificate of Incorporation is hereby
amended by deleting the first sentence of Article THIRD and by
replacing such deleted sentence with the following sentence:
"THIRD: The aggregate number of shares which the Corporation
shall have authority to issue is 61,000,000 of which 1,000,000 shares,
of the par value of $1.00 each, shall be Preferred Stock and 60,000,000
shares, of the par value of $1.25 each, shall be Common Stock."
FOURTH: No change in the number of outstanding shares of Common Stock
or Preferred Stock of the Corporation resulted from the above amendment.
However, as the result of such amendment, the total number of authorized shares
of the Corporation is increased from 31,000,000 to 61,000,000 with the number of
shares of Preferred Stock, of the par value of $1.00 each, being unchanged from
1,000,000 shares and the number of shares of Common Stock, of the par value of
$1.25 each, being increased from 30,000,000 to 60,000,000 shares.
2
FIFTH, the foregoing amendment to the Certificate of Incorporation was
authorized by the unanimous vote of the Directors present at a meeting of the
Board of Directors duly convened and held on September 9, 1995, and such
amendment was thereafter approved by an affirmative vote of a majority of all
the outstanding shares of the Common Stock at a Special Meeting of Shareholders
of the Corporation held on November 30, 1995.
IN WITNESS WHEREOF, we hereunto sign our respective names and affirm
that the statements made herein are true under penalties of perjury, this 3rd
day of January, 1996.
/s/ William M. Jordan
-----------------------------
William M. Jordan,
President
/s/ Ronald F. Shuff
-----------------------------
Ronald F. Shuff,
Secretary
1
EXHIBIT 3.5
AMENDMENT NO.1
TO
RESTATED BY-LAWS
OF
THE DURIRON COMPANY, INC.
RESOLVED, that Section 1 and Section 2 of Article V of the By-Laws of the
Company shall be amended and restated in their entirety to read as follows:
Section 1. Certificates for Shares. The interest of each shareholder
shall either be uncertificated or evidenced by a certificate or
certificates for shares of stock of the Company in such form as the
Board of Directors may from time to time prescribe. The certificates of
stock shall be signed by the Chairman of the Board, President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary and sealed with the seal of the Company, and
shall be countersigned and registered in such manner, if any, as the
Board of Directors may by resolution prescribe; provided that, in case
such certificates are required by such resolution to be signed by a
transfer agent and a registrar, the signatures of the Chairman of the
Board or the President and of the Treasurer or the Secretary, and the
seal of the Company upon such certificates, may be facsimiles, engraved
or printed.
Section 2. Transfer of Shares. Shares in the capital stock of the
Company shall be transferred on the books of the Company, either by the
holder in person or by his attorney, upon surrender and cancellation of
certificates for a like number of shares with duly executed power to
transfer endorsed thereon or attached thereto, or upon proper
assignment in the case of uncertificated shares.
FURTHER RESOLVED, that the remainder of the By-Laws shall remain unchanged and
in full force and effect.
1
EXHIBIT 10.2
Effective July 21, 1995
AMENDMENT NO.1
TO THE DURIRON COMPANY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
FOR SENIOR EXECUTIVES
(AS RESTATED JANUARY 1, 1994)
SECTION IX(B) IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
"B. ELECTION TO DEFER
Each Participant may elect to defer distribution of an Award
(cash or Shares or both) or a portion thereof. The
Participant's election to defer must be made either at or
before August 31 of the applicable Plan Year. Such election
may not be changed after August 31 of the applicable Plan
Year. Appendix C is a copy of the election to defer, although
the Committee may elect to honor any written communication
statement from a Participant which communicates substantially
the same election intention. The Committee, in its absolute
discretion, may elect to accept any such election applicable
to the Plan Year beginning January 1, 1990, January 1, 1991,
January 1, 1992 or January 1, 1993 where the Committee (or the
Chief Administrative Officer on behalf of the Committee,
except in cases involving the Chief Administrative Officer)
determines in its absolute discretion that the Participant
submitted in good faith an irrevocable election to defer a
possible award prior to the commencement of the applicable
Plan Year, including interpreting any such election made prior
to such date as including the deferral of any Share Award,
regardless of the content of any election form or notice."
The remainder of the Plan shall remain in full force and effect as
currently stated.
1
EXHIBIT 10.6
WILLIAM M. JORDAN P.O. Box 8820
President and Dayton, Ohio 45401
Chief Executive Officer Telephone: (513)476-6182
Fax: (513)476-6247
January 24, 1996
Dear :
Reference is made to the letter agreement dated May 11, 1992 (the
"Letter Agreement") between The Duriron Company, Inc. (the "Company") and you.
Subject to and effective immediately upon your execution of this letter of
amendment, the Letter Agreement is hereby amended by adding new paragraph 15
reading as follows:
15(A) In the event you defer compensation (cash or other)
pursuant to any Deferred Compensation program (as hereinafter defined)
offered by the Company and, as a result of such deferral, your "base
amount" (calculated as provided in Section 280G of the Code) shall be
less than it would be if you had not deferred any compensation, then a
calculation shall be made of the excess (the "Excess Amount"), if any,
of
(i) the greater of (x) the Net After Tax Benefit (as
defined in subparagraph 9(C)) of all Agreement Payments which
you would then be entitled to receive if you had not deferred
any compensation or (y) the Net After Tax Benefit of the
Reduced Amount which you would then be entitled to receive if
you had not deferred compensation,
over
(ii) the greater of (x) the Net After Tax Benefit of
all Agreement Payments or (y) the Net After Tax Benefit of the
Reduced Amount, with (x) and (y) of this clause (ii) being
calculated as provided in paragraph 9.
2
JANUARY 24, 1996
PAGE 2
Notwithstanding anything else in this agreement, if there is such an
excess, the Company shall pay to you, as an additional benefit and payment, such
amount (the "Section 15 Amount") as will yield to you a net amount, after
payment of all federal, state and local income and excise taxes, equal to such
excess.
(B) As used herein, "Deferred Compensation Program" means and
includes any program established by the Company pursuant to which, at
your election, compensation otherwise payable to you on a current basis
is deferred. The Company currently has in place programs allowing for
the deferral of salary as well as amounts payable under the Annual
Incentive Compensation Plan for Senior Executives, the Long-Term
Incentive Plan, and the Equity Incentive Plan.
(C) The initial calculation of the Excess Amount and the
Section 15 Amount shall be made by the Company and furnished to you in
writing within 14 days following the Date of Termination. The Company's
calculation will be final and binding upon you unless you notify the
Company within 21 days after you receive such calculation that you
dispute the same. Within ten days after you so notify the Company, you
must deliver to the Company a statement detailing your calculation of
the Excess Amount and/or the Section 15 Amount, as the case may be. If,
within ten days after the Company receives your statement, the Company
and you are unable to agree as to the calculation, then the Company and
you shall, within three days thereafter, choose a nationally recognized
accounting firm to deliver its determination concerning the
calculation. Such accounting firm's calculation shall be delivered to
the Company and you within 20 days of its appointment and shall be
final and binding on all parties. With respect to your cost incurred in
contesting the Company's calculation, if the final calculation of the
Section 15 Amount represents an increase of more than 2% as calculated
by the Company, then the Company shall pay all reasonable costs
incurred by you with respect to such calculation; in all other cases,
you shall pay all such costs. All costs incurred by the Company in
connection with such calculation and the costs of the accounting firm's
calculation shall be borne by the Company.
(D) Pending a final and binding calculation of the Section 15
Amount, you shall have the right to require the Company to pay to you
all or any portion of the Section 15 Amount calculation by the Company
to be payable. Such payment shall be made by the Company within two
days after the date of receipt of notice from you requiring the same.
3
JANUARY 24, 1996
PAGE 3
(E) The Company shall pay to you or for your benefit the
Section 15 Amount finally calculated to be owing (less any payment
previously paid by the Company pursuant to (D) above) within 15 days
after the date the calculation becomes final and binding in accordance
with (C) above.
(F) The provisions of this paragraph 15 shall apply
notwithstanding any other provision of this agreement, including,
without limitation thereto, the provisions of paragraph 9.
Except as set forth above, the Letter Agreement will remain in full
force and effect.
If this letter of amendment correctly sets forth our agreement on the
subject matter hereof, please so confirm by signing and returning the enclosed
copy.
Very truly yours,
THE DURIRON COMPANY, INC.
/s/ William M Jordan
-------------------------
William M. Jordan
President and CEO
Enclosure
Confirmed and Agreed to:
------------------------
1
EXHIBIT 10.13
Effective July 21, 1995
AMENDMENT NO.1
TO THE DURIRON COMPANY, INC.
LONG-TERM INCENTIVE PLAN
(AS RESTATED NOVEMBER 1, 1993)
SECTION X(B) SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
"B. ELECTION TO DEFER
Each Participant may elect to defer distribution of an Award
(cash or Shares, or both) in increments of not less than 10%
of the Total Award or a portion thereof. The Participant's
election to defer must be made on or before August 31 of the
last year of the applicable Performance Cycle. This election
may not be changed after such August 31 date. Attachment E is
a copy of the election to defer, although the Committee may
elect to honor any written election statement from a
Participant which communicates substantially the same election
intention. The Committee, in its absolute discretion, may
elect to accept any such election where the Committee (or the
Chief Administrative Officer on behalf of the Committee,
except in cases involving the Chief Administrative Officer)
determines in its absolute discretion that the Participant
submitted a good faith and irrevocable election to defer any
possible Award prior to the commencement of an applicable
Cycle, including interpreting any such election made prior to
such date as including a deferral of any Share Award,
regardless of the content of any election form or notice."
The remainder of this Plan shall remain unchanged and in full force and
effect.
1
EXHIBIT 10.18
Effective April 20, 1995
AMENDMENT NO. 3 TO
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
I. ARTICLE III, SECTION 1 SHALL BE AMENDED BY ADDING THE FOLLOWING TWO
SENTENCES AT THE END OF THIS SECTION.
"The Committee, also at its discretion, may delegate its authority to
the Company's Chief Executive Officer to so award Restricted Shares in an amount
not to exceed 5,000 shares per calendar year to Eligible Employees of the
Company, provided that any such grant shall be limited to 1,000 shares per
Eligible Employee per calendar year, and further provided that the Chief
Executive Officer shall not be authorized to award any grants to any officers of
the Company. The Chief Executive Officer shall, on an annual basis, report all
such awards to the Committee, and the Committee's ratification and approval of
such awards shall be presumed in the absence of express action by the Committee
to the contrary."
II. ARTICLE IV IS AMENDED IN ITS ENTIRETY AND RESTATED AS FOLLOWS.
-1-
2
Shares," with the term "Deferred Shares" hereafter applying equally to both
Mandatory Deferred Shares and Voluntary Deferred Shares.
SECTION 2. ACCOUNTS FOR DEFERRED RESTRICTED SHARES.
(a) The Company will establish a separate account for each Participant
who has Deferred Shares in which the Deferred Shares will be maintained. The
Company will create this account through a trust (the "Trust") established by
the Company, with the applicable trustee (the "Trustee") maintaining the
Deferred Shares pursuant to the Trust.
(b) Notwithstanding Article I, Section 6(a), which shall not apply to
Deferred Shares except as follows, the Company shall fund such account in the
case of Voluntary Deferred Shares by providing sufficient cash to the Trustee,
on the date that the grant of the Voluntary Deferred Shares are to be deferred.
The Company shall then give instructions to the Trustee to purchase such
Voluntary Deferred Shares for this account on the open market, and the Company
shall reimburse the trustee for any associated brokerage or other transaction
fees.
(c) In the case of Mandatory Deferred Shares, the Company shall fund
such account by transferring such Mandatory Deferred Shares to the Trustee for
holding pursuant to the terms of the Trust, with the provisions of Article I,
Section 6(a) and 6(b) being inapplicable to the Mandatory Deferred Shares.
(d) Any dividends paid on the Voluntary Deferred Shares in this account
("Dividends") will be credited to a deferred cash account to be established
under the Trust in which the amount of the Dividends will be recorded for the
benefit of the Participant, with interest to be credited to the Dividends in the
following manner. The Company will credit to each such cash account, as of the
first day of each calendar quarter, interest on the amount then credited to such
account, including all previous credits to such account by operation of this
Section, computed at an annual rate equal to the average composite bond yield
for Single A bonds, rounded to the nearest 1/10 of 1%, as published for the
month last preceding the beginning of such calendar quarter in the Standard &
Poor's Indexes of the Securities Markets.
(e) Any dividends paid on the Mandatory Deferred Shares shall be
reinvested in the Company Stock of the Company through the Trustee's use of the
Company's automatic stock dividend plan available to all of its shareholders of
record. Such reinvestment shares shall also be held in the participant's
Deferred Shares trust account where they shall be included, where applicable, in
any reference to "Deferred Shares" hereafter.
(f) In the event that the company is obligated to pay any cash amounts
to a Participant in connection with the vesting of any Mandatory Deferred
Shares, such cash ("Tax Reimbursement Cash") shall be credited to the cash
account of such Participant under the Trust. Interest shall be credited on the
Tax Reimbursement Cash in the same way as applies to Dividends, and the Trustee
shall likewise handle Tax Reimbursement Cash and Dividends in the same way.
(g) Any Deferred Shares hereunder and any amount credited to either the
cash or Deferred Shares Trust accounts of a Participant, or as any interest or
any Dividends paid on such
-2-
3
Deferred Shares, will represent only an unsecured promise of the Company to pay
or deliver the amount so credited in accordance with the terms of this Article
of the Plan. Neither a Participant nor any beneficiary of a Participant will
acquire any right, title, or interest in any asset of the Company as a result of
any amount of cash or Deferred Shares credited to a Participant's account or
accounts. At all times, a Participant's rights with respect to the amount
credited to his/her account or accounts will be only those of an unsecured
creditor of the Company. The Company will not be obligated or required in any
manner to restrict the use of any of its assets as a result of any amount
credited to a Participant's account or accounts. No right or benefit under the
Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
lien, encumbrance or charge, and any attempt to take any such action shall be
void.
(h) The Trustee will have voting rights on all Deferred Shares prior to
their distribution.
SECTION 3. DISTRIBUTION OF DEFERRED SHARES.
(a) Deferred Shares will be distributed only in accordance with the
following sections, pursuant to the election specified by the Participant under
the attached form marked Exhibit A with regard to Voluntary Deferred Shares or
the attached form marked Exhibit B (or any substantially similar documents
acceptable to the Committee) with regard to Mandatory Deferred Shares.
(i) In the event a Participant leaves service from the Company's Board
of Directors or employment from the Company, as the case may be, for any reason,
any Deferred Shares and the interest, Dividends and Tax Reimbursement Cash on
these Deferred Shares previously or currently credited to his/her account will
be distributed commencing within 60 calendar days of his/her termination in
accordance with the method of distribution elected by the Participant.
(ii) The Participant may elect to receive such distribution in a lump
sum, in equal annual installments (not exceeding ten), or in some designated
combination thereof.
(iii) If the election is a lump sum, then interest, Dividends and Tax
Reimbursement Cash, if any, will be credited to the account through the date of
distribution, and the entire amount of Dividends and Tax Reimbursement Cash, if
any, with applicable interest will be paid, and the entire Deferred Shares
account balance will be transferred in kind, to the Participant within 60 days
of his/her termination.
(iv) If installments have been elected, any Dividends and any Tax
Reimbursement Cash with applicable interest, will be calculated through the date
of termination and added to the account. The resulting deferred cash total shall
be divided equally by the number of installments elected and the first payment
made within 60 days of termination. The second and all subsequent installment
payments shall be made between January 1 and 30 of each following year. Interest
will continue to accrue to the account on the balance remaining in the
Participant's Dividend and Tax Reimbursement Cash account until all installments
have been paid. Interest will be paid annually with each installment payment.
With regard to the Deferred Shares, the aggregate number of Deferred Shares held
in the separate account for Deferred Shares will be divided by the number of
installments
-3-
4
elected and allocated in equal whole number proportions to be distributed with
each such installment payment (with any remainder after such equal division to
be included in the first installment). All Deferred Shares so allocated will be
distributed in kind with each applicable installment, which shall be paid
simultaneously with any deferred cash distribution installments. Certificates
representing the applicable amount of Deferred Shares held for the then longest
time in the Deferred Shares account of the Trust will be delivered with each
installment, where applicable. Dividends from any undistributed Voluntary
Deferred Shares will continue to accrue to the Director's Dividend account,
receive applicable interest credit and will be paid with the next applicable
installment payment of deferred cash. Undistributed Mandatory Deferred Shares
will continue to be invested in the shareholder dividend reinvestment plan,
with the entire balance in the reinvestment plan distributed in the last
installment.
(v) If any portion of a Participant's deferred account remains unpaid
at his/her death, then after his/her death such amount will be paid (i) to
his/her beneficiary(ies) in accordance with the method of distribution elected
by the Participant (following the procedure for lump sum and installment
payments set forth above), or (ii), if the Participant has not designated a
beneficiary or if the beneficiary predeceases the Participant, to the
Participant's estate in a lump sum. Should a beneficiary die after the
Participant has terminated service but before the entire Deferred Shares have
been disbursed, the balance of the cash benefit will be paid to the
beneficiary's estate in a lump sum, and the Deferred Shares benefit will be
transferred to such estate in kind.
(vi) Notwithstanding anything to the contrary above, no Deferred Shares
shall be paid to the Participant until expiration or termination of the
applicable Restriction Period or, if earlier, until the provisions of Article I,
Section 5(a) cease to apply to such Shares."
-4-
5
EXHIBIT A
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
PARTICIPANT'S ELECTION TO DEFER
VOLUNTARY DEFERRED SHARES
In accordance with the provisions of the 1989 Restricted Stock Plan
(the "Plan") of The Duriron Company, Inc. (the "Company"), I elect:
1. Effective immediately to defer the receipt of any Voluntary
Restricted Shares (as defined in the Plan) granted to me under
the Plan unless I notify you to revoke this election.
2. To receive payment of the amount credited to my deferred
account in the following manner:
/ / In one lump sum payment of cash ("Cash") equivalent to
Dividends and interest on the Deferred Shares and an in
kind distribution of Deferred Shares.
/ / In _____ equal annual installments (not to exceed ten)
of Cash and Deferred Shares.
3. To have any payments above, which have not been made to me
prior to my death, paid after my death to the following
designated person in the same manner as would have been paid
to me:
In making this election, I understand that:
1. My election may not be modified to retroactively change the
deferral of Restricted Shares after their grant.
2. My election is otherwise subject to the terms of the Plan and
applicable securities law.
3. The delivery of the Deferred Shares to me will be subject to
applicable SEC requirements, including, without limitation,
possible time restrictions on resale.
-------------------- -------------------------------
Date Signature of Participant
The undersigned, Secretary of the Company, acknowledges receipt of the
above election on .
-----------------------
Secretary
6
EXHIBIT B
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
PARTICIPANT'S DISTRIBUTION ELECTION
OF MANDATORY DEFERRED SHARES
In accordance with the provisions of the 1989 Restricted Stock Plan
(the "Plan") of The Duriron Company, Inc. (the "Company"), I elect:
1. To receive payment of the amount credited to my Mandatory
Deferred Shares account in the following manner:
/ / In one lump sum payment of cash ("Cash") equivalent to
any Dividends, any Tax Reimbursement Cash (as both
defined in the Plan), and interest on the Deferred
Shares and an in kind distribution of Mandatory Deferred
Shares.
/ / In _____ equal annual installments (not to exceed ten)
of any Cash, any Tax Reimbursement Cash and Mandatory
Deferred Shares.
2. To have any payments above, which have not been made to me
prior to my death, paid after my death to the following
designated person in the same manner as would have been paid
to me:
In making this election, I understand that:
1. My election may not be modified to retroactively change the
distribution of Mandatory Deferred Shares after their vesting.
2. My election is otherwise subject to the terms of the Plan and
applicable securities law.
3. The delivery of the Mandatory Deferred Shares to me will be
subject to applicable SEC requirements, including, without
limitation, possible time restrictions on resale.
----------------------- --------------------------------
Date Signature of Participant
The undersigned, Secretary of the Company, acknowledges receipt of the
above election on .
-----------------------------
Secretary
1
EXHIBIT 10.19
Effective July 21, 1995
AMENDMENT NO.4 TO
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
II ARTICLE IV IS AMENDED IN ITS ENTIRETY AND RESTATED AS FOLLOWS.
"ARTICLE IV. PARTICIPANT DEFERRAL OF RESTRICTED SHARES
SECTION 1. FORMS OF DEFERRAL
(a) Participants who are either Eligible Directors of the Company or
who are participants in the Company's Equity Incentive Plan ("Eligible
Participants" or "Eligible Participant") shall be eligible to defer receipt of
Restricted Shares received.
(b) An Eligible Participant may execute an election with the Company to
defer the receipt of the Restricted Shares granted pursuant to the Plan through
completion of a form (Exhibit "A" or "Exhibit B", whichever is applicable) or a
substantially similar document to be delivered to and be subject to acceptance
by the Secretary of the Company. An election to defer Restricted Shares shall be
effective upon such acceptance and shall apply only to Restricted Shares which
either have not yet been granted or which vest in the following calendar year or
thereafter, provided, in the case of previously granted Restricted Shares, such
election is made and accepted prior to August 31 of the year preceding such
vesting. This election to defer to Restricted Shares (which shall be called
"Deferred Shares" hereafter upon such election) shall remain in effect until
terminated or changed as provided in this Plan.
(c) A Participant may terminate any agreement to accept receipt of
Deferred Shares relating to future grants by giving notice of termination to
the Company. Any such termination shall be effective only with respect to grants
of Restricted Shares which occur on or after the date of the termination notice.
SECTION 2. ACCOUNTS FOR DEFERRED RESTRICTED SHARES.
(a) The Company will establish a separate account for each Participant
who has Deferred Shares in which the Deferred Shares will be maintained. The
Company will create this account through a trust (the "Trust") established by
the Company, with the applicable trustee (the "Trustee") maintaining the
Deferred Shares pursuant to the Trust.
(b) Notwithstanding Article I, Section 6(a), which shall not apply
except as follows, the Company shall fund such account, in the case of Deferred
Shares where the deferral election is made prior to granting of the Deferred
Shares, by providing appropriate instructions and sufficient cash to the
Trustee, on or about the date of the grant, to purchase such Deferred Shares for
this account on the open market. The Company shall reimburse the Trustee for any
associated brokerage or other transaction fees in making this purchase.
-1-
2
(c) In the case of Deferred Shares in which the deferral election is
properly made after the date of grant but prior to the date of vesting, the
Company shall fund such account by transferring (and causing the Participant to
assign) such Deferred Shares to the Trustee for holding pursuant to the terms of
the Trust, with the provisions of Article I, Section 6(a) and 6(b) being
inapplicable to these Deferred Shares.
(d) Any dividends paid on the Deferred Shares in this account
("Dividends") will be credited to a deferred cash account to be established
under the Trust in which the amount of the Dividends will be recorded for the
benefit of the Participant, with interest to be credited to the Dividends in the
following manner. The Company will credit to each such cash account, as of the
first day of each calendar quarter, interest on the amount then credited to such
account, including all previous credits to such account by operation of this
Section, computed at an annual rate equal to the average composite bond yield
for Single A bonds, rounded to the nearest 1/10 of 1%, as published for the
month last preceding the beginning of such calendar quarter in the Standard &
Poor's Indexes of the Securities Markets.
(e) Any Deferred Shares hereunder and any amount credited to either the
cash or Deferred Shares Trust accounts of a Participant, or as any interest or
any Dividends paid on such Deferred Shares, will represent only an unsecured
promise of the Company to pay or deliver the amount so credited in accordance
with the terms of this Article of the Plan. Neither a Participant nor any
beneficiary of a Participant will acquire any right, title, or interest in any
asset of the Company as a result of any amount of cash or Deferred Shares
credited to a Participant's account or accounts. At all times, a Participant's
rights with respect to the amount credited to his/her account or accounts will
be only those of an unsecured creditor of the Company. The Company will not be
obligated or required in any manner to restrict the use of any of its assets as
a result of any amount credited to a Participant's account or accounts. No right
or benefit under the Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, lien, encumbrance or charge, and any attempt to take any
such action shall be void.
(f) The Trustee will have voting rights on all Deferred Shares prior to
their distribution.
SECTION 3. DISTRIBUTION OF DEFERRED SHARES.
(a) Deferred Shares will be distributed only in accordance with the
following sections, pursuant to the election specified by the Participant.
Attached form marked Exhibit A shall be used with regard to Deferred Shares
applicable to Eligible Directors, and the attached form marked Exhibit B (or any
substantially similar documents acceptable to the Committee) shall be used with
regard to Deferred Shares applicable to participants in the Equity Incentive
Plan.
(i) In the event a Participant leaves service from the Company's Board
of Directors or employment from the Company, as the case may be, for any reason,
any Deferred Shares and the interest and Dividends on these Deferred Shares
previously or currently credited to his/her account will be distributed
commencing within 60 calendar days of his/her termination in accordance with the
method of distribution elected by the Participant.
(ii) The Participant may elect to receive such distribution in a lump
sum, in equal annual installments (not exceeding ten), or in some designated
combination thereof
(iii) If the election is a lump sum, then interest and Dividends, will
be credited to the account through the date of distribution, and the entire
amount of Dividends, with applicable interest, will be paid, and
-2-
3
the entire Deferred Shares account balance will be transferred in kind, to the
Participant within 60 days of his/her termination.
(iv) If installments have been elected, any Dividends, with applicable
interest, will be calculated through the date of termination and added to the
account. The resulting deferred cash total shall be divided equally by the
number of installments elected and the first payment made within 60 days of
termination. The second and all subsequent installment payments shall be made
between January 1 and 30 of each following year. Interest will continue to
accrue to the account on the balance remaining in the Participant's Dividend
account until all installments have been paid. Interest will be paid annually
with each installment payment. With regard to the Deferred Shares, the aggregate
number of Deferred Shares held in the separate account for Deferred Shares will
be divided by the number of installments elected and allocated in equal whole
number proportions to be distributed with each such installment payment (with
any remainder after such equal division to be included in the first
installment). All Deferred Shares so allocated will be distributed in kind with
each applicable installment, which shall be paid simultaneously with any
deferred cash distribution installments. Certificates representing the
applicable amount of Deferred Shares held for the then longest time in the
Deferred Shares account of the Trust will be delivered with each installment,
where applicable. Dividends from any undistributed Deferred Shares will continue
to accrue to the Director's Dividend account, receive applicable interest credit
and will be paid with the next applicable installment payment of deferred cash.
(v) If any portion of a Participant's deferred account remains unpaid
at his/her death, then after his/her death such amount will be paid (i) to
his/her beneficiary(ies) in accordance with the method of distribution elected
by the Participant (following the procedure for lump sum and installment
payments set forth above), or (ii), if the Participant has not designated a
beneficiary or if the beneficiary predeceases the Participant, to the
Participant's estate in a lump sum. Should a beneficiary die after the
Participant has terminated service but before the entire Deferred Shares have
been disbursed, the balance of the cash benefit will be paid to the
beneficiary's estate in a lump sum, and the Deferred Shares benefit will be
transferred to such estate in kind.
(vi) Notwithstanding anything to the contrary above, no Deferred Shares
shall be paid to the Participant until expiration or termination of the
applicable Restriction Period or, if earlier, until the provisions of Article I,
Section 5(a) cease to apply to such Shares."
-3-
4
EXHIBIT A
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
DIRECTOR'S ELECTION TO DEFER
PREVIOUSLY GRANTED BUT UNVESTED SHARES
(COVERING 1993, 1994 AND 1995 GRANTS)
In accordance with the provisions of the 1989 Restricted Stock Plan
(the "Plan") of The Duriron Company, Inc. (the "Company"), I elect:
1. Effective immediately to defer the receipt of any Restricted
Shares (as defined in the Plan) previously granted to me in
1993, 1994 and/or 1995, as applicable, but which remain
unvested at the time of this election.
2. To receive payment of the amount credited to my deferred
account in the following manner:
/ / In one lump sum payment of cash ("Cash") equivalent to
Dividends on the Deferred Shares (and interest on the
Dividends) and an in kind distribution of Deferred
Shares.
/ / In _____ equal annual installments (not to exceed ten)
of Cash and Deferred Shares.
3. To have any payments above, which have not been made to me
prior to my death, paid after my death to the following
designated person in the same manner as would have been paid
to me:
4. I also agree to execute an irrevocable power of attorney in
favor of the Secretary of the Company in the form set forth on
the reverse side of this election in order to permit the
appropriate deferral arrangements to be made for such
Restricted Shares.
In making this election, I understand that:
1. My election may not be modified to retroactively change the
deferral of Restricted Shares after their grant.
2. My election is otherwise subject to the terms of the Plan and
applicable securities law.
3. The delivery of the Deferred Shares to me will be subject to
applicable SEC requirements, including, without limitation,
possible time restrictions on resale.
4. My election, in order to be valid under the Plan, must be made
on or before August 31 of the year preceding the vesting of
such Restricted Shares at the Annual Meeting of Shareholders
of such following year.
--------------- ------------------------------
Date Signature of Participant
The undersigned, Secretary of the Company, acknowledges receipt of the
above election on .
------------------------------
Secretary
(over)
5
EXHIBIT B
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
OFFICERS'S ELECTION TO DEFER
PREVIOUSLY GRANTED BUT UNVESTED SHARES
(COVERING EQUITY INCENTIVE PLAN GRANTS)
In accordance with the provisions of the 1989 Restricted Stock Plan
(the "Plan") of The Duriron Company, Inc. (the "Company"), I elect:
1. Effective immediately to defer the receipt of any Restricted
Shares (as defined in the Plan) granted to me under the Equity
Incentive Plan, but which remain unvested at the time of this
election.
2. To receive payment of the amount credited to my deferred
account in the following manner
/ / In one lump sum payment of cash ("Cash") equivalent
to Dividends on the Deferred Shares (and interest on
the Dividends) and an in kind distribution of
Deferred Shares.
/ / In equal annual installments (not to exceed ten)
of Cash and Deferred Shares.
3. To have any payments above, which have not been made to me
prior to my death, paid after my death to the following
designated person in the same manner as would have been paid
to me:
4. I also agree to execute an irrevocable power of attorney in
favor of the Secretary of the Company in the form set forth on
the reverse side of this election in order to permit the
appropriate deferral arrangements to be made for such
Restricted Shares.
In making this election, I understand that:
1. My election may not be modified to retroactively change the
deferral of Restricted Shares after their grant
2. My election is otherwise subject to the terms of the Plan and
applicable securities law.
3. The delivery of the Deferred Shares to me will be subject to
applicable SEC requirements, including, without limitation,
possible time restrictions on resale.
4. My election, in order to be valid under the Plan, must be made
on or before August 31 of the year preceding the vesting of
such Restricted Shares.
--------------- ------------------------------
Date Signature of Participant
The undersigned, Secretary of the Company, acknowledges receipt of the
above election on .
-------------------------
Secretary
(over)
6
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Ronald F. Shuff, with
full power of substitution, as the undersigned's true and lawful
attorney-in-fact to:
1. Execute and deliver stock powers, share assignments and
other documents and instruments required for the assignment and
transfer to Bank One Trust Company (the "Trustee") as Trustee under the
First Master Benefit Trust Agreement dated October 1, 1987 and
thereafter amended between The Duriron Company, Inc. (the "Company")
and the Trustee, of________________ shares of Common Stock of the
Company issued pursuant to Article II of the Company's 1989 Restricted
Stock Plan and standing in the name of the undersigned on the books of
the Company and represented by Certificate(s).
2. Do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to consummate the
assignments and transfers contemplated by paragraph 1 above.
This Power of Attorney shall expire as of the close of
business on________________________, 19___________.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this ______ day of___________________________ 19_____.
------------------------
Signature
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Printed Name
1
EXHIBIT 10.21
AMENDMENT #1
TO
THE DURIRON COMPANY, INC
RETIREMENT COMPENSATION PLAN
FOR
DIRECTORS
EFFECTIVE JANUARY 1, 1989
Effective January 1, 1996, the Plan shall be amended as follows:
1) Section 2 ("Amount of Deferral") shall be amended to add the
following sentence at the end of the current Section 2.
"Notwithstanding anything to the contrary above, the
Company shall make no further contributions to the
Plan after December 31, 1995."
2) Section 6 ("Amendment or Termination") shall be amended to add
the following sentence at the end of the current Section 6.
"The Plan shall automatically terminate without any
further action of the Board of Directors when the
last Director's Account under the Plan has been
distributed to that Director pursuant to Section 4."
The remainder of the Plan shall remain unchanged.
Pursuant to authorities granted to me under a resolution duly adopted
by the Board of Directors, the undersigned hereby executes this Amendment on
behalf of The Duriron Company, Inc.
/S/ Ronald F. Shuff
----------------------------------
Ronald F. Shuff
Secretary
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EXHIBIT 1O.25
DURIRON "EQUITY INCENTIVE" PLAN
AS AMENDED AND RESTATED
EFFECTIVE JULY 21, 1995
1. PURPOSE
The purpose of the Duriron "Equity Incentive" Plan (the "Plan") is
as follows:
a. To more closely tie and identify the interest of the
executive officers of the Company to creating increased share
value and to meeting shareholder goals.
b. To require each officer to make a personal capital investment
in the Company's common stock.
c. To ensure that each officer feels the same kind of "downside
risk" and "upside potential" with regard to Duriron's common
stock as do other shareholders.
d. To encourage each officer to continue his employment at
Duriron and to provide an incentive to keep the executive
officers together and functioning as an effective team.
e. To require the participating officer to retain the Restricted
Stock which vests under the Plan until he terminates
employment with the Company.
2. ELIGIBILITY
The following officers of the Company shall continue to
participate in the Plan, with their month of initial participation
shown after their name.
a. W. M. Jordan, President and CEO (2/91)
b. B. E. Hines, Senior Vice President and CAO (2/91)
c. G. A. Shedlarski, Group Vice President (2/91)
d. C. E. Daily, Group Vice President (2/91)
e. M. E. Vernon, Group Vice President (10/93)
f. R. F. Shuff, Vice President -- Secretary and General Counsel
(2/91)
Other officers may be added to the Plan only upon the prior
express approval of the Compensation Committee.
3. GENERAL TERMS OF THE PLAN
The Plan contains three basic components:
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a. A personal investment component where the officer purchases
1,500 shares of Duriron common stock and where the officer
agrees that one-half of any amounts due him under the
Company's Long-Term Incentive Plan will be paid to him in the
form of Duriron common stock.
b. The Company grants a stock option under its 1989 Stock Option
Plan in the amount of 15,000 (after adjustment for the 1994
three-for-two stock split) shares to the officer in
conjunction with this purchase, subject also to the
applicable conditions below.
c. The Company makes a grant under its 1989 Restricted Stock
Plan of 15,000 (adjusted for this split) shares to the
officer, subject again to the terms below.
4. PURCHASE AND PAYMENT OF SHARES
a. As a condition of Plan participation, the officer is
obligated to acquire 1,500 shares of Company common stock,
for himself or immediate family members, within one year
after the officer initiates participation in the Plan. This
acquisition is made on the open market or from existing stock
options, at the officer's election.
b. All payments from the Long-Term Incentive Plan are made to
participating officers in the following form for ten years
after the officer's initial participation in the Plan.
One-half of the payment is, pursuant to the officer's
election, under the Long-Term Plan, made in cash, stock,
deferred cash or deferred stock, while the remainder must be
paid in the form of Duriron common stock, which may be
deferred by the officer until retirement. At its discretion,
the Compensation Committee may elect, in any particular year,
to provide the portion of the Long-Term Incentive Award,
otherwise payable in stock, in the form of cash to a
designated officer or officers.
c. The Company stock has a fair market value at the time of
issuance which is equal to this "one-half" award. Thus, the
number of shares due are not determined until payment is
actually due. These shares are not registered at issuance and
may not be resold for at least two years after issuance and
only then under Rule 144.
d. If the officer sells any of the common stock received as
payment under the Long-Term Incentive Plan or that he
otherwise holds, he forfeits an equal amount of unexercised
stock options and restricted stock granted under the Plan, as
described hereafter, except where approved in advance by the
Compensation Committee. This forfeiture is qualified by the
understanding that the bonafide gift of common stock, or use
of stock to pay the exercise price or withholding tax of
exercised stock options, or to otherwise increase the net
holdings of common stock by the participant, shall continue
to be permitted without penalty.
e. Additionally, the officer's receipt of such common stock
causes the officer to be prohibited under Section 16 of the
Securities Exchange Act from selling stock at a profit either
six months before or after a stock payout. This means that
the officer is effectively prohibited by law from selling in
the event that Long-Term Incentive Plan bonuses are always
paid (except for "exempt" sales under Section 16(b)).
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5. STOCK OPTION GRANT
a. The Company makes a grant under its 1989 Stock Option Plan in
the amount of 15,000 shares at the time of entrance into the
Plan.
b. The options are priced at their current market value on the
date of the grant.
c. The options are not exercisable for one year, but are then
exercisable only to the extent that the officer has acquired
beneficial ownership of shares of common stock subsequent to
this grant.
d. The options granted are nonqualified with the accompanying
tax consequences, including deductibility of the "spread"
(between current value and purchase price at exercise) for
the Company and corresponding income to the officer.
e. The options are for a ten year term and expire at that date
to the extent unexercised.
f. Any option is forfeited within thirty days after the officer
leaves the Company for any reason except death, disability,
normal retirement at age 65 or early retirement with the
consent of the Compensation Committee. In such cases, the
options shall be prorated based upon the number of full
calendar quarters of the officer's participation in the Plan.
g. All options are personal to the officer and nonassignable.
h. The options are granted without any accompanying stock
appreciation rights.
i. Any other applicable general terms and conditions of the 1989
Stock Option Plan apply.
6. RESTRICTED STOCK GRANT
a. 15,000 shares of Restricted Stock are granted to a
participant under the Company's 1989 Restricted Stock Plan,
simultaneously with the above stated stock option grant.
b. 7,500 shares of this Restricted Stock vest on the fifth
anniversary of this restricted stock grant, with the
remaining 7,500 vesting on the tenth anniversary. Shares also
automatically vest upon a change of control.
c. The restricted shares are forfeited if the officer leaves the
employment of the Company prior to the vesting date for any
reason other than death, disability, normal retirement at age
65 or early retirement with the consent of the Compensation
Committee. Upon such normal or such early retirement, death
or disability, the restricted shares will vest on a pro rata
basis based upon actual service rendered by full calendar
quarter.
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d. The Restricted Stock will be nonassignable. The Company will
retain the certificate covering the shares until the vesting
date, except as it applies to "Deferred Shares," as defined
in Section 6(h) below.
e. Pursuant to the Restricted Stock Plan, the officer will have
dividend and voting rights, regardless of the vesting status,
except for Restricted Stock deferred under Section 6(h)
below. Applicable restrictions will automatically lapse in
the event of a change of control of the Company, regardless
of deferral status.
f. Except for Deferred Shares, the taxes resulting from this
Restricted Stock grant will apply upon the vesting of the
stock. If the taxes were not so deferred, and the tax
liability arose upon vesting, the Company will provide the
officer, through a five year loan, sufficient money to pay
federal, state and local taxes arising from the vesting. In
an effort to offset the tax liability, conditioned upon the
officer's continued employment with the Company, the Company
will pay for five years an annual bonus equaling the
principal and interest due that year on the loan.
g. If the Restricted Stock vests on a pro rata basis by reasons
outlined in Section 6(c), the Company will pay a one-time
bonus to the affected participant (or his estate) which is
equivalent to such tax liability of such participant
regardless of whether or not this Restricted Stock
constitutes Deferred Shares. This payment will be made at or
around the end of the calendar year of such pro rata vesting.
h. A participating officer may elect to defer receipt and
payment of the Restricted Shares granted hereunder until his
termination of service with the Company. Such Restricted
Stock shall, accordingly, be treated as "Deferred Shares"
under the 1989 Restricted Stock Plan ("Restricted Plan") in
accordance with the provisions of the Restricted Plan. As a
condition for such deferral, the participating officer shall
take such action as deemed necessary or desirable by counsel
of the Company to effect this deferred treatment, including
completing deferral election forms satisfactory to the
Company and complying with the provisions of the Restricted
Plan governing Deferred Shares. In order to be valid, any
such deferral election is to be appropriately filed with the
Secretary of the Company on or before the August 31 of the
year preceding the vesting of the Restricted Shares.
i. In order to assist the participating officer in the payment
of taxes arising from the distribution of these Deferred
Shares after his termination of service, the Company makes
the following payment to the participant, as determined
through the following procedure. First, the Company
calculates the total federal, state and local income taxes
that the officer would have owed upon the vesting of the
Restricted Shares if they were not Deferred Shares.
Thereafter, the Company accrues an amount, equal to one-fifth
of such tax liability, for the benefit of the participant on
each immediately following anniversary of such vesting for a
number of anniversaries not to exceed five, provided that the
officer is still employed by the Company on each such
anniversary date. The Company, simultaneously with each such
accrual, also accrues an amount equal to the interest which
would be accrued to a participant's account under the Rabbi
Trust, if such total tax liability amount were funded into
the participant's cash account in this Trust on the day of
such Restricted Share vesting. The amount of the
aforementioned cash payment to
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the participant electing Deferred Shares is the amount of
this accrual including the applicable interest credits. This
payment is also to be made within thirty (30) days after the
participant terminates service with the Company. However, no
further accrual nor resulting payment right of the officer
shall arise after the participating officer leaves the
service of the Company.
7. MISCELLANEOUS
a. The commitment of the Company and the officer to implement
this Plan is effective upon Compensation Committee approval
of the initial participation in the Plan of the officer.
b. The stock option grant and Restricted Stock grant occur at
the time of such approval.
c. Appropriate legal documentation is prepared and the Company
and the officer execute all documents necessary to affix
their respective rights and obligations. Such legal
documentation is subject to ratification by either the
Chairman of the Compensation Committee or by the Company's
Chief Executive Officer, where applicable.
d. The Plan is administered by the Compensation Committee of the
Board.
e. All applicable legal requirements governing the Plan are also
to be met, including applicable Proxy Statement disclosures,
SEC filings and other matters.
f. No further grants occur under the Plan, nor does any other
Company personnel become eligible to participate in the Plan,
without the prior express approval of the Compensation
Committee.
g. The officers' participation in other Company compensation
programs is not affected by the Plan, provided that an
officer shall not be eligible to receive any other stock
option or Restricted Stock grants during the calendar year in
which he begins Plan participation.
h. A participant's exercise of stock appreciation rights, which
were granted with options outside the Plan, has no effect on
the Plan.
i. The number of shares granted under the stock option and
Restricted Stock provisions of the Plan, or which are
required to be purchased by the participant under Section
3(a), shall be automatically adjusted for any stock
dividends, stock splits or similar recapitalizations
affecting the common stock in general.
j. All duties and obligations of a participant under the Plan
expire on his tenth anniversary of his initial participation
in the Plan, except with regard to the officer's need to
maintain continued employment with the Company to receive the
tax reimbursement funding described in Section 6(f) or its
functional equivalent covering Deferred Shares described in
Section 6(i), whichever is applicable.
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EXHIBIT 10.29
EXECUTIVE LIFE INSURANCE PLAN
OF
THE DURIRON COMPANY, INC.
This Executive Life Insurance Plan is established to provide
certain employees of Duriron with an additional life insurance benefit.
ARTICLE I
TITLE AND EFFECTIVE DATE
1.01 Title: This Plan shall be known as the Executive Life
Insurance Plan.
2.01 Effective Date: This Plan shall be effective retroactively to
November 1, 1994 or as soon thereafter the Insurer has approved and placed in
force and effect the insurance to be provided under this Plan.
ARTICLE II
DEFINITIONS
When used herein, the following terms shall have the meanings
indicated unless a different meaning is clearly required by the context:
2.01 "Committee": The Compensation Committee of the Board of
Directors of the Company which shall administer the Plan, including delegating
certain administrative functions of the Plan to the Chief Administrative
Officer.
2.02 "Company": The Duriron Company, Inc. or any successor
company.
2.03 "Employee": A person who is employed by the Company.
2.04 "Insurer": New England Mutual Life Insurance Company or a
successor insurance company providing the life insurance and other benefits
pursuant to this Plan.
2.05 "Participant": An Employee who is or hereafter becomes
eligible to participate in the Plan and does participate by enrolling in the
Plan.
2.06 "Plan": This Executive Life Insurance Plan, as may be amended
from time to time.
2.07 "Policy": The life insurance policy or policies on the life
of each Participant issued by the Insurer pursuant to this Plan.
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2.08 "Covered Pay": The annual or market salary plus the annual
incentive target at 100% of a Participant, as may be changed from time to time.
2.09 "Currency": United States Dollars.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility: The Committee shall have the sole discretion to
determine the Employees eligible to become Participants under the Plan.
3.02 Participation: An eligible Employee shall be notified by the
Committee or the Chief Administrative Officer of such eligibility and shall
become a Participant upon (i) the execution and delivery of an insurance
application and (ii) approval and acceptance of such application by the Insurer.
By executing such application, the Employee agrees to comply with the terms and
conditions of the Plan as contained herein and in the insurance application. An
Employee shall continue to be a Participant until the earlier of (i) termination
of the Plan by the Committee, (ii) termination of the Participant's employment
with the Company, whether voluntary or involuntary or (iii) retirement of the
Participant from the Company.
ARTICLE IV
INSURANCE BENEFITS
4.01 Amount of Coverage: The Participant shall be provided with a
life insurance benefit equal to one times the Participant's Covered Pay.
The face amount of the life insurance policy shall be designed so
that if certain assumptions hold true (including payment of dividends, if any,
by the Insurer) it will be large enough that, with Covered Pay increases
averaging 5.5% per year, it will provide the following in the event of a
Participant's death, although no guarantee of such amount is actually made to
the Participant.
(1) A Participant life insurance benefit equal to one times
Covered Pay each year until assumed retirement at age 62,
although nothing under this Plan shall require the
Participant to retire at age 62 nor give the Participant any
rights, express or implied, of continued employment with the
Company.
(2) A life insurance benefit to the Company in an amount so that
after payment of the life insurance death benefit to the
Participant, the Company's life insurance benefit will be
sufficient to repay an amount to the Company equal to the sum
of its share of premiums.
(3) Any life insurance benefit payable in excess of the amounts
set forth in paragraphs (1) and (2) above will be paid to the
Company.
4.02 Effective Date of Coverage: The Policy shall become effective
as soon as the Insurer has accepted and approved the Participant's application
and shall be dated November 1, 1994 or the closest November 1 to the Employee's
selection as a Participant.
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4.03 Increases or Decreases in Coverage: The amount of the life
insurance benefit for each Participant shall be adjusted annually as of the
first day of January of each year to reflect any changes in the Participant's
Covered Pay during the past year. The amount of life insurance benefit shall be
increased or decreased to equal one times the Participant's Covered Pay.
ARTICLE V
LIFE INSURANCE POLICIES
5.01 Ownership of Policy: The Participant shall be the owner of
the Policy (except as noted in 5.03 or 5.04) covering the Participant and may
exercise all rights of ownership of the Policy, subject to the restrictions
contained herein, including the right to designate the beneficiary or
beneficiaries of the Participant's share of the death proceeds under the Policy.
5.02 Collateral Assignment: If the Participant is a Citizen of the
United States and a resident of the U.S., then the Participant must execute and
deliver to the Company a collateral assignment of the Policy on a form approved
by the Insurer.
5.03 Participant Residing Outside of the U.S. and a U.S. Citizen:
If, at the time an Employee is selected to be a Participant, the Employee is
residing outside of the United States and is a U.S. citizen, then the Policy
will be owned by The Duriron Company, Inc. and the life insurance benefit equal
to one times Covered Pay will be endorsed to the Participant's beneficiary.
Upon the U.S. Citizen Participant's permanent return to the United
States, ownership of the policy will be transferred to the Participant; and the
Participant will, at the same time, collaterally assign the policy in favor of
the Company.
5.04 Participant Not a U.S. Citizen: If, at the time an Employee
is selected to be a Participant, the Employee is not a U.S. citizen, then the
policy will be owned by The Duriron Company, Inc., and the Participant's life
insurance benefit will be endorsed to the Participant's beneficiary.
5.05 Payment of Premiums: The Company shall pay the premiums due
on the Policy of each Participant as long as the Participant remains a
Participant under the Plan.
The Participant shall pay to the Company, through payroll
deduction or as otherwise established by the Company, as the Participant's share
of the premium, an amount equal to the Participant's current economic benefit
under the Policy, as determined by the regulations of the Internal Revenue
Service of the United States Department of Treasury.
If there are any extra premiums charged by the Insurer for
smoking, aviation or other hazardous activities of the Participant, then the
Participant shall reimburse the Company for that extra premium, in addition to
the premium for the current economic benefit.
If, as result of an underwriting decision by the Insurer, the
Policy is issued on a basis that, under the Plan assumptions, would preclude the
Company from recovering its share of the premium from the Policy cash value at
assumed retirement age of 62, then the Participant's share of the premium shall
be increased so that the Company will be expected to recover its share of the
premiums at retirement age 62.
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The Company's interest in the cash value of the policy will always
be equal to the lesser of the total cash value or the sum of the Company's share
of the premium.
5.06 Dividends: As long as the Participant is employed by the
Company, insurance dividends, if any, declared and paid by the Insurer with
respect to each Policy shall be used to purchase paid up additional insurance.
5.07 Loans: As long as the Participant is employed by the Company,
the Participant may not borrow against the cash value of the Policy.
5.08 Disability Waiver of Premium Refunds: If the Policy provides
for waiver of premiums in the event of disability, the Participant shall
reimburse the Company any amount refunded to the Participant for any premiums
paid by the Company in excess of the Participant's contribution, if the Insurer
determines that premiums will be waived due to disability of the Participant.
ARTICLE VI
TERMINATION
6.01 Termination: For the purposes of the Article VI, a
"Termination" is defined as (i) termination of the Plan by the Company, or (ii)
the Participant's termination of employment with the Company, whether voluntary
or involuntary, or (iii) the Participant's retirement.
6.02 Premiums: In the event of Termination, the Company will cease
paying the premiums, if any, on the Policy for the Participant, unless the
Committee expressly decides to continue premium payments for any reason
satisfactory to the Committee in its discretion.
6.03 Release of Collateral Assignment: Upon a termination of a
Participant whose Policy has been collaterally assigned, the Company will
execute and deliver to the Participant a release of the collateral assignment of
the Policy. Subject to Section 6.05, at that time, the Policy and will be
divided into two policies. One new policy will be owned by the Company will have
a cash value equal to the sum of its share of the premiums since the inception
of the policy. The original policy owned by the Participant will have a cash
value equal to the total cash value just prior to termination minus the cash
value in the new Company policy. The Participant's Policy will no longer be
subject to the restrictions contained in this Plan.
6.04 Division of Policy: Subject to Section 6.05, in the event the
Policy on the Participant's life is owned by the Company at the Participant's
termination, then the Company will have the policy divided into two policies.
The original policy will be owned by the Company and will have a cash value
equal to the sum of the Company's share of the aggregate premiums since the
inception of the policy. The new policy will be transferred to the Participant
and will have a cash value equal to the total cash value in the original policy
just prior to termination minus such Company share.
6.05 Total Cash Value Less Than Sum of Company's Premium: At
termination, if the cash value of the Policy is insufficient to return to the
Company the sum of its share of the premiums, then the Participant will have no
benefit after termination. Furthermore, if the Policy is collaterally assigned,
the Participant agrees to transfer ownership of the Policy to the Company.
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ARTICLE VII
ADMINISTRATION
7.01 Administration: This Plan shall be administered by the
Committee. The Committee shall have all powers necessary to enable it to carry
out its duties in the administration of the Plan, including delegating
administration functions to the Chief Administrative Officer. Any action taken
by the Chief Administrative Officer in administering the Plan shall be deemed to
be ratified and approved by the Committee in the absence of express statement by
the Committee to the contrary. Not in limitation, but in application of the
foregoing, the Committee shall have the duty and power to determine all
questions that may arise as to the status and rights of Participants in the
Plan. The decision of the Committee is final and incontestable by the
Participant, Participant's heirs or Assigns.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.01 Amendment and Termination: The Company reserves the right, at
any time or from time to time, by action of the Committee, to modify or amend in
whole or in part any or all provisions of the Plan. In addition, the Company
reserves the right, by action of the Committee, to terminate the Plan at any
time. In the event of such termination by the Company, the Participant shall
have the right to receive the Policy and exercise his or her rights in
accordance with Article VI.
ARTICLE IX
MISCELLANEOUS
9.01 Governing Law: This Plan shall be governed by and construed
in accordance with the laws of the State of Ohio.
9.02 Entire Plan: This document and any amendments contain all the
terms and provisions of the Plan and shall constitute the entire Plan, with any
other alleged terms or provisions being of no force or effect.
9.03 ERISA Exemption: The Plan is designed to be a supplemental
life insurance plan to provide welfare benefits for a select group of highly
compensated management employees. As such, the Plan is exempt from the
participation, vesting, funding or fiduciary requirements of the Employment
Retirement Income Security Act of 1974.
9.04 Alienation of Benefits: No benefits which shall be payable
under this Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, garnishment, embracement, encumbrance, or a
charge by a Participant, beneficiary or survivor of anyone claiming under any of
them. If a Participant, beneficiary or survivor or anyone claiming under any of
them shall attempt to or shall subject in any manner any benefit which shall be
payable under this Plan to anticipation, alienation, sale, transfer, assignment,
pledge, garnishment, embracement, encumbrance or charge, his or her interest in
any such benefits shall terminate, and the Committee shall hold or apply it to
or for the benefit of any such person, his/her spouse, children or other
dependents, or any of them as the Committee may decide, in its discretion. In
addition, all benefits under this Plan shall be computed without giving effect
to any "qualified domestic relations order," such terms as defined under ERISA.
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9.05 Incompetency: Every person receiving or claiming benefits
under the Plan shall be assumed to be mentally competent and of age until the
Committee receives written notice, in a form and manner acceptable to it, that
such person is incompetent, and that a guardian, conservator, statutory
committee or other person legally vested with the care of his/her estate has
been appointed.
9.06 Employment Rights: The establishment of the Plan shall not be
construed as conferring any legal rights upon any Participant or any other
person for a continuation of employment, nor shall it interfere with the rights
of the Company to discharge any person or to treat him or her without regard to
the effect which such treatment might have upon him or her as a person covered
by this Plan.
9.07 Notices: Any Notice required or permitted to be given
hereunder to a Participant will be properly given if delivered and mailed,
postage prepaid, to the Participant or the Participant's beneficiary at the last
Post Office address as shown on the Company's records. Any Notice to the Company
shall be properly given or filed if delivered or mailed, postage prepaid, to the
Company's Chief Administrative Officer at its principal place of business.
9.08 Company Records Control: In administering the Plan, the
records of the Company, in respect to the Plan, shall be conclusive in
determining all Participants' benefits, rights, beneficiaries and survivors,
regardless of any records of the Participant to the contrary.
9.09 Liability Exemption: No liability whatsoever shall attach to
or be incurred by the shareholders, officers, directors or employees of the
Company, or any representatives appointed hereunder by the Company, under or by
reason of any of the terms or provisions of the Plan.
9.10 Illegality of Particular Provision: If any particular
provision of this Plan shall be found to be illegal or unenforceable, such
provision shall not affect the other provisions of the Plan, but the Plan shall
be construed in all respects as if such illegal provision were omitted.
9.11 Contingencies: In the event of a merger, consolidation of the
Company or the transfer of substantially all the assets of the Company to
another corporation, such successor corporation shall automatically inure to all
the rights and obligations of the Company under the provisions of the Plan.
This Plan, effective as of the first day of November, 1994, is
adopted this 15th day of February, 1996.
THE DURIRON COMPANY, INC.
By:
------------------------------------
Vice President, Secretary
and General Counsel
(Corporate Seal)
keep 216
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Exhibit 10.30
EXECUTIVE LONG TERM DISABILITY INCOME PLAN
OF
THE DURIRON COMPANY, INC.
This Executive Long Term Disability Income Plan is estnablished to
provide certain employees of Duriron with a long term disability income
benefit.
ARTICLE I
TITLE AND EFFECTIVE DATE
1.01 Title: This Plan shall be known as the Executive Long Term
Disability Income Plan.
1.02 Effective Date: This Plan shall be effective as of November
1, 1994 or as soon thereafter the Insurer has approved and placed in force and
effect the insurance to be provided under this Plan.
ARTICLE II
DEFINITIONS
When used herein, the following terms shall have the meanings
indicated unless a different meaning is clearly required by the context:
2.01 "Committee": The Compensation Committee of the Board of
Directors of the Company.
2.02 "Company": The Duriron Company, Inc. or any successor
company.
2.03 "Employee": A person who is employed by the Company.
2.04 "Insurer": New England Mutual Life Insurance Company or a
successor insurance company providing the disability insurance and other
benefits pursuant to this Plan.
2.05 "Participant": An Employee who is or hereafter becomes
eligible to participate in the Plan and does participate by enrolling in the
Plan.
2.06 "Plan": This Executive Long Term Disability Income Plan and
as may be amended from time to time.
2.07 "Policy": The long term disability policy or policies on the
life of each Participant issued by the Insurer pursuant to this Plan.
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2.08 "Covered Pay": The amount of compensation deemed by the
insurer to be eligible for coverage under this Plan which shall be adjusted on
the first day of each year to reflect the average annual salary and annual
bonus of the Participant for the past three years.
2.09 "Currency": United States Dollars.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility: The Committee shall have the sole discretion to
determine the Employees eligible to become Participants under the Plan.
3.02 Participation: An eligible Employee shall be notified by the
Committee of such eligibility and shall become a Participant upon (i) the
execution and delivery of an insurance application and (ii) approval and
acceptance of such application by the Insurer. By executing such application,
the Employee agrees to comply with the terms and conditions of the Plan as
contained herein and in the insurance application. An Employee shall continue to
be a Participant until the earlier of (i) termination of the Plan by the
Committee, (ii) termination of the Participant's employment with the Company,
whether voluntary or involuntary, or (iii) retirement of the Participant from
the Company.
ARTICLE IV
INSURANCE BENEFITS
4.01 Amount of Coverage: The Participant shall apply for an
individual long term disability Policy with features and monthly benefit amounts
approved by the Committee.
4.02 Effective Date of Coverage: The Policy shall become effective
as soon as the Insurer has accepted and approved the Participant's application
and shall be dated November 1, 1994 or this closest November 1 to the Employee's
selection as a Participant.
4.03 Increases or Decreases in Coverage: The amount of the monthly
disability benefit for each Participant may be adjusted from time to time to
reflect changes in the Participant's Covered Pay. These adjustments will be made
consistent with the underwriting rules in effect with the Insurer at the time.
ARTICLE V
DISABILITY POLICIES
5.01 Ownership of Policy: The Participant shall be the owner of
the Policy (except as noted in 5.02) covering the Participant and may exercise
all rights of ownership of the Policy, subject the restrictions contained
herein.
5.02 Participant Not A U.S. Citizen: If, at the time an Employee
is selected to be a Participant, the Employee is not a U.S. Citizen, then the
Policy will be owned by The Duriron
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Company, Inc. and the Participant's insurance benefit will be endorsed to the
Participant or the Participant's beneficiary.
5.03 Payment of Premiums: The Company shall pay the premiums due
on the Policy of each Participant as long as the Participant remains a
Participant under the Plan.
5.04 Disability Waiver of Premium Refunds: In the event of covered
disability, the Participant shall reimburse the Company any amount refunded to
the Participant for any premium paid by the Company in excess of the
Participant's contribution, if the Insurer determines that premium will be
waived due to disability of the Participant.
ARTICLE VI
TERMINATION
6.01 Termination: For purposes of the Article VI, a "Termination"
is defined as (i) termination of the Plan by the Company, or (ii) the
Participant's termination of employment with the Company, whether voluntary or
involuntary, or (iii) the Participant's retirement.
6.02 Premiums: In the event of Termination, the Company will cease
paying the premiums, if any, on the Policy of the Participant unless the
Committee expressly decides to continue premium payments for any reason
satisfactory to the Committee in its discretion.
ARTICLE VII
ADMINISTRATION
7.02 Administration: This Plan shall be administered by the
Committee. The Committee shall have all powers necessary to enable it to carry
out its duties in the administration of the Plan. Not in limitation, but in
application of the foregoing, the Committee shall have the duty and power to
determine all questions that may arise as to the status and rights of
Participants in the Plan. The decision of the Committee is final and
incontestable by the Participant, Participant's heirs or assigns. The Committee
may delegate such of its functions under this Plan to the Senior Vice President
and Chief Administrative Officer (or his successors in responsibility). Any
action by the Chief Administrative Officer taken in administration of the Plan
shall be deemed to be ratified by the Committee in the absence of an express
statement of the Committee to the contrary.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.01 Amendment and Termination: The Company reserves the right, at
any time or from time to time, by action of the Committee, to modify or amend in
whole or in part any or all provisions of the Plan. In addition, the Company
reserves the right, by action of the Committee, to terminate the Plan at any
time. In the event of such termination by the Company, the Participant shall
have the right to receive the Policy and exercise his rights in accordance with
Article VI.
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ARTICLE IX
MISCELLANEOUS
9.01 Governing Law: This Plan shall be governed by and construed
in accordance with the laws of the State of Ohio.
9.02 Entire Plan. This document and any amendments contain all the
terms and provisions of the Plan and shall constitute the entire Plan, with any
other alleged terms or provisions being of no force or effect.
9.03 ERISA Exemption: The Plan is designed to be a supplemental
life insurance plan to provide welfare benefits for a select group of highly
compensated management employees. As such, the Plan is exempt from the
participation, vesting, funding or fiduciary requirements of the Employment
Retirement Income Security Act of 1974.
9.04 Alienation of Benefits: No benefits which shall be payable
under this Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, garnishment, embracement, encumbrance, or a
charge by a Participant, beneficiary or survivor of anyone claiming under any of
them. If a Participant, beneficiary or survivor or anyone claiming under any of
them shall attempt to or shall subject in any manner any benefit which shall be
payable under this Plan to anticipation, alienation, sale, transfer, assignment,
pledge, garnishment, embracement, encumbrance or charge, his or her interest in
any such benefits shall terminate, and the Committee shall hold or apply it to
or for the benefit of any such person, his/her spouse, children or other
dependents, or any of them as the Committee may decide, in its discretion. In
addition, all benefits under this Plan shall be computed without giving effect
to any "qualified domestic relations order," such terms as defined under ERISA.
9.05 Incompetency: Every person receiving or claiming benefits
under the Plan shall be assumed to be mentally competent and of age until the
Committee receives written notice, in a form and manner acceptable to it, that
such person is incompetent, and that a guardian, conservator, statutory
committee or other person legally vested with the care of his/her estate has
been appointed.
9.06 Employment Rights: The establishment of the Plan shall not be
construed as conferring any legal rights upon any Participant or any other
person for a continuation of employment, nor shall it interfere with the rights
of the Company to discharge any person or to treat him or her without regard to
the effect which such treatment might have upon him or her as a person covered
by this Plan.
9.07 Notices: Any Notice required or permitted to be given
hereunder to a Participant will be properly given if delivered and mailed,
postage prepaid, to the Participant or the Participant's beneficiary at the
last Post Office address as shown on the Company's records. Any Notice to the
Company shall be properly given or filed if delivered or mailed, postage
prepaid, to the Company's Chief Administrative Officer at its principal place
of business.
9.08 Company Records Control: In administering the Plan, the
records of the Company, in respect to the Plan, shall be conclusive in
determining all Participants' benefits, rights, beneficiaries and survivors,
regardless of any records of the Participant to the contrary
9.09 Liability Exemption: No liability whatsoever shall attach to
or be incurred by the shareholders, officers, directors or employees of the
Company, or any representatives appointed hereunder by the Company, under or by
reason of any of the terms or provisions of the Plan.
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9.10 Illegality of Particular Provision: If any particular
provision of this Plan shall be found to be illegal or unenforceable, such
provision shall not affect the other provisions of the Plan, but the Plan shall
be construed in all respects as if such illegal provision were omitted.
9.11 Contingencies: In the event of a merger, consolidation of the
Company or the transfer of substantially all the assets of the Company to
another corporation, such successor corporation shall automatically inure to all
the rights and obligations of the Company under the provisions of the Plan.
This Plan, effective as of the first day of November, 1994, is
adopted this 15th day of February, 1996.
THE DURIRON COMPANY, INC.
By:
----------------------------------
Vice President, Secretary
and General Counsel
(Corporate Seal)
keep 2l5
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Exhibit 10.31
CONSULTING AGREEMENT
THIS AGREEMENT is made on April 12, 1991, between DURAMETALLIC
CORPORATION of Kalamazoo, Michigan ("DURAMETALLIC"), and JAMES S. WARE
("Ware").
WITNESSETH:
WHEREAS, Ware is employed by DURAMETALLIC as a senior executive
and has contributed and is expected to contribute substantially to the
future success of DURAMETALLIC; and
WHEREAS, as part of the terms and conditions of Ware's continued
employment, DURAMETALLIC wishes to provide for continued consulting
services following his retirement;
THE PARTIES agree as follows:
1. Consulting Services. Ware agrees to consult with Durametallic
and assist the Board of Directors on matters arising after his
retirement which require Ware's experience and special expertise. These
matters may include, but are not limited to, customer relations,
business development, projects upon which Ware has participated and the
transitional matters occasioned by Ware's retirement.
Ware will have responsibility and control over the performance of
his consulting services. Ware may perform his obligations in any manner
consistent with the goals and policies of DURAMETALLIC. This includes
the ability to delegate any task he deems appropriate to an assistant
of his choosing and the ability to choose the time and place to perform
his services.
Although Ware is, in general, responsible for providing the
facilities and equipment required to perform his obligations,
DURAMETALLIC agrees to reimburse Ware for any reasonable expenses
incurred while providing assistance or consultation to DURAMETALLIC
under this agreement.
2. Payment for Consulting Services.
(a) Payment for the consulting services required by this
agreement ("Consulting Fees") will be paid as described below if:
(i) Ware has not voluntarily terminated his employment
with DURAMETALLIC within 5 years or before reaching the age
of 60 whichever shall first occur;
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(ii) DURAMETALLIC has not terminated Ware's employment
in good faith and with good cause and other than by reason of
Ware's disability; and
(iii) Ware provides consulting services as required by
this agreement.
(b) The Consulting Fees shall be paid to Ware in annual
installments of $110,000 for 10 years or until Ware's death. The
Consulting Fees shall be paid on the anniversary of Ware's
retirement for each successive year in which the consulting
services are provided. No such fees are payable unless Ware is
living on such anniversary date and has provided the services
provided hereunder.
3. Insurance. DURAMETALLIC will purchase and maintain insurance
policies to partially fund the Consulting Fees described in this
Agreement. DURAMETALLIC will pay all premiums due under these insurance
policies directly and will be the sole owner and beneficiary of these
insurance policies. DURAMETALLIC will not be required to fund the
entire amount of its obligation under this Agreement by these insurance
policies. DURAMETALLIC will not grant any security interest,
encumbrance or lien on the insurance policies which is superior to the
interest of general creditors of the corporation.
4. No Fiduciary Relationship. Ware shall have no greater rights
under this agreement than those of a general unsecured creditor of
DURAMETALLIC. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall be construed as
creating a trust of any kind. Nothing contained in this Agreement shall
be construed as creating an escrow arrangement of any kind or a
fiduciary relationship between DURAMETALLIC and Ware as pertains to the
subject matter of this Agreement.
5. Other Benefits and Remuneration. Nothing contained in this
Agreement shall be deemed to exclude Ware from any compensation,
insurance, or other benefit to which he may now be or later become,
entitled as an employee of DURAMETALLIC.
6. No Assignment of Consulting Fees. The right to receive deferred
compensation under this Agreement may not be sold, assigned,
transferred, pledged, or encumbered by Ware or Ware's beneficiary, or
any other person.
7. Termination. This Agreement cannot be terminated by
DURAMETALLIC without the consent of Ware. This Agreement is terminated
without further action if DURAMETALLIC terminates Ware's employment
with good cause and in good faith.
8. Change in Management or Control. This Agreement will be
unaffected by a change in the management or control of DURAMETALLIC.
Termination of Ware's employment related to or following a change in
management or control of DURAMETALLIC will not be deemed to be "for
good cause" and will not affect Ware's rights under this Agreement.
9. Disability. Ware shall be considered disabled if by reason of
accident, physical illness, or mental illness: (a) Ware does not
fulfill Ware's normal responsibilities as an employee of DURAMETALLIC
for a period of at least 6 months; (b) DURAMETALLIC and Ware agree that
Ware is or will be unable to perform Ware's normal responsibilities as
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an employee for a period of at least 6 months; or (c) there is a
dispute as to disability and a physician or panel of physicians
determines that Ware is or will be unable to perform Ware's normal
responsibilities for a period of at least 6 months. Disputes regarding
existence or date of disability shall be determined by a licensed
physician selected by agreement of DURAMETALLIC and Ware. Such
physician's fees shall be paid by DURAMETALLIC. If they cannot agree
upon a physician, the dispute shall be determined by a majority of a
panel of three licensed physicians, one selected by DURAMETALLIC, one
selected by Ware, and the third selected by the first two. DURAMETALLIC
and Ware shall each pay the fees of the physician they select, and the
fees of the third physician shall be shared equally. The date of
disability shall be the beginning of the 6-month period or the date
determined to be the onset of the disability by the physicians or panel
of physicians.
10. Amendment. The parties may amend this Agreement only by a
mutually executed written document.
11. Governing Law. This Agreement shall be construed according to
the laws of the State of Michigan.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date written above.
DURAMETALLIC CORPORATION
By /s/ Clark D. Hurlbert
--------------------------------
Its Senior VP Finance
--------------------------------
/s/ James S. Ware
--------------------------------
James S. Ware
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Exhibit 10.32
SENIOR EXECUTIVE DEATH BENEFIT AGREEMENT
THIS AGREEMENT is made on April 12, 1991, between DURAMETALLIC
CORPORATION, of Kalamazoo, Michigan ("DURAMETALLIC"), and JAMES S. WARE
("Ware").
WITNESSETH:
WHEREAS, Ware is employed by DURAMETALLIC as a senior executive
and has contributed and is expected to contribute substantially to the
success of DURAMETALLIC; and
WHEREAS, as part of the terms and conditions of Ware's employment,
DURAMETALLIC wishes to provide for the accumulation and payment of
certain benefits in the event of Ware's death prior to termination of
his employment;
THE PARTIES agree as follows:
1. Death Benefit. DURAMETALLIC and Ware agree that if Ware dies
while employed by or providing consulting services to DURAMETALLIC,
DURAMETALLIC will pay Ware's designated beneficiary installment
payments of $100,000 per year for up to 10 years after Ware's
retirement or death ("Death Benefit"). If Ware has not designated a
beneficiary, then DURAMETALLIC will pay this Death Benefit to Ware's
estate.
2. Payment of Death Benefits.
(a) The Death Benefit will be paid upon Ware's death if:
(i) Ware has not voluntarily terminated his employment
with DURAMETALLIC before reaching the age of 60;
(ii) DURAMETALLIC has not terminated Ware's employment
in good faith and with good cause and other than by reason of
Ware's disability; and
(iii) Ware has continued to provide consulting services
to the company during the years following retirement up to 10
years or he is prevented from doing so by reason of death or
disability.
(b) The Death Benefit shall be paid to Ware's beneficiary or
estate in annual installments of $100,000. The first installment
will be paid on the 6-month anniversary of Ware's death if he dies
before retirement, or on the next anniversary date of his
retirement if he dies after retirement. Subsequent payments shall
be done on the anniversary of the first due date, and the last
installment shall be paid on the
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tenth anniversary of Ware's death or retirement, whichever shall
first occur. If Ware dies after the last installment would have
been due, no Death Benefit shall be payable.
3. Disability Payments. The Death Benefit will be paid to Ware as
described in this Agreement. If Ware is unable to continue his
employment or to perform the services required under the Consulting
Agreement with DURAMETALLIC by reason of his disability for a period of
6 months, Ware shall be paid the amounts provided under this Agreement
as if he had died at the end of such 6-month period. Notwithstanding
the foregoing, if the disability no longer exists, the benefits
hereunder shall cease and Ware shall resume his employment or
consulting position with DURAMETALLIC. The Death Benefit will be paid
beginning on the 6-month anniversary date of the termination of
Ware's employment or consulting services because of the disability or
on the anniversary date of his retirement.
4. Insurance. DURAMETALLIC will purchase and maintain insurance
policies which will assist in funding the Death Benefit described in
this Agreement. DURAMETALLIC will pay all premiums due under these
insurance policies directly and will be the sole owner and beneficiary
of these insurance policies. DURAMETALLIC will not be required to fund
the entire amount of its obligation under this Agreement by these
insurance policies. DURAMETALLIC will not grant any security interest,
encumbrance or lien on the insurance policies which is superior to the
interests of general creditors of the corporation.
5. Designation of Beneficiaries and Successors. Ware may from
time to time designate primary and successor beneficiaries of the
Death Benefit by executing and delivering to DURAMETALLIC an
appropriate beneficiary designation form.
6. No Fiduciary Relationship. Ware and his beneficiary shall have
no greater rights under this Agreement than those of a general
unsecured creditor of DURAMETALLIC. Nothing contained in this Agreement
and no action taken pursuant to the provisions of this Agreement shall
be construed as creating a trust of any kind. Nothing contained in
this Agreement shall be construed as creating an escrow arrangement of
any kind or a fiduciary relationship between DURAMETALLIC and Ware, or
Ware's beneficiary, as pertains to the subject matter of this
Agreement.
7. Other Benefits and Remuneration. Nothing contained in this
Agreement shall be deemed to exclude Ware from any compensation,
insurance, or other benefit to which he may now be or later become,
entitled as an employee of DURAMETALLIC.
8. Termination. This Agreement terminates if Ware retires or
resigns from DURAMETALLIC before reaching the age of 60, or ceases to
render consulting services to DURAMETALLIC other than by reason of
disability. This Agreement is terminated without further action if
DURAMETALLIC terminates Ware's employment with good cause and in good
faith and other than by reason of Ware's disability.
This Agreement cannot otherwise be terminated by DURAMETALLIC
without the consent of Ware.
9. Change in Management or Control. This Agreement will be
unaffected by a change in the management or control of DURAMETALLIC.
Termination of Ware's
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employment related to or following a change in management or control of
DURAMETALLIC will not be deemed to be "for good cause" and will not
affect Ware's rights under this Agreement.
10. Disability. Ware shall be considered disabled if by reason of
accident, physical illness, or mental illness: (a) Ware does not
fulfill Ware's normal responsibilities as an employee of DURAMETALLIC
for a period of at least 6 months; (b) DURAMETALLIC and Ware agree that
Ware is or will be unable to perform Ware's normal responsibilities as
an employee for a period of at least 6 months; or (c) there is a
dispute as to disability and a physical or panel of physicians
determines that Ware is or will be unable to perform Ware's normal
responsibilities for a period of at least 6 months. Disputes regarding
existence or date of disability shall be determined by a licensed
physician selected by agreement of DURAMETALLIC and Ware. Such
physician's fees shall be paid by DURAMETALLIC. If they cannot agree
upon a physician, the dispute shall be determined by a majority of a
panel of three licensed physicians, one selected by DURAMETALLIC, one
selected by Ware, and the third selected by the first two. DURAMETALLIC
and Ware shall each pay the fees of the physician they select, and the
fees of the third physician shall be shared equally. The date of
disability shall be the beginning of the 6-month period or the date
determined to be to onset of the disability by the physicians or panel
of physicians.
11. Amendment. The parties may amend this Agreement only by a
mutually executed written document.
12. Governing Law. This Agreement shall be construed according to
the laws of the State of Michigan.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date written above.
DURAMETALLIC CORPORATION
By /s/ Clark D. Hurlbert
--------------------------------
Its Senior VP Finance
--------------------------------
/s/ James S. Ware
--------------------------------
James S. Ware
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Exhibit 10.33
EXECUTIVE SEVERANCE AGREEMENT
THIS IS AN AGREEMENT between DURAMETALLIC CORPORATION (the
"Corporation") whose principal offices are located at 2104 Factory
Street, Kalamazoo, Michigan 49001, and James S. Ware (the "Employee"),
who resides at _____________________________, dated January 6, 1994.
1. Term of Agreement. This Agreement will begin on the date
entered above (the "Commencement Date") and will continue in effect
through the third anniversary of the Commencement Date; provided,
however, that if a Change of Control occurs during the term of this
Agreement, this Agreement will continue in effect for 36 months beyond
the end of the month in which any Change of Control occurs.
2. Definitions. The following defined terms shall have the
meanings set forth below, for purposes of this Agreement.
(a) Change of Control. "Change of Control" means an
occurrence of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Without limiting the inclusiveness of the
definition in the preceding sentence, a Change of Control of the
Corporation shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation
representing forty percent (40%) or more of the combined
voting power of the Corporation's then-outstanding
securities; or
(ii) At any time a majority of the Board of Directors of
the Corporation is comprised of other than Continuing
Directors (for purposes of this paragraph, the term
Continuing Director means a director who was either (A) first
elected or appointed as a Director prior to the date of this
Agreement; (B) subsequently elected or appointed as a
director if such director was nominated or appointed by at
least a majority of the then-Continuing Directors); or
(iii) Any of the following occur:
(A) any merger or consolidation of the Corporation,
other than a merger or consolidation in which the voting
securities of the Corporation immediately prior to the
merger or consolidation continue to represent (either by
remaining outstanding or being converted into securities
of the surviving
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entity) fifty-one percent (51%) or more of the combined
voting power of the Corporation or surviving entity
immediately after the merger or consolidation with another
entity;
(B) any sale, exchange, lease, mortgage, pledge,
transfer, or other disposition (in a single transaction or a
series of related transactions) of all or substantially all
of the assets of the Corporation which shall include, without
limitation, the sale of assets or earning power aggregating
more than fifty percent (50%) of the assets or earning power
of the Corporation on a consolidated basis;
(C) any liquidation or dissolution of the Corporation;
(D) any reorganization, reverse stock split, or
recapitalization of the Corporation which would result in a
Change of Control; or
(E) any transaction or series of related transactions
having, directly or indirectly, the same effect as any of the
foregoing; or any agreement, contract, or other arrangement
providing for any of the foregoing.
(b) Disability. "Disability" means that, as a result of Employee's
incapacity due to physical or mental illness, the Employee shall have
been absent from the full-time performance of his duties with the
Corporation for 6 consecutive months and, within 30 calendar days after
written notice of suspension due to Disability is given, the Employee
shall not have returned to the full-time performance of his duties.
(c) Cause. "Cause" means (i) Employee's willful and continued
failure to substantially perform Employee's duties with the Corporation
under this Agreement (other than any such failure resulting from
Disability or occurring after issuance by Employee of a Notice of
Termination for Good Reason), after a written demand for substantial
performance is delivered to the Employee that specifically identifies
the manner in which the Corporation believes that the Employee has
willfully failed to substantially perform his duties, and after the
Employee has failed to resume substantial performance of his duties on
a continuous basis within 14 calendar days of receiving such demand;
(ii) the Employee willfully engaging in conduct (other than conduct
covered under (I) above, which is demonstrably and materially injurious
to the Corporation, monetarily or otherwise; or (iii) the Employee's
having been convicted of a felony which impairs his ability
substantially to perform his duties with the Corporation. For purposes
of this subparagraph, no act, or failure to act, on the Employee's part
shall be deemed "willful" unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief that the
action or omission was in the best interest of the Corporation.
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(d) Good Reason. For purposes of this Agreement, "Good Reason"
means the occurrence of any one or more of the following after a Change
of Control (or before a Change of Control, if covered by subparagraph
(viii), below) without the Employee's express written consent:
(i) The assignment to Employee of duties inconsistent with
the duties, responsibilities, and status of Employee's position as
of the day prior to the Change of Control of the Corporation;
(ii) A reduction by the Corporation in Employee's base salary
as of the day prior to the Change of Control, or reduction of
Employee's most recent target incentive award opportunity prior to
the Change of Control under the Corporation's Executive Incentive
Bonus Plan, or any successor plan (provided, however, that a
reduction in bonus opportunity will not constitute Good Reason if
there is a corresponding increase in the Employee's salary);
(iii) The Corporation's requiring Employee to be based at a
location in excess of 50 miles from the location where Employee is
currently based;
(iv) Any reduction in Employee's fringe benefits, including
insurance, retirement and other benefits, provided, however, that
except as provided elsewhere in this subsection (d), a reduction
in benefits shall not constitute "Good Reason" if it affects all
salaried employees of the Corporation who receive such benefit and
is taken as a legitimate and prudent management action to bring
the Corporation's benefits into line with prevailing benefits paid
to employees holding comparable positions with other businesses of
comparable size in the United States;
(v) The failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and
agree to perform this Agreement, as contemplated in Paragraph 7
hereof;
(vi) Any termination by the Corporation of Employee's
employment that is not effected pursuant to a Notice of
Termination;
(vii) Any action adverse to Employee, if taken to denigrate
Employee's status within the Corporation; or
(viii) Any termination of Employee's employment, reduction in
Employee's compensation or benefits, or adverse change in
Employee's location or duties, if such termination, reduction or
adverse change occurs within 12 months before a Change of Control,
is in contemplation of such Change in Control, and is taken to
avoid the effect of this Agreement should such action occur after
such Change in Control.
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The existence of Good Reason shall not be affected by
Employee's incapacity due to physical or mental illness.
Employee's continued employment shall not constitute a waiver of
Employee's rights with respect to any circumstances constituting
Good Reason hereunder.
(e) Notice of Termination. "Notice of Termination" means a
written notice indicating the specific termination provision in
this Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
3. Eligibility for Severance Benefits. Subject to Paragraph 5, the
Employee shall receive the Severance Benefits described in Paragraph 4
if the Employee's employment is terminated during the term of this
Agreement; and:
(a) the termination occurs within 36 months after a Change of
Control, unless the termination is (i) because of Employee's
death or Disability, (ii) by the Corporation for Cause, or (iii)
by the Employee other than for Good Reason; or
(b) the Corporation terminates the employment within 12
months before a Change of Control, in contemplation of such Change
of Control, and to avoid the effect of this Agreement should such
action occur after such Change of Control.
4. Severance Benefits. Subject to Paragraph 5, the Employee shall
receive the following Severance Benefits (in addition to accrued
compensation and vested benefits) if eligible under Paragraph 3:
(a) Employee's average annual W-2 compensation from the
Corporation for the five full calendar year period ending at the
end of the calendar year immediately preceding that in which the
employment terminates (and not counting any year in which Employee
was not employed by the Corporation for the full year), multiplied
by 3;
(b) Immediate full vesting of all shares of the Corporation's
stock which have theretofore been granted to Employee under the
Corporation's Executive Incentive Bonus Plan; and
(c) For a 3-year period after the date the employment is
terminated, the Corporation will arrange to provide to Employee at
the Corporation's expense, with:
(i) the same health care coverage Employee had prior to
the termination (or, if more favorable to Employee, that
furnished generally to salaried employees of the Corporation)
including, but not limited to, hospital, surgical, medical,
dental, and dependent coverages. Health care benefits
otherwise receivable by Employee pursuant to this Paragraph
4(c) shall be reduced to the extent comparable benefits are
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actually received by Employee from a subsequent employer
during the 3-year period following the date the employment is
terminated and any such benefits actually received by
Employee shall be reported to the Corporation;
(ii) life and accidental death and dismembership
insurance coverage (including supplemental coverage purchase
opportunity and double indemnity for accidental death) equal
(including policy terms) to that in effect at the time
Notice of Termination is given or, if more favorable to
Employee, equal to that in effect at the date the Change of
Control occurs; and
(iii) disability insurance coverage (including policy
terms) equal to that in effect at the time Notice of
Termination is given or, if more favorable to Employee, equal
to that in effect immediately prior to the Change of Control;
provided, however, that no income replacement benefits will
be payable under such disability policy with regard to the
3-year period following a termination of employment provided
that the payments payable under subparagraphs 4(a) and (b)
above have been made.
(d) in computing and determining Severance Benefits under
subparagraphs 4(a), (b), and (c) above, a decrease in Employee's
salary, target bonus, or insurance benefits shall be disregarded
if such decrease occurs within 12 months before a Change of
Control, is in contemplation of such Change of Control, and is
taken to avoid the effect of this Agreement should such action be
taken after such Change of Control; in such event, the salary,
target bonus, and/or insurance benefits used to determine
Severance Benefits shall be that in effect immediately before the
decrease that is disregarded pursuant to this subparagraph 4(d).
(e) Employee shall not be required to mitigate the amount of
any payment provided for in this paragraph 4 by seeking other
employment or otherwise, nor shall the amount of any payment
provided for in this paragraph be reduced by any compensation
earned by Employee as the result of employment by another employer
after the date the employment is terminated, or otherwise, with
the exception of a reduction in health insurance coverage as
provided in subparagraph 4(c) (i).
The payments provided in subparagraphs 4(a) and (b) above shall be
made not later than 10 business days following the date the employment
terminates.
Any termination by the Corporation for Cause or due to Employee's
Disability, or by Employee for Good Reason shall be communicated by
Notice of Termination to the other party.
5. Maximum Payments. Notwithstanding any provision in this
Agreement to the contrary, if part or all of any amount to be paid to
Employee by the Corporation under this Agreement or otherwise
constitute a "parachute payment" (or payments) under Section 280G
page 5
6
or any other similar provision of the Internal Revenue Code of 1986, as
amended (the "Code"), the following limitation shall apply:
If the aggregate present value of such parachute payments
(the "Parachute Amount") exceeds 2.99 times Employee's "base
amount" as defined in Section 28OG of the Code, the amounts
otherwise payable to or for the benefit of the Employee subsequent
to the termination of his employment, and taken into account in
calculating the Parachute Amount (the "termination payments"),
shall be reduced and/or delayed, as further described below, to
the extent necessary so that the Parachute Amount is equal to 2.99
times the Employee's "base amount."
Any determination or calculation described in this Paragraph 5
shall be made by the Corporation's independent accountants. Such
determination, and any proposed reduction and/or delay in termination
payments shall be furnished in writing promptly by the accountants to
the Employee. The Employee may then elect, in his sole discretion,
which and how much of any particular termination payment shall be
reduced and/or delayed and shall advise the Corporation in writing of
his election, within 30 days of the accountant's determination, of the
reduction or delay in termination payments. If no such election is made
by the Employee within such 3O-day period, the Corporation may elect
which and how much of any termination payment shall be reduced and/or
delayed and shall notify the Employee promptly of such election. As
promptly as practicable following such determination and the elections
hereunder, the Corporation shall pay to or distribute to or for the
benefit of the Employee such amounts as are then due to the Employee.
Any disagreement regarding a reduction or delay in termination
payments will be subject to arbitration under Paragraph 14 of this
Agreement. Neither the Employee's designation of specific payments to
be reduced or delayed, nor the Employee's acceptance of the reduced or
delayed payments, shall waive the Employee's right to contest such
reduction or delay.
6. Successors; Binding Agreements. This Agreement shall inure to
the benefit of and be enforceable by Employee's personal and legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. Employees rights and benefits
under this Agreement may not be assigned, except that if Employee dies
while any amount would still be payable to Employee hereunder if
Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms
of this Agreement, to the beneficiaries designated by the Employee to
receive benefits under this Agreement in a writing on file with the
Corporation at the time of the Employee's death or, if there is no
such beneficiary, to Employee's estate. The Corporation will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all of substantially all of the
business and/or assets of the Corporation (or any division or
subsidiary thereof employing Employee) to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the same
terms to which Employee would be entitled
page 6
7
hereunder if Employee terminated the employment for Good Reason
following a Change of Control.
7. Withholding of Taxes. The Corporation may withhold from any
amounts payable under this Agreement all federal, state, city, or other
taxes as required by law.
8. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt required, postage
prepaid, addressed to the respective addressees set forth on the first
page of this Agreement, or at such other addresses as the parties may
designate in writing.
9. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is
agreed to in writing and signed by Employee and such officer as may be
specifically designed by the Board of Directors of the Corporation. The
validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Michigan.
10. Employment Rights. This Agreement shall not confer upon
Employee any right to continue in the employ of the Corporation or its
subsidiaries and shall not in any way affect the right of the
Corporation or its subsidiaries to dismiss or otherwise terminate
Employee's employment at any time with or without cause.
11. No Vested Interest. Neither Employee nor Employee's
beneficiary shall have any right, title, or interest in any benefit
under this Agreement prior to the occurrence of the right to the
payment thereof, or in any property of the Corporation or its
subsidiaries or affiliates.
12. Prior Agreements. If there is any discrepancy or conflict
between this Agreement and any plan, policy, or program of the
Corporation regarding any term or condition of severance benefits in
connection with a Change of Control of the Corporation, the language of
this Agreement shall govern.
13. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
15. Arbitration. The sole and exclusive method for resolving any
dispute arising out of this Agreement shall be arbitration in
accordance with this paragraph. Except as provided otherwise in this
paragraph, arbitration pursuant to this paragraph shall be governed by
the Commercial Arbitration Rules of the American Arbitration
Association. A party wishing to obtain arbitration of an issue shall
deliver written notice to the other party, including a description of
the issue to be arbitrated. Within 15 days after either party demands
arbitration, the Corporation and the Employee shall each appoint an
arbitrator. Within 15 additional days, these two arbitrators shall
appoint the third arbitrator by mutual
page 7
8
agreement; if they fail to agree within said 15-day period, then the
third arbitrator shall be selected promptly pursuant to the rules of
the American Arbitration Association for Commercial Arbitration. The
arbitration panel shall hold a hearing in Kent Country, Michigan,
within 90 days after the appointment of the third arbitrator. The fees
and expenses of the arbitrator, and any American Arbitration
Association fees, shall be paid by the Corporation. Both the
Corporation and the Employee may be represented by counsel and may
present testimony and other evidence at the hearing. Within 90 days
after commencement of the hearing, the arbitration panel will issue a
written decision; the majority vote of two of the three arbitrators
shall control. The majority decision of the arbitrators shall be final
and binding on the parties, and shall be enforceable in accordance with
law. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The Employee shall be entitled to seek specific
performances of his rights under this Agreement during the pendency of
any dispute or controversy arising under or in connection with this
Agreement. The Corporation will reimburse Employee for all reasonable
attorney fees incurred by Employee as the result of any arbitration
with regard to any issue under this Agreement (or any judicial
proceeding to compel or to enforce such arbitration): (i) which is
initiated by Employee if the Corporation is found in such proceeding to
have violated this Agreement substantially as alleged by Employee; or
(ii) which is initiated by the Corporation, unless Employee is found in
such proceeding to have violated this Agreement substantially as
alleged by the Corporation.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the day and year written above.
DURAMETALLIC CORPORATION
By /s/ Clark D. Hurlbert
-------------------------------
Its Sr. VP Finance
----------------------------
"Corporation"
/s/ James S. Ware
-------------------------------
"Employee"
page 8
9
AMENDMENT NO.1
TO EXECUTIVE SEVERANCE AGREEMENT
This is an Amendment No.1 to an Executive Severance Agreement (the
"Agreement") between Durametallic Corporation (the "Corporation")
whose principal offices are located at 2104 Factory Street, Kalamazoo,
Michigan, 49001, and James S. Ware (the "Employee") dated January 6,
1994.
The Corporation and Employee agree to the following amendment of the
Agreement:
1. Section 4(b) shall be deleted in its entirety.
The remainder of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the day and year written below.
EMPLOYEE DURAMETALLIC CORPORATION
/s/ James S. Ware By: /s/ Clark D. Hurlbert
-------------------- ---------------------------
Date: 9/11/95 Title: Sr. VP Finance
-------------- ------------------------
"Corporation"
Date 9/11/95
--------------------------
1
EXHIBIT 10.34
W. M. JORDAN P.O. Box 8820
President and Dayton, Ohio 45401
Chief Executive Officer Telephone: (513) 476-6182
Fax: (513) 476-6247
September 11, 1995
Mr. James S. Ware
1009 Essex Circle
Kalamazoo, Michigan 49008
Dear Jim:
This will confirm the agreement between you and The Duriron
Company, Inc. ("Duriron") made under the following circumstances.
1. Duriron today has entered into an Agreement and Plan of
Merger (the "Merger") with Durametallic, Inc. which will have
the effect of making Durametallic, Inc., a wholly-owned
subsidiary of Duriron upon completion of the Merger.
2. The completion of the Merger is contingent upon the approval
of the shareholders of both Duriron and Durametallic and
certain other factors.
3. Assuming the completion of the Merger, you desire to formally
confirm the respective rights and responsibilities of you and
Durametallic under certain agreements which you executed with
Durametallic prior to the Merger.
4. You have also agreed to perform certain additional consulting
services directly for Duriron after completion of the Merger
in return for the following defined additional considerations.
Accordingly, in consideration of the premises and mutual promises
contained herein, you and Duriron agree as follows:
1. Duriron agrees that it will cause Durametallic, after the Merger, to
honor the Executive Severance Agreement (the "Severance Agreement")
between you and
2
Mr. James S. Ware
September 11, 1995
Page 2
Durametallic dated January 6, 1994 subject to the following deletion
to this agreement with which you concur.
a. Section 4(b) shall be deleted (which would have the
effect of accelerating the vesting of shares of
Durametallic common stock granted to you under the
Durametallic's Executive Incentive Bonus Plan).
2. Duriron also understands that you will retire effective April
12, 1996 with such retirement, being treated, for purposes of
the Severance Agreement, as a resignation for "good reason"
under the terms of the Severance Agreement. Upon such
retirement, Duriron will cause Durametallic to pay the
benefits contemplated under the Severance Agreement in
accordance with its terms because Duriron acknowledges that
your duties as CEO of Durametallic will be inherently and
unavoidably reduced by reason of the Merger.
3. Duriron agrees that it will cause Durametallic to honor the
"Senior Executive Death Benefit Agreement" dated April 12,
1991 between you and Durametallic in accordance with its
terms, subject to the following exception with which you
concur.
a. Clause 4 of this agreement shall be deleted (which would
require Durametallic to purchase and maintain insurance
policies to assist in funding the death benefit
described in this agreement).
4. Duriron agrees that it will honor the "Consulting Agreement"
dated April 12, 1991 with you in accordance with its terms.
5. In addition, you and Duriron agree that you provide special consulting
services to the Chief Executive Officer of Duriron directly in connection
with the successful integration of Durametallic into Duriron after the
Merger. Furthermore, you will provide personal consulting to him in
connection with the management of Durametallic during the term of the
Consulting Agreement in a scope beyond that contemplated under the current
Consulting Agreement. You further agree that you will, at the option of
Duriron, agree to remain in the capacity as Chairman of Durametallic, for
at least three years subsequent to your retirement. In return, Duriron will
purchase for you a life insurance policy selected by Duriron with a death
benefit in the amount of $5 million, which will be paid to your life
insurance trust upon the death of you and your wife, whichever occurs last.
The policy would be contingent upon you and
3
Mr. James S. Ware
September 11, 1995
Page 3
your wife passing the insurer's medical examination and
otherwise complying with its requirements and other coverage
preconditions. In addition, the death benefit will be
contingent upon the insurer paying all dividends contemplated
under the program, which Duriron cannot assure. The exact
terms of the policy shall be in accordance with those issued
by the insurer. Duriron's obligation to continue to provide
this compensation to you will be terminated if you willfully
refuse to perform such consulting services or service as
Durametallic Board Chairman without good reason (such as a
medical disability).
6. In the event that this Merger is not completed by December
31, 1995 or such other date as may be mutually agreed between
Duriron and Durametallic, this letter agreement shall be null
and void.
Jim, we are happy that we are able to work out these details with
you, and we look forward to working with you subsequent to the Merger.
Sincerely,
/s/ William M. Jordan
W. M. Jordan
ACKNOWLEDGED AND AGREED:
/s/ James S. Ware
- ------------------
James S. Ware
September 11, 1995
- ------------------
Date
1
Exhibit 22.1
Jurisdiction
Name of Subsidiary (a) In Which Incorporated
---------------------- ---------------------
Automax Inc. Ohio
Duriron Canada Inc. Canada
S.A. Durco Europe N.V. Belgium
Durco Process Equipment Ltd. United Kingdom
Durco GmbH Germany
Durco France S.A.R.L. France
Duriron Foreign Sales Corporation Virgin Islands
Durco Ireland Limited Ireland
Valtek Incorporated Utah
Valtek Controls Ltd. Canada
Valtek Australia Pty. Ltd. Australia
Durco Valtek (Asia Pacific) Pte. Ltd. Singapore
Durco Europe S.A. - Coordination Centre Belgium
Durco B.V. Holland Holland
Davco Equipment Inc. Ohio
Durco Valtek, S.A. Spain
Durco Italia S.r.l. Italy
Kammer Ventile GmbH Germany
Kammer Vannes S.A. Switzerland
Automax Mecair S.r.l. Italy
Mecair U.K. Ltd. United Kingdom
Mecair S.a.r.l. France
Automax Mecair S.r.l. Italy
Sereg Vannes S.A. France
Durametallic Corporation Michigan
Pac-Seal Inc. International Michigan
Metal Fab Machine Corporation Florida
Durametallic Mexicana S.A. de C.V. Mexico
Durametallic do Brasil Brazil
Durametallic Canada Inc. Canada
Durametallic Uruguay Uruguay
Durametallic Pty. Ltd. New Zealand
Durametallic Corporation Australia Pty. Ltd. Australia
Durametallic G.m.b.H. Germany
Durametallic Europe N.V. Belgium
Durametallic Argentina S.A. Argentina
Durametallic Australia Holding Company Michigan
Durametallic Europe Holding Company Michigan
Arabian Seals Company, Ltd. (b) Saudi Arabia
Korea Seal Master Company, Ltd. (b) Korea
Durametallic (India) Ltd. (b) India
Durametallic Asia Pte. Ltd. (b) Singapore
Durametallic Malaysia Sdn. Bhd. (c) Malaysia
(a) All subsidiaries are wholly owned or controlled except as
otherwise indicated by one of the following footnotes
(b) 40% ownership
(c) 51% ownership
- ---------------
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
pertaining to the 1979 and 1989 Stock Option Plans (Forms S-8 No. 2-66089 and
No. 33-28497, respectively), The Duriron Company, Inc. Savings and Thrift Plan
and the Valtek Incorporated Retirement Plan and Trust (Form S-8 No. 33-72372),
and the Registration Statement (Form S-4 No. 33-62527) of The Duriron Company,
Inc. and in the related prospectuses of our report dated January 30, 1996, with
respect to the consolidated financial statements and schedule of The Duriron
Company, Inc. included in this Annual Report (Form 10-K) for the year ended
December 31, 1995.
/s/ Ernst&Young LLP
Dayton, Ohio
February 22, 1996
5
1,000
12-MOS
DEC-31-1995
JAN-01-1995
DEC-31-1995
19,434
0
103,963
1,408
93,155
224,722
247,975
144,252
395,373
89,722
51,756
30,506
0
0
165,266
395,373
532,726
532,726
317,306
317,306
165,298
577
5,179
50,122
19,450
30,672
0
0
0
30,672
1.24
1.24
