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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
COMMISSION FILE NUMBER 1-11793
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THE DIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 51-0374887
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15501 NORTH DIAL BOULEVARD
SCOTTSDALE, ARIZONA 85260-1619
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 754-3425
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all Exchange
Act reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 3, 1998, 102,672,370 shares of the Company's Common Stock, $.01
par value, were outstanding and the aggregate market value of the Common Stock
(based on its closing price per share on such date) held by non-affiliates was
approximately $2.4 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement relating to the 1998 Annual
Meeting of Stockholders to be held on June 4, 1998, have been incorporated by
reference into Part III, Items 10, 11 and 12 of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 8
Item 3. Legal Proceedings........................................... 8
Item 4. Submission of Matters to a Vote of Security Holders......... 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 9
Item 6. Selected Financial and Operating Data....................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures................................... 37
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 38
Item 11. Executive Compensation...................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 40
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 41
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PART I
Prior to August 15, 1996, the business of the Company was operated as the
consumer products business (the "Consumer Products Business") of Viad Corp (then
known as The Dial Corp) ("Former Parent"). On August 15, 1996, Former Parent
distributed to its stockholders all of the Company's then outstanding common
stock (the "Spin-off") causing the Company to become a separate publicly-traded
company. Unless otherwise indicated, (i) all references in this Annual Report on
Form 10-K to the "Company" or "Dial" for periods prior to the Spin-off refer to
the Consumer Products Business of Former Parent and for periods following the
Spin-off refer to the Company and its consolidated subsidiaries, (ii) all
financial information contained in this Form 10-K has been prepared as if the
Company had always been a separate operating company, (iii) the industry data
contained herein are derived from publicly available industry trade journals and
reports, including, with respect to market rank and market share, reports
published by Information Resources, Inc., and other publicly available sources
which the Company has not independently verified but which the Company believes
to be reliable, and (iv) references to years and periods are to fiscal years and
periods and, with respect to comparative industry data, years are to calendar
years. Unless otherwise noted, all market share data as of any particular date
are as of the 52 weeks then ended and are based upon sales in the U.S. market,
which with respect to soap products is measured by ounces sold, with respect to
detergent products is measured by standard cases sold and with respect to air
fresheners and canned meats is measured by units sold.
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-K the words "anticipates," "intends," "plans," "believes,"
"expects," "estimates" and similar expressions are intended to identify
forward-looking statements. Such statements, including, but not limited to, the
Company's cost-cutting program and potential product introductions, are based
upon management's beliefs, as well as on assumptions made by and information
currently available to management, and involve various risks and uncertainties,
certain of which are beyond the Company's control. The Company's actual results
could differ materially from those expressed in any forward-looking statements
made by or on behalf of the Company. Factors that could cause actual results to
differ include, but are not limited to, those factors identified in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors That May Affect Future Results and Financial Condition" in
this Form 10-K.
ITEM 1. BUSINESS
GENERAL
Dial is a consumer products company with net sales of $1.4 billion and
operating income of approximately $162 million in 1997. The Company markets its
products primarily under such well-known household brand names as DIAL(R) soaps,
PUREX(R) detergents, RENUZIT(R) air fresheners and ARMOUR(R) canned meats. Dial
believes that its brand equities have contributed to its products achieving
leading market positions.
For organizational, marketing and financial reporting purposes, the Company
has organized its business into four domestic franchises and an international
line of business. The four core brands discussed above serve as the flagships
for these franchises. The Company's Dial franchise includes Dial and LIQUID
DIAL(R) soaps and body washes, as well as TONE(R) and NATURE'S ACCENTS(R) soaps,
body washes and other bath products, PURE & NATURAL(R), FELS NAPTHA(R), and
BORAXO(R) soaps and BRECK(R) hair care products. The Company's Purex franchise
includes Purex(R) detergents, bleach and fabric softeners, as well as TREND(R)
and DUTCH(R) detergents, BORATEEM(R) bleach, VANO(R) and STA-FLO(R) starches, 20
MULE TEAM(R) borax and LA FRANCE(R) brightener. The products in the Company's
Renuzit franchise consist of a variety of air fresheners, candles and
accessories that all bear the Renuzit name. The Company's Armour franchise
includes Armour and Armour Star canned meats, chilis, hashes and meat spreads
and CREAM(R) corn starch. Within its franchises, the Company has chosen to focus
its marketing and product development efforts on the Dial, Purex, Renuzit and
Armour core brands.
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The Company's products are sold throughout the United States primarily
through supermarkets, mass merchandisers, drug stores and membership club
stores. The Company's products are also sold internationally, principally in
Argentina, Canada, Mexico, Puerto Rico and the Caribbean.
PRODUCTS
The Company organizes its domestic business by franchise:
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FRANCHISES
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DIAL PUREX RENUZIT ARMOUR
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Dial Classic Purex Renuzit Adjustables Armour
Dial Plus Ultra Purex Renuzit Roommate Armour Star
Dial Ultra Skin Care Classic Purex Baby Renuzit Electric Armour Star Treet
Dial Antibacterial Soft Renuzit Aerosol Armour Star Lite Treet
Hand Sanitizer Ultra Purex Baby Soft Renuzit AromaSense Armour Star Ultimate
Liquid Dial Purex Rinse N' Soft Renuzit Crystal Cream
Tone Purex StaPuf AcScent
Nature's Accents Classic Trend
Pure & Natural Ultra Trend
Fels Naptha Borateem
Breck Dutch
Boraxo Vano
Sta-Flo
20 Mule Team
La France
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DIAL
The products in the Company's Dial franchise include the Dial, Dial Plus,
Dial Ultra Skin Care, Tone, Nature's Accents, Pure & Natural and Fels Naptha bar
soaps, the Liquid Dial and Dial Ultra Skin Care liquid soaps, the Dial Ultra,
Dial Plus, Dial Ultra Skin Care, Tone and Nature's Accents body washes, the Tone
and Nature's Accents lotions, the Breck shampoos, conditioners and hair sprays
and Boraxo powdered hand soap. The product lines bearing the Dial label
represent the Company's core brands within the Dial franchise and the Company
focuses the majority of its resources in such franchise on those product lines.
These product lines accounted for 87% of the franchise's total sales in 1997.
With its line of Dial and other soap products, which currently includes bar
soaps, liquid soaps and body washes, the Company has established a solid record
of market leadership, and at the end of fiscal 1997, held an approximately 17%,
measured in ounces sold, of the $2.0 billion soap category. This strong market
position is largely driven by the Company's Dial-branded soap products. At the
end of fiscal 1997, Dial was America's leading bar soap overall, the leading
antibacterial bar soap, the second leading antibacterial liquid soap and the
second leading liquid soap overall. Recognizing the growth potential of the body
wash segment of the market, the Company introduced in 1993 Moisturizing Dial
Plus Body Wash. In 1995, responding to the growing interest in skincare-oriented
products, the Company introduced the Dial Ultra Skin Care line which offers a
special combination of antibacterial efficacy and skin conditioning ingredients.
In 1998, the Company will introduce the Dial Antibacterial Hand Sanitizer(TM)
product, an alcohol-based gel that eliminates more than 99% of harmful germs
when applied. This introduction is intended to develop the growing market for
hand sanitizer products.
Other product lines within the Dial franchise include the Company's Tone
product line, which includes a bar soap, a body wash and a body lotion that
feature the moisturizing qualities of cocoa butter, a key ingredient in the
line, and the Nature's Accents product line which features translucent soap,
shower and bath gel, foaming face wash, hand and body lotion and bath crystals
and is designed to capitalize on consumer interest in more high-end bath
products. Several of the Dial Ultra Skin Care and Nature's Accents products are
produced in Guatemala by ISC International Ltd., a soap manufacturer which was
acquired by the Company
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in July 1995. The Company also markets hotel amenity products, including
personal-size bar soaps under the Dial, Tone and Pure & Natural labels.
PUREX
The products in the Company's Purex franchise include the Classic Purex,
Ultra Purex, Classic Purex Baby Soft, Ultra Purex Baby Soft, Classic Trend and
Ultra Trend liquid and powder laundry detergents, Dutch powder laundry
detergent, the Purex Rinse 'n Soft and Purex StaPuf fabric softener products,
the Purex and Borateem bleaches, the Vano and Sta-Flo liquid starches, 20 Mule
Team borax and La France brightener. The product lines bearing the Purex label
represent the Company's core brands within the Purex franchise and the Company
focuses the majority of its resources in such franchise on those product lines.
These product lines accounted for 69% of the franchise's total sales in 1997. At
the end of fiscal 1997, Purex held the number two market share position,
measured by units sold, in the $4.4 billion domestic laundry detergent market.
From 1986 to 1997, the Company has increased Purex annual revenues from $160
million to $393 million.
RENUZIT
The products in the Company's Renuzit franchise include Renuzit
Adjustables, Renuzit Roomate and Renuzit Electric solid air fresheners, Renuzit
Aerosol air fresheners and Renuzit AromaSense and Renuzit Crystal AcScent
candles, as well as certain accessories.
The Company established its market presence in the air freshener category
with the acquisition of Renuzit in 1993. Since then, Renuzit sales have grown at
a compounded annual rate of 16% to $158 million in 1997. At the end of fiscal
1997, Renuzit was the second leading brand in the $900 million growing domestic
air freshener market.
Line extensions and new, or enhanced forms of, products are particularly
important in the air freshener market as the Company and its competitors seek
greater market share. The Company introduced Renuzit New Naturals, a line of
premium aerosol air fresheners in 1995, and in 1996 introduced Renuzit
AromaSense and Renuzit Crystal AcScent scented candles. In 1997, the Renuzit
franchise increased its sales by 8% over 1996, with approximately one-third of
total sales attributable to new products introduced since 1996.
ARMOUR
The products in the Company's Armour franchise include Armour Star and
Armour Star Lite Vienna Sausage, Armour Star Potted Meat, Armour Star and Armour
Star Ultimate Chili, Armour Star Hash, Armour Star Stew, Armour Star Treet,
Armour Star Lite Treet, Armour Star Dried Beef and Armour Star meat spreads and
other canned meats and Cream corn starch. The product lines bearing the Armour
label accounted for 78% of the franchise's total sales in 1997.
At the end of fiscal 1997, Armour products were second in the domestic
canned meat market based on unit sales. Armour Vienna sausage, potted meat and
sliced dried beef led their respective segments on a national basis, based on
unit and dollar retail sales. At the end of fiscal 1997, Armour was the number
two national brand of canned meats and was the market leader in the growing
Vienna sausage segment, with a 48% market share in that segment.
RECENTLY DISCONTINUED AND DIVESTED BRANDS
The Company recently discontinued or divested product lines which were not
within its four franchises. Under this strategy, the Company recently sold
certain of its household cleaning brands to Church & Dwight for approximately
$30 million. The sale included the following brands and related inventories:
Brillo soap pads and related products, Parsons ammonia, Bo Peep ammonia, Sno Bol
toilet bowl cleaner, Cameo metal polish and Rain Drops water softener. The
Company's London, Ohio plant, where Brillo is manufactured, was also part of the
sale. In addition, the Company sold its Bruce floor care product trademark and
its Magic sizing starch brand and related inventories to other third parties. In
1997 and 1996, these brands as well as
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discontinued brands generated net sales of approximately $63 million, and $171
million respectively, or approximately 5% and 12%, respectively, of the
Company's total net sales.
In addition, in February 1998, the Company sold the Purex Toss N' Soft
brand to Church & Dwight for $5.3 million. In 1997 and 1996, this brand
contributed $6.9 million and $11.8 million, respectively, to the Company's total
net sales.
INTERNATIONAL
The Company distributes products in more than 40 countries. The Company's
international sales for 1997, 1996 and 1995 were $102.3 million, $76.4 million
and $67.3 million, respectively. Historically, the Company has focused its
international efforts on Canada, Mexico, Puerto Rico and the Caribbean. During
1997, approximately 60% of international sales came from these markets. In
Canada, Purex Liquid is the leading liquid laundry detergent overall and the
number one liquid laundry detergent in mass merchandisers, the country's fastest
growing retail channel. Liquid Dial is the number two antibacterial liquid soap
in Canada. In Mexico, where the revenues have tripled since the business was
acquired in 1991, Liquid Dial is the number one liquid soap with 80% of this
fast growing category. Breck haircare products enjoy strong brand recognition in
Mexico, with Breck hairspray having 12% of the hairspray category. In Puerto
Rico, Purex Liquid is a strong third in the liquid laundry detergent category
with 12% of the category.
The Company recently acquired Nuevo Federal S.A., a manufacturer and
marketer of personal care and household products in Argentina ("Nuevo Federal"),
and acquired three personal care soap brands and two laundry bar brands from The
Procter & Gamble Company's Argentinean subsidiary. With these acquisitions, the
Company will enter what it believes is one of Latin America's fastest growing
consumer markets. The Company intends to establish a position in Mercosur, a
regional trading bloc with over 230 million consumers in Argentina and
neighboring countries, including Brazil, Paraguay, Uruguay and Chile.
The Company believes that the acquisition of Nuevo Federal represents an
important building block in its strategy to grow its international business. As
of January 3, 1998, Nuevo Federal held the number two position in laundry
detergents with the Zorro, Enzimax and Limzul brands, the number two position in
laundry bars with the Gran Federal and Gram Llauro brands and the number two
position in bar soaps with the Limol, Manuelita, Gelatti and Nube brands, in
each case in the respective Argentinean consumer products market as measured by
A.C. Nielsen.
MARKETING
CUSTOMERS
The Company's products are sold throughout the United States primarily
through supermarkets, mass merchandisers, drug stores, membership club stores
and other outlets. The Company's products are also sold internationally in 40
countries, with the majority of sales occurring in Canada, Mexico, Puerto Rico,
and the Caribbean. The Company's top ten customers accounted for 35% of net
sales in 1997. Wal-Mart Stores Inc. (and its affiliate, SAM's Club) ("Wal-Mart")
was the Company's largest customer in 1997, accounting for 17% of net sales, up
from 16% in 1996 and 13% in 1995. No other customer accounted for more than 10%
of net sales in 1997, 1996 or 1995. The Company was named one of Wal-Mart's
"Vendors of the Year for Inventory Management" in 1996. The Company's payment
terms to customers range from 30 to 60 days.
SALES
The Company's customers are served by a national sales organization of
approximately 200 employees. The sales organization is divided into four regions
for grocery sales plus specialized sales operations which sell to large mass
merchandisers, membership club stores, chain drug stores, vending and military
customers. In addition, 20% of the Company's retail customers are served by a
national broker sales organization.
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PROMOTION AND ADVERTISING
The Company expends a significant portion of its revenues for trade
discounts and the promotion and advertising of its products. The Company
believes that such discounts and expenditures are necessary to maintain and
increase market shares in an industry highly dependent on product image and
quality, trade support and consumer trends. The Company incurred discounts and
expenses for these purposes of $311.4 million in 1997, or 23% of net sales.
DISTRIBUTION
Products are shipped by the Company from seven warehouses located at
domestic manufacturing facilities, 10 domestic regional warehouses and two
domestic distribution centers for detergent products. The regional warehouses
are operating by third parties except for one warehouse owned and operated by
the Company. Total distribution space is approximately 2,000,000 square feet at
the regional warehouses, approximately 530,000 square feet at the warehouses
located at the manufacturing facilities and approximately 450,000 square feet at
the detergent production distribution centers. The Company is further
consolidating its total distribution operations by reducing the number of its
distribution facilities to four leased new mega-centers by early 1998. The
Company principally uses outside carriers to transport its products.
The Company has a "just-in-time" inventory management program (the
"Continuous Replenishment Program") of continuous, automatic replenishment of
certain of its trade customers' inventories. The primary objective of the
Continuous Replenishment Program is to improve service to customers and reduce
costs by shortening the order-to-delivery pipeline (i.e., by anticipating
customer needs based on historical sales, shipping the product just before those
needs arise and eliminating redundancy, errors and interruption throughout the
replenishment process). Sales under the Continuous Replenishment Program
accounted for 15.1% of the Company's net sales in 1997.
SUPPLIERS
The Company relies on a number of third parties for research and
development, manufacturing and packaging. Many of the Company's arrangements
with respect to new products contain limited mutual exclusivity provisions
designed to permit both the Company and the supplier to profit from the product
enhancement or innovation before the Company uses an alternative supplier or the
supplier sells to one of the Company's competitors. Most outsourcing
arrangements can be terminated without material penalties on an average of three
months' notice.
RAW MATERIALS
The Company believes that ample sources of raw materials are generally
available with respect to all of its major products. Paper, fats and oils,
detergent chemicals and meat are the raw materials that generally have the most
significant impact on the Company's costs. Generally, the Company purchases such
raw materials from a variety of suppliers in the United States. While the
Company believes that it may in certain circumstances be able to respond to
price increases for certain raw materials by increasing sales prices, rapid
increases in the prices of such raw materials could have a short-term material
adverse impact on the Company's financial results. For example, tallow (a key
ingredient in Dial soaps) has experienced price fluctuations within the range of
$0.16 and $0.28 per pound from January 1, 1995 to December 31, 1997. Recently,
the price of tallow has been trading at the lower end of this historical range.
Since the majority of competitors' soap products use significantly less tallow,
the Company may not be able to increase the prices of its Dial soaps in response
to fluctuations in tallow prices. In addition, the antibacterial agent,
Triclosan, which is the active ingredient used in Liquid Dial products, is
sourced from a single supplier. Although the Company has an adequate supply of
Triclosan for its current and foreseeable needs, a significant disruption in
this supply could have a short-term material adverse impact on the Company's
financial results. The Company seeks to mitigate the risk by entering into
contracts to provide up to six-month supplies of tallow, Triclosan and packaging
materials. Long-term hedging opportunities against price increases for these raw
materials are generally not available.
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COMPETITION
The Company competes primarily on the basis of brand equity, brand
advertising, customer service, product performance and product quality at
competitive retail price points. The Company competes with numerous,
well-established local, regional, national and international companies, some of
which have greater financial resources than the Company and may be willing to
commit significant resources to protecting their own market shares or to
capturing market share from the Company. The principal competitors of the
Company in the soap category are: The Procter & Gamble Company ("P&G"), Lever
Brothers Co., a division of Unilever PLC ("Lever"), and Colgate-Palmolive
Company ("Colgate"); in the detergent category are: P&G, Colgate, Lever, and
Church & Dwight Co., Inc.; in the household and air freshener categories are:
S.C. Johnson & Son, Inc., Clorox Co., P&G, Colgate and Reckitt & Colman Inc.;
and in the canned meat category are: Hormel Foods Corp. and the Libby's division
of The Nestle Company.
RESEARCH AND DEVELOPMENT
The Company conducts research and development at its facility in
Scottsdale, Arizona. The Company engages primarily in applied research and
development, relying on outside sources for general research and development
activities. Internal research and development is directed at improving existing
products and developing new products, as well as providing technical assistance
and support to the Company's manufacturing activities.
MARKETING RESEARCH
The Company relies on industry data, purchased syndicated market share
data, various attitude and usage studies prepared by independent marketing firms
on behalf of the Company and direct sales information from its largest customers
to identify consumer needs and anticipate shifts in consumer preferences,
allowing the Company to develop line extensions and new products to meet
changing demands.
PATENTS AND TRADEMARKS
The Company's trademarks include Dial, Purex, Renuzit, Armour, Armour Star,
Tone, Nature's Accents, Pure & Natural, Breck, Trend, Treet, 20 Mule Team and
Boraxo and related trade names. Use of the Armour and Armour Star trademarks by
the Company is permitted by a perpetual license granted by ConAgra, Inc. and use
of the 20 Mule Team trademark is permitted by a perpetual license granted by
U.S. Borax, Inc. ConAgra, Inc. also sells non-canned food products under the
Armour trademark.
United States trademark registrations are for a term of 10 years, renewable
every 10 years so long as the trademarks are used in the regular course of
trade. The Company maintains a portfolio of such trademarks representing
substantial goodwill in the businesses using such trademarks. The Company also
has a significant number of registered foreign trademarks and pending foreign
trademark applications.
United States patents are currently granted for a term of 17 years from the
date a patent application is filed. The Company owns a number of patents that
provide competitive advantages in the marketplace. The Company does not believe,
however, that the loss of its patents would have a material adverse effect on
the Company.
GOVERNMENT REGULATION
Substantially all of the operations of the Company are, or may become,
subject to various federal laws and agency regulations. These include the
Federal Food, Drug, and Cosmetic Act, which is administered by the Food and Drug
Administration (the "FDA") and regulates the manufacturing, labeling, and sale
of the Company's over-the-counter drug and cosmetic products; the Federal
Insecticide, Fungicide, and Rodenticide Act and the Toxic Substances Control
Act, which are administered by the Environmental Protection Agency and regulate
the Company's disinfectant products and certain of the substances used in the
manufacturing of its products, respectively; the Federal Meat Inspection Act,
which is administered by the Department of Agriculture and regulates the
Company's meat products; the Federal Hazardous Substances Act, which is
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administered by the Consumer Product Safety Commission, and regulates the
labeling of the Company's household products; and the Fair Packaging and
Labeling Act, which is administered by the Federal Trade Commission (the "FTC"),
and regulates the packaging and labeling of all the Company's products. The
Company's products also are subject to regulation by various state laws and
various state regulatory agencies. In addition, the Company is subject to
similar laws and regulations imposed by foreign jurisdictions.
The FDA's regulation of most of the over-the-counter drug products in the
United States (such as the Dial antibacterial products) has not been finalized.
In addition, the FTC continually monitors the advertising practices of consumer
products companies with respect to claims made relating to product functionality
and efficacy.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of environmental and health and safety
laws and regulations in each jurisdiction in which it operates. These laws and
regulations pertain to the Company's present and past operations.
In the United States, the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") authorizes the federal and state
governments and private parties to take action with respect to releases and
threatened releases of hazardous substances and provides a cause of action to
recover the response costs from certain statutorily responsible parties,
including parties who disposed or arranged for disposal of waste. The federal
government may also order responsible parties to take remedial action directly.
Liability under CERCLA may be joint and several among responsible parties. Most
states have also enacted Superfund-type laws.
Since 1980, the Company has received notices or requests for information
with respect to 27 sites that have been deemed "Superfund" sites under CERCLA,
five of which are currently active, 14 of which are inactive and eight of which
have been settled. The Company is also engaged in investigatory and remedial
activities with respect to four closed plants previously operated by Former
Parent. As of January 3, 1998, the Company had accrued in its financial
statements approximately $10 million in reserves for expenses related to
Superfund and clean-up of closed plant sites, which reserves it believes are
adequate.
The Company does not currently anticipate that it will incur significant
capital expenditures in connection with matters relating to environmental
control or compliance in 1998. The Company does not anticipate that the costs to
comply with environmental laws and regulations or the costs related to Superfund
sites and the clean-up of closed plant sites will have a material adverse effect
on the Company's capital expenditures, earnings or competitive position;
however, there can be no assurance that other developments, such as the
emergence of unforeseen claims or liabilities or the imposition of increasingly
stringent laws, regulations and enforcement policies will not result in material
costs in the future.
Federal, state, local and foreign environmental compliance may from time to
time require changes in product formulation or packaging. Such changes have not
had, and are not expected to have, a material adverse effect on revenues,
capital expenditures or earnings of the Company.
EMPLOYEES
At the end of fiscal 1997, the Company employed 2,533 individuals in the
U.S., of whom 1,207 were covered by collective bargaining agreements, and a
total of 3,716 individuals worldwide.
Four of the Company's six plants in the U.S. are unionized. The Company has
collective bargaining agreements with each of these four unions. One of these
contracts covering approximately 350 employees is scheduled for renegotiation in
1998, and three other contracts covering approximately 1,075 employees are
scheduled for renegotiation in 1999. In 1993, the Company's St. Louis, Missouri
plant experienced a five-week work stoppage. Although the Company believes that
its relations with employees are satisfactory, there can be no assurance that
the Company will not face similar labor disputes in the future or that such
disputes will not be material to the Company.
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ITEM 2. PROPERTIES
The Company's corporate headquarters are located in a leased
130,000-square-foot, single-tenant building in Scottsdale, Arizona that is
adjacent to its owned technical and administrative building comprising 200,000
square feet.
The Company's principal manufacturing plants include the following:
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LOCATION SQ,. FEET PRINCIPAL PRODUCTS MANUFACTURED
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Aurora, Illinois......................... 451,000 Bar soaps
Fort Madison, Iowa....................... 447,000 Canned meats and corn starch
St Louis, Missouri....................... 272,400 Fabric softeners, dry and liquid laundry
detergents
Bristol, Pennsylvania.................... 261,800 Dry detergents
West Hazelton, Pennsylvania.............. 214,470 Liquid detergents, fabric softeners and
liquid soaps
Los Angeles, California.................. 55,000 Powdered soap and fabric softeners
Guatemala................................ 100,000 Translucent bar soaps
Mexico................................... 68,000 Shampoos and liquid soaps
Argentina................................ 150,000 Bar soaps and dry detergents
</TABLE>
The Company believes that its facilities in the aggregate are adequate and
suitable for their purposes and that capacity is sufficient for current needs.
The Company continues to seek ways to cut costs and may close plants as
warranted.
ITEM 3. LEGAL PROCEEDINGS
As in the case with many companies, the Company faces exposure to actual or
potential claims and lawsuits involving its business and assets. The Company is
currently party to a number of lawsuits consisting of ordinary, routine
litigation incidental to the business of the Company, including general and
product liability and workers' compensation claims. The Company believes that
any liabilities resulting from such claims after taking into account amounts
already provided for, but exclusive of any potential insurance recovery, should
not have a material adverse effect on the Company's financial position,
liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its stockholders during
the fourth quarter of 1997.
8
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "DL". The following table sets forth the high and low
closing sale prices as reported on the NYSE for the periods indicated. The
closing sale price of the Common Stock on March 3, 1998 was $24 11/16 per share.
<TABLE>
<CAPTION>
PRICE RANGE
-------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1996:
Third Quarter (from August 15, 1996)...................... $14 7/8 $11 1/8
Fourth Quarter............................................ 15 13 1/4
FISCAL 1997:
First Quarter............................................. 16 5/8 13 3/8
Second Quarter............................................ 17 1/2 15 1/8
Third Quarter............................................. 18 1/8 15 3/8
Fourth Quarter............................................ 21 13/16 15 1/8
</TABLE>
The Company declared dividends of $0.08 per share of Common Stock in each
of the third and fourth quarters of 1996 and the first, second, third and fourth
quarters of 1997. Prior to the third quarter of 1996, the Company was not in
existence as an independent public company and, therefore, did not pay
dividends. The declaration and payment of dividends by the Company are subject
to the discretion of its Board of Directors (the "Board"). Any future
determination to pay dividends will depend on the Company's results of
operations, financial condition, capital requirements, contractual restrictions
and other factors deemed relevant at the time by the Board. As of March 8, 1998,
there were 102,672,370 shares of Common Stock outstanding, which were held by
57,974 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial information derived from
the Company's consolidated financial statements. The selected consolidated
balance sheet data as of January 3, 1998 and December 28, 1996 and the
consolidated income statement data for each of the three fiscal years in the
period ended January 3, 1998 have been derived from the audited consolidated
financial statements of the Company which are included elsewhere herein. The
selected consolidated balance sheet data as of December 30, 1995 and December
31, 1994 and consolidated income statement data for the fiscal years then ended
have been derived from audited consolidated financial statements of the Company
which are not included elsewhere herein. The consolidated income statement data
for the fiscal year ended December 25, 1993 and the consolidated balance sheet
data as of December 25, 1993 were derived from unaudited consolidated financial
statements of the Company. In the opinion of management, such unaudited
consolidated financial statements include all material adjustments necessary to
present fairly the information set forth therein and were prepared as if the
Company were a separate entity for all periods presented. Prior to the Spin-off,
the Company operated as the Consumer Products Business of Former Parent. The
following data should be read in conjunction with the Company's consolidated
financial statements and notes thereto, "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information included elsewhere in this Form 10-K or incorporated by
reference herein.
9
<PAGE> 12
SELECTED FINANCIAL AND OTHER DATA
(000 OMITTED, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND STOCKHOLDERS OF
RECORD)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------
JAN. 3 DEC. 28 DEC. 30 DEC. 31 DEC. 25
1998 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales............................ $1,362,606 $1,406,400 $1,365,290 $1,511,362 $1,420,173
---------- ---------- ---------- ---------- ----------
Cost of products sold................ 718,112 739,893 709,888 767,507 723,387
Write-down of discontinued product
inventories........................ -- 27,924 20,400 -- --
---------- ---------- ---------- ---------- ----------
Total cost of products sold.......... 718,112 767,817 730,288 767,507 723,387
---------- ---------- ---------- ---------- ----------
Gross profit....................... 644,494 638,583 635,002 743,855 696,786
---------- ---------- ---------- ---------- ----------
Selling, general and administrative
expenses........................... 482,324 541,110 523,058 583,847 557,573
Restructuring charges and other asset
write-downs........................ -- 27,076 135,600 -- --
---------- ---------- ---------- ---------- ----------
482,324 568,186 658,658 583,847 557,573
---------- ---------- ---------- ---------- ----------
Operating income (loss)(1)........... 162,170 70,397 (23,656) 160,008 139,213
Spinoff transaction costs............ 5,000
Interest and other expenses.......... 28,235 22,974 23,360 12,468 5,909
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes.... 133,935 42,423 (47,016) 147,540 133,304
Income taxes (benefit)............... 50,225 12,511 (19,527) 56,468 49,123
---------- ---------- ---------- ---------- ----------
Net income (loss)(1)................. $ 83,710 29,912 $ (27,489) $ 91,072 $ 84,181
========== ========== ========== ========== ==========
Net income per share (2)
Basic.............................. $ 0.91 $ 0.33
Diluted............................ $ 0.89 $ 0.33
Basic shares outstanding............. 91,918 89,705
Equivalent shares(2)............... 2,231 1,269
---------- ----------
Diluted shares....................... 94,149 90,974
========== ==========
BALANCE SHEET DATA (AT YEAR END)
Total assets......................... $ 883,852 $ 866,126 $ 798,405 $ 887,373 $ 857,516
Working capital (deficit)............ (11,797) 41,107 45,663 56,188 (10,177)
Parent investment and advances....... 496,230 555,703 502,199
Long-term debt....................... 84,399 269,515 3,320 3,510 6,063
Common stock and other equity(2)..... 320,048 140,657
OTHER DATA
Depreciation and amortization........ 31,763 30,533 29,118 34,910 33,583
Capital expenditures................. 46,715 49,468 27,214 37,471 40,605
Number of employees (end of year).... 2,533 2,812 3,985 3,995 4,000
Number of employees (average)........ 2,648 3,125 3,992 3,983 4,121
Dividends on common shares(2)........ 29,510 14,365
</TABLE>
- ---------------
(1) Includes restructuring charges and asset write-downs and Spin-off
transaction costs of $60,000,000 ($35,300,000 after tax) or $0.39 per share
in 1996 and restructuring charges and asset write-downs of $156,000,000
($94,900,000 after tax) in 1995.
(2) Per share, common stock and other equity and dividend information is not
presented for 1995 and prior years because the Company was not a publicly
held company during such years. Income (loss) per share is presented for
1996, as the Company's common shares were issued on August 15, 1996. The
calculation of income (loss) per share assumes that the common shares and
common share equivalents were outstanding for the entire year. The earnings
per share calculation reflects the implementation of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" for all periods
presented.
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company, which was previously operated as the Consumer Products
Business of Former Parent, was spun-off by Former Parent in August 1996. As a
result, the Company became a separate publicly-traded company. Since the
Spin-off, the Company's management team has adopted and implemented strategies
that have enabled the Company to improve its financial performance.
The Company's fiscal year ends on the Saturday closest to December 31. The
1997 fiscal year consisted of 53 weeks and the 1996 and 1995 fiscal years
consisted of 52 weeks.
RESTRUCTURING CHARGES AND ASSET WRITE-DOWNS
In the third quarter of 1996, the Company announced an administrative and
line of business reorganization to: (i) streamline its management and
administrative organization, (ii) reduce administrative overhead by 20%, (iii)
sell or discontinue a number of underperforming brands and (iv) exit the then
existing corporate headquarters. The Company recorded restructuring charges and
asset write-downs of $55 million ($35.3 million after tax) in the third quarter
of 1996 for severance costs, discontinuance of product lines and building exit
costs. Approximately $27.9 million of the charge related to inventories and was
included in cost of products sold. The Company estimates that the 1996
reorganization saved the Company approximately $50 million in 1997 and will save
approximately $50 million in 1998.
In the third quarter of 1995, the Company recorded restructuring charges
and asset write-downs totaling $156 million ($94.9 million after tax) to provide
for a business-based reorganization through plant closings, work force
reductions and elimination of certain products. The charges provided for the
closing or sale of six plants (Clearing, Illinois; Burlington, Iowa; Auburndale,
Florida; Omaha, Nebraska; Memphis, Tennessee; and New Berlin, Wisconsin) and the
reduction of the work force by approximately 700 employees, substantially all of
whom were based in the plants that were closed. All six plants were closed by
September 28, 1996. Approximately $20.4 million of the charge related to
inventories and was included in cost of products sold.
As of January 3, 1998, $14.4 million in reserves remained from the 1996 and
1995 restructurings, consisting primarily of building exit, environmental and
facility closure costs. Such reserves are believed to be adequate and such
expenses are expected to be paid utilizing cash flow from operations.
RESULTS OF OPERATIONS
BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS
In the reorganization undertaken in the third quarter of 1996, the Company
identified certain brands and lines of business upon which it intends to
dedicate the resources of the Company. These businesses are the retail branded
products which the Company markets under its Dial, Purex, Renuzit and Armour
franchises and the Company's international line of business, which markets
products internationally under certain of these and other brand names. The Dial
franchise includes not only the Dial and Liquid Dial brands but also the Tone,
Nature's Accents, Pure & Natural, Fels Naptha, Boraxo and Breck brands. The
Purex franchise includes the Trend, Dutch, Borateem, Vano, Sta-Flo, 20 Mule Team
and La France brands in addition to the Purex brand. The Renuzit franchise
includes only products that bear the Renuzit name. The Armour franchise includes
the Armour, Armour Star and Cream brands. These brands and lines of business
were identified on the basis of their profitability, strength in the marketplace
and potential growth. Accordingly, most products and lines of business outside
of the identified franchises have been discontinued or sold.
FISCAL 1997 COMPARED WITH FISCAL 1996
Net sales decreased $43.8 million, or 3%, to $1,362.6 million in 1997 from
$1,406.4 million in 1996. This decrease resulted primarily from the
discontinuation and divestiture of certain non-core businesses and a 15% price
reduction of Purex detergent products initiated in the second quarter of 1996,
offset in part by an
11
<PAGE> 14
increase in sales of the Company's four franchises and sales attributable to the
Company's acquisitions in Argentina in September and November 1997. After
adjusting for the Purex price reduction and excluding the impact of discontinued
and divested non-core businesses, net sales in 1997 increased $67.5 million, or
5.6%, primarily due to a 6% increase in sales of the Company's four franchises
and growth in international markets.
Sales of products in the Dial, Purex, Renuzit and Armour franchises
accounted for 26%, 29%, 12% and 17%, respectively, of the Company's total net
sales in 1997, compared to 24%, 27%, 10% and 14%, respectively, in 1996. From
1996 to 1997, Dial sales increased 3%, Renuzit sales increased 8% and Armour
sales increased 11%. During that same period, Purex sales decreased 1%, but
after adjusting for the 1996 price reduction, Purex sales increased 5%. Net
sales in international markets, including sales attributable to the acquisitions
in Argentina, increased $25.9 million, or 34%, to $102.3 million in 1997 from
$76.4 million in 1996.
Excluding write-downs of inventory of $27.9 million associated with the
reorganization in 1996, gross profit margin remained relatively flat in 1997 and
1996 at 47.3% and 47.4%, respectively. Lower costs in 1997, which resulted from
improved procurement, distribution and manufacturing practices, were offset by
the price reduction of Purex detergent products initiated in 1996.
Selling, general and administrative expenses in 1997 decreased $58.8
million, or 11%, to $482.3 million from $541.1 million in 1996, and declined as
a percentage of net sales to 35.4% from 38.5%. This was primarily attributable
to lower consumer and trade promotion expenditures and administrative savings
realized from the restructuring in 1996.
Operating income in 1997 increased $91.8 million, or 130%, to $162.2
million from $70.4 million in 1996. Operating income in 1996 was impacted by
restructuring charges and inventory and asset write-downs totaling $55.0
million. Excluding these charges, operating income increased $36.8 million, or
29%, in 1997, primarily due to the significant reduction of selling, general and
administrative expenses and a reduction of cost of products sold.
In 1997, the Company sold to Church & Dwight Co., Inc. for $30.2 million
Brillo soap pads and related products, Parsons ammonia, Bo Peep ammonia, Sno Bol
toilet bowl cleaner, Cameo metal cleaner and Rain Drops water softener. The
Company's London, Ohio plant, where Brillo is manufactured, was also part of the
sale. In addition, the Company sold to other third parties for $4.5 million its
Bruce floor care trademark and its Magic sizing starch brand and related
inventories. An aggregate gain of $15.7 million from the sale of these
businesses is included in operating income.
Also included in 1997 operating income are $15.9 million of various
impairment and other operating charges. In the third quarter of 1997, the
Company evaluated the estimated life of the capitalized package design costs,
which were being amortized over five years. In light of the accelerated pace of
package design changes occurring at the Company and in the industry, the
estimated life of capitalized package design costs was reduced to one year.
Accordingly, $9.5 million of capitalized package design costs were considered
impaired and written-off against income. In addition, the Company charged
against income $4.5 million of additional discontinued product sales returns and
$1.9 million in additional promotion claims on discontinued products.
Interest and other expenses increased $5.3 million, or 23%, to $28.2
million in 1997 from $23.0 million in 1996, due to an increase of accretion
costs related to Armour employee benefit liabilities assumed from Former Parent
in the Spin-off, offset in part by lower interest expense resulting from the
repayment of debt with cash flow from operations and the proceeds of the
Company's public equity offering in the fourth quarter of 1997.
Net income increased $53.8 million, or 180%, to $83.7 million in 1997 from
$29.9 million in 1996. Excluding the restructuring and spin-off charges taken in
1996, net income increased $18.5 million, or 28%, in 1997, primarily due to the
significant reduction of selling, general and administrative expense.
The effective tax rate for 1997 was 37.5%, up from 29.5% in 1996. The lower
effective tax rate in 1996 resulted from a one-time tax benefit due to the
revaluation of the Company's deferred tax benefits for the higher effective
state tax rate incurred after the Spin-off.
12
<PAGE> 15
FISCAL 1996 COMPARED WITH FISCAL 1995
Net sales increased $41.1 million, or 3%, to $1,406.4 million in 1996 from
$1,365.3 million in 1995. The increase resulted primarily from the successful
launch of new Renuzit products, increases in marketplace consumption of Dial and
Armour products and growth in international markets. Partially offsetting the
increases was a decline in Purex sales as the result of the 15% price reduction
initiated in the second quarter of 1996 and a 23% decline in net sales from
products discontinued or divested.
Sales of products in the Dial, Purex, Renuzit and Armour franchises
accounted for 24%, 27%, 10% and 14%, respectively, of the Company's total net
sales in 1996, compared to 22%, 27%, 7% and 13%, respectively, in 1995. From
1995 to 1996, Dial sales increased 16%, Renuzit sales increased 48% and Armour
sales increased 15%. During that same period, Purex sales decreased 8%, but
after adjusting for the 1996 price reduction Purex sales increased 2%.
Gross profit margin declined to 45.4% in 1996 from 46.5% in 1995. Included
in cost of products sold for 1996 and 1995 are write-downs of discontinued
product inventories of $27.9 million and $20.4 million, respectively, associated
with the restructuring in each of those years. Excluding those charges, gross
profit margin declined to 47.4% in 1996 from $48.0% in 1995. The decline in
gross profit margin resulted from the 1996 Purex price reduction initiative,
offset in large part by a reduction of cost of products sold due to lower costs
from both the 1995 manufacturing restructuring and efficiencies from larger
production volumes.
Selling, general and administrative expenses in 1996 increased $18.1
million, or 3.5%, to $541.1 million from $523.1 million in 1995, but remained
relatively constant as a percentage of net sales in 1996 and 1995 at 38.5% and
38.3%, respectively. The increase in absolute dollars resulted from increased
marketing support for existing Dial and Renuzit branded products, introductory
marketing expenses for Renuzit candles and the Dial Ultra Skin Care line, and,
to a lesser extent, increased administrative costs associated with being a
public company, offset in part by lower trade promotion expenses that were no
longer necessary due to the Purex price reduction.
Operating income in 1996 increased $94.1 million to $70.4 million from an
operating loss of $23.7 million in 1995. Operating income in 1996 and 1995 was
impacted by restructuring charges and inventory and asset write-downs totaling
$55.0 million and $156.0 million, respectively. Excluding these charges,
operating income decreased $6.9 million, or 5.2%, in 1996, primarily due to the
increase in selling, general and administrative expenses.
Interest and other expenses remained relatively constant in 1996 and 1995
at $23 million and $23.4 million, respectively. Included in 1996 are $2.6
million in accretion costs related to the Armour employee benefit liability
assumed from Former Parent in the Distribution. These incremental costs were
offset by lower interest costs from lower interest-bearing advances in 1996 from
Former Parent.
Net income increased $57.4 million to $29.9 million in 1996 from a net loss
of $27.5 million in 1995. Excluding the restructuring charges and spin-off
transaction costs in 1996 and the restructuring charges in 1995, net income
decreased $2.2 million, or 3.3%, in 1996, primarily due to the increase in
selling, general and administrative expense.
The effective tax rate for 1996 was 29.5%, down from 41.5% in 1995. The
lower effective tax rate in 1996 resulted from a one-time tax benefit due to the
revaluation of the Company's deferred tax benefits for the higher effective
state tax rate incurred after the Spin-off, as well as additional income from
certain foreign operations, which was not subject to taxation.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $160.8 million, $99.5 million and
$90.3 million in 1997, 1996 and 1995 respectively. The 62% increase in operating
cash flow from 1996 to 1997 resulted from the increase in net income and
decreases in deferred taxes, finished goods inventories and accounts receivable.
For the foreseeable future, the Company believes that cash generated by
operating activities will be sufficient to finance its capital expenditures, pay
dividends on its Common Stock and provide working capital for sales.
13
<PAGE> 16
Capital expenditures were $46.7 million, $49.5 million and $27.2 million in
1997, 1996 and 1995 respectively. In 1997, the Company expended $12 million to
upgrade its information systems to improve operational efficiencies and ensure
Year 2000 compliance. The Company expects to spend an additional $40 million
over the next two years to upgrade its information systems.
Capital spending in 1998 is expected to approximate $50 million and will be
concentrated primarily on equipment and information systems that provide
opportunities to reduce manufacturing, logistic and administrative costs and
address the Year 2000 issue. However, such plans are dependent on the
availability of funds, as well as identification of projects with sufficient
returns. As a result, there can be no assurance as to the quantity and the type
of capital spending in the future.
In the last half of 1997, the Company acquired Nuevo Federal, a
manufacturer and marketer of personal care and household products in Argentina,
and acquired three personal care soap brands and two detergent brands from The
Procter & Gamble Company's Argentinean subsidiary for an aggregate purchase
price of approximately $40 million. Of this amount, $32 million was paid in cash
with the remainder of the purchase price comprised of future payments contingent
on the completion of certain transactions.
In the third quarter of 1997, the Company sold to Church & Dwight Co., Inc.
for approximately $30 million the following brands and related inventories:
Brillo soap pads and related products, Parsons ammonia, Bo Peep ammonia, Sno Bol
toilet bowl cleaner, Cameo metal cleaner and Rain Drops water softener. The
Company's London, Ohio plant, where Brillo is manufactured, was also part of the
sale. In addition, the Company has sold its Bruce floor care product trademark
and its Magic sizing starch brand and related inventories to other third
parties. Total proceeds from the sale of all product lines were $34.7 million.
The Company's financing strategy includes the sale of accounts receivable
to accelerate cash flow. Accounts receivables sold but not yet collected under
this plan at January 3, 1998 and December 28, 1996, were $58.9 million and $74.9
million, respectively. Under the terms of the plan, the Company retains the risk
of credit loss on receivables sold.
The Company has a $350 million revolving credit agreement (the "Credit
Agreement") with various banks. The Credit Agreement, which will terminate on
August 15, 2002, unless extended, contains certain covenants which impose
limitations on the Company with respect to, among other things, its ability to
place liens on property, its ability to merge, consolidate or transfer
substantially all its assets, its minimum net worth and the incurrence of
certain indebtedness. The Company, from time to time, makes borrowings that are
supported by the Credit Agreement. As of January 3, 1998, the Company had $84.4
million aggregate principal amount of such borrowings outstanding. In addition,
the Company had $350 million available under the Credit Agreement at that date.
Borrowings are classified as long-term debt because they are supported by the
long-term Credit Agreement.
In the fourth quarter of 1997, the Company sold 6.3 million shares of
Common Stock to the public at a purchase price of $18.3125 per share. The net
proceeds of $108 million from the offering were used to repay certain
indebtedness.
In August 1997, the Company moved its corporate headquarters from the Viad
Tower in Phoenix, Arizona to office space in Scottsdale, Arizona. The Company
has approximately nine years remaining on the lease for the Viad Tower space,
which commits the Company to payments of approximately $2.7 million annually
through 2006. The Company is actively marketing the space for sublease.
As of January 3, 1998, the Company had approximately $88.8 million in net
deferred tax benefits. The realization of such benefits will require average
annual taxable income of approximately $12 million over the next 20 years. The
Company's average income before income taxes over the last three years was
approximately $43.1 million.
In the first quarter of 1998, the Company intends to complete a $100
million offering of Senior Notes to take advantage of favorable long-term
interest rates. The net proceeds of this debt financing will be used for the
repayment of indebtedness that bears short-term interest rates and general
corporate purposes, and may be used to fund stock repurchases.
14
<PAGE> 17
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
The Company's future results and financial condition are dependent upon the
Company's ability to successfully develop, manufacture and market consumer
products. Inherent in this process are a number of factors that the Company must
successfully manage to achieve favorable future operating results and financial
condition. Potential risks and uncertainties that could affect the Company's
future operating results and financial condition include, but are not limited
to, the factors discussed below.
INTENSE COMPETITION IN THE CONSUMER PRODUCTS INDUSTRY
The consumer products industry, particularly its detergent, personal care
and air freshener categories, is intensely competitive. Several of the Company's
most significant competitors, including The Procter & Gamble Company, Lever
Brothers Co. (a division of Unilever plc), and Colgate-Palmolive Company, have
greater financial resources than the Company and may be willing to commit
significant resources to protecting their own market shares or to capturing
market share from the Company. As a result, the Company may need to incur
greater costs than previously incurred for trade and consumer promotions and
advertising to preserve or improve market share and to introduce and establish
new products and line extensions. At the same time, the Company may need to
undertake additional production-related cost-cutting measures to enable it to
respond to competitors' price cuts and marketing efforts without reducing the
Company's margins. There can be no assurance that the Company will be able to
make such additional expenditures or implement such cost-cutting measures or
that if made or implemented they will be effective.
CONSUMER PRICING PRESSURES
Consumer products, particularly those that are value-priced, are subject to
significant price competition. From time to time, the Company may need to engage
in price-cutting initiatives for some of its products to respond to competitive
and consumer pressures. The failure of the Company's sales volumes to grow
sufficiently to improve overall revenues and income as a result of a competitive
price reduction could have a material adverse effect on the financial
performance of the Company.
TRADE CUSTOMER PRICING PRESSURES; COMPETITIVE RETAIL ENVIRONMENT
The Company faces pricing pressures from its trade customers. Because of
the competitive retail environment, retailers have increasingly sought to reduce
inventory levels and obtain pricing concessions from vendors. In addition,
because consumer products companies, including the Company, have historically
offered end-of-quarter discounts to achieve quarterly sales goals, trade
customers have been inclined to delay inventory restocking until quarter-end.
Over the past 18 months, the Company has reduced end-of-quarter discounts to
retailers and has changed its sales incentive structure to emphasize not only
quarterly revenue targets but also trade spending management and other personal
performance targets. The reduction in discounts has not had and the Company
believes it will not have a material adverse effect on sales although there can
be no assurance in that regard. The Company is also subject to the risk that
high-volume customers could seek alternative pricing concessions or better trade
terms. The Company's performance is also dependent upon the general health of
the retail environment and could be materially adversely affected by changes
therein and by the financial difficulties of retailers.
DEPENDENCE OF KEY CUSTOMERS
The Company's top ten customers accounted for 35% of net sales in 1997.
Wal-Mart Stores Inc. (and its affiliate, SAM's Club) ("Wal-Mart") was the
Company's largest customer, accounting for 17% of the Company's net sales in
1997. The loss of, or a substantial decrease in the volume of purchases by,
Wal-Mart or any of the Company's other top customers could have a material
adverse effect on the Company's results of operations.
PRICE VOLATILITY OF RAW MATERIALS; SINGLE SOURCE SUPPLIER
While the Company believes that it may, in certain circumstances, be able
to respond to price increases for certain raw materials by increasing sales
prices, rapid increases in the prices of such raw materials could have a
material adverse impact on financial results. For example, tallow (a key
ingredient in Dial bar soaps) has experienced price fluctuations within the
range of $0.16 and $0.28 per pound from January 1, 1995 to
15
<PAGE> 18
December 31, 1997. Recently, the price of tallow has been trading near the lower
end of this historical range. Because the majority of the competitors' soap
products use considerably less tallow in their bar soap products, the Company
may not be able to increase the prices of its Dial bar soaps in response to
increases in tallow prices. In addition, the antibacterial agent, Triclosan,
which is the active ingredient used in Liquid Dial products, is sourced from a
single supplier. Although the Company has an adequate supply of Triclosan for
its current and foreseeable needs, a significant disruption in this supply could
have a short-term material adverse impact on the Company's financial results.
The Company seeks to mitigate the risk by entering into contracts to provide up
to six-month supplies of tallow, Triclosan and packaging materials. Long-term
hedging opportunities against price increases for these items are generally not
available.
DEPENDENCE ON DOMESTIC MARKETS; RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
While a number of the Company's competitors have diversified their revenues
to include a strong international component, the Company is currently dependent
primarily on sales generated in the U.S. (92% of sales in 1997). With respect to
a number of the Company's most significant product categories, including
detergents and bar soaps, the U.S. markets are mature and characterized by high
household penetration. The Company's unit sales growth in these domestic markets
will depend on increasing usage by consumers and capturing market share from
competitors. There can be no assurance that the Company will succeed in
implementing its strategies to achieve such domestic growth.
To reduce its dependence on domestic revenues, the Company has adopted a
strategy to further penetrate international markets. In implementing this
strategy, the Company faces barriers to entry and the risk of competition from
local and other companies that already have established global businesses, risks
generally associated with conducting business internationally, including
exposure to currency fluctuations, limitations on foreign investment,
import/export controls, nationalization, unstable governments and legal systems
and the additional expense and risks inherent in operating in geographically and
culturally diverse locations. Because the Company plans to develop its
international business through acquisitions as well as joint ventures, co-
packaging arrangements and/or other alliances, the Company may also be subject
to risks associated with such acquisitions, ventures, arrangements and
alliances, including those relating to the marriage of different corporate
cultures and shared decision-making. In addition, because the Company's current
international distribution capabilities are extremely limited, the Company will
also need to acquire a distribution network or enter into alliances with
existing distributors before it can effectively conduct operations in new
markets. There can be no assurance that the Company will succeed in increasing
its international business in a profitable manner, and a failure to expand this
business may have a material adverse effect on the Company.
The Company has a significant number of registered foreign trademarks as
well as pending foreign trademark applications. There can be no assurance that
the Company will successfully register any foreign trademarks for which
applications are currently pending or that such trademarks, once registered,
together with any existing registered foreign trademarks, will be protected in
the foreign markets in which they are used.
ADVERSE PUBLICITY; PRODUCT RECALLS
Certain news broadcasts by major U.S. television and radio networks have
focused on the use of antibacterial agents to kill germs on various surfaces.
Triclosan, the active ingredient in Liquid Dial, has also been a focus of these
broadcasts. Although none of the broadcasts disputed that Triclosan kills germs
on the skin, some third party experts did question whether it provides any
additional protection beyond that provided by non-antibacterial soap products.
Although the Company has test results that it believes prove that Triclosan
provides consumers with additional protection in limiting exposure to
bacteria-related diseases, there can be no assurance that the adverse publicity
stemming from these broadcasts will not adversely affect the Company's sales of
its antibacterial soap products and its results of operations.
Because the Company shares the use of the Armour trademark for food
products with ConAgra Inc., the manufacturer of Armour-branded non-canned meat
products, the Company faces the risk that consumer preferences and perceptions
with respect to any of the Company's Armour products may be influenced by
adverse publicity affecting any of the Armour-branded products of ConAgra, Inc.
16
<PAGE> 19
From time to time, consumer product companies, including Dial, have had to
recall certain products for various reasons, which costs of recall or other
liabilities could be material to such companies. To date, the Company has not
made any product recalls that have been material to the Company's financial
condition. In addition, adverse publicity regarding any such product recalls
could have a material adverse effect on the Company.
ENVIRONMENTAL CONCERNS REGARDING DETERGENT COMPOUND
Nonlyphenol ethoxylate ("NPE") is an ingredient used in the Company's
liquid and powder detergent products. Certain environmental and regulatory
groups have raised concerns regarding the toxicity of compounds produced from
NPE as it decomposes and the adverse impact on the reproductive health of
certain aquatic animals, exposed to those compounds. Although to the best of the
Company's knowledge none of the studies undertaken on NPE have demonstrated a
link between the compound and such effect in the environment or in human beings,
there can be no assurance that subsequent studies will in fact demonstrate such
a link or demonstrate other adverse environmental consequences. Current
government regulations do not impose any restrictions on the use of NPE, or
impose any liability on any of the businesses that utilize NPE in the products
they manufacture. The Company believes, however, that a number of governmental
agencies in North America and Europe are discussing formal regulations of NPE in
the environment. The Company is in the process of reformulating its detergents
to eliminate this compound as an ingredient. The additional expense the Company
expects to incur as a result of this reformulation is not expected to have a
material adverse impact on the Company's financial results. In addition, the
Company believes that it will not incur any significant environmental liability
as a result of the use of NPE in its products.
DEPENDENCE ON KEY PERSONNEL
The operation of the Company requires managerial expertise. Of the
Company's key personnel, only the Chief Executive Officer has an employment
contract with the Company. There can be no assurance that any of the Company's
key employees will remain in the Company's employ. The loss of such key
personnel could have a material adverse effect on the Company's operations.
TURNOVER; EMPLOYEE RELATIONS
Primarily as a result of the restructuring of its business, the Company
discharged approximately 950 salaried and non-salaried employees during 1995 and
1996. In addition, the Company experienced greater aggregate voluntary turnover
of salaried employees in 1996 and 1997 than the industry average. Although the
Company believes that it presently has sufficient staffing, there can be no
assurance that the Company would not be materially adversely affected by any
future significant voluntary turnover of salaried or other employees.
Four of the Company's six plants in the U.S. are unionized. The Company's
contracts with its various unions are scheduled for renegotiation as follows:
(i) International Brotherhood of Teamsters (covering approximately 350 employees
at the Company's St. Louis, Missouri plant) in July 1998; (ii) Oil, Chemical and
Atomic Workers union (covering approximately 100 employees at the Company's
Bristol, Pennsylvania plant) in May 1999; (iii) United Food and Commercial
Workers union (covering approximately 360 employees at the Company's Aurora,
Illinois plant) in August 1999; and (iv) the United Food and Commercial Workers
union (covering approximately 425 employees at the Company's Fort Madison, Iowa
plant) in September 1999. There can be no assurance that these contracts can be
renegotiated on terms acceptable to the Company. In 1993, the Company's St.
Louis, Missouri plant experienced a five-week work stoppage. Although the
Company believes that its relations with the employees at this plant and other
plants are satisfactory, there can be no assurance that the Company will not
face similar labor disputes in the future or that such disputes will not be
material to the Company.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of environmental and health and safety
laws in each jurisdiction in which it operates. These laws and regulations
pertain to the Company's present and past operations.
Since 1980, the Company has received notices or requests for information
with respect to 27 sites that have been deemed "Superfund" sites under the
federal Comprehensive Environmental Response, Compensation and Liability Act,
five of which are currently active, 14 of which are inactive, and eight of which
have
17
<PAGE> 20
been settled. The Company is also engaged in investigatory and remedial
activities with respect to four closed plants previously operated by Former
Parent. As of January 3, 1998, the Company has accrued in its financial
statements approximately $10 million in reserves for expenses related to
Superfund sites and the clean-up of closed plant sites, which reserves it
believes are adequate.
The Company does not anticipate that the costs to comply with environmental
laws and regulations or the costs related to Superfund sites and the clean-up of
closed plant sites will have any material adverse effect on the Company's
capital expenditures, earnings or competitive position; however, there can be no
assurance that other developments, such as the emergence of unforeseen claims or
liabilities or the imposition of increasingly stringent laws, regulations and
enforcement policies will not result in material costs in the future.
RISKS OF POTENTIAL ACQUISITIONS
The Company may acquire or make substantial investments in complementary
businesses or products in the future. Any such acquisition or investment would
entail various risks, including the difficulty of assimilating the operations
and personnel of the acquired business or products, the potential disruption of
the Company's ongoing business and, generally, the potential inability of the
Company to obtain the desired financial and strategic benefits from the
acquisition or investment. These factors could have a material adverse effect on
the Company's financial results. Future acquisitions and investments by the
Company also could result in substantial cash expenditures, potentially dilutive
issuances of equity securities, the incurrence of additional debt and contingent
liabilities, and amortization expenses related to goodwill and other intangible
assets, which could adversely affect the Company's financial results and
condition. The Company engages from time to time in discussions with respect to
potential acquisitions, some of which may be material.
YEAR 2000 COMPLIANCE
Many existing computer systems and software products, including several
used by the Company, are coded to accept only two digit entries in the date code
field. Beginning in the year 2000, these date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates. As
a result, the Company's date critical functions related to the year 2000 and
beyond, such as sales, distribution, manufacturing, purchasing, inventory
control, trade promotion management, planning and replenishment, facilities and
financial systems may be materially adversely affected unless these computer
systems are or become year 2000 compliant.
The Company has begun a comprehensive upgrade of its information systems to
significantly improve operating efficiencies and to identify, correct or
reprogram, and test its systems for year 2000 compliance. In 1997, the Company
incurred costs of $12 million to upgrade its information technology and expects
to spend an additional $40 million over the next two years for such upgrades.
There can be no assurance, however, that the Company's computer systems will be
year 2000 compliant in a timely manner or that the Company will not incur
significant additional expenses pursuing year 2000 compliance. Furthermore, even
if the Company's systems are year 2000 compliant, there can be no assurance that
the Company will not be materially adversely effected by the failure of others
to become year 2000 compliant. For example, the Company may be adversely
affected by the disruption or inaccuracy of data provided to the Company by
non-year 2000 compliant third parties and the failure of the Company's customers
and service providers, such as independent shipping companies, to become year
2000 compliant. There can be no assurance that the year 2000 problem will not
have a material adverse effect on the Company in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of the Company as of January 3, 1998 and
for each of the fiscal years in the three-year period ended January 3, 1998,
together with related notes and the report of Deloitte & Touche LLP are set
forth on the following pages.
18
<PAGE> 21
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The Dial Corporation has the responsibility for preparing
and assuring the integrity and objectivity of the accompanying financial
statements and other financial information in this report. The financial
statements were prepared using generally accepted accounting principles
consistently applied. The financial statements reflect, where applicable,
management's best estimates and judgments and include disclosures and
explanations that are relevant to an understanding of the financial affairs of
the Company.
The Company's financial statements have been audited by Deloitte & Touche
LLP. Management has made available to Deloitte & Touche LLP all of the Company's
financial records and other relevant data and has made appropriate and complete
written and oral representations and disclosures in connection with the audit.
Management has established and maintains a system of internal control that
is designed to provide reasonable assurance that transactions are authorized and
properly recorded, that assets are protected and that materially inaccurate
financial reporting is prevented and detected. The appropriate segregation of
responsibilities and careful selection of employees are components of the system
of internal controls. The internal control system is independently monitored and
evaluated by an extensive and comprehensive internal auditing program.
The Board of Directors, acting through its Audit Committee, oversees the
adequacy of the Company's internal control environment. The Audit Committee
meets regularly with management representatives and, jointly and separately,
with representatives of Deloitte & Touche LLP and internal auditing management
to review accounting, auditing and financial reporting matters.
<TABLE>
<S> <C>
/s/ MALCOLM JOZOFF /s/ SUSAN J. RILEY
- ----------------------------------------------------- -----------------------------------------------------
Malcolm Jozoff Susan J. Riley
Chairman, President and Chief Executive Officer Senior Vice President and Chief Financial Officer
</TABLE>
19
<PAGE> 22
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of The Dial Corporation:
We have audited the accompanying consolidated balance sheets of The Dial
Corporation as of January 3, 1998 and December 28, 1996, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three fiscal years in the period ended January 3, 1998. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of The Dial Corporation as of
January 3, 1998 and December 28, 1996, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended January 3,
1998 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------------------------------
Deloitte & Touche LLP
Phoenix, Arizona
January 22, 1998
20
<PAGE> 23
THE DIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
JANUARY 3, 1998 DECEMBER 28, 1996
--------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 10,089 $ 14,102
Receivables, less allowance of $6,841 and $3,170.......... 60,448 28,689
Inventories............................................... 124,058 139,492
Deferred income taxes..................................... 25,185 61,379
Other current assets...................................... 7,174 4,119
-------- --------
Total current assets.............................. 226,954 247,781
Property and equipment, net................................. 260,928 226,551
Deferred income taxes....................................... 63,567 63,918
Intangibles, net............................................ 331,482 325,739
Other assets................................................ 921 2,137
-------- --------
$883,852 $866,126
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable.................................... $102,235 $ 91,341
Short-term borrowings..................................... 8,500
Income taxes payable...................................... 14,581 7,188
Other current liabilities................................. 113,435 108,145
-------- --------
Total current liabilities......................... 238,751 206,674
Long-term debt.............................................. 84,399 269,515
Pension and other benefits.................................. 231,634 233,306
Other liabilities........................................... 9,022 15,974
-------- --------
Total liabilities................................. 563,806 725,469
-------- --------
Commitments and contingencies (Notes M and P)
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock, $.01 par value, 300,000,000 shares
authorized; 102,725,481 and 95,638,532 shares issued... 1,027 956
Additional capital........................................ 393,947 247,209
Retained income (deficit)................................. 33,892 (20,308)
Unearned employee benefits................................ (107,372) (86,554)
Treasury stock, 101,040 and 49,399 shares held............ (1,448) (646)
-------- --------
Total stockholders' equity........................ 320,046 140,657
-------- --------
$883,852 $866,126
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE> 24
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(000 OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $1,362,606 $1,406,400 $1,365,290
---------- ---------- ----------
Costs and expenses:
Cost of products sold............................... 718,112 739,893 709,888
Write down of discontinued product inventories...... 27,924 20,400
---------- ---------- ----------
718,112 767,817 730,288
Selling, general and administrative expenses........ 482,324 541,110 523,058
Restructuring charges and other asset write-downs... 27,076 135,600
---------- ---------- ----------
1,200,436 1,336,003 1,388,946
---------- ---------- ----------
Operating income (loss)............................... 162,170 70,397 (23,656)
---------- ---------- ----------
Spin-off transaction costs............................ 5,000
Interest and other expenses........................... 28,235 22,974 23,360
---------- ---------- ----------
28,235 27,974 23,360
---------- ---------- ----------
Income (loss) before income taxes..................... 133,935 42,423 (47,016)
Income taxes (benefit)................................ 50,225 12,511 (19,527)
---------- ---------- ----------
NET INCOME (LOSS)..................................... $ 83,710 $ 29,912 $ (27,489)
========== ========== ==========
NET INCOME PER SHARE -- BASIC......................... $ 0.91 $ 0.33
========== ==========
NET INCOME PER SHARE -- DILUTED....................... $ 0.89 $ 0.33
========== ==========
Basic shares outstanding.............................. 91,918 89,705
Equivalent shares................................... 2,231 1,269
---------- ----------
Diluted shares outstanding............................ 94,149 90,974
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE> 25
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss)...................................... $ 83,710 $ 29,912 $(27,489)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................ 31,763 30,533 29,118
Deferred income taxes................................ 36,545 (965) (34,733)
Restructuring charges and asset write-downs.......... 55,000 156,000
Change in operating assets and liabilities:
Receivables....................................... 9,894 12,766 69,202
Inventories....................................... 17,815 (7,763) (10,005)
Trade accounts payable............................ (3,457) 11,839 (22,356)
Other assets and liabilities, net................. (15,423) (31,870) (69,429)
--------- -------- --------
Net cash provided by operating activities.............. 160,847 99,452 90,308
--------- -------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures................................... (46,715) (49,468) (27,214)
Acquisition of business, net of cash acquired.......... (31,575) (23,558)
Proceeds from sales of product lines and other property
and equipment........................................ 35,853 128 7,099
--------- -------- --------
Net cash used by investing activities.................. (42,437) (49,340) (43,673)
--------- -------- --------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Net payments on long-term borrowings................... (206,216) (13,488) (491)
Proceeds from sale of common stock..................... 107,990
Net change in short-term borrowings.................... 8,500 (317) 301
Net change in receivables sold......................... (15,998) (1,808) (14,290)
Dividends paid on common stock......................... (29,510) (14,365)
Cash proceeds from stock options....................... 12,810 2,779
Cash transfers to parent, net.......................... (14,695) (32,168)
--------- -------- --------
Net cash used by financing activities.................. (122,424) (41,894) (46,648)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents... (4,014) 8,218 (13)
Cash and cash equivalents, beginning of year........... 14,102 5,884 5,897
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR................. $ 10,089 $ 14,102 $ 5,884
========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE> 26
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
(000 OMITTED)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED UNEARNED PARENT COMMON
---------------- ADDITIONAL INCOME EMPLOYEE INVESTMENT STOCK IN
SHARES AMOUNT CAPITAL (DEFICIT) BENEFITS AND ADVANCES TREASURY TOTAL
------- ------ ---------- --------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995............ $ 555,703 $ 555,703
Net loss.......................... (27,489) (27,489)
Payments to parent................ (31,984) (31,984)
------- ------ -------- -------- --------- --------- ------- ---------
BALANCE, DECEMBER 30, 1995.......... 496,230 496,230
Net income........................ 35,855 35,855
Payments to parent................ (14,695) (14,695)
BALANCE AT SPINOFF, AUGUST 15,
1996.............................. 517,390 517,390
Spinoff capitalization............ 95,346 953 237,664 (81,379) (517,390) (360,152)
------- ------ -------- -------- --------- --------- ------- ---------
BALANCE AFTER SPINOFF, AUGUST 15,
1996.............................. 95,346 953 237,664 (81,379) 157,238
Exercise of stock options......... 293 3 3,165 (389) 2,779
Dividends on common stock......... (14,365) (14,365)
Change in unearned employee
benefits........................ 6,380 (5,175) (257) 948
Net loss.......................... (5,943) (5,943)
------- ------ -------- -------- --------- --------- ------- ---------
BALANCE, DECEMBER 28, 1996.......... 95,639 956 247,209 (20,308) (86,554) (646) 140,657
Exercise of stock options......... 807 8 5,884 10,009 (715) 15,186
Net proceeds from stock
offering........................ 6,279 63 107,927 107,990
Dividends on common stock......... (29,510) (29,510)
Change in unearned employee
benefits........................ 32,927 (30,827) (87) 2,013
Net income........................ 83,710 83,710
------- ------ -------- -------- --------- --------- ------- ---------
BALANCE, JANUARY 3, 1998............ 102,725 $1,027 $393,947 $ 33,892 $(107,372) $ $(1,448) $ 320,046
======= ====== ======== ======== ========= ========= ======= =========
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996,
AND DECEMBER 30, 1995
NOTE A. BASIS OF PREPARATION
On July 25, 1996, the Board of Directors of The Dial Corp ("Former Parent")
declared a dividend to effect the spin-off of its Consumer Products Business
(the "Spin-off"). The dividend was paid on August 15, 1996, to stockholders of
record as of August 5, 1996. Each Dial stockholder received a dividend of one
share of common stock of The Dial Corporation ("the Company"), which, after the
Spin-off, owns and operates the Consumer Products Business previously conducted
by Former Parent. Concurrently with the Spin-off, the name of the Former Parent
was changed to Viad Corp.
The Consolidated Financial Statements present the financial position,
results of operations and cash flows of the divisions and subsidiaries
comprising The Dial Corporation, as if it had been formed as a separate entity
for all periods presented. Dial's historical cost basis of the assets and
liabilities have been carried over to the new company. Concurrent with the
Spin-off, the Company was capitalized through settlement of The Dial Corp's
investment and advances account of $517.4 million by the assumption of $280
million of long-term debt and $80.2 million (net of income taxes) in Armour
employee benefit liabilities, with the net amount remaining of $157.2 million
comprising the Company's stockholders' equity as of the Spin-off date. All
intercompany balances and transactions among the entities comprising the Company
have been eliminated.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements are prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The Company's fiscal year ends on the Saturday closest to December 31.
Fiscal year 1997 consisted of 53 weeks. Fiscal years 1996 and 1995 consisted of
52 weeks.
Certain reclassifications have been made to 1996 and 1995 balances to
conform with the 1997 presentation.
REVENUE RECOGNITION. Sales are recorded at the time products are shipped
to trade customers.
MAJOR CUSTOMERS. Major customers are defined as those that individually
accounted for more than 10% of the Company's sales. Sales to a major customer
accounted for 17%, 16% and 13% of the Company's net sales in 1997, 1996 and
1995, respectively.
MARKETING AND RESEARCH AND DEVELOPMENT COSTS. All expenditures for
marketing and research and development are charged against earnings in the year
incurred and are reported in the Statement of Consolidated Operations under the
caption "Selling, general and administrative expenses." The Company's internal
and external research and development expenditures totaled approximately $12.3
million, $15.2 million and $14.7 million in 1997, 1996 and 1995, respectively.
Marketing costs include the costs of advertising and various sales promotional
programs.
CASH EQUIVALENTS. The Company considers all highly liquid investments with
original maturities of three months or less from the date of purchase to be cash
equivalents.
INVENTORIES. Generally, inventories are stated at the lower of cost (first
in, first out and average cost methods) or market.
LONG-LIVED ASSETS. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, the Company reviews the carrying values of its
long-lived assets and identifiable intangibles for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to be held and used may not be recoverable. For assets to be disposed of, the
Company reports long-lived assets and certain identifiable intangibles at the
lower of carrying amount or fair value less cost to sell.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost, net of
accumulated depreciation.
Depreciation is provided principally by use of the straight-line method at
annual rates as follows:
<TABLE>
<S> <C>
Buildings.................................... 2% to 5%
Machinery and other equipment................ 5% to 33%
Leasehold improvements....................... Lesser of lease term or useful life
</TABLE>
INTANGIBLES. Intangibles are carried at cost less accumulated
amortization. Intangibles that arose prior to November 1, 1970, as a result of
the Former Parent's initial investment in the Company are not being amortized.
Goodwill arising on or after November 1, 1970, is amortized on the straight-line
method over the periods of expected benefit ranging from 25 to 40 years.
Trademarks are amortized on the straight-line method over 40 years.
PENSION AND OTHER BENEFITS. Trusteed, noncontributory pension plans cover
substantially all employees, with benefit levels supplemented in most cases by
defined matching common stock contributions to employees' 401(k) plans. Defined
benefits are based primarily on final average salary and years of service.
Funding policies provide that payments to defined benefit pension trusts shall
be at least equal to the minimum funding required by applicable regulations.
The Company has defined benefit postretirement plans that provide medical
and life insurance for eligible retirees and dependents. The related
postretirement benefit liabilities are recognized over the period that services
are provided by employees.
STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 123 defines a fair-value based method of accounting for an employee
stock option or similar equity instrument. As permitted by SFAS No. 123, the
Company has elected to continue to measure cost for its stock-based compensation
plans using the intrinsic-value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." See Note O to the Consolidated Financial Statements for additional
information concerning stock-based compensation.
NET INCOME (LOSS) PER COMMON SHARE. In March 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"), which is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Early adoption of the statement was not permitted. This new standard
requires dual presentation of "basic" and "diluted" earnings per share ("EPS")
on the face of the statement of operations and requires a reconciliation of the
numerators and denominators of basic and diluted EPS calculations.
In accordance with SFAS No. 128, basic net income per common share is
computed by dividing net income by the weighted average number of common shares
outstanding during the year before giving effect to stock options considered to
be dilutive common stock equivalents. Diluted net income per common share is
computed by dividing net income by the weighted average number of common shares
outstanding during the year after giving effect to stock options considered to
be dilutive common stock equivalents. Shares held by the Employee Equity Trust
(the "Trust") are not considered outstanding for net income per share
calculations until the shares are released from the Trust.
At January 3, 1998, there were 102,725,481 shares of common stock issued
and 97,551,656 shares outstanding. At January 3, 1998, and December 28, 1996, a
total of 5,072,785 and 5,670,818, respectively, of the issued shares were held
by the Trust.
In addition to common stock, the Company is authorized to issue 10,000,000
shares of preferred stock, par value of $.01 per share, none of which has been
issued.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Per share information is not presented for 1995 because the Company was not
a publicly held company during such year. Income per share is presented for 1996
as the Company's common shares were issued on August 15, 1996. The calculation
of income per share assumes that the common shares and common share equivalents
were outstanding for that entire year.
NEW ACCOUNTING PRONOUCEMENTS. In June 1997, the FASB issued Statements of
Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income"
and No. 131 "Disclosures About Segments of an Enterprise and Related
Information". SFAS 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
income and additional capital in the shareholders equity section of the balance
sheet. SFAS 131 establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for disclosures about products and services, geographic areas and major
customers. Both statements are effective for fiscal year 1998. The Company has
not completed evaluating the impact of implementing the provisions of SFAS Nos.
130 and 131.
NOTE C. ACQUISITION OF BUSINESS
In September 1997, the Company acquired Nuevo Federal S.A., a manufacturer
and marketer of personal care and household products in Argentina, for a
purchase price of approximately $35 million. Of this amount, $26.8 million was
paid in cash with the remainder of the purchase price comprised of future
payments contingent on the completion of certain transactions. In addition, in
November 1997, the Company acquired three personal care soap brands and two
laundry bar brands from The Procter & Gamble Company's Argentinean subsidiary
for a purchase price of $4.8 million paid in cash.
The acquisitions were accounted for as purchases. The purchase price,
including acquisition costs, was allocated to the net tangible and intangible
assets acquired based on estimated fair values at the date of acquisition. The
difference between the purchase price and the related fair value of net assets
acquired represents goodwill, which is being amortized on a straight-line basis
over 25 years. The fair value of patents and other intangible assets acquired is
amortized over their estimated useful lives. The results of the acquired
companies have been included in the Statement of Consolidated Operations from
the date of acquisition.
Net cash paid, assets acquired and debt and other liabilities assumed are
shown in the table below.
<TABLE>
<CAPTION>
(000 OMITTED)
ASSETS ACQUIRED: 1997
---------------- --------
<S> <C>
Receivables................................................. $ 26,414
Inventories................................................. 9,544
Property and equipment...................................... 22,599
Intangibles................................................. 27,635
Other assets................................................ 369
Debt and other liabilities assumed.......................... (54,986)
--------
Net cash paid............................................... $ 31,575
========
</TABLE>
The Company is still gathering certain information required to complete the
allocation of the purchase price of the acquisition of Nuevo Federal. Further
adjustments may arise as a result of the finalization of the ongoing study.
The following unaudited proforma combined condensed financial information
for 1996 and 1997 include the results of operations for the Company, including
the results of operation of Nuevo Federal for the fourth quarter of 1997 and The
Procter & Gamble Company brands for November and December of 1997, along with
adjustments which give effect to events that are directly attributable to the
transaction and are expected
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to have a continuing impact. The information assumes the transactions were
consummated at the beginning of each period presented.
The unaudited proforma combined condensed financial information does not
purport to represent the results of operations that would have actually resulted
had the purchases occurred on the indicated dates, nor should it be taken as
indicative of future results of operations.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Revenues................................................... $1,428 $1,477
Operating income........................................... 164 75
Net income................................................. 85 33
Earnings per share-diluted................................. $ 0.90 $ 0.36
</TABLE>
NOTE D. RESTRUCTURING CHARGES AND INVENTORY AND ASSET WRITE-DOWNS
In the third quarter of 1996, the Company announced an administrative and
line of business reorganization to streamline its management and administrative
organization, eliminate approximately 250 positions, sell or discontinue a
number of underperforming brands and exit the existing corporate headquarters.
The Company recorded restructuring charges and asset write-downs of $55 million
($33.6 million after tax) in the third quarter of 1996 for severance costs,
discontinuance of product lines and building exit costs. Approximately $27.9
million of the charge related to inventories and was included in cost of
products sold.
In the third quarter of 1995, the Company recorded restructuring charges
and asset write-downs totaling $156 million ($94.9 million after tax) to provide
for a business-based reorganization through plant closings, work force
reductions and elimination of certain products. The charges provided for the
closing of six plants and the reduction of the work force by approximately 700
employees, substantially all of whom were based in the plants that were closed.
All six plants have been closed. Approximately $20.4 million of the charge
related to inventories and was included in cost of products sold.
During 1997, approximately $20.6 million of expenses, consisting of
severance pay and benefits and headquarters building exit costs, were charged
against these reserves. Approximately $14.4 million in reserves from the 1995
and 1996 restructuring charges remained at January 3, 1998, consisting primarily
of facility closure, environmental and building exit costs. These reserves are
believed to be adequate and the expenses are expected to be paid utilizing cash
flow from operations.
NOTE E. INCOME AND EXPENSE ITEMS
In the third quarter of 1997, the Company sold to Church & Dwight Co., Inc.
for $30.2 million Brillo soap pads and related products, Parsons ammonia, Bo
Peep ammonia, Sno Bol toilet bowl cleaner, Cameo metal cleaner and Rain Drops
water softener. The Company's London, Ohio plant, where Brillo is manufactured,
was also part of the sale. In addition, the Company sold to other third parties
for approximately $4.5 million its Bruce floor care trademark and its Magic
sizing starch brand and related inventories. Included in operating income is an
aggregate gain of $15.7 million from the sale of these businesses.
Also included in 1997 operating income is $15.9 million of various
impairment and other operating charges. In the third quarter of 1997, the
Company evaluated the estimated life of the capitalized package design costs,
which was being amortized over five years. In light of the accelerated pace of
package design changes taking place in the Company and the industry, the
estimated life of the capitalized package design costs was changed to one year.
Accordingly, $9.5 million of capitalized package design costs were considered
impaired and written-off against income. In addition, the Company charged
against income $4.5 million of discontinued product sales returns and $1.9
million in additional promotion claims on discontinued products.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Raw materials and supplies........................... $ 36,938 $ 37,744
Work in process...................................... 9,373 10,939
Finished goods....................................... 77,747 90,809
-------- --------
$124,058 $139,492
======== ========
</TABLE>
NOTE G. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Land................................................. $ 10,071 $ 5,473
Buildings and leasehold improvements................. 108,613 81,874
Machinery and other equipment........................ 376,582 328,014
Construction in progress............................. 15,936 33,054
-------- --------
511,202 448,415
Less accumulated depreciation........................ (250,274) (221,864)
-------- --------
$260,928 $226,551
======== ========
</TABLE>
NOTE H. INTANGIBLES
Intangibles consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Goodwill(1).......................................... $265,335 $238,623
Trademarks........................................... 54,957 69,675
Customer list and other intangibles.................. 78,997 98,689
-------- --------
399,289 406,987
Less accumulated amortization........................ (67,807) (81,248)
-------- --------
$331,482 $325,739
======== ========
</TABLE>
- ---------------
(1) Includes $155,259,000 of goodwill arising prior to November 1, 1970 that is
not being amortized.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Accrued compensation................................. $ 30,238 $ 12,829
Accrued trade promotions............................. 21,256 22,835
Restructure liabilities.............................. 14,631 34,114
Other................................................ 47,310 38,367
-------- --------
$113,435 $108,145
======== ========
</TABLE>
NOTE J. DEBT
Short-term debt at January 3, 1998 consisted of a $8,500,000 bank loan to
the Company's Argentinean subsidiary, Nuevo Federal. The loan is denominated in
Argentinean pesos, bears interest at the bank's short-term rate (7.3% at January
3, 1998) and reprices monthly. The loan is subject to call by the bank at the
end of each month.
Long-term debt at January 3, 1998 and December 28, 1996, amounted to
$84,399,400 and $269,515,250, respectively, in the form of bank borrowings
supported by a $350,000,000 long-term, revolving credit agreement. The
interest-rate applicable to the bank borrowings is, at the Company's option,
indexed to the bank prime rate or the London Interbank Offering Rate ("LIBOR")
(5.6875% at January 3, 1998), plus appropriate spreads over such indices during
the period of the borrowings.
Any borrowings made under the credit agreement are on a revolving basis
under commitments available until August 15, 2002. The agreement also provides
for commitment fees. Such spreads and fees will change moderately should the
Company's debt ratings change.
The financial covenants of the revolving credit agreement require the
Company to maintain stockholders' equity equal to 80% of such equity as of the
Spin-off date plus 25% of net income subsequent thereto plus certain other
additions to stockholders' equity. The Company is also required to maintain a
three-to-one ratio of long-term debt to income before interest, taxes,
depreciation and amortization. Under the most restrictive of these covenants,
approximately $64,000,000 of stockholders' equity was available for dividends as
of January 3, 1998.
Interest expense incurred on long-term debt in 1997, 1996 and 1995 was
$13,152,000, $6,500,000 and $333,000, respectively.
Interest paid to lenders other than Former Parent in 1997, 1996 and 1995
was approximately $13,567,500, $5,329,800 and $133,300, respectively.
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE K. INCOME TAXES
The deferred income tax assets (liabilities) included in the Consolidated
Balance Sheet at January 3, 1988 and December 28, 1996, are related to the
following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Property, plant and equipment........................ $(34,837) $(42,159)
Pension and other employee benefits.................. 83,599 89,098
1995 restructure costs............................... 4,563 28,170
1996 restructure costs............................... 1,662 12,299
Other................................................ 19,237 16,949
Deferred state income taxes.......................... 14,528 20,940
-------- --------
$ 88,752 $125,297
======== ========
</TABLE>
The combined provision (benefit) for income taxes consisted of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
(000 OMITTED)
<S> <C> <C> <C>
Current:
United States:
Federal................................. $10,744 $10,262 $ 14,576
State................................... 2,024 3,081 549
Foreign.................................... 912 133 81
------- ------- --------
13,680 13,476 15,206
------- ------- --------
Deferred:
United States:
Federal................................. 30,133 5,977 (30,955)
State................................... 6,412 (6,942) (3,778)
------- ------- --------
36,545 (965) (34,733)
------- ------- --------
Provision (benefit) for income taxes......... $50,225 $12,511 $(19,527)
======= ======= ========
</TABLE>
Income taxes paid in 1997, 1996 and 1995 amounted to $4,577,000, $3,789,000
and $32,237,000, respectively.
Reconciliations between the statutory federal income tax rate and the
Company's consolidated effective income tax rate for the years ended January 3,
1998; December 28, 1996; and December 30, 1995, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate................................. 35.0 35.0% 35.0%
Goodwill amortization.................................. .4 1.1 (2.1)
Spin-off transaction costs............................. .5
Foreign Sales Corp. exclusion (benefit)................ (.7) (1.0) .8
State income taxes..................................... 3.7 3.6 2.9
State deferred tax asset adjustment.................... (9.5)
Impact of lower foreign tax rate (benefit)............. (1.1) (1.4)
Other, net............................................. .2 1.2 4.9
---- ---- ----
Effective income tax rate.............................. 37.5% 29.5% 41.5%
==== ==== ====
</TABLE>
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L. PENSION AND OTHER BENEFITS
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(000 OMITTED)
<S> <C> <C> <C>
Service cost benefits earned during the
period................................. $ 4,365 $ 4,516 $ 4,483
Interest cost on projected benefit
obligation............................. 11,923 11,419 6,951
Actual return on plan assets (gain)...... (28,421) (13,767) (14,841)
Net amortization and deferral............ 17,406 3,573 8,973
Other items, primarily defined
contribution and multi-employer
plans.................................. 3,137 3,360 3,154
-------- -------- --------
Net pension cost......................... $ 8,410 $ 9,101 $ 8,720
======== ======== ========
</TABLE>
Weighted average assumptions used were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate for obligation......................... 7.75% 8.0% 8.0%
Rate of increase in compensation Levels.............. 4.0% 5.0% 5.0%
Long-term rate of return on assets................... 10.0% 9.5% 9.5%
</TABLE>
The following table indicates the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheet:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
-------------------------- --------------------------
JANUARY 3, DECEMBER 28, JANUARY 3, DECEMBER 28,
1998 1996 1998 1996
---------- ------------ ---------- ------------
(000 OMITTED)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation................. $126,682 $47,300 $ 5,455 $ 77,506
======== ======= ======= ========
Accumulated benefit obligation............ $136,098 $52,298 $ 5,866 $ 82,562
======== ======= ======= ========
Projected benefit obligation.............. $153,877 $68,802 $ 7,522 $ 85,870
Market value of plan assets, primarily
equity and fixed income securities(1)... 156,754 64,496 862 72,829
-------- ------- ------- --------
Plan assets under projected benefit
obligation.............................. 2,877 (4,306) (6,660) (13,041)
Unrecognized transition (asset)
obligation.............................. 821 (126) 107 1,381
Unrecognized prior service cost
(reduction)............................. 4,090 (579) 1,052 6,168
Unrecognized net (gain)................... (18,500) (829) (94) (195)
Additional minimum liability(2)........... (185) (6,252)
-------- ------- ------- --------
Accrued pension cost...................... $(10,712) $(5,840) $(5,780) $(11,939)
======== ======= ======= ========
</TABLE>
- ---------------
(1) The assets reported at December 28, 1996, represent primarily the portion of
the trust assets funding Former Parent's joint benefit plan allocated to the
Company under separate SFAS No. 87 calculations. In conjunction with the
Spin-off, assets were transferred from the trust funding the joint, defined
benefit plan based upon actuarial determinations made in conformity with
regulatory requirements. There was provision for payment by Former Parent
(from a source other than the trust) to the Company of an amount in cash
equal to the excess of the amount allocated to the Company under separate
SFAS No. 87 calculations over the amount allocated from the trust in
accordance with regulatory requirements. For all free-standing qualified
plans attributable directly to the Company, the related trust assets were
transferred based upon the amounts in the respective plans' trusts.
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) At January 3, 1998, the Company recorded an additional minimum liability for
pensions of $185,000 and a deferred tax asset of $73,000. At December 28,
1996, the Company recorded an additional minimum liability for pensions of
$6,252,000, an intangible asset of $143,000, a deferred tax asset of
$2,397,000 and a reduction of equity of $3,712,000. There are restrictions
on the use of certain excess pension plan assets in the event of a defined
change in control of the Company.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company and its
subsidiaries have defined benefit postretirement plans that provide medical and
life insurance for eligible employees, retirees and dependents. In addition, the
Company retained the obligations for such benefits for eligible retirees of
Armour and Company (sold in 1983).
Effective January 1, 1992, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("OPEB"), which requires that estimated OPEB benefits be accrued during the
years the employees provide services.
The status of the plans was as follows:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(000 OMITTED)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................... $144,784 $157,224
Fully eligible active plan participants............ 15,660 13,264
Other active plan participants..................... 29,673 25,748
-------- --------
Accumulated postretirement benefit obligation........ 190,117 196,236
Unrecognized prior service cost...................... 12,212 14,045
Unrecognized net gain................................ 24,373 21,080
-------- --------
Accrued postretirement benefit cost.................. $226,702 $231,361
======== ========
Discount rate for obligation......................... 7.75% 8.0%
</TABLE>
The assumed health-care rate cost trend used in measuring the 1997
accumulated postretirement benefit obligation was 10% for retirees below age 65,
gradually declining to 5% by the year 2002 and remaining at that level
thereafter, and 7.5% for retirees above age 65, gradually declining to 5% by the
year 2002 and remaining at that level thereafter.
A 1.0% increase in the assumed health-care cost trend rate for each year
would increase the accumulated postretirement benefit obligation as of January
3, 1998, by approximately 8% and the ongoing expense by approximately 10%.
The net periodic postretirement benefit cost includes the following
components for the corresponding fiscal years ending:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
(000 OMITTED)
<S> <C> <C> <C>
Service cost-benefits attributed to service
during the period............................ $ 2,276 $ 2,589 $2,979
Interest cost on the accumulated postretirement
benefit obligation........................... 14,453 15,641 6,695
Net amortization and deferral.................. (3,448) (3,087) (233)
------- ------- ------
Net periodic postretirement benefit cost....... $13,281 $15,143 $9,441
======= ======= ======
Curtailment gains due to termination of certain
benefits..................................... $ 4,611
======= ======= ======
</TABLE>
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1997 and 1996 components of net periodic postretirement benefit cost
reflect a full year's expense of approximately $5.8 million and $6.9 million,
respectively, incurred on the Armour employee benefit liabilities assumed in the
Spin-off. Expenses of approximately $5.8 million for the year ended January 3,
1998, and $2.2 million for the year ended December 28, 1996, which were incurred
after the Spin-off, are included in "Interest and other expenses" in the
Statement of Consolidated Operations. For the year ended December 28, 1996,
expenses of $4.7 million incurred prior to the Spin-off were recorded in the
financial statements of Former Parent.
NOTE M. LEASES
Certain sales and administration offices and equipment are leased. The
leases expire in periods ranging generally from one to five years, and some
provide for renewal options ranging from one to eight years. Leases that expire
are generally renewed or replaced by similar leases depending on business needs
at that time. Net rent expense paid in 1997, 1996 and 1995 totaled $6,533,229,
$3,797,000 and $3,234,000, respectively.
At January 3, 1998, the Company's future minimum rental payments with
respect to noncancelable operating leases with terms in excess of one year were
as follows: $7,033,208 (1998), $5,902,048 (1999), $5,577,581 (2000), $5,293,061
(2001) and $4,269,602 (2002), and $7,863,000 thereafter.
Included in the above future minimum rental payments are payments of
$2,676,000 per year through 2006 for office space in the Viad Tower, which the
Company vacated in mid-year 1997 to move its corporate headquarters to office
space in Scottsdale, Arizona. The Company is actively marketing the space for
sublease.
NOTE N. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. At January 3, 1998, the
Company had an agreement to sell undivided participating interests in a defined
pool of trade accounts receivable in an amount not to exceed $90,000,000 as a
means of accelerating cash flow. From time to time, as collections reduce
accounts receivable in the pool, the Company sells participating interests in
new receivables. The Company's expenses of selling receivables amounted to
approximately $4,752,000, $2,059,000 and $2,323,000 in 1997, 1996 and 1995,
respectively, and are included in the Statement of Consolidated Operations under
the caption "Interest and other expenses." Under the terms of the agreement, the
Company has retained substantially the same risk of credit loss as if the
receivables had not been sold, as the Company is obligated to replace
uncollectible receivables with new accounts receivable. The Company's accounts
receivable sold totaled $58,902,000 and $74,900,000 at January 3, 1998 and
December 28, 1996, respectively. The Company's average accounts receivable sold
approximated $70,727,000, $42,637,000 and $33,500,000 during 1997, 1996 and
1995, respectively.
In connection with the Spin-off, the Company assumed an interest rate swap
agreement in the notional amount of $65,000,000. The agreement, which matured in
December 1997, required the Company to pay a fixed rate of 8.87% and receive a
six-month LIBOR rate (currently 5.63%).
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of cash and cash
equivalents, receivables, accounts payable and bank borrowings approximate fair
values due to the short-term maturities of these instruments. The fair value of
the above-described interest rate swap agreement was $1,900,070 at December 28,
1996, representing the estimated amount the Company would pay to the swap
counter-party to terminate the agreement.
NOTE O. STOCK OPTIONS
Certain officers and employees hold options to acquire the Company's common
stock, which were granted under the Former Parent company's stock option plans.
These options were granted over a period of nine years and have been adjusted
for stock splits and the spin-off of a major subsidiary occurring during that
period. Such options were transferred to the Company as part of the spin-off,
with the number of shares and
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
option prices adjusted so as to preserve the economic value of the options to
the optionees. Such options were granted at the market prices on the dates of
grant, became exercisable 50% after one year and 100% after two years and expire
after 10 years. No additional options are to be granted under these plans.
In connection with the Spin-off, the Company adopted The Dial Corporation
1996 Stock Incentive Plan ("1996 Plan") which is administered by the Executive
Compensation Committee of the Board of Directors. Under the 1996 Plan, the
aggregate number of shares of common and preferred stock covered by awards to
any one individual cannot exceed 1,000,000 shares for any three-year period
(plus shares necessary to replace options granted by Former Parent and
transferred to the Company in connection with the Spin-off), and no more than
9,600,000 shares are cumulatively available for options intended to qualify as
"incentive stock options" under the Internal Revenue Code. The term of the
options is 10 years. The 1996 Plan provides that options are generally to be
granted at the market price on the date of grant; however, the Executive
Compensation Committee may grant options at less than such market price. The
1996 Plan also authorizes the issuance of stock appreciation rights and
restricted stock.
During 1997, under the 1996 Plan, incentive stock options to 1,019,802
shares and non-qualified options to 128,800 shares were granted at the market
price on the dates of grant. After one year, one-third of the options become
exercisable when the average closing market price over 20 consecutive days
equals or exceeds 133% of the option price, two-thirds when such price equals or
exceeds 167% of the option price and 100% when such price equals or exceeds 200%
of the option price. All such options become exercisable, in any event, after
five years from the date of grant. It is expected that additional options
granted will generally be limited to new employees.
Options to 87,100 shares were also granted to non-employee members of the
Board of Directors and options to 47,650 were granted to certain non-union
employees at the market prices on the dates of grant. Such options are
exercisable 50% after one year and 100% after two years. The options expire
after 10 years.
A summary of the status of the Company's stock option plans as of January
3, 1998, and changes during fiscal years 1996 and 1997 is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- --------
<S> <C> <C>
Outstanding at Spin-off............................... 4,298,041 $ 9.63
Granted............................................... 6,226,324 $13.11
Exercised............................................. (293,015) $ 9.25
Canceled.............................................. (61,776) $11.84
Outstanding at December 28, 1996...................... 10,169,574 $11.76
Granted............................................... 1,283,352 $16.23
Exercised............................................. (1,415,570) $ 9.57
Canceled.............................................. (1,056,435) $13.23
---------- ------
Outstanding at end of year............................ 8,980,921 $12.60
========== ======
Options exercisable at end of year.................... 4,380,917 $11.14
========== ======
</TABLE>
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
and exercisable at January 3, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF OPTIONS LIFE EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.62-$ 6.88 614,868 2.4 $ 6.47 614,868 $ 6.47
$ 8.38-$ 9.23 402,151 4.8 $ 8.95 402,151 $ 8.95
$ 9.64-$11.15 800,759 5.9 $10.37 800,759 $10.37
$11.91-$12.88 4,892,271 8.6 $12.75 2,138,810 $12.58
$13.38-$14.50 1,088,128 8.9 $14.30 424,329 $14.21
$15.38-$16.25 686,658 9.4 $15.82
$16.53-$17.78 455,803 9.8 $16.84
$18.31-$20.91 40,283 10.0 $20.03 -- --
--------- ---- ------ --------- ------
8,980,921 6.7 $12.60 4,380,917 $11.14
========= ==== ====== ========= ======
</TABLE>
The estimated fair value of options granted during 1997 was $4.18 per
share, as determined using the Black-Scholes valuation model assuming an
expected average risk-free interest rate of 6.3%, an expected life of 4.4 years,
an expected volatility of 25% and expected dividend rate of 2.0%. The estimated
fair value of options granted during 1996 was $2.27 as determined using the
Black-Scholes valuation model assuming an expected average risk-free interest
rate of 6.3%, an expected life of 4.2 years, an expected volatility of 20.4% and
an expected dividend rate of 2.4%. The Company applies Accounting Principles
Board Opinion No. 25 and related Interpretations in accounting for its stock
option plans. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's stock option plans
been determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below. Compensation
cost computed under SFAS No. 123 for 1995 is immaterial.
<TABLE>
<CAPTION>
1997 1996
------- -------
(000 OMITTED)
<S> <C> <C>
Net income as reported................................... $83,710 $29,912
======= =======
Pro forma net income..................................... $78,224 $27,298
======= =======
Net income per share-basic-as reported................... $ 0.91 $ 0.33
======= =======
Pro forma net income per share-basic..................... $ 0.85 $ 0.30
======= =======
Net income per share-diluted-as reported................. $ 0.89 $ 0.33
======= =======
Pro forma net income per share-diluted................... $ 0.83 $ 0.30
======= =======
</TABLE>
NOTE P. LITIGATION AND CLAIMS
The Company is party to various legal actions, proceedings and pending
claims. Some of the foregoing involve, or may involve, compensatory, punitive or
other damages in material amounts. Litigation is subject to many uncertainties,
and it is possible that some of the legal actions, proceedings and claims
referred to above could be decided against the Company. Although the amount of
liability at January 3, 1998, with respect to these matters is not
ascertainable, the Company believes that any resulting liability will not
materially affect the Company's financial position, liquidity or results of
operations.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is subject to various environmental laws and regulations of the
United States, as well as of the states and other countries in whose
jurisdictions the Company has or had operations and is subject to certain
international agreements. As is the case with many companies, the Company faces
exposure to actual or potential claims and lawsuits involving environmental
matters. Although the Company is party to certain environmental disputes, the
Company believes that any liabilities resulting therefrom, after taking into
consideration amounts already provided for, but exclusive of any potential
insurance recoveries, will not have a material adverse effect on the Company's
financial position or results of operations.
NOTE Q. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------- ------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- -------- -------- --------
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $316,242 $352,392 $349,268 $353,758 $334,290 $350,508 $362,806 $349,742
Gross profit......... $146,952 $176,947 $166,231 $163,910 $160,567 $134,357 $170,742 $163,669
Operating income
(loss)(1)(2)....... $ 36,657 $ 36,342 $ 40,057 $ 42,997 $ 40,985 $(31,393) $ 44,471 $ 22,451
Net income
(loss)(1)(2)....... $ 18,323 $ 19,608 $ 20,382 $ 19,289 $ 22,352 $(25,486) $ 22,653 $ 16,501
Net income (loss) per
share(1)(2)
-- Basic........... $0.20 $0.22 $0.22 $0.22 $0.25 $(0.28) $0.24 $0.18
-- Diluted......... $0.20 $0.22 $0.22 $0.22 $0.24 $(0.28) $0.23 $0.18
</TABLE>
- ---------------
(1) After deducting Spin-off transaction costs of $4,000,000 ($2,400,000 after
tax) or $0.03 per share in the second quarter of 1996 and restructuring
charges and asset write-downs and Spin-off transaction costs of $56,000,000
($32,900,000 after tax) or $0.36 per share in the third quarter of 1996.
(2) Included in the fourth quarter of 1996 were credits of approximately $4.6
million ($2.8 million after tax) for pension expense and other
postretirement benefits resulting from favorable variances between budgeted
and actual expense.
In addition, the Company recorded a $4 million increase in deferred state
income tax assets in the fourth quarter of 1996. The Company's future state
income tax rate is approximately 1% higher than that which the Company was
subject to as a subsidiary of Former Parent.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has never filed a Current Report on Form 8-K to report a change
in accountants because of a disagreement over accounting principles or
procedures, financial statement disclosure or otherwise.
37
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's Directors and Executive Officers is
set forth below and under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders to be held on June 4, 1998 (the "Proxy
Statement"), which is incorporated by reference into this Form 10-K. With the
exception of this foregoing information and other information specifically
incorporated by reference into this Form 10-K, the Proxy Statement is not being
filed as a part hereof.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Malcolm Jozoff.................. 58 Chairman of the Board, President and Chief Executive Officer
Patricia I. Bowman.............. 46 Senior Vice President -- Research and Development
Daniel J. King.................. 45 Senior Vice President -- Product Supply
Scott McHenry................... 46 Senior Vice President -- Sales and Marketing
Jane E. Owens................... 44 Senior Vice President, General Counsel and Secretary
Susan J. Riley.................. 39 Senior Vice President and Chief Financial Officer
Mark R. Shook................... 43 Senior Vice President -- International/CMD
Bernhard J. Welle............... 49 Senior Vice President -- Human Resources
Joy A. Amundson(1)(2)........... 42 Director
Herbert M. Baum(3).............. 60 Director
Joe T. Ford(2).................. 60 Director
Thomas L. Gossage(1)(3)(4)...... 63 Director
Donald E. Guinn(3).............. 64 Director
Michael T. Riordan(4)........... 46 Director
Dennis C. Stanfill(4)........... 71 Director
Barbara S. Thomas (2)........... 45 Director
A. Thomas Young(1)(2)(4)........ 59 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Governance Committee.
(4) Member of the Executive Compensation Committee.
Malcolm Jozoff. Mr. Jozoff has been Chairman of the Board, President and
Chief Executive Officer of the Company since the Company's formation in 1996.
Prior to joining the Company, Mr. Jozoff served as President and Chief Executive
Officer of the Consumer Products Business of Viad Corp, positions to which he
was appointed in May 1996. From 1993 to 1995, he was Chairman and Chief
Executive Officer of Lenox, Inc., a manufacturer of consumer durables. From 1967
to 1992, Mr. Jozoff was employed by The Procter & Gamble Company, a manufacturer
of consumer products where, in 1990, he achieved the positions of
President -- Health Care Sector, Corporate Group Vice President and member of
the Executive Committee. Mr. Jozoff also is a Director of Columbia Energy Group
and ChemTrak Incorporated. In 1993, in connection with a civil proceeding
brought by the Securities and Exchange Commission, Mr. Jozoff consented, without
admitting or denying the allegations, to the entry of an order enjoining him
from violating Section 10(b) of the Exchange Act.
Patricia I. Bowman. Dr. Bowman has served as Senior Vice President,
Research and Development of the Company since April 1997. From 1994 to April
1997, she served as Senior Vice President, Research and Development for North
and South America for Reckitt & Colman plc, and from 1989 to 1994 she served as
Senior Vice President, Research and Development for L&F Products, a subsidiary
of Eastman Kodak Company ("L&F"), until L&F was sold to Reckitt & Colman plc in
1994.
38
<PAGE> 41
Daniel J. King. Mr. King has served as Senior Vice President, Product
Supply of the Company since September 1996. From the Spin-off to September 1996,
Mr. King served as the Company's Senior Vice President, Customer Service. From
1991 until the Spin-off, Mr. King served as Senior Vice President, Customer
Service of the Consumer Products Business of the Former Parent.
Scott McHenry. Mr. McHenry has served as Senior Vice President, Sales and
Marketing since joining the Company in October 1996. From 1991 to October 1996,
Mr. McHenry served as a Principal of McKinsey & Company, an international
management consulting firm ("McKinsey"), which he joined in 1983. While at
McKinsey, Mr. McHenry primarily served packaged goods clients and, in 1992,
became co-leader of the North American packaged goods practice.
Jane E. Owens. Ms. Owens has served as Senior Vice President and General
Counsel of the Company since May 1997. From 1992 to May 1997, Ms. Owens served
as Vice President and General Counsel of The Timberland Company.
Susan J. Riley. Ms. Riley has served as Senior Vice President and Chief
Financial Officer of the Company since September 1997. From 1995 until July
1997, she was Senior Vice President and Chief Financial Officer of Tambrands
Inc. ("Tambrands"). She joined Tambrands in 1987 as Manager, International
Finance and held various positions in Tambrands' international and domestic
operations until she was named Senior Vice President and Chief Financial Officer
in 1995.
Mark R. Shook. Mr. Shook has served as Senior Vice President,
International of the Company since September 1996. From the Spin-off until
September 1996, he was an Executive Vice President and General Manager, Personal
Care, of the Company. From September 1990 to the Spin-off, Mr. Shook was an
Executive Vice President of the Consumer Products Business of the Former Parent,
serving as General Manager, Food from September 1990 to September 1993; General
Manager, Food and International, from September 1993 to April 1994; General
Manager, Laundry and International, from April to September 1994; General
Manager, Soaps and Detergents, from September 1994 to July 1995; and General
Manager, Personal Care from July 1995 to the Spin-off.
Bernhard J. Welle. Mr. Welle has served as Senior Vice President, Human
Resources of the Company since August 1996. From 1987 to August 1996, Mr. Welle
served as Vice President, Human Resources of the Consumer Products Business of
the Former Parent.
Joy A. Amundson. Ms. Amundson has been a Director of the Company since
1997, and is Senior Vice President of Abbott Laboratories ("Abbott"), a
diversified health care products and services company, and President of Ross
Laboratories. She has held a number of management positions since joining Abbott
in 1982. Ms. Amundson serves on the Board of the National Committee for Quality
Healthcare and is Chairman of the Board of Lutheran General Hospital.
Herbert M. Baum. Mr. Baum has been a Director of the Company since 1997,
and has been Chairman and Chief Executive Officer of Quaker State Corporation, a
producer of motor oils and lubricants, since 1993. From 1978 to 1992, Mr. Baum
was employed by Campbell Soup Company ("Campbell"). In 1992, he was named
President of Campbell -- North and South America. Mr. Baum also is a Director of
Meredith Corporation, Whitman Corporation and Midas International, Inc.
Joe T. Ford. Mr. Ford has been a Director of the Company since 1996, and
is Chairman and Chief Executive Officer of ALLTEL Corporation ("ALLTEL"), a
telecommunications and information services company. Mr. Ford became Chief
Executive Officer of ALLTEL in 1987 and Chairman of the Board in 1991.
Thomas L. Gossage. Mr. Gossage has been a Director of the Company since
1996. Mr. Gossage retired as Chairman and Chief Executive Officer of Hercules
Incorporated, a worldwide producer of chemicals and related products, in January
1997. Mr. Gossage also is a Director of Fluor Corp. and Alliant Techsystems Inc.
Donald E. Guinn. Mr. Guinn has been a Director of the Company since 1996,
and is Chairman Emeritus of Pacific Telesis Group, a telecommunications holding
company ("PacTel"). Mr. Guinn served as Chairman and Chief Executive Officer of
PacTel from 1984 through his retirement in 1988. He also is a
39
<PAGE> 42
Director of Pacific Mutual Life Insurance Company and its affiliates, Pacific
LifeCorp and Pacific Life Insurance Company, and BankAmerica Corporation and its
subsidiary, Bank of America, NT&SA.
Michael T. Riordan. Mr. Riordan has been a Director of the Company since
1997, and is President and Chief Operating Officer of Fort James Corporation, a
paper products manufacturer. Prior to the recent merger of Fort Howard
Corporation with James River Corporation, he served as Chairman of the Board,
President and Chief Executive Officer of Fort Howard Corporation, a paper
products manufacturer, where he had been employed since 1979. Mr. Riordan is a
director of Fort James Corporation and American Medical Security Holdings, Inc.
Dennis C. Stanfill. Mr. Stanfill has been a Director of the Company since
1996, and has been President of the Dennis Stanfill Company, a private
investment and venture capital firm since 1993. Prior thereto, he was Senior
Advisor at Credit Lyonnais, a global bank; Co-Chairman and Co-Chief Executive
Officer of Metro-Goldwyn-Mayer Inc.; Chairman and President of AME, Inc., a
video post-production company; and President and a principal stockholder of
Stanfill Bowen & Co., Inc., a private investment and venture firm. Mr. Stanfill
will retire as a Director of the Company upon the expiration of his term at the
1998 Annual Meeting of Stockholders.
Barbara S. Thomas. Ms. Thomas has been a Director of the Company since
1997, and is President of Warner-Lambert Consumer Healthcare, the
over-the-counter pharmaceuticals business of the Warner-Lambert Co. Ms. Thomas
has over 20 years of experience as a consumer goods marketer and general
manager. She was with the Pillsbury Company ("Pillsbury") from 1993 to 1997,
serving last as President of Pillsbury Canada Ltd. Prior to joining Pillsbury,
Ms. Thomas was Senior Vice President Marketing for Nabisco Brands, Inc. from
1991 to 1993.
A. Thomas Young. Mr. Young has been a Director of the Company since 1996.
Mr. Young served as Executive Vice President of Lockheed Martin Corporation from
March 1995 to July 1995. From 1990 to March 1995, he was President and Chief
Operating Officer of Martin Marietta Corporation. Mr. Young also is a Director
of Potomac Electric Power Co., B.F. Goodrich and Science Applications
International Corp.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation matters is incorporated
herein by reference to "Executive Compensation," "Option/SAR Grants in Last
Fiscal Year," "Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values," "Pension Plans" and "Employment Agreements and Change
of Control Arrangements" in the Proxy Statement; provided, however, that the
"Compensation Committee Report on Executive Compensation" and the "Stock Price
Performance Graph" contained in the Proxy Statement are not incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the Common Stock beneficially owned by each Director
of the Company, by all Executive Officers and Directors of the Company as a
group and by each stockholder known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock is incorporated herein by reference
to "Common Stock Ownership of Certain Beneficial Owners" and "Common Stock
Ownership of Directors and Executive Officers" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last fiscal year, there were no relationships or related
transactions that are required to be disclosed herein.
40
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(i) Financial Statements.
(1) Management's Report on Responsibility for Financial
Reporting............................................... 19
(2) Independent Auditor's Report........................ 20
(3) Consolidated Financial Statements:
Consolidated Balance Sheet at January 3, 1998 and
December 28, 1996................................... 21
Statements of Consolidated Operations for the years
ended January 3, 1998, December 28, 1996 and
December 30, 1995................................... 22
Statements of Consolidated Cash Flows for the years
ended January 3, 1998, December 28, 1996 and
December 30, 1995................................... 23
Statements of Consolidated Stockholders' Equity for
the years ended January 3, 1998, December 28, 1996
and December 30, 1995............................... 24
Notes to Consolidated Financial Statements......... 25
(ii) Financial Statement Schedules.
Schedules have been omitted because of the absence of
conditions under which they are required or because the
required material information is included in the consolidated
financial statements or notes to the consolidated financial
statements included herein.
</TABLE>
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated November 10, 1997,
reporting that in connection with the offering of up to $115,000,000 aggregate
offering price of its Common Stock, par value $.01 per share, pursuant to the
Registration Statement on Form S-3 (File No. 333-33659), as amended, which
Registration Statement was declared effective on October 16, 1997, the Company
filed the U.S. Purchase Agreement, dated November 10, 1997, entered into by the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., NationsBanc Montgomery Securities, Inc., PaineWebber
Incorporated, Prudential Securities Incorporated and Smith Barney Inc.
The Company also filed a Current Report on Form 8-K, dated January 27,
1998, reporting that the Company issued a press release relating to its
financial results for the fourth quarter of 1997 and the 1997 fiscal year, a
copy of which was filed as Exhibit 99.
(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<C> <S> <C>
3(a) Restated Certificate of Incorporation of Incorporated by reference to Exhibit 3(a)
the Company of the Company's Form 10/A (Am. No. 2),
dated July 26, 1996 (the "Form 10").
3(b) Bylaws of the Company*
4 Form of Rights Agreement between the Incorporated by reference to Exhibit 4 of
Company and the Rights Agent the Form 10.
10(a) Director's Indemnification Agreement+ Incorporated by reference to Exhibit
10(a) of the Company's Form 10-Q, dated
November 11, 1996 (the "Form 10-Q").
10(b) Officer's Indemnification Agreement+ Incorporated by reference to Exhibit
10(b) of the Form 10-Q.
10(c) Supplemental Capital Accumulation Plan Incorporated by reference to Exhibit
Agreement+ 10(c) of the Form 10-Q.
</TABLE>
41
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<C> <S> <C>
10(d) Supplemental Pension Plan Agreement+ Incorporated by reference to Exhibit
10(d) of the Form 10-Q.
10(e) The Dial Corporation 1996 Stock Incentive Incorporated by reference to Exhibit
Plan+ 10(d) of the Form 10.
10(f) Annual Incentive Plan Agreement+ Incorporated by reference to Exhibit
10(f) of the Company's Form 10-K for the
fiscal year ended December 28, 1996 (the
"Form 10-K")
10(g) Form of The Dial Corporation Director's Incorporated by reference to Exhibit
Charitable Award Program+ 10(f) of the Form 10.
10(h) Form of Employment Agreements with Incorporated by reference to Exhibit
certain Executive Officers of the 10(h) of the Form 10.
Company+
10(i) Credit Agreement Incorporated by reference to Exhibit
10(j) of the Form 10.
10(j) Form of The Dial Corporation Employee Incorporated by reference to Exhibit
Equity Trust 10(k) of the Form 10.
10(k) The Dial Corporation Amended and Restated
Directors Deferred Compensation Plan+*
10(l) The Dial Corporation Amended and Restated
Management Deferred Compensation Plan+*
10(m) Restated Employment Agreement, dated
August 11, 1997, between the Company and
Malcolm Jozoff+*
11 Statement Regarding Computation of Per
Share Earnings*
21 List of Significant Subsidiaries*
23 Consent of Deloitte & Touche LLP*
24 Power of Attorney See Signature Page
27 Financial Data Schedule*
</TABLE>
- ---------------
+ Management contract or compensatory plan or arrangement
* Filed herewith.
42
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned; thereunto duly authorized, in Scottsdale, Arizona, on March
4, 1998.
THE DIAL CORPORATION
By: /s/ MALCOLM JOZOFF
------------------------------------
Malcolm Jozoff
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS that the persons whose signatures appear
below, constitute and appoint Malcolm Jozoff and Susan J. Riley, and each of
them, as their true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for them and in their names, places and steads,
in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 and any and all amendments to the Form 10-K, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as they might or could do in person,
thereby ratifying and confirming all that said attorney-in-fact and agent, or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MALCOLM JOZOFF Chairman of the Board, President March 4, 1998
- ----------------------------------------------------- and Chief Executive Officer
Malcolm Jozoff (Principal Executive Officer)
/s/ SUSAN J. RILEY Senior Vice President and Chief March 4, 1998
- ----------------------------------------------------- Financial Officer (Principal
Susan J. Riley Financial Officer and Principal
Accounting Officer)
/s/ JOY A. AMUNDSON Director March 4, 1998
- -----------------------------------------------------
Joy A. Amundson
/s/ HERBERT M. BAUM Director March 4, 1998
- -----------------------------------------------------
Herbert M. Baum
/s/ JOE T. FORD Director March 4, 1998
- -----------------------------------------------------
Joe T. Ford
/s/ THOMAS L. GOSSAGE Director March 4, 1998
- -----------------------------------------------------
Thomas L. Gossage
/s/ DONALD E. GUINN Director March 4, 1998
- -----------------------------------------------------
Donald E. Guinn
/s/ MICHAEL T. RIORDAN Director March 4, 1998
- -----------------------------------------------------
Michael T. Riordan
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DENNIS C. STANFILL Director March 4, 1998
- -----------------------------------------------------
Dennis C. Stanfill
/s/ BARBARA S. THOMAS Director March 4, 1998
- -----------------------------------------------------
Barbara S. Thomas
/s/ A. THOMAS YOUNG Director March 4, 1998
- -----------------------------------------------------
A. Thomas Young
</TABLE>
44
<PAGE> 1
EXHIBIT 3(b)
LAST REVISED ON OCTOBER 30, 1997
BYLAWS
OF
THE DIAL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The principal office of the
Corporation in the State of Delaware shall be located in the City of Wilmington,
County of New Castle, and the name and address of its registered agent is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may have such
other offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept at the Corporation's headquarters in Phoenix, Arizona or
at such other locations outside the State of Delaware as may from time to time
be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. Commencing in 1997, the annual
meeting of the stockholders of the Corporation shall be held on the first
Tuesday in May of each year, if not a legal holiday, and if a legal holiday,
then on the next succeeding business day, at 10:00 a.m., local time, at the
principal executive offices of the Corporation, or at such other date, place
and/or time as may be fixed by resolution of the Board of Directors.
SECTION 2.2. SPECIAL MEETING. Subject to the rights of the
holders of any series of preferred stock, par value $.01 per share, of the
Corporation (the "Preferred Stock") or any other series or class of stock as set
forth in the Certificate of Incorporation, special meetings of the stockholders
may be called only by the Chairman of the Board or by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of directors
specified in the resolution pursuant to Section 3.2 which the Corporation would
have if there were no vacancies (the "Whole Board").
<PAGE> 2
SECTION 2.3. PLACE OF MEETING. The Board of Directors may
designate the place of meeting for any meeting of the stockholders. If no
designation is made by the Board of Directors, the place of meeting shall be the
principal office of the Corporation.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice,
stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be prepared and delivered by the Corporation
not less than ten days nor more than sixty days before the date of the meeting,
either personally, or by mail, to each stockholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with postage thereon prepaid, addressed to
the stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law. Only
such business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting. Meetings may be held without notice if all stockholders entitled to
vote are present (except as otherwise provided by law), or if notice is waived
by those not present in accordance with Section 6.4 of these Bylaws. Any
previously scheduled meeting of the stockholders may be postponed, and (unless
the Certificate of Incorporation otherwise provides) any special meeting of the
stockholders may be canceled, by resolution of the Board of Directors upon
public notice given prior to the time previously scheduled for such meeting of
stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT. Except as otherwise
provided by law or by the Certificate of Incorporation, the holders of a
majority of the voting power of the outstanding shares of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock"),
represented in person or by proxy shall constitute a quorum at a meeting of
stockholders, except that when specified business is to be voted on by a class
or series voting as a class, the holders of a majority of the voting power of
the shares of such class or series shall constitute a quorum for the transaction
of such business. The chairman of the meeting or a majority of the shares of
Voting Stock so represented may adjourn the meeting from time to time, whether
or not there is such a quorum (or, in the case of specified business to be voted
on by a class or series, the chairman or a majority of the shares of such class
or series so represented may adjourn the meeting with respect to such specified
business). No notice of the time and place of adjourned meetings need be given
except as required by law. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6. PROXIES. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stockholder or as may
be permitted by law, or by his duly authorized attorney-in-fact. Such proxy must
be filed with the Secretary of the Corporation or his representative at or
before the time of the meeting.
2
<PAGE> 3
SECTION 2.7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the
direction of the Chairman or the Board of Directors or (c) by any stockholder of
the Corporation who is entitled to vote at the meeting, who complied with the
notice procedures set forth in clauses (2) and (3) of this paragraph (A) of this
Bylaw and who was a stockholder of record at the time such notice is delivered
to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that with respect to the annual meeting to be held
in 1997, the anniversary date shall be deemed to be May 7, 1997; and provided,
further, that in the event that the date of the annual meeting is advanced by
more than twenty days, or delayed by more than seventy days, from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described in this Section 2.7(A).
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11
thereunder, including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected; (b) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
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(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant to
Section 2.4 of these Bylaws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Bylaw and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate such number of persons for election to such position(s) as are
specified in the Corporation's Notice of Meeting, if the stockholder's notice as
required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than the close of
business on the later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
(C) General. (1) Only persons who are nominated in accordance
with the procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
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(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 2.8. PROCEDURE FOR ELECTION OF DIRECTORS. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and, except as otherwise set forth in the
Certificate of Incorporation with respect to the right of the holders of any
series of Preferred Stock or any other series or class of stock to elect
additional directors under specified circumstances, a plurality of the votes
cast thereat shall elect directors. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all matters other than the
election of directors submitted to the stockholders at any meeting shall be
decided by the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote thereon.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE
POLLS.
(A) The Board of Directors by resolution shall appoint one or
more inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
(B) The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
SECTION 2.10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT.
Subject to the rights of the holders of any series of Preferred Stock or any
other series or class of stock as set forth in the Certificate of Incorporation,
any action required or permitted to be taken by
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the stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be affected by any
consent in writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these Bylaws required to be exercised or done
by the stockholders.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. Subject to the
rights of the holders of any series of Preferred Stock, or any other series or
class of stock as set forth in the Certificate of Incorporation, to elect
directors under specified circumstances, the number of directors shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Whole Board, but shall consist of not more than eleven nor less than three
directors. The directors, other than those who may be elected by the holders of
any series of Preferred Stock, or any other series or class of stock as set
forth in the Certificate of Incorporation, shall be divided, with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as possible, with the term of office of the first class to expire at
the 1997 annual meeting of stockholders, the term of office of the second class
to expire at the 1998 annual meeting of stockholders and the term of office of
the third class to expire at the 1999 annual meeting of stockholders. Each
director shall hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of stockholders, commencing with
the 1997 annual meeting, (i) directors elected to succeed those directors whose
terms then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified, and (ii) only if authorized by a resolution of the Board of
Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
Notwithstanding the foregoing, no outside director shall be
nominated by the Board of Directors for election as a director for another term
of office unless such term of office shall begin before he attains age 70 and no
inside director's term of office shall continue after he attains age 65 or after
the termination of his services as an officer or employee of the Corporation,
unless such continuance is approved by a majority of the outside directors on
the Board of Directors at the time the disqualifying event occurs and each time
thereafter that such inside director is nominated for reelection. The term
"outside director" means any person who has never served as an officer or
employee of the Corporation or an affiliate and the term "inside director" means
any director who is not an "outside director." Any person who is ineligible for
reelection as a director under this
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paragraph may, by a majority vote of the Board of Directors, be designated as a
"Director Emeritus" and as such shall be entitled to receive notice of, and to
attend meetings of, the Board of Directors, but shall not vote at such meetings.
SECTION 3.3. REGULAR MEETINGS. A regular meeting of the Board
of Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, each annual meeting of stockholders. The Board
of Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board
of Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 3.5. NOTICE. Notice of any special meeting shall be
given to each director at his business or residence in writing or by telegram or
by telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least five days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least twenty-four hours before such meeting. If by
facsimile transmission, such notice shall be transmitted at least twenty-four
hours before such meeting. If by telephone, the notice shall be given at least
twelve hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting, except for
amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof.
A meeting may be held at any time without notice if all the directors are
present (except as otherwise provided by law) or if those not present waive
notice of the meeting in accordance with Section 6.4 hereof, either before or
after such meeting.
SECTION 3.6. CONFERENCE TELEPHONE MEETINGS. Members of the
Board of Directors, or any committee thereof, may participate in a meeting of
the Board of Directors or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.7. QUORUM. A whole number of directors equal to at
least a majority of the Whole Board shall constitute a quorum for the
transaction of business, but if at any meeting of the Board of Directors there
shall be less than a quorum present, a majority of the directors present may
adjourn the meeting from time to time without further notice. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If permitted by applicable law, the
directors present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of enough directors to leave
less than a quorum.
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SECTION 3.8. VACANCIES. Subject to the rights of the holders
of any series of Preferred Stock, or any other series or class of stock as set
forth in the Certificate of Incorporation, to elect additional directors under
specified circumstances, and unless the Board of Directors otherwise determines,
vacancies resulting from death, resignation, retirement, disqualification,
removal from office or other cause, and newly created directorships resulting
from any increase in the authorized number of directors, may be filled only by
the affirmative vote of a majority of the remaining directors, though less than
a quorum of the Board of Directors and not by stockholders. Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Whole Board
shall shorten the term of any incumbent director.
SECTION 3.9. EXECUTIVE AND OTHER COMMITTEES. The Board of
Directors may designate an Executive Committee to exercise, subject to
applicable provisions of law, all the powers of the Board in the management of
the business and affairs of the Corporation when the Board is not in session,
including the power to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of the State of Delaware, provided
that, the Executive Committee shall not have the power to declare dividends or
to authorize the issuance of the Corporation's capital stock. The Board of
Directors may also, by resolution similarly adopted, designate one or more other
committees. The Executive Committee and each such other committee shall consist
of two or more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, other
than the Executive Committee (the powers of which are expressly provided for
herein), may to the extent permitted by law exercise such powers and shall have
such responsibilities as shall be specified in the designating resolution. In
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Section 3.5 of these Bylaws. The Board shall have power
at any time to fill vacancies in, to change the membership of, or to dissolve
any such committee. Nothing herein shall be deemed to prevent the Board from
appointing one or more committees consisting in whole or in part of persons who
are not directors of the Corporation; provided however, that no such committee
shall have or may exercise any authority of the Board.
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SECTION 3.10. REMOVAL. Subject to the rights of the holders of
any series of Preferred Stock, or any other series or class of stock as set
forth in the Certificate of Incorporation, to elect additional directors under
specified circumstances, any director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTED OFFICERS. The elected officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary, a
Treasurer, and such other officers (including, without limitation, a Chief
Financial Officer) as the Board of Directors from time to time may deem proper.
The Chairman of the Board shall be chosen from the directors. All officers
chosen by the Board of Directors shall each have such powers and duties as
generally pertain to their respective offices, subject to the specific
provisions of this Article IV. Such officers shall also have powers and duties
as from time to time may be conferred by the Board of Directors or by any
committee thereof.
SECTION 4.2. ELECTION AND TERM OF OFFICE. The elected officers
of the Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.7 of these Bylaws, each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign.
SECTION 4.3. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of Directors.
The Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all certificates, contracts, and other instruments of the
Corporation which may be authorized by the Board of Directors. He shall make
reports to the Board of Directors and the stockholders, and shall perform all
such other duties as are properly required of him by the Board of Directors. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
SECTION 4.4. PRESIDENT. The President shall act in a general
executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President shall, in the absence of
or because of the inability to act of the Chairman of the Board, perform all
duties of the Chairman of the Board and preside at all meetings of stockholders
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and of the Board of Directors. The President may sign, alone or with the
Secretary, or an Assistant Secretary, or any other proper officer of the
Corporation authorized by the Board of Directors, certificates, contracts, and
other instruments of the Corporation as authorized by the Board of Directors.
SECTION 4.5. SECRETARY. The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and Directors and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board or the President, or by the
Board of Directors, upon whose request the meeting is called as provided in
these Bylaws. He shall record all the proceedings of the meetings of the Board
of Directors, any committees thereof and the stockholders of the Corporation in
a book to be kept for that purpose, and shall perform such other duties as may
be assigned to him by the Board of Directors, the Chairman of the Board or the
President. He shall have the custody of the seal of the Corporation and may
affix the same to all instruments requiring it and attest to the same.
SECTION 4.6. TREASURER. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate account
of receipts and disbursements in books belonging to the Corporation. The
Treasurer shall deposit all moneys and other valuables in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, the Chairman of the Board, or the
President, taking proper vouchers for such disbursements. The Treasurer shall
render to the Chairman of the Board, the President and the Board of Directors,
whenever requested, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
the Treasurer shall give the Corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board of Directors shall
prescribe.
SECTION 4.7. REMOVAL. Any officer elected by the Board of
Directors may be removed by a majority of the members of the Whole Board
whenever, in their judgment, the best interests of the Corporation would be
served thereby. No elected officer shall have any contractual rights against the
Corporation for compensation by virtue of such election beyond the date of the
election of his successor, his death, his resignation or his removal, whichever
event shall first occur, except as otherwise provided in an employment contract
or an employee plan.
SECTION 4.8. VACANCIES. A newly created office and a vacancy
in any office because of death, resignation, or removal may be filled by the
Board of Directors for the unexpired portion of the term at any meeting of the
Board of Directors.
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ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. STOCK CERTIFICATES AND TRANSFERS.
(A) The interest of each stockholder of the Corporation shall
be evidenced by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time prescribe, provided, that the
Board of Directors may provide by resolution or resolutions that some or all of
any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, or the President or Vice President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation representing the number of shares registered in
certificate form. Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated stock and the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
(B) The certificates of stock shall be signed, countersigned
and registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
(C) The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send to the
registered owner thereof a written notice containing the information required to
be set forth or stated on certificates pursuant to the Delaware General
Corporation Law or, unless otherwise provided by the Delaware General
Corporation Law, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
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SECTION 5.2. LOST, STOLEN OR DESTROYED CERTIFICATES. No
certificate for shares or uncertificated shares of stock in the Corporation
shall be issued in place of any certificate alleged to have been lost, destroyed
or stolen, except on production of such evidence of such loss, destruction or
theft and on delivery to the Corporation of a bond of indemnity in such amount,
upon such terms and secured by such surety, as the Board of Directors or any
financial officer may in its or his discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation
shall consist of a year ranging from fifty-two to fifty-three weeks and ending
on the Saturday which is closest to December 31 of each year.
SECTION 6.2. DIVIDENDS. The Board of Directors may from time
to time declare, and the Corporation may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and its
Certificate of Incorporation.
SECTION 6.3. SEAL. The corporate seal shall be in circular
form and shall have inscribed thereon the name of the Corporation and the words
"Corporate Seal -- Delaware 1996."
SECTION 6.4. WAIVER OF NOTICE. Whenever any notice is required
to be given to any stockholder or director of the Corporation under the
provisions of the General Corporation Law of the State of Delaware, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders or any meeting of
the Board of Directors or committee thereof need be specified in any waiver of
notice of such meeting.
SECTION 6.5. AUDITS. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors, and
it shall be the duty of the Board of Directors to cause such audit to be made
annually.
SECTION 6.6. RESIGNATIONS. Any director or any officer,
whether elected or appointed, may resign at any time by serving written notice
of such resignation on the Chairman of the Board, the President or the
Secretary, and such resignation shall be deemed to be effective as of the close
of business on the date said notice is received by the Chairman of the Board,
the President, or the Secretary or at such later date as is stated therein. No
formal action shall be required of the Board of Directors or the stockholders to
make any such resignation effective.
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SECTION 6.7. INDEMNIFICATION AND INSURANCE. (A) Each person
who was or is made a party or is threatened to be made a party to or is involved
in any action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans maintained or sponsored by the Corporation, whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, if permitted by applicable law, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in paragraph (C) of
this Bylaw, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Bylaw shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition, such advances to be paid by the Corporation within 20 days after
the receipt by the Corporation of a statement or statements from the claimant
requesting such advance or advances from time to time; provided, however, that
if the General Corporation Law of the State of Delaware requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
(B) To obtain indemnification under this Bylaw, a claimant
shall submit to the Corporation a written request, including therein or
therewith such documentation and information as is reasonably available to the
claimant and is reasonably necessary to determine whether and to what extent the
claimant is entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by a majority vote
of the Disinterested Directors
13
<PAGE> 14
(as hereinafter defined), even though less than a quorum, or (ii) if there are
no Disinterested Directors or, if the Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the claimant, or (iii) if the Disinterested
Directors so direct, by the stockholders of the Corporation. In the event the
determination of entitlement to indemnification is to be made by Independent
Counsel at the request of the claimant, the Independent Counsel shall be
selected by the Board of Directors unless there shall have occurred within two
years prior to the date of the commencement of the action, suit or proceeding
for which indemnification is claimed a "Change of Control" as defined in The
Dial Corporation 1996 Stock Incentive Plan, in which case the Independent
Counsel shall be selected by the claimant unless the claimant shall request that
such selection be made by the Board of Directors. If it is so determined that
the claimant is entitled to indemnification, payment to the claimant shall be
made within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid
in full by the Corporation within 30 days after a written claim pursuant to
paragraph (B) of this Bylaw has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including without limitation, the
Disinterested Directors, Independent Counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including,
without limitation, the Disinterested Directors, Independent Counsel or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to
paragraph (B) of this Bylaw that the claimant is entitled to indemnification,
the Corporation shall be bound by such determination in any judicial proceeding
commenced pursuant to paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to paragraph (C) of this Bylaw that the
procedures and presumptions of this Bylaw are not valid, binding and enforceable
and shall stipulate in such proceeding that the Corporation is bound by all the
provisions of this Bylaw.
14
<PAGE> 15
(F) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Bylaw shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this Bylaw,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights to
be paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the Corporation,
and to persons serving as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, at the request of the
Corporation, to the fullest extent of the provisions of this Bylaw with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
(I) If any provision or provisions of this Bylaw shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this Bylaw (including, without limitation, each such portion of
any paragraph of this Bylaw containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the proceeding
or matter in respect of which indemnification is sought by the
claimant.
15
<PAGE> 16
(2) "Independent Counsel" means a law firm, a member
of a law firm, or an independent practitioner, that is
experienced in matters of corporation law and shall include
any person who, under the applicable standards of professional
conduct then prevailing, would not have a conflict of interest
in representing either the Corporation or the claimant in an
action to determine the claimant's rights under this Bylaw.
(K) Any notice, request or other communication required or
permitted to be given to the Corporation under this Bylaw shall be in writing
and either delivered in person or sent by telecopy, telex, telegram, overnight
mail or courier service, or certified or registered mail, postage prepaid,
return receipt requested, to the Secretary of the Corporation and shall be
effective only upon receipt by the Secretary.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
SECTION 7.1. CONTRACTS. Except as otherwise required by law,
the Certificate of Incorporation or these Bylaws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers of the Corporation as the Board of
Directors may from time to time direct. Such authority may be general or
confined to specific instances as the Board may determine. The Chairman of the
Board, the President or any Vice President may execute bonds, contracts, deeds,
leases and other instruments to be made or executed for or on behalf of the
Corporation. Subject to any restrictions imposed by the Board of Directors or
the Chairman of the Board, the President or any Vice President of the
Corporation may delegate contractual powers to others under his jurisdiction, it
being understood, however, that any such delegation of power shall not relieve
such officer of responsibility with respect to the exercise of such delegated
power
SECTION 7.2. PROXIES. Unless otherwise provided by resolution
adopted by the Board of Directors, the Chairman of the Board, the President or
any Vice President may from time to time appoint an attorney or attorneys or
agent or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
the holder of stock or other securities in any other corporation or entity, any
of whose stock or other securities may be held by the Corporation, at meetings
of the holders of the stock or other securities of such other corporation or
entity, or to consent in writing, in the name of the Corporation as such holder,
to any action by such other corporation or entity, and may instruct the person
or persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
16
<PAGE> 17
ARTICLE VIII
AMENDMENTS
SECTION 8.1. AMENDMENTS. These Bylaws may be altered, amended,
or repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given no
less than twenty-four hours prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these Bylaws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock required by law, the Certificate of
Incorporation or these Bylaws, the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal any provision of these Bylaws or to adopt any additional
Bylaws.
17
<PAGE> 1
Exhibit 10(k)
THE DIAL CORPORATION AMENDED AND RESTATED
DIRECTORS DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 Purpose ............................................... 1
ARTICLE 2 Definitions ........................................... 1
ARTICLE 3 Deferral Elections of Compensation .................... 5
3.1 DEFERRAL ELECTION ....................................... 5
3.2 TIMING OF DEFERRAL ELECTIONS ............................ 5
3.3 IRREVOCABILITY .......................................... 5
3.4 CESSATION OF DEFERRAL ELECTIONS ......................... 6
3.5 RETURN TO WORK FOLLOWING DISABILITY OR LEAVE OF ABSENCE . 6
3.6 INITIAL PLAN YEAR ....................................... 6
ARTICLE 4 Treatment of Deferral Amounts ......................... 6
4.1 MEMORANDUM ACCOUNTS ..................................... 6
4.2 INVESTMENT OF CASH ACCOUNTS ............................. 6
4.3 CONVERSION TO STOCK UNITS ............................... 6
4.4 TRANSFER AMONG INVESTMENT CHOICES ....................... 7
4.5 CONVERSION BETWEEN STOCK UNIT ACCOUNTS AND CASH ACCOUNTS 7
4.6 STOCK UNIT DIVIDEND EQUIVALENT RIGHTS ................... 7
4.7 VESTING ................................................. 8
4.8 REPORTS ................................................. 8
4.9 TREATMENT OF PRIOR BALANCES ............................. 9
ARTICLE 5 Payment of Account Balances ........................... 9
5.1 FORM OF PAYMENT ........................................... 9
5.2 INITIAL PAYMENT METHOD ELECTION ........................... 9
5.3 PAYMENT OF PRIOR BALANCES ................................. 9
5.4 CHANGE IN PAYMENT METHOD .................................. 9
5.5 PAYMENT UPON TERMINATION .................................. 10
5.6 PAYMENT UPON DISABILITY ................................... 10
5.7 PAYMENT UPON DEATH ........................................ 10
5.8 SHORT-TERM PAYOUT ......................................... 11
5.9 UNFORESEEABLE FINANCIAL EMERGENCY ......................... 11
5.10 WITHDRAWAL ELECTION ...................................... 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.11 TIMING OF LUMP SUM PAYMENTS ............................ 11
5.12 TIMING OF ANNUAL INSTALLMENTS .......................... 12
5.13 PRORATION OF PAYMENTS .................................. 12
5.14 PAYMENT FROM STOCK UNIT ACCOUNTS ....................... 12
ARTICLE 6 Administration....................................... 12
6.1 PLAN ADMINISTRATION ..................................... 12
6.2 DELEGATION TO MANAGEMENT COMMITTEE ...................... 12
6.3 GENERAL POWERS AND RESPONSIBILITIES OF PLAN ADMINISTRATOR 12
6.4 ACTION OF PLAN ADMINISTRATOR ............................ 13
6.5 LIABILITY ............................................... 13
6.6 INDEMNIFICATION OF PLAN ADMINISTRATOR ................... 13
6.7 ADMINISTRATION UPON CHANGE IN CONTROL ................... 13
6.8 COMPANY INFORMATION ..................................... 14
ARTICLE 7 Beneficiary Designation ............................. 14
7.1 BENEFICIARY ............................................. 14
7.2 CHANGE OF BENEFICIARY; SPOUSAL CONSENT .................. 14
7.3 ACKNOWLEDGMENT .......................................... 14
7.4 NO BENEFICIARY DESIGNATION .............................. 14
7.5 DOUBT AS TO BENEFICIARY ................................. 14
ARTICLE 8 Amendment and Termination of the Plan ............... 15
8.1 TERMINATION ............................................. 15
8.2 AMENDMENT ............................................... 15
8.3 EFFECT OF PAYMENT ....................................... 16
ARTICLE 9 Claims Procedures ................................... 16
9.1 PRESENTATION OF CLAIM ................................... 16
9.2 NOTIFICATION OF DECISION ................................ 16
9.3 REVIEW OF A DENIED CLAIM ................................ 16
9.4 DECISION ON REVIEW ...................................... 16
9.5 LEGAL ACTION ............................................ 17
ARTICLE 10 Funding ............................................ 17
10.1 ESTABLISHMENT OF THE TRUST ............................. 17
10.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST ............ 17
10.3 DISTRIBUTIONS FROM THE TRUST ........................... 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 11 Miscellaneous ..................................... 17
11.1 STATUS OF PLAN ...................................... 17
11.2 UNSECURED GENERAL CREDITOR .......................... 17
11.3 ASSETS .............................................. 17
11.4 COMPANY LIABILITY ................................... 18
11.5 NONASSIGNABILITY .................................... 18
11.6 NO RIGHT TO CONTINUED SERVICE ....................... 18
11.7 FURNISHING INFORMATION .............................. 18
11.8 TERMS ............................................... 18
11.9 CAPTIONS ............................................ 18
11.10 GOVERNING LAW ...................................... 18
11.11 NOTICE ............................................. 18
11.12 SUCCESSORS ......................................... 19
11.13 SPOUSE'S INTEREST .................................. 19
11.14 REFORMATION AND SEVERABILITY ....................... 19
11.15 INCOMPETENCE ....................................... 19
11.16 COURT ORDER ........................................ 20
11.17 DISTRIBUTION IN THE EVENT OF TAXATION .............. 20
11.18 TAXES .............................................. 20
11.19 INSURANCE .......................................... 20
11.20 LITIGATION TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL 20
11.21 EFFECT OF THE PLAN ................................. 20
</TABLE>
iii
<PAGE> 5
THE DIAL CORPORATION AMENDED AND RESTATED
DIRECTORS DEFERRED COMPENSATION PLAN
(FORMERLY KNOWN AS THE DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF THE DIAL CORPORATION)
ARTICLE I
PURPOSE
The purpose of this Amended and Restated Directors Deferred
Compensation Plan is to provide directors who are not employees of The Dial
Corporation the opportunity to defer receipt of Compensation to which they are
entitled while the Plan is in effect. The Plan is intended to be an unfunded
nonqualified deferred compensation plan maintained for "a select group of
management or highly compensated employees," as that phrase is used in Title I
of ERISA, and shall be construed and administered accordingly.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall have the following
meanings:
"ACCOUNT BALANCES" shall mean the sum of the balances of a
Participant's Cash Account and Stock Unit Account.
"ALLOCATION DATE" shall mean the date on which all or a portion of a
Participant's Deferral Amount is credited to his or her Cash Account or Stock
Unit Account, which shall be the date on which such Deferral Amount (or portion
thereof) would have been paid to the Participant if the Participant had not made
a Deferral Election.
"ANNUAL INSTALLMENT" shall mean any installment payment required to be
paid to a Participant, the amount of each of which shall be determined by
multiplying each Account Balance as of the Valuation Date immediately preceding
the date of the Annual Installment by a fraction, the numerator of which shall
be one (1) and the denominator of which shall be the number of Annual
Installments remaining to be paid to the Participant.
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Article 7 to receive payments under the Plan
following the death of the Participant.
"BOARD" shall mean the Board of Directors of the Company.
<PAGE> 6
"CASH ACCOUNT" shall mean a memorandum account established on the books
of the Company on behalf of a Participant, into which shall be credited an
amount, cash pursuant to Article 4.
"CAUSE" shall mean (i) the conviction of a Participant for committing a
felony under federal law or the law of the state in which such action occurred,
(ii) material dishonesty in the course of fulfilling a Participant's duties or
(iii) willful and deliberate failure on the part of a Participant to perform his
duties in any material respect, or (iv) such other events as shall be determined
by the Plan Administrator.
"CHANGE IN CAPITALIZATION" shall have the meaning set forth in Section
4.6(iv) of Article 4.
"CHANGE IN CONTROL" shall have the meaning set forth in Appendix A.
"CHANGE IN CONTROL PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to a Participant following a Change in
Control in accordance with the Participant's election, such manner to be either
(i) a lump sum upon a Change in Control or (ii) a lump sum upon termination for
any reason following a Change in Control; provided, that, if a Participant does
not elect a Change in Control Payment Method, the Participant's other Payment
Methods shall remain in effect following a Change in Control.
"CLAIMANT" shall have the meaning set forth in Section 9.1 of Article
9.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock, par value $.01 per share,
of the Company.
"COMPANY" shall mean The Dial Corporation, A Delaware corporation, and
any successor thereto.
"COMPENSATION" shall mean the retainer fees and meeting fees payable to
a Participant.
"CONVERSION NOTICE" shall have the meaning set forth in Section 4.5 of
Article 4.
"DEFERRAL AMOUNT" shall mean a specified percentage or specified dollar
amount of Compensation elected by a Participant to be deferred in a Plan Year.
"DEFERRAL ELECTION" shall mean A Participant's timely election of a
Deferral Amount pursuant to Article 3.
2
<PAGE> 7
"DEFERRAL ELECTION FORM" shall mean the form that a Participant must
submit to the Plan Administrator documenting his or her Deferral Election.
"DEFERRED COMPENSATION ACCOUNTS" shall mean a Participant's Cash
Account and Stock Unit Account.
"DISABILITY" shall mean a condition as a result of which a Participant
would qualify for permanent disability benefits under the Company's long-term
disability if the Participant were a participant in such plan, as determined by
the Plan Administrator.
"ELIGIBLE DIRECTOR" shall mean each member of the Board who does not
receive a regular salary as an employee of the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" on any date shall mean the mean between the highest
and lowest reported sales prices of the Common Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national exchange on which the Common Stock is listed or on the NASDAQ National
Market System or on NASDAQ or, if there is no regular public trading market for
the Common Stock, as determined by the Committee in good faith.
"INVESTMENT CHOICES" shall mean the reference investment vehicles made
available by the Plan Administrator from time to time in which Participants'
Deferral Amounts and Prior Balances will be deemed to be invested pursuant to
Section 4.2 of Article 4.
"LEAVE OF ABSENCE" shall mean a paid or unpaid break in the service of
a Participant with the approval of the Plan Administrator.
"PARTICIPANT" shall mean any Eligible Director who makes a Deferral
Election pursuant to Section 3.1 of Article 3 and for whom one or more Deferred
Compensation Accounts are maintained under the Plan.
"PAYMENT METHOD" shall mean any of a Participant's Change in Control
Payment Method, Retirement Payment Method, Survivor Payment Method and
Termination Payment Method.
"PLAN" shall mean The Dial Corporation Amended and Restated Directors
Deferred Compensation Plan (formerly known as the Deferred Compensation Plan for
Directors of The Dial Corporation), as such Plan may be amended from time to
time.
3
<PAGE> 8
"PLAN ADMINISTRATOR" shall mean the Board or a committee to which the
Board delegates its powers and duties under the Plan, as set forth in Section
6.2 of Article 6, or, upon and following a Change in Control, one or more
persons selected pursuant to Section 6.7 of Article 6.
"PLAN YEAR" shall mean the calendar year.
"PRIOR BALANCES" shall mean the amounts in a Participant's deferred
compensation accounts (under the terms of the Deferred Compensation Plan for
Directors of The Dial Corporation) as of December 31, 1997.
"RETIREMENT" shall mean termination of service as a member of the Board
upon or following the earlier of (i) the date on which the Participant has five
(5) Years of Service or (ii) the date on which the Participant's age is at
least 70; provided, however, that "Retirement" shall not include termination
upon or following such dates for Cause or as a result of death.
"RETIREMENT PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Participant upon Retirement in
accordance with the Participant's election, such manner to be either (i) a lump
sum payment or (ii) two (2), three (3), five (5), ten (10) or fifteen (15)
Annual Installments.
"SHORT-TERM PAYOUT" shall have the meaning set forth in Section 5.8 of
Article 5.
"STOCK UNIT ACCOUNT" shall mean a memorandum account established on the
books of the Company on behalf of a Participant, into which shall be credited a
number of Stock Units pursuant to Article 4.
"STOCK UNITS" shall mean units credited to a Participant's Stock
Unit Account, with one Stock Unit having a value on a date equal to the Fair
Market Value of one share of Common Stock on such date.
"SURVIVOR PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Beneficiary of the Participant
upon the Participant's death prior to Retirement in accordance with the
Participant's election, such manner to be either (i) a lump sum or (ii) two (2),
three (3), five (5), ten (10) or fifteen (15) Annual Installments.
"TERMINATION" shall mean termination of a Participant's service as a
member of the Board, other than (i) for Cause or (ii) upon his or her Retirement
or death.
"TERMINATION PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Participant upon Termination in
accordance
4
<PAGE> 9
with the Participant's election, such manner to be either (i) a lump sum
payment or (ii) two (2) or three (3) Annual Installments.
"TRUST" shall mean the trust established pursuant to Article 10.
"UNFORESEEABLE FINANCIAL EMERGENCY" shall mean an unanticipated
emergency which is (i) a sudden and unexpected illness or accident of the
Participant or a dependent of the Participant (with "dependent" defined for
purposes of the Plan as in Section 152(a) of the Code), (ii) a loss of the
Participant's property due to casualty or (iii) such other extraordinary
circumstances deemed to be an Unforeseeable Financial Emergency, in each case
caused by an event beyond the control of the Participant and imposing severe
financial hardship to the Participant.
"VALUATION DATE" shall mean the last day of each calendar month.
"YEAR OF SERVICE" shall mean each complete 365-day period during which
a member of the Board has been a member of the Board, such period to commence on
the member's initial date of appointment or election (as the case may be) and
each anniversary of such date; provided, that the calculation of the Years of
Service of an member with breaks in service as a result of a Disability or a
Leave of Absence shall be as determined by the Plan Administrator.
ARTICLE 3
DEFERRAL ELECTIONS OF COMPENSATION
3.1 DEFERRAL ELECTION. Each Eligible Director may elect to have the
payment of a specified percentage or specified dollar amount of Compensation
deferred in each Plan Year pursuant to the Plan; provided, however, that the
Plan Administrator may in its discretion establish limits on Deferral Amounts as
it deems appropriate. Each Deferral Election shall be timely made on a Deferral
Election Form to be provided by the Plan Administrator and shall specify the
Deferral Amount. Upon the acknowledgment of a Deferral Election Form by the Plan
Administrator, such Eligible Director shall become a Participant in the Plan for
such Plan Year.
3.2 TIMING OF DEFERRAL ELECTIONS. Deferral Elections in respect of
Compensation otherwise payable to Participants in a Plan Year shall be timely if
made on or before November 30 of the preceding year; provided, however, that
Deferral Elections in respect of Compensation otherwise payable in the 1998 Plan
Year shall be timely if made on or before a date specified by the Plan
Administrator.
3.3 IRREVOCABILITY. Except as provided in Section 3.4 of this Article
3, a Deferral Election, once made, shall be irrevocable.
5
<PAGE> 10
3.4 CESSATION OF DEFERRAL ELECTIONS. The Deferral Election of a
Participant shall be of no further force and effect (i) upon the Participant's
death, (ii) in the discretion of the Plan Administrator, if a Participant is
suffering from a Disability, (iii) during a Participant's Leave of Absence or
(iv) upon withdrawal of a Participant from the Plan pursuant to Section 5.10 of
Article 5.
3.5 RETURN TO WORK FOLLOWING DISABILITY OR LEAVE OF ABSENCE. If a
Participant returns to service as a member of the Board upon cessation of
Disability, or following a Leave of Absence, in either case during which the
Participant's Deferral Election was of no force and effect pursuant to Section
3.4 of this Article 3, (i) the Plan Administrator may give effect to the
Participant's unexpired Deferral Election and (ii) the Participant may, with
the consent of the Plan Administrator, make Deferral Elections in respect of
future Plan Years.
3.6 INITIAL PLAN YEAR. The initial Plan Year of the Plan as amended and
restated shall commence on January 1, 1998.
ARTICLE 4
TREATMENT OF DEFERRAL AMOUNTS
4.1 MEMORANDUM ACCOUNTS. The Company shall establish on its books for
each Participant in the Plan, as necessary, a Cash Account and a Stock Unit
Account. On each Allocation Date, an amount of cash reflecting a Participant's
Deferral Amount shall be credited (i) to the Participant's Cash Account, to the
extent that the Participant has elected to invest in one or more Investment
Choices and (ii) to the Participant's Stock Unit Account, in accordance with
Section 4.3 of this Article 4, to the extent that the Participant has elected
that Deferral Amounts be credited as Stock Units.
4.2 INVESTMENT OF CASH ACCOUNTS. A Participant's Cash Account shall be
deemed invested among the Investment Choices selected by the Participant on the
Participant's Deferral Election Form (or such other form as may be prescribed by
the Plan Administrator). Each Participant's Cash Account shall be adjusted as of
each Valuation Date to reflect the performance of the Investment Choices, and,
to the greatest extent practicable, the value of each Participant's Cash Account
shall be determined as if Deferral Amounts were actually invested among the
Investment Choices as directed by such Participant; provided, however, that the
Company shall have no obligation actually to invest any Deferral Amounts or
other assets in any Investment Choices.
4.3 CONVERSION TO STOCK UNITS. Credits to a Participant's Stock Unit
Account on an Allocation Date shall be converted into a number of Stock Units
equal to the amount of the credit to the Stock Unit Account on such Allocation
Date divided by the Fair Market Value of a share of Common Stock on the
Allocation Date. Upon and
6
<PAGE> 11
following such conversion, such Stock Units shall be allocated to the Stock Unit
Account in lieu of such credit.
4.4 TRANSFER AMONG INVESTMENT CHOICES. A Participant may elect to
change the allocation of his or her Cash Account among the Investment Choices
(both as to the Account Balance of the Cash Account and future Deferral Amounts)
not more frequently than quarterly by completing such form as may be prescribed
by the Plan Administrator and submitting it to the Plan Administrator. Any such
change in allocation will become effective on the first day of the next
following calendar quarter.
4.5 CONVERSION BETWEEN STOCK UNIT ACCOUNTS AND CASH ACCOUNTS. A
Participant may, by notice delivered to the Plan Administrator (a "Conversion
Notice"), convert (i) all or any portion of the Stock Units credited to his or
her Stock Unit Account (either before or after Annual Installments from such
account may have commenced) to his or her Cash Account by multiplying the Stock
Units to be converted by the Fair Market Value of a share of Common Stock on the
earlier of the Valuation Date coincident with or the Valuation Date next
following the day on which the Conversion Notice is received (or, if neither
such Valuation Date is a day on which the Common Stock is traded, on the next
following trading day), or (ii) all or any portion of his or her Cash Account
(either before or after Annual Installments from such account may have
commenced) into a number of Stock Units equal to the portion of the Cash Account
to be converted divided by the Fair Market Value of a share of Common Stock on
the last trading day of the month in which such Conversion Notice is given;
provided, however, that no Conversion Notice shall be of any force and effect if
it (A) is given within six months following the date of an election by such
Participant, with respect to any plan of the Company, that effected a
"Discretionary Transaction" (as defined in Rule 16b-3(f) under the Exchange
Act) that was an acquisition (if the Conversion Notice is pursuant to clause
(i)) or a disposition (if the Conversion Notice is pursuant to clause (ii)) or
(B) is given after a Participant ceases to be a member of the Board and the Plan
Administrator does not consent to such Conversion Notice. Any such Conversion
Notice will become effective on the first day of the next following calendar
quarter.
4.6 STOCK UNIT DIVIDEND EQUIVALENT RIGHTS. In the event of a dividend
paid with respect to the Common Stock, whether in cash, Common Stock or other
stock or property of the Company, credits (dividend equivalents) will be made to
each Participant's Stock Unit Account as follows:
(i) in the case of a cash dividend, or a dividend of stock of
the Company (other than Common Stock) or other property, additional
credits will be made to the Stock Unit Account consisting of a number
of Stock Units equal to the number determined by dividing (A) the cash
amount of such dividend per share (or the fair market value, on the
date of payment, of dividends paid in such stock or other property),
multiplied by the aggregate number of Stock Units credited to such
Stock Unit Account on the record date for the payment of such dividend
by (B) the
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Fair Market Value of a share of Common Stock on the day prior to the
date such dividend is payable to holders;
(ii) in the case of a dividend consisting of Common Stock, the
Stock Unit Account will be credited with a number of Stock Units equal
to the number of Stock Units in such account immediately prior to
such dividend multiplied by the number of shares of Common Stock paid
per share of Common Stock in such dividend;
(iii) in the case of a dividend consisting of shares of stock
of any of the Company's subsidiaries, a new stock unit subaccount will
be established and credited with a number of shares of stock of such
subsidiary equal to the number of Stock Units in the Participant's
Stock Unit Account immediately prior to such dividend multiplied by the
number of shares of subsidiary stock issued per share of Common Stock
in such dividend (with dividends thereafter accruing on such new
subaccount solely in the form of cash in an amount equal to the value
of dividends paid by the issuer of the stock to which the stock units
relate); and
(iv) in the case of a Change in Capitalization not described
in subsections (i), (ii) or (iii) of this Section 4.6, the Plan
Administrator in good faith shall take such action as it deems
necessary to preserve the economic value of the Stock Unit Account
immediately prior to the Change in Capitalization. For purposes of this
Section 4.6(iv), "Change in Capitalization" shall mean any increase or
reduction in the number of shares of Common Stock, or any change
(including, but not limited to, a change in value) in such shares or
exchange of such shares for a different number or kind of shares or
other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise.
After payment in respect of a Participant's Stock Unit Account
commences, dividend equivalents will accrue on the unpaid balance of such Stock
Unit Account in the same manner until all of the amounts credited to such
Stock Unit Account have been paid.
4.7 VESTING. A Participant shall be fully (100%) vested in his or her
Account Balances at all times.
4.8 REPORTS. Until a Participant's Account Balances shall have been
paid in full, the Company will furnish to the Participant a report at least
quarterly which shall set forth transactions in, and the status of, the
Participant's Deferred Compensation Accounts.
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4.9 TREATMENT OF PRIOR BALANCES. Effective as of January 1, 1998,
Prior Balances denominated as cash shall be allocated to a Participant's Cash
Account, and Prior Balances denominated as stock units shall be allocated to a
Participant's Stock Unit Account. A Participant's Prior Balances shall be paid
to the Participant in accordance with Article 5 of the Plan.
ARTICLE 5
PAYMENT OF ACCOUNT BALANCES
5.1 FORM OF PAYMENT. This Article 5 shall govern the payment of a
Participant's Account Balances.
(a) PAYMENT TO BE MADE IN CASH. Any payment required to be
paid from a Participant's Cash Account shall be in cash.
(b) PAYMENT TO BE MADE IN COMMON STOCK. Any payment required
to be paid from a Participant's Stock Unit Account shall be in cash or, at the
election of the Participant or the Plan Administrator, in Common Stock. A
Participant's election pursuant to this Section 5.l(b) shall be honored by the
Plan Administrator in its discretion.
5.2 INITIAL PAYMENT METHOD ELECTION. Each Eligible Director shall
select Payment Methods upon completion of his or her initial Deferral Election
Form. Except as provided in Sections 5.5 and 5.6 of this Article 5, a
Participant's Account Balances shall be paid in accordance with such Payment
Methods. If a Participant fails to select one or more Payment Methods, he or she
will be deemed to have selected a lump sum in respect of such Payment Methods;
provided, however, that if a Participant has not selected a Change in Control
Payment Method, the Participant's Retirement Payment Method, Survivor Payment
Method and Termination Payment Method will remain in effect following a Change
in Control.
5.3 PAYMENT OF PRIOR BALANCES. Prior Balances shall be paid to a
Participant in accordance with the Payment Methods selected by the Participant
pursuant to Section 5.2 of this Article 5 (or, if the Participant has failed to
select one or more Payment Methods, in a lump sum).
5.4 CHANGE IN PAYMENT METHOD. A Participant may change one or more of
his or her Payment Methods by completing such form as may be prescribed by the
Plan Administrator, provided, however, that such change shall be effective only
if made by the Participant and acknowledged by the Plan Administrator: (i) if
the change relates to the Change in Control Payment Method, at least one (1)
year prior to the date of a Change in Control, (ii) if the change relates to the
Retirement Payment Method or Termination Payment Method, at least two (2) years
prior to the date of Termination or Retirement
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(whichever is applicable) and (iii) if the change relates to the Survivor
Payment Method, immediately.
5.5 PAYMENT UPON TERMINATION. Notwithstanding a Participant's
selection of a Termination Payment Method, a Participant's Account Balances
shall be paid in a lump sum if (i) the Participant's Account Balances on the
Valuation Date next following his or her Termination equal less than
twenty-five thousand dollars ($25,000) or (ii) the Participant ceases to be a
member of the Board by reason of termination for Cause. If a Participant's
Account Balances on the Valuation Date next following his or her Termination
equal twenty-five thousand dollars ($25,000) or greater, the Account Balances
shall be paid in accordance with the Participant's Termination Payment Method.
5.6 PAYMENT UPON DISABILITY. If a Participant is determined by
the Plan Administrator to be suffering from a Disability, the Plan Administrator
may deem such Participant to have effected a Termination; provided, however,
that if a Participant is eligible for Retirement on the date he or she would
have been deemed to have effected a Termination, the Plan Administrator, with
the consent of the Participant, may deem the Participant to have effected his or
her Retirement.
5.7 PAYMENT UPON DEATH
(a) PRIOR TO RETIREMENT. Notwithstanding a
Participant's selection of a Survivor Payment Method, if a
Participant's Account Balances on the Valuation Date next
following his or her death prior to Retirement equal less than
twenty-five thousand dollars ($25,000), the Account Balances
shall be paid to the Participant's Beneficiary in a lump sum.
If a Participant's Account Balances on such Valuation Date
equal twenty-five thousand dollars ($25,000) or greater, the
Account Balances shall be paid to the Participant's
Beneficiary in accordance with the Participant's Survivor
Payment Method.
(b) FOLLOWING RETIREMENT. If a Participant's
Account Balances on the Valuation Date next following his or
her death following Retirement equal less than twenty-five
thousand dollars ($25,000), the Account Balances shall be paid
to the Participant's Beneficiary in a lump sum. If a
Participant's Account Balances on such Valuation Date equal
twenty-five thousand dollars ($25,000) or greater, the Account
Balances shall be paid to the Participant's Beneficiary in
accordance with the Retirement Payment Method in effect in
respect of the Participant on the date of his or her death;
provided, however, that the Beneficiary may request that the
Plan Administrator pay the Participant's Account Balances in a
lump sum without giving effect to Section 5.10 of this
Article 5, which request shall be honored by the Plan
Administrator in its discretion in whole or in part or
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upon such terms and conditions as the Plan administrator in
good faith deems appropriate.
5.8 SHORT-TERM PAYOUT. In making his or her Deferral
Election, a Participant may irrevocably elect to receive a "Short-Term Payout"
of the Deferral Amount in respect of the Plan Year for which such Deferral
Election is made. The Short-Term Payout shall be a lump sum payment in an amount
equal to such Deferral Amount plus or minus amounts credited or debited to such
Deferral Amount in the manner provided in Section 4.2 of Article 4, to be paid
to such Participant before March 1 of a Plan Year selected by the Participant;
provided, however, that at least two (2) complete Plan Years must elapse between
the Plan Year in which the Deferral Amount is deferred and the Plan Year in
which the Short-Term Payout is to occur. If, after a Participant elects to
receive a Short-Term Payout but before the Short-Term Payout occurs, the
Participant becomes entitled to payment of his or her Account Balances (in whole
or in part), such Short-Term Payout shall be of no force and effect to the
extent inconsistent with such other payment.
5.9 UNFORESEEABLE FINANCIAL EMERGENCY. If a Participant (or,
after a Participant's death, his or her Beneficiary) experiences an
Unforeseeable Financial Emergency, the Participant or Beneficiary may request
that the Plan Administrator (i) suspend his or her Deferral Election and (ii)
distribute a partial or full lump sum payment from the Participant's Account
Balances. The payment shall not exceed the amount reasonably needed to satisfy
the Unforeseeable Financial Emergency (and may include an amount equal to any
income taxes and other taxes payable by the Participant or Beneficiary upon
receipt of the amount to be distributed). The request shall be honored by the
Plan Administrator in its discretion. The lump sum payment shall be paid
promptly after the first Valuation Date after approval of the request.
5.10 WITHDRAWAL ELECTION. A Participant (or, after a
Participant's death, his or her Beneficiary) may elect to withdraw from the Plan
at any time. A Participant or Beneficiary shall make such election in writing
delivered to the Plan Administrator on such form as the Plan Administrator may
prescribe. Except as provided in Section 5.7(b) of this Article 5, upon the
making of such an election, ten percent (10%) of the Participant's Account
Balances shall be immediately forfeited. Payment of a Participant's Account
Balances shall be in a lump sum to be paid as soon as practicable following the
election; provided, however, that the Plan Administrator may delay making such
payment if necessary to comply with Rule 16b-3 of the Exchange Act. Upon payment
of his or her Account Balances pursuant to this Section 5.10, a Participant's
participation in the Plan shall terminate and the Participant shall be
ineligible to participate in the Plan in the future.
5.11 TIMING OF LUMP SUM PAYMENTS. Except as provided in
Sections 5.9 and 5.10 of this Article 5, prior to a Change in Control, any lump
sum payment required to be paid pursuant to the Plan shall be paid by March 1 of
the Plan Year following the Plan Year in which occurs the event giving rise to
such payment. Upon and following a Change in Control, any lump sum payment
required to be paid pursuant to the Plan shall be paid
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within ten (10) business days following the first Valuation Date following the
occurrence of the event giving rise to such payment
5.12 TIMING OF ANNUAL INSTALLMENTS. A Participant's initial
Annual Installment shall be paid by March 1 of the Plan Year following the Plan
Year in which occurs the event giving rise to such Annual Installment.
Subsequent Annual Installments required to be paid under the Plan shall be paid
as promptly as practicable after the end of each subsequent Plan Year until all
Annual Installments have been paid.
5.13 PRORATION OF PAYMENTS. To the extent that a Participant
has more than one Account Balance at the time a payment is due from such Account
Balances, any payment due such Participant (or such Participant's Beneficiary)
shall be paid pro rata from each Account Balance.
5.14 PAYMENT FROM STOCK UNIT ACCOUNTS. Payments from Stock
Unit Accounts shall be based on the Fair Market Value of a share of Common
Stock on the Valuation Date immediately preceding the date of such payment.
ARTICLE 6
ADMINISTRATION
6.1 PLAN ADMINISTRATION. It is intended that the provisions of
the Plan be self-effectuating to the greatest extent possible. To the extent
necessary to secure the proper administration of the Plan, the Board shall be
the Plan Administrator.
6.2 DELEGATION TO MANAGEMENT COMMITTEE. The Plan Administrator
may delegate one or more of its functions to a committee composed of three or
more senior executives of the Company; provided, however, that the Plan
Administrator may not delegate (i) the selection of Investment Choices or (ii)
any other function required by law to be performed by the Board. Upon
appointment of such a committee and delegation of duties thereto, such
committee shall become the Plan Administrator to the extent of such delegation.
6.3 GENERAL POWERS AND RESPONSIBILITIES OF PLAN ADMINISTRATOR.
The Plan Administrator shall have full authority to construe and interpret the
terms and provisions of the Plan, and to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan and perform
all acts as it shall, from time to time, deem advisable, and otherwise to
supervise the administration of the Plan. The Plan Administrator may correct any
defect, supply any omission or reconcile any inconsistency in the Plan, or in
any Deferral Election hereunder, in the manner and to the extent it shall deem
necessary to effectuate the Plan. Any decision, interpretation or other action
made or taken in good faith by or at the direction of the Plan Administrator in
connection with the Plan shall be in the sole and absolute discretion of the
Plan Administrator and shall be
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final, binding and conclusive on all persons (including, but not limited to, the
Company, employees of the Company, Participants and their respective
Beneficiaries, heirs, executors, administrators, successors and assigns). A
Participant shall not participate in any decision involving a request made by
him or her or relating in any way to his or her rights, duties, and obligations
as a Participant (unless such decision relates to all Participants generally and
in a similar manner).
6.4 ACTION OF PLAN ADMINISTRATOR. Action taken by the Plan
Administrator shall be taken by a vote of the majority of its members present at
a meeting at which a quorum is present or signed by a majority of its members in
writing without a meeting.
6.5 LIABILITY. The Plan Administrator shall not be liable for
any act or action hereunder, whether of omission or commission, by any person to
whom duties in connection with the administration of the Plan have been
delegated except in respect of the prudent appointment and periodic monitoring
of such person. Except in circumstances involving bad faith, gross negligence,
willful misconduct or fraud, neither the Plan Administrator nor any employee or
agent of the Company shall be liable for anything done or omitted to be done by
him or her. The Company or the Plan Administrator may consult with legal
counsel, who may be counsel for the Company or other legal counsel with respect
to obligations or duties hereunder or with respect to any action or proceeding
or any question of law, and shall not be liable with respect to any action taken
or omitted by it in good faith pursuant to the advice of such counsel except in
respect of the prudent selection of such counsel.
6.6 INDEMNIFICATION OF PLAN ADMINISTRATOR. The Company hereby
indemnifies the Plan Administrator and each employee to whom responsibilities
are delegated under the Plan against any and all liabilities and expenses,
including attorney's fees, actually and reasonably incurred by them in
connection with any threatened, pending or completed legal action or judicial or
administrative proceeding to which they may be a party, or may be threatened to
be made a party, by reason of being a member of a committee which is the Plan
Administrator or due to a delegation of responsibilities, except with regard to
any matters (i) as to which they shall be adjudged to have failed to act with
the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims, and (ii) with respect to any action finally adjudged to be a crime, had
reasonable cause to believe their conduct was unlawful.
6.7 ADMINISTRATION UPON CHANGE IN CONTROL. Upon and following
a Change in Control, the Plan Administrator shall be one or more persons
approved by the Board prior to the Change in Control and selected by the
individual who, immediately prior to the Change in Control, was the Company's
chief executive officer; provided, however, that if no such Plan Administrator
has been appointed or accepted such
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appointment within ninety (90) days following such Change in Control, the Plan
Administrator shall remain as in effect prior to such Change in Control. The
Company's chief executive officer may appoint himself or herself as Plan
Administrator pursuant to this Section 6.7.
6.8 COMPANY INFORMATION. To enable the Plan Administrator to
perform its functions under the Plan, the Company shall supply full and timely
information to the Plan Administrator regarding all matters relating to the
Compensation of Participants, the date and circumstances of the Retirement,
Disability, death and Termination of Participants, and such other pertinent
information as the Plan Administrator may reasonably require.
ARTICLE 7
BENEFICIARY DESIGNATION
7.1 BENEFICIARY. Each Participant shall designate upon such
form as may be prescribed by the Plan Administrator one or more primary
Beneficiaries and one or more contingent Beneficiaries to receive such
Participant's Account Balances upon his or her death.
7.2 CHANGE OF BENEFICIARY; SPOUSAL CONSENT. A Participant
shall have the right to change his or her Beneficiaries upon such form as may be
prescribed by the Plan Administrator. If the Participant names a primary
Beneficiary other than his or her spouse, a spousal consent, in the form
designated by the Plan Administrator, must be signed by the Participant's spouse
and returned to the Plan Administrator.
7.3 ACKNOWLEDGMENT. No designation or change in designation of
a Beneficiary shall be effective until actually received and acknowledged in
writing by the Plan Administrator. Upon such receipt and acknowledgment, all
prior Beneficiary designations of a Participant shall be of no further force and
effect. The Plan Administrator shall be entitled to rely on the most recent
Beneficiary designation in effect prior to a Participant's death.
7.4 NO BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary as provided in this Article 7, or if all designated
Beneficiaries who are natural persons shall have predeceased the Participant or
die prior to complete distribution of the Participant's Account Balances, such
Participant's Account Balances shall be paid to his or her surviving spouse or,
if the Participant has no surviving spouse, to the Participant's estate.
7.5 DOUBT AS TO BENEFICIARY. If the Plan Administrator is in
doubt as to a Participant's Beneficiary, the Plan Administrator may withhold
payments under the Plan until the Plan Administrator has resolved its doubts to
its satisfaction.
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ARTICLE 8
AMENDMENT AND TERMINATION OF THE PLAN
8.1 TERMINATION
(a) BY THE COMPANY. Subject to Section 8.l(b) of this Article
8, the Company may terminate the Plan in whole or in part at any time and for
any reason without prior notice to or consent of any Participant.
(b) PAYMENT OF ACCOUNT BALANCES FOLLOWING PLAN TERMINATION.
Upon the termination of the Plan prior to a Change in Control, Participants
shall receive their Account Balances in a lump sum or in two (2), three (3),
five (5), ten (10) or fifteen (15) Annual Installments (at the discretion of the
Plan Administrator); provided however, that if a Participant is receiving
Annual Installments upon termination of the Plan pursuant to the election of a
Payment Method, such Annual Installments shall continue following termination of
the Plan. Upon termination of the Plan upon or following a Change in Control,
Participants shall receive their Account Balances in a lump sum promptly
following the Valuation Date next following the date of such termination.
Termination of the Plan shall not adversely affect the Account Balances of any
Participant or Beneficiary; provided however, that neither lump sum payment of
Account Balances nor a reduced number of Annual Installments upon termination of
the Plan shall be deemed such an adverse effect.
8.2 AMENDMENT
(a) BY THE COMPANY. Subject to Section 8.2(c) of this Article
8, the Company may amend or modify the Plan in whole or in part at any time and
for any reason without prior notice to or consent of any Participant or
Beneficiary; provided, however, that, unless a Participant or Beneficiary who
would be affected by such amendment shall have consented thereto, the Plan may
not be amended (i) at the request of a third party who has indicated an
intention or taken steps to effect a Change in Control and who effectuates a
Change in Control (ii) within six (6) months prior to, or otherwise in
connection with, or in anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs, or (iii) upon or following a
Change in Control.
(b) BY THE PLAN ADMINISTRATOR. Subject to Section 8.2(c) of
this Article 8, prior to a Change in Control the Plan Administrator may in good
faith amend or modify the Plan to effectuate its intent or to resolve any
discrepancy among the provisions of the Plan or between the Plan and other
documents describing the Plan.
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(C) EFFECT OF AMENDMENT. No amendment or
modification of the Plan shall reduce a Participant's Account
Balances as of the date of such amendment or modification.
8.3 EFFECT OF PAYMENT. The full payment of a Participant's
Account Balances shall completely discharge all obligations to a Participant and
his or her Beneficiaries under the Plan.
ARTICLE 9
CLAIMS PROCEDURES
9.1 PRESENTATION OF CLAIM. Any Participant, Beneficiary or
other person (each such person, a "Claimant") may deliver to the Plan
Administrator a written claim for payment from the Plan. All claims must be made
within one hundred eighty (180) days following the date of the occurrence of the
event giving rise to the claim; provided however, that, if a claim relates to a
notice given by the Company, such claim must be made within sixty (60) days
following receipt of such notice by the Claimant. The claim must state with
particularity the determination desired by the Claimant.
9.2 NOTIFICATION OF DECISION. The Plan Administrator shall
consider a Claimant's claim, and shall notify the Claimant in writing of its
determination within a reasonable time. Such notice shall set forth (i) one or
more reasons for the grant or denial of the claim or any part of it; (ii) a
description of any additional material or information necessary for the Claimant
to perfect the claim, and an explanation of why such material or information is
necessary; and (iii) an explanation of the claim review procedure set forth in
Section 9.3 of this Article 9.
9.3 REVIEW OF A DENIED CLAIM. Within sixty (60) days after
receiving a notice from the Plan Administrator that a claim has been denied in
whole or in part a Claimant (or such Claimant's duly authorized representative)
may file with the Plan Administrator a written request for a review of the
denial of the claim. During such sixty-day period, the Claimant (or the
Claimant's duly authorized representative) (i) may review pertinent documents,
(ii) may submit written comments or other documents to the Plan Administrator
and (iii) may request a hearing.
9.4 DECISION ON REVIEW. The Plan Administrator shall render
its decision on review promptly, and not later than sixty (60) days after the
filing of a written request for review of the denial, unless a hearing is held
or other special circumstances require additional time, in which case the Plan
Administrator's decision must be rendered within one hundred twenty (120) days
after such date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain (i) specific reasons for the
decision, (ii) specific reference(s) to the pertinent Plan provisions upon
which the decision was based, and (iii) such other matters as the Plan
Administrator may deem relevant.
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9.5 LEGAL ACTION. In making, a Deferral Election under the
Plan, each Participant shall be deemed to have agreed that compliance with the
provisions of this Article 9 is a mandatory prerequisite to commencement of any
legal action with respect to any claim for payment under the Plan.
ARTICLE 10
FUNDING
10.1 ESTABLISHMENT OF THE TRUST. The Company shall establish a
Trust in connection with the Plan and may from time to time and in its sole
discretion transfer to the Trust assets with respect to Participants.
10.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The
provisions of the Plan shall govern the rights of a Participant to receive
payment of his or her Account Balances. The provisions of the Trust shall govern
the rights of the Company, the trustee of the Trust, Participants and the
creditors of the Company to the assets held in the Trust.
10.3 DISTRIBUTIONS FROM THE TRUST. The Company's obligations
under the Plan may be satisfied with Trust assets distributed pursuant to the
terms of the Trust, and any such distribution shall reduce the Company's
obligations under the Plan.
ARTICLE 11
MISCELLANEOUS
11.1 STATUS OF PLAN. The Plan is intended to be a plan that is
not qualified within the meaning of Section 40l(a) of the Code and that "is
unfunded and is maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees" within the meaning of Sections 201(2),301(a)(3) and 40l(a)(l)of
ERISA. The Plan shall be administered and interpreted in a manner consistent
with that intent.
11.2 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Company. For
purposes of the payment of benefits under the Plan, any and all of the Company's
assets shall be, and remain, the general, unpledged unrestricted assets of the
Company. The Company's obligation under the Plan shall be merely that of an
unfunded and unsecured promise to pay money in the future.
11.3 ASSETS. This Plan, and the crediting of Deferral Amounts
to Cash Accounts and Stock Unit Accounts hereunder, shall not constitute a trust
and shall be an unsecured contractual obligation of the Company to the
Participants. The obligations of the Company hereunder to any Participant on any
date shall be limited to his or her Account Balances as of the most recent
preceding Valuation Date.
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11.4 COMPANY LIABILITY. The Company's liability for the
payment of benefits under the Plan shall be defined only by the Plan. The
Company shall have no obligation to a Participant under the Plan except as
expressly provided herein.
11.5 NONASSIGNABILITY. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, any amount payable under the Plan. All
amounts payable under the Plan, and all rights to such amounts, are expressly
declared to be unassignable and non-transferable. Except as provided in Section
11.16 of this Article 11, no part of a Participant's Account Balances shall,
prior to actual payment, be subject to seizure, attachment, garnishment or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by the Participant or any other person, be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency or be transferable to a spouse as a result of a
property settlement or otherwise.
11.6 NO RIGHT TO CONTINUED SERVICE. The terms and conditions
of the Plan shall not be deemed to establish, constitute or be evidence of a
right of any Participant to remain in service as a member of the Board, or of a
restriction of the right of the Company to discipline or discharge a Participant
at any time in accordance with the Company's customary policies and procedures.
11.7 FURNISHING INFORMATION. A Participant or his or her
Beneficiary will cooperate with the Plan Administrator by furnishing any and all
information requested by the Plan Administrator and will take such other
action as may be requested in order to facilitate the administration of the Plan
and the payments of benefits hereunder.
11.8 TERMS. Unless the context shall plainly require
otherwise, (i) use of the masculine herein shall be deemed to include the
feminine (and vice versa), (ii) use of the singular shall be deemed to include
the plural (and vice versa) and (iii) use of the conjunctive shall be deemed to
include the disjunctive (and vice versa).
11.9 CAPTIONS. The captions of the articles, sections and
paragraphs of the Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
11.10 GOVERNING LAW. The provisions of the Plan shall be
construed and interpreted according to the internal laws of the State of
Delaware without regard to its conflicts of laws principles, except to the
extent governed by ERISA.
11.11 NOTICE. Any notice or filing required or permitted to
be given to the Company or the Plan Administrator shall be sufficient if in
writing and sent to the following address by (i) hand, (ii) registered or
certified mail or (iii) facsimile:
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The Dial Corporation
Attention: Senior Vice President, Human Resources
15501 North Dial Boulevard
Scottsdale, AZ 85260
(Fax: 602-754-1098)
Such notice shall be deemed given as of the date of receipt by the Company or
the Plan Administrator (whichever may apply). The person sending such notice or
filing shall produce satisfactory evidence of receipt by the Company upon the
request of the Plan Administrator, and, if such person fails to produce such
evidence of receipt, the Plan Administrator may give effect to such notice or
filing as it deems appropriate.
Any notice or filing required or permitted to be given to a Participant under
the Plan shall be sufficient if in writing and hand-delivered, or sent by
first-class mail, to the last known address of the Participant.
11.12 SUCCESSORS. The provisions of the Plan shall bind and
inure to the benefit of the Company and its successors and assigns. The
provisions of the Plan shall bind and inure to Participants and, upon the death
of a Participant, his or her Beneficiaries or estate (whichever may apply).
11.13 SPOUSES'S INTEREST. The interest in the Plan of a spouse
of a Participant who is not a Beneficiary shall be subject to the terms and
conditions of Article 7. Without limiting the generality of the foregoing
sentence, the spouse of a Participant shall have no interest in the Plan if such
spouse shall predecease such Participant.
11.14 REFORMATION AND SEVERABILITY. In the event that any
provision of the Plan shall be held illegal, invalid or unenforceable for any
reason, the provision shall be reformed to the extent necessary such that the
provision, as reformed, is legal, valid and enforceable. If a provision of the
Plan shall be held illegal, invalid or enforceable and such reformation is not
possible, such provision shall be ineffective to the extent of such illegality,
invalidity or unenforceability without rendering illegal, invalid or
unenforceable the remaining provisions of the Plan.
11.15 INCOMPETENCE. If the Plan Administrator determines that
a benefit under the Plan is to be paid to a minor, a person declared incompetent
or a person adjudged legally incapable of handling the disposition of his or her
property, the Plan Administrator may direct payment of such benefit to the
guardian, legal representative or other person having the care and custody of
such minor or such incompetent or incapable person. The Plan Administrator may
require proof of minority, incompetence, incapacity or guardianship, as it may
deem appropriate prior to distribution of such benefit. Any payment of a benefit
shall be a payment for the account of the Participant or the Participant's
Beneficiary, as the case may be, and shall effect a complete discharge of any
liability under the Plan for such payment.
19
<PAGE> 24
11.16 COURT ORDER. The Plan Administrator is authorized to
make any payments directed by court order in any action in which the Plan, the
Company or the Plan Administrator has been named as a party. Without limiting
the generality of the foregoing sentence, if a court determines that a spouse or
former spouse of a Participant has an interest in the Participant's Account
Balances under the Plan in connection with a property settlement or otherwise,
the Plan Administrator, in its sole discretion, shall have the right,
notwithstanding any election by a Participant of a Payment Method, immediately
to distribute the interest of such spouse or former spouse in the Participant's
Account Balances under the Plan to such spouse or former spouse.
11.17 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any
reason, all or any portion of a Participant's Account Balances becomes taxable
to the Participant prior to receipt, a Participant may request that the Plan
Administrator distribute that portion of his or her Account Balances that has
become taxable. The granting of such a request shall not be unreasonably
withheld. If the request is granted, the distribution for such tax liability
shall be paid within ninety (90) days of the date the request is granted.
11.18 TAXES
(a) UPON DEFERRAL. For each Plan Year in respect of
which a Participant makes a Deferral Election, the Company shall withhold (from
amounts other than Deferral Amounts) an amount equal to the employment taxes on
the Deferral Amounts required to be so withheld.
(b) UPON DISTRIBUTION. When Account Balances are
distributed to Participants, the Company shall withhold from such distributions
any taxes required by federal, state or local law to be so withheld.
11.19 INSURANCE. The Company, on its own behalf or on behalf
of the Trust, in its sole discretion may apply for and procure insurance
policies on the lives of Participants, in such amounts and in such forms as the
Trustee may select. The Trust shall be the sole owner and beneficiary of any
such policies. The Participant shall have no interest in any such policies.
11.20 LITIGATION TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL.
Upon or following a Change in Control, litigation in respect of the rights of
Participants and Beneficiaries under the Plan may be commenced as provided in
The Dial Corporation Director Benefits Protection Trust.
11.21 EFFECT OF THE PLAN. The terms and conditions of the Plan
shall supersede the terms and conditions of the Deferred Compensation Plan for
Directors of The Dial Corporation.
20
<PAGE> 25
IN WITNESS WHEREOF, the Company has caused the plan to be
executed by its duly authorized representative effective as of this 14th day of
January 1998.
THE DIAL CORPORATION
/s/ Malcolm Jozoff
---------------------------
By: Malcolm Jozoff
---------------------------
Its: Chairman of the Board,
President and
Chief Executive Officer
---------------------------
21
<PAGE> 1
Exhibit 10(l)
THE DIAL CORPORATION AMENDED AND RESTATED
MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1 Purpose ...........................................................1
ARTICLE 2 Definitions........................................................1
ARTICLE 3 Deferral Elections of Base Salary and Incentive Awards.............6
3.1 DEFERRAL ELECTION....................................................6
3.2 TIMING OF DEFERRAL ELECTIONS.........................................6
3.3 IRREVOCABILITY.......................................................6
3.4 CESSATION OF DEFERRAL ELECTIONS......................................6
3.5 RETURN TO WORK FOLLOWING DISABILITY OR LEAVE OF ABSENCE..............7
3.6 INITIAL PLAN YEAR....................................................7
ARTICLE 4 Treatment of Deferral Amounts......................................7
4.1 MEMORANDUM ACCOUNTS..................................................7
4.2 INVESTMENT OF CASH ACCOUNTS..........................................7
4.3 TRANSFER AMONG INVESTMENT CHOICES....................................7
4.4 CONVERSION BETWEEN STOCK UNIT ACCOUNTS AND CASH ACCOUNTS.............8
4.5 STOCK UNIT DIVIDEND EQUIVALENT RIGHTS................................8
4.6 VESTING..............................................................9
4.7 REPORTS..............................................................9
4.8 TREATMENT OF PRIOR ACCOUNTS..........................................9
ARTICLE 5 Management Stock Unit Purchase Program............................10
5.1 PURPOSE.............................................................10
5.2 STOCK UNIT DEFERRAL ELECTIONS.......................................10
5.3 STOCK UNIT ACCOUNTS.................................................10
5.4 CONVERSION TO STOCK UNITS...........................................10
5.5 VESTING IN STOCK UNITS..............................................10
5.6 FORFEITURE AND ACCELERATED VESTING OF MATCHING STOCK UNITS..........10
5.7 DIVIDEND EQUIVALENT RIGHTS..........................................11
ARTICLE 6 Payment of Account Balances.......................................11
6.1 FORM OF PAYMENT.....................................................11
6.2 INITIAL PAYMENT METHOD ELECTION.....................................11
6.3 PAYMENT OF PRIOR ACCOUNTS...........................................11
<PAGE> 3
6.4 CHANGE IN PAYMENT METHOD............................................12
6.5 PAYMENT UPON TERMINATION OF EMPLOYMENT..............................12
6.6 PAYMENT UPON DISABILITY.............................................12
6.7 PAYMENT UPON DEATH..................................................12
6.8 SHORT-TERM PAYOUT...................................................13
6.9 UNFORESEEABLE FINANCIAL EMERGENCY...................................13
6.10 WITHDRAWAL ELECTION................................................13
6.11 EFFECT OF SECTION 162(m) OF THE CODE...............................14
6.12 EFFECT OF SECTION 280G OF THE CODE.................................14
6.13 TIMING OF LUMP SUM PAYMENTS........................................14
6.14 TIMING OF ANNUAL INSTALLMENTS......................................14
6.15 PRORATION OF PAYMENTS..............................................14
6.16 PAYMENT FROM STOCK UNIT ACCOUNTS...................................15
ARTICLE 7 Administration....................................................15
7.1 PLAN ADMINISTRATOR..................................................15
7.2 DELEGATION TO MANAGEMENT COMMITTEE..................................15
7.3 GENERAL POWERS AND RESPONSIBILITIES OF PLAN ADMINISTRATOR...........15
7.4 ACTION OF PLAN ADMINISTRATOR........................................16
7.5 LIABILITY...........................................................16
7.6 INDEMNIFICATION OF PLAN ADMINISTRATOR...............................16
7.7 ADMINISTRATION UPON CHANGE IN CONTROL...............................16
7.8 EMPLOYER INFORMATION................................................16
ARTICLE 8 Beneficiary Designation...........................................17
8.1 BENEFICIARY.........................................................17
8.2 CHANGE OF BENEFICIARY; SPOUSAL CONSENT..............................17
8.3 ACKNOWLEDGMENT......................................................17
8.4 NO BENEFICIARY DESIGNATION..........................................17
8.5 DOUBT AS TO BENEFICIARY.............................................17
ARTICLE 9 Amendment and Termination of the Plan.............................17
9.1 TERMINATION.........................................................17
9.2 AMENDMENT...........................................................18
9.3 EFFECT OF PAYMENT...................................................19
ARTICLE 10 Claims Procedures................................................19
10.1 PRESENTATION OF CLAIM..............................................19
10.2 NOTIFICATION OF DECISION...........................................19
ii
<PAGE> 4
10.3 REVIEW OF A DENIED CLAIM............................................19
10.4 DECISION ON REVIEW..................................................19
10.5 LEGAL ACTION........................................................20
ARTICLE 11 Funding...........................................................20
11.1 ESTABLISHMENT OF THE TRUST..........................................20
11.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST.........................20
11.3 DISTRIBUTIONS FROM THE TRUST........................................20
ARTICLE 12 Miscellaneous.....................................................20
12.1 STATUS OF PLAN......................................................20
12.2 UNSECURED GENERAL CREDITOR..........................................20
12.3 ASSETS..............................................................21
12.4 COMPANY LIABILITY...................................................21
12.5 NONASSIGNABILITY....................................................21
12.6 NOT A CONTRACT OF EMPLOYMENT........................................21
12.7 FURNISHING INFORMATION..............................................21
12.8 TERMS...............................................................21
12.9 CAPTIONS............................................................21
12.10 GOVERNING LAW......................................................22
12.11 NOTICE.............................................................22
12.12 SUCCESSORS.........................................................22
12.13 SPOUSE'S INTEREST..................................................22
12.14 REFORMATION AND SEVERABILITY.......................................22
12.15 INCOMPETENCE.......................................................22
12.16 COURT ORDER........................................................23
12.17 DISTRIBUTION IN THE EVENT OF TAXATION..............................23
12.18 TAXES..............................................................23
12.19 INSURANCE..........................................................23
12.20 LITIGATION TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL...............24
12.21 EFFECT OF THE PLAN.................................................24
iii
<PAGE> 5
THE DIAL CORPORATION AMENDED AND RESTATED
MANAGEMENT DEFERRED COMPENSATION PLAN
(FORMERLY KNOWN AS THE DIAL CORPORATION DEFERRED COMPENSATION PLAN)
ARTICLE 1
PURPOSE
The purpose of this Amended and Restated Management Deferred
Compensation Plan is to provide a select group of key management employees of
The Dial Corporation and designated subsidiaries and affiliates the opportunity
to defer receipt of Base Salary and Incentive Awards to which they are entitled
while the Plan is in effect. The Plan is intended to be an unfunded nonqualified
deferred compensation plan maintained for "a select group of management or
highly compensated employees," as that phrase is used in Title I of ERISA, and
shall be construed and administered accordingly.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall have the
following meanings:
"ACCOUNT BALANCES" shall mean the sum of the balances of a
Participant's Cash Account, Stock Unit Account and Prior Account.
"ALLOCATION DATE" shall mean the date on which all or a
portion of a Participant's Deferral Amount is credited to his or her Cash
Account or Stock Unit Account, which shall be the date on which such Deferral
Amount (or portion thereof) would have been paid to the Participant if the
Participant had not made a Deferral Election.
"ANNUAL INSTALLMENT" shall mean any installment payment
required to be paid to a Participant, the amount of each of which shall be
determined by multiplying each Account Balance as of the Valuation Date
immediately preceding the date of the Annual Installment by a fraction, the
numerator of which shall be one (1) and the denominator of which shall be the
number of Annual Installments remaining to be paid to the Participant.
"BASE SALARY" shall mean a Participant's regular base salary
for a Plan Year (excluding Incentive Awards or other incentive compensation)
payable by an Employer to a Participant, before reduction pursuant to the Plan
or any other plan or arrangement of the Employer.
"BASIC STOCK UNITS" shall have the meaning set forth in
Section 5.5 of Article 5.
<PAGE> 6
"BENEFICIARY" shall mean the person or persons designated by a
Participant in accordance with Article 8 to receive payments under the Plan
following the death of the Participant.
"BOARD" shall mean the Board of Directors of the Company.
"CASH ACCOUNT" shall mean a memorandum account established on
the books of the Company on behalf of a Participant, into which shall be
credited an amount of cash pursuant to Article 4, in accordance with the
Participant's Deferral Elections.
"CAUSE" shall mean (i) the conviction of a Participant for
committing a felony under federal law or the law of the state in which such
action occurred, (ii) material dishonesty in the course of fulfilling a
Participant's employment duties or (iii) willful and deliberate failure on the
part of a Participant to perform his employment duties in any material respect,
or (iv) such other events as shall be determined by the Plan Administrator.
"CHANGE IN CAPITALIZATION" shall have the meaning set forth in
Section 4.5(iv) of Article 4.
"CHANGE IN CONTROL" shall have the meaning set forth in
Appendix A.
"CHANGE IN CONTROL PAYMENT METHOD" shall mean the manner in
which a Participant's Account Balances are paid to a Participant following a
Change in Control in accordance with the Participant's election, such manner to
be either (i) a lump sum upon a Change in Control or (ii) a lump sum upon
termination for any reason following a Change in Control; provided, that, if a
Participant does not elect a Change in Control Payment Method, the Participant's
other Payment Methods shall remain in effect following a Change in Control.
"CLAIMANT" shall have the meaning set forth in Section 10.1 of
Article 10.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMITTEE" shall mean the Executive Compensation Committee of
the Company; provided, that if the Committee shall cease to be composed of at
least two "Non-Employee Directors" as defined in Rule 16b-3(b) of the Exchange
Act, "Committee" shall mean two individuals, each of whom is a "Non-Employee
Director."
"COMMON STOCK" shall mean the common stock, par value $.01 per
share, of the Company.
"COMPANY" shall mean The Dial Corporation, a Delaware
corporation, and any successor thereto.
2
<PAGE> 7
"CONVERSION NOTICE" shall have the meaning set forth in
Section 4.4 of Article 4.
"DEFERRAL AMOUNT" shall mean a specified percentage or
specified dollar amount of Base Salary or Incentive Awards elected by a
Participant to be deferred in a Plan Year.
"DEFERRAL ELECTION" shall mean a Participant's timely election
of a Deferral Amount pursuant to Article 3.
"DEFERRAL ELECTION FORM" shall mean the form that a
Participant must submit to the Plan Administrator documenting his or her
Deferral Election.
"DEFERRED COMPENSATION ACCOUNTS" shall mean a Participant's
Cash Account, Stock Unit Account, and Prior Account.
"DISABILITY" shall mean a condition as a result of which a
Participant qualifies for permanent disability benefits under the Company's
long-term disability plan (or would qualify for such benefits, if the
Participant is not a participant in such plan) as determined by the Plan
Administrator.
"ELIGIBLE EMPLOYEE" shall mean an employee of an Employer in a
management position who is designated from time to time by the Plan
Administrator to be eligible for participation in the Plan.
"EMPLOYER" shall mean the Company and any subsidiary or
affiliate of the Company which is an employer of one or more employees who are
Participants in the Plan.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FAIR MARKET VALUE" on any date shall mean the mean between
the highest and lowest reported sales prices of the Common Stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any other
national exchange on which the Common Stock is listed or on the NASDAQ National
Market System or on NASDAQ or, if there is no regular public trading market for
the Common Stock, as determined by the Committee in good faith.
"GROSS-UP PAYMENT" shall mean a payment to a Participant upon
or following a Change in Control of the Company pursuant to a plan, arrangement
or agreement other than the Plan which is intended to indemnify the Participant,
in whole or
3
<PAGE> 8
in part, from the impact of the excise tax imposed by Section 4999
of the Code on any or all of the "excess parachute payments" (within the meaning
of Section 280G(b)(1) of the Code) received or to be received by the
Participant.
"INCENTIVE AWARD" shall mean an award to a Participant
pursuant to the Company's Annual Incentive Plan or Sales Incentive Plan.
"INVESTMENT CHOICES" shall mean the reference investment
vehicles made available by the Plan Administrator from time to time in which
Participants' Deferral Amounts will be deemed to be invested pursuant to Section
4.2 of Article 4.
"LEAVE OF ABSENCE" shall mean a paid or unpaid break in the
service of a Participant as an employee of his or her Employer with the approval
of the Plan Administrator.
"MANAGEMENT STOCK UNIT PURCHASE PROGRAM" shall mean the
program by which Deferral Amounts are credited as Stock Units to a Stock Unit
Account maintained for the benefit of a Participant, as set forth in Article 5.
"MATCHING STOCK UNITS" shall have the meaning set forth in
Section 5.5 of Article 5.
"PARTICIPANT" shall mean any Eligible Employee who makes a
Deferral Election pursuant to Section 3.1 of Article 3 and for whom one or more
Deferred Compensation Accounts are maintained under the Plan.
"PAYMENT METHOD" shall mean any of a Participant's Change in
Control Payment Method, Retirement Payment Method, Survivor Payment Method and
Termination Payment Method.
"PLAN" shall mean The Dial Corporation Amended and Restated
Management Deferred Compensation Plan (formerly known as The Dial Corporation
Deferred Compensation Plan), as such Plan may be amended from time to time.
"PLAN ADMINISTRATOR" shall mean the Committee or such
committee to which the Committee delegates its powers and duties under the Plan,
as set forth in Section 7.2 of Article 7, or, upon and following a Change in
Control, one or more persons selected pursuant to Section 7.7 of Article 7.
"PLAN YEAR" shall mean the calendar year.
"PRIOR ACCOUNT" shall mean the amounts in a Participant's
deferred compensation accounts (under the terms of The Dial Corporation Deferred
Compensation Plan) as of December 31, 1997.
4
<PAGE> 9
"RETIREMENT" shall mean termination of employment of a
Participant upon or following the date on which the sum of the Participant's age
and Years of Service is at least 55; provided, however, that "Retirement" shall
not include termination upon or following such date for Cause or as a result of
death or Disability.
"RETIREMENT PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Participant upon Retirement in
accordance with the Participant's election, such manner to be either (i) a lump
sum payment or (ii) five (5), ten (10) or fifteen (15) Annual Installments.
"SHORT-TERM PAYOUT" shall have the meaning set forth in
Section 6.8 of Article 6.
"STOCK UNIT ACCOUNT" shall mean a memorandum account
established on the books of the Company on behalf of a Participant, into which
shall be credited a number of Stock Units pursuant to Sections 4.1 of Article 4
and 5.4 of Article 5, in accordance with the Participant's Deferral Elections,
or pursuant to Section 4.4 of Article 4, in accordance with the Participant's
Conversion Notices.
"STOCK UNITS" shall mean units credited to a Participant's
Stock Unit Account as Matching Stock Units or Basic Stock Units, with one Stock
Unit having a value on a date equal to the Fair Market Value of one share of
Common Stock on such date.
"SURVIVOR PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Beneficiary of the Participant
upon the Participant's death prior to Retirement in accordance with the
Participant's election, such manner to be either (i) a lump sum or (ii) five
(5), ten (10) or fifteen (15) Annual Installments.
"TERMINATION" shall mean termination of employment of a
Participant, other than (i) for Cause or (ii) upon his or her Retirement or
death.
"TERMINATION PAYMENT METHOD" shall mean the manner in which a
Participant's Account Balances are paid to the Participant upon Termination in
accordance with the Participant's election, such manner to be either (i) a lump
sum payment or (ii) two (2) or three (3) Annual Installments.
"TRUST" shall mean the trust established pursuant to Article
11.
"UNFORESEEABLE FINANCIAL EMERGENCY" shall mean an
unanticipated emergency which is (i) a sudden and unexpected illness or accident
of the Participant or a dependent of the Participant (with "dependent" defined
for purposes of the Plan as in Section 152(a) of the Code), (ii) a loss of the
Participant's property due to casualty or (iii) such other extraordinary
circumstances deemed to be an Unforeseeable Financial
5
<PAGE> 10
Emergency, in each case caused by an event beyond the control of the Participant
and imposing severe financial hardship to the Participant.
"VALUATION DATE" shall mean the last day of each calendar
month.
"YEAR OF SERVICE" shall mean each complete 365-day period
during which an employee is an employee of any Employer, such period to commence
on the employee's initial date of hire and each anniversary of his or her date
of hire; provided, that the calculation of the Years of Service of an employee
with breaks in service as a result of a Disability or a Leave of Absence shall
be as determined by the Plan Administrator.
ARTICLE 3
DEFERRAL ELECTIONS OF BASE SALARY AND INCENTIVE AWARDS
3.1 DEFERRAL ELECTION. Each Eligible Employee may elect
to have the payment of a specified percentage or specified dollar amount of Base
Salary or one or more Incentive Awards deferred in each Plan Year pursuant to
the Plan; provided, however, that the Plan Administrator shall establish minimum
and maximum Deferral Amounts in respect of each Plan Year and may in its
discretion establish other limits on Deferral Amounts as it deems appropriate.
Each Deferral Election shall be timely made on a Deferral Election Form to be
provided by the Plan Administrator and shall specify the Deferral Amount. Upon
the acknowledgment of a Deferral Election Form by the Plan Administrator, such
Eligible Employee shall become a Participant in the Plan for such Plan Year.
3.2 TIMING OF DEFERRAL ELECTIONS. Deferral Elections in
respect of Base Salary otherwise payable to Participants in a Plan Year shall be
timely if made on or before December 15 of the preceding year. Deferral
Elections in respect of Incentive Awards otherwise payable to Participants in a
Plan Year shall be timely (i) for awards pursuant to the Company's Annual
Incentive Plan, if made on or before September 30 of the preceding year;
provided, however, that Deferral Elections in respect of Annual Incentive Plan
awards otherwise payable in the 1998 Plan Year shall be timely if made on or
before a date specified by the Plan Administrator not later than November 30,
1997; and (ii) for awards pursuant to the Company's Sales Incentive Plan, if
made at least six (6) months prior to the Allocation Date of such awards.
3.3 IRREVOCABILITY. Except as provided in Section 3.4 of
this Article 3, a Deferral Election, once made, shall be irrevocable.
3.4 CESSATION OF DEFERRAL ELECTIONS. The Deferral
Election of a Participant shall be of no further force and effect (i) upon the
Participant's death, (ii) in the discretion of the Plan Administrator, if a
Participant is suffering from a Disability, (iii) in
6
<PAGE> 11
the discretion of the Plan Administrator, during a Participant's Leave of
Absence; provided, however, that the Plan Administrator may permit the Deferral
Election of a Participant who is on a paid Leave of Absence to remain in effect
during the Leave of Absence, or (iv) upon withdrawal of a Participant from the
Plan pursuant to Section 6.10 of Article 6.
3.5 RETURN TO WORK FOLLOWING DISABILITY OR LEAVE OF ABSENCE.
If a Participant returns to employment upon cessation of Disability, or
following a Leave of Absence, in either case during which the Participant's
Deferral Election was of no force and effect pursuant to Section 3.4 of this
Article 3, (i) the Plan Administrator may give effect to the Participant's
unexpired Deferral Election and (ii) the Participant may, with the consent of
the Plan Administrator, make Deferral Elections in respect of future Plan Years.
3.6 INITIAL PLAN YEAR. The initial Plan Year of the Plan
as amended and restated shall commence on January 1, 1998.
ARTICLE 4
TREATMENT OF DEFERRAL AMOUNTS
4.1 MEMORANDUM ACCOUNTS. The Company shall establish on
its books for each Participant in the Plan, as necessary, a Cash Account and a
Stock Unit Account. On each Allocation Date, an amount of cash reflecting a
Participant's Deferral Amount shall be credited (i) to the Participant's Cash
Account, to the extent that the Participant has elected to invest in one or more
Investment Choices and (ii) to the Participant's Stock Unit Account, in
accordance with the terms and conditions of Article 5, to the extent that the
Participant has elected to participate in the Management Stock Unit Purchase
Program.
4.2 INVESTMENT OF CASH ACCOUNTS. A Participant's Cash
Account shall be deemed invested among the Investment Choices selected by the
Participant on the Participant's Deferral Election Form (or such other form as
may be prescribed by the Plan Administrator). Each Participant's Cash Account
shall be adjusted as of each Valuation Date to reflect the performance of the
Investment Choices, and, to the greatest extent practicable, the value of each
Participant's Cash Account shall be determined as if Deferral Amounts were
actually invested among the Investment Choices as directed by such Participant;
provided, however, that the Company shall have no obligation actually to invest
any Deferral Amounts or other assets in any Investment Choices.
4.3 TRANSFER AMONG INVESTMENT CHOICES. A Participant may elect
to change the allocation of his or her Cash Account among the Investment Choices
(both as to the Account Balance of the Cash Account and future Deferral Amounts)
not more frequently than quarterly by completing such form as may be prescribed
by the Plan
7
<PAGE> 12
Administrator and submitting it to the Plan Administrator. Any such change in
allocation will become effective on the first day of the next following calendar
quarter.
4.4 CONVERSION BETWEEN STOCK UNIT ACCOUNTS AND CASH ACCOUNTS.
A Participant may, by notice delivered to the Plan Administrator (a "Conversion
Notice"), convert (i) all or any portion of the Stock Units credited to his or
her Stock Unit Account (either before or after Annual Installments from such
account may have commenced) to his or her Cash Account by multiplying the Stock
Units to be converted by the Fair Market Value of a share of Common Stock on the
earlier of the Valuation Date coincident with or the Valuation Date next
following the day on which the Conversion Notice is received (or, if neither
such Valuation Date is a day on which the Common Stock is traded, on the next
following trading day), or (ii) all or any portion of his or her Cash Account
(either before or after Annual Installments from such account may have
commenced) into a number of Stock Units equal to the portion of the Cash Account
to be converted divided by the Fair Market Value of a share of Common Stock on
the last trading day of the month in which such Conversion Notice is given;
provided, however, that no Conversion Notice shall be of any force and effect if
it (A) is given within six months following the date of an election by such
Participant, with respect to any plan of the Company, that effected a
"Discretionary Transaction" (as defined in Rule 16b-3(f) under the Exchange Act)
that was an acquisition (if the Conversion Notice is pursuant to clause (i)) or
a disposition (if the Conversion Notice is pursuant to clause (ii)), (B) is
given after an individual ceases to be an employee of an Employer and the
Committee does not consent to such Conversion Notice, (C) applies to (i) any
Basic Stock Units which (by reason of the calculation set forth in Section 5.4
of Article 5) give rise to Matching Stock Units, if such Matching Stock Units
are unvested as of the date of the Conversion Notice or (ii) any unvested
Matching Stock Units, or (D) applies to a Prior Account. Any such Conversion
Notice will become effective on the first day of the next following calendar
quarter.
4.5 STOCK UNIT DIVIDEND EQUIVALENT RIGHTS. In the event
of a dividend paid with respect to the Common Stock, whether in cash, Common
Stock or other stock or property of the Company, credits (dividend equivalents)
will be made to each Participant's Stock Unit Account as follows:
(i) in the case of a cash dividend, or a dividend of
stock of the Company (other than Common Stock) or other property,
additional credits will be made to the Stock Unit Account consisting of
a number of Stock Units equal to the number determined by dividing (A)
the cash amount of such dividend per share (or the fair market value,
on the date of payment, of dividends paid in such stock or other
property), multiplied by the aggregate number of Stock Units credited
to such Stock Unit Account on the record date for the payment of such
dividend by (B) the Fair Market Value of a share of Common Stock on the
day prior to the date such dividend is payable to holders;
8
<PAGE> 13
(ii) in the case of a dividend consisting of Common
Stock, the Stock Unit Account will be credited with a number of Stock
Units equal to the number of Stock Units in such account immediately
prior to such dividend multiplied by the number of shares of Common
Stock paid per share of Common Stock in such dividend;
(iii) in the case of a dividend consisting of shares
of stock of any of the Company's subsidiaries, a new stock unit
subaccount will be established and credited with a number of shares of
stock of such subsidiary equal to the number of Stock Units in the
Participant's Stock Unit Account immediately prior to such dividend
multiplied by the number of shares of subsidiary stock issued per share
of Common Stock in such dividend (with dividends thereafter accruing on
such new subaccount solely in the form of cash in an amount equal to
the value of dividends paid by the issuer of the stock to which the
stock units relate); and
(iv) in the case of a Change in Capitalization not
described in subsections (i), (ii) or (iii) of this Section 4.5, the
Committee in good faith shall take such action as it deems necessary to
preserve the economic value of the Stock Unit Account immediately prior
to the Change in Capitalization. For purposes of this Section 4.5(iv),
"Change in Capitalization" shall mean any increase or reduction in the
number of shares of Common Stock, or any change (including, but not
limited to, a change in value) in such shares or exchange of such
shares for a different number or kind of shares or other securities of
the Company or another corporation, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off,
split-up, issuance of warrants or rights or debentures, stock dividend,
stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in
corporate structure or otherwise.
After payment in respect of a Participant's Stock Unit Account
commences, dividend equivalents will accrue on the unpaid balance of such Stock
Unit Account in the same manner until all of the amounts credited to such Stock
Unit Account have been paid.
4.6 VESTING. A Participant shall be fully (100%) vested
in the Account Balances of his or her Cash Account and Prior Account at all
times. A Participant shall be vested in the Account Balance of his or her Stock
Unit Account as provided in Section 5.5 of Article 5.
4.7 REPORTS. Until a Participant's Account Balances shall
have been paid in full, the Company will furnish to the Participant a report at
least quarterly which shall set forth transactions in, and the status of, the
Participant's Deferred Compensation Accounts.
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4.8 TREATMENT OF PRIOR ACCOUNTS. Prior Accounts shall be
accounted for separately under the Plan. Prior Accounts may be allocated between
the investment alternatives available under the Plan as of December 31, 1997
(unless the Plan Administrator shall make available another investment
alternative) but may not be allocated among the Investment Choices (unless such
other investment alternative is also an Investment Choice) or to a Stock Unit
Account. A Participant's Prior Account shall be paid to the Participant in
accordance with Article 6 of the Plan.
ARTICLE 5
MANAGEMENT STOCK UNIT PURCHASE PROGRAM
5.1 PURPOSE. The purpose of the Management Stock Unit
Purchase Program is to encourage Participants in the Plan to defer compensation
into Stock Units, thereby aligning the interests of senior management of the
Company with the interests of the Company's stockholders.
5.2 STOCK UNIT DEFERRAL ELECTIONS. In making his or her
Deferral Election, a Participant may elect that Deferral Amounts be deferred as
Stock Units. A Participant shall make such a Deferral Election on the Deferral
Election Form or such other form as the Plan Administrator may prescribe.
5.3 STOCK UNIT ACCOUNTS. A Stock Unit Account shall be
maintained as necessary for each Participant. On each Allocation Date, an amount
of cash shall be credited to a Participant's Stock Unit Account which shall
reflect the portion of the Participant's Deferral Amount not credited to the
Participant's Cash Account pursuant to Section 4.1 of Article 4.
5.4 CONVERSION TO STOCK UNITS. Credits to a Participant's
Stock Unit Account on an Allocation Date shall be converted into a number of
Stock Units equal to the amount of the credit to the Stock Unit Account on such
Allocation Date divided by the product of (i) the Fair Market Value of a share
of Common Stock on the Allocation Date and (ii) eight-tenths (.8). Upon and
following such conversion, such Stock Units shall be allocated to the Stock Unit
Account in lieu of such credit.
5.5 VESTING IN STOCK UNITS. Stock Units which are equal
to the credit to the Stock Unit Account on an Allocation Date divided by the
Fair Market Value of a share of Common Stock on such Allocation Date shall be
deemed "Basic Stock Units." The remaining Stock Units following the conversion
of the credit into Stock Units on such Allocation Date shall be deemed "Matching
Stock Units." Each Participant shall at all times be fully (100%) vested in the
Basic Stock Units allocated to his or her Stock Unit Account. Except as provided
in Section 5.6 of this Article 5, each Participant shall vest in
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the Matching Stock Units allocated to his or her Stock Unit Account on the last
day of the second Plan Year following the Plan Year in which such Stock Units
were allocated.
5.6 FORFEITURE AND ACCELERATED VESTING OF MATCHING STOCK
UNITS. If, prior to a Change in Control, a Participant ceases to be an employee
of an Employer for any reason other than death or Disability, all unvested
Matching Stock Units credited to the Participant's Stock Unit Account shall be
immediately forfeited. Upon (i) the death of a Participant, (ii) termination of
employment by reason of Disability or (iii) a Change in Control, all unvested
Matching Stock Units credited to the Participant's Stock Unit Account shall
immediately vest. If a Participant shall remain a Participant following a Change
in Control or become a Participant following cessation of a Disability, Stock
Units thereafter allocated to the Participant's Stock Unit Account shall be
subject to the terms and conditions of the Plan as if no such Change in Control
or Disability (as the case may be) had occurred.
5.7 DIVIDEND EQUIVALENT RIGHTS. Dividend equivalents credited
pursuant to Section 4.5 of Article 4 shall be subject to the vesting and
forfeiture provisions of Sections 5.5 and 5.6 of this Article 5 in accordance
with the Stock Units to which such dividend equivalents relate.
ARTICLE 6
PAYMENT OF ACCOUNT BALANCES
6.1 FORM OF PAYMENT. This Article 6 shall govern the
payment of a Participant's Account Balances.
(a) PAYMENT TO BE MADE IN CASH. Any payment required
to be paid from (i) a Participant's Cash Account and (ii) the cash portion of a
Participant's Prior Account shall be in cash.
(b) PAYMENT TO BE MADE IN COMMON STOCK. Any payment
required to be paid from (i) a Participant's Stock Unit Account and (ii) from
the stock unit portion of a Participant's Prior Account shall be in cash or, at
the election of the Participant or the Plan Administrator, in Common Stock. A
Participant's election pursuant to this Section 6.1(b) shall be honored by the
Plan Administrator in its discretion.
6.2 INITIAL PAYMENT METHOD ELECTION. Each Eligible Employee
shall select Payment Methods upon completion of his or her initial Deferral
Election Form. Except as provided in Sections 6.5 and 6.6 of this Article 6, a
Participant's Account Balances shall be paid in accordance with such Payment
Methods. If a Participant fails to select one or more Payment Methods, he or she
will be deemed to have selected a lump sum in respect of such Payment Methods;
provided, however, that, if a Participant has not
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selected a Change in Control Payment Method, the Participant's Retirement
Payment Method, Survivor Payment Method and Termination Payment Method will
remain in effect following a Change in Control.
6.3 PAYMENT OF PRIOR ACCOUNTS. Prior Accounts shall be
paid to a Participant in accordance with the Payment Methods selected by the
Participant pursuant to Section 6.2 of this Article 6 (or, if the Participant
has failed to select one or more Payment Methods, in a lump sum).
6.4 CHANGE IN PAYMENT METHOD. A Participant may change
one or more of his or her Payment Methods by completing such form as may be
prescribed by the Plan Administrator; provided, however, that such change shall
be effective only if made by the Participant and acknowledged by the Plan
Administrator: (i) if the change relates to the Change in Control Payment
Method, at least one (1) year prior to the date of a Change in Control, (ii) if
the change relates to the Retirement Payment Method or Termination Payment
Method, at least two (2) years prior to the date of Termination or Retirement
(whichever is applicable) and (iii) if the change relates to the Survivor
Payment Method, immediately.
6.5 PAYMENT UPON TERMINATION OF EMPLOYMENT.
Notwithstanding a Participant's selection of a Termination Payment Method, a
Participant's Account Balances shall be paid in a lump sum if (i) the
Participant's Account Balances on the Valuation Date next following his or her
Termination of employment equal less than twenty-five thousand dollars ($25,000)
or (ii) the Participant ceases to be an employee of an Employer by reason of
termination for Cause. If a Participant's Account Balances on the Valuation Date
next following his or her Termination of employment equal twenty-five thousand
dollars ($25,000) or greater, the Account Balances shall be paid in accordance
with the Participant's Termination Payment Method.
6.6 PAYMENT UPON DISABILITY. If a Participant is
determined by the Plan Administrator to be suffering from a Disability, the Plan
Administrator may deem such Participant to have effected a Termination of
employment; provided, however, that if a Participant is eligible for Retirement
on the date he or she would have been deemed to have effected a Termination, the
Plan Administrator, with the consent of the Participant, may deem the
Participant to have effected his or her Retirement.
6.7 PAYMENT UPON DEATH.
(a) PRIOR TO RETIREMENT. Notwithstanding a
Participant's selection of a Survivor Payment Method, if a
Participant's Account Balances on the Valuation Date next
following his or her death prior to Retirement equal less than
twenty-five thousand dollars ($25,000), the Account Balances
shall be paid to the Participant's Beneficiary in a lump sum.
If a
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Participant's Account Balances on such Valuation Date equal
twenty-five thousand dollars ($25,000) or greater, the Account
Balances shall be paid to the Participant's Beneficiary in
accordance with the Participant's Survivor Payment Method.
(c) FOLLOWING RETIREMENT. If a Participant's
Account Balances on the Valuation Date next following his or
her death following Retirement equal less than twenty-five
thousand dollars ($25,000), the Account Balances shall be paid
to the Participant's Beneficiary in a lump sum. If a
Participant's Account Balances on such Valuation Date equal
twenty-five thousand dollars ($25,000) or greater, the Account
Balances shall be paid to the Participant's Beneficiary in
accordance with the Retirement Payment Method in effect in
respect of the Participant on the date of his or her death;
provided, however, that the Beneficiary may request that the
Plan Administrator pay the Participant's Account Balances in a
lump sum without giving effect to Section 6.10 of this Article
6, which request shall be honored by the Plan Administrator in
its discretion in whole or in part or upon such terms and
conditions as the Plan administrator in good faith deems
appropriate.
6.8 SHORT-TERM PAYOUT. In making his or her Deferral Election,
a Participant may irrevocably elect to receive a "Short-Term Payout" of the
Deferral Amount in respect of the Plan Year for which such Deferral Election is
made. The Short-Term Payout shall be a lump sum payment in an amount equal to
such Deferral Amount plus or minus amounts credited or debited to such Deferral
Amount in the manner provided in Section 4.2 of Article 4, to be paid to such
Participant before March 1 of a Plan Year selected by the Participant; provided,
however, that at least two (2) complete Plan Years must elapse between the Plan
Year in which the Deferral Amount is deferred and the Plan Year in which the
Short-Term Payout is to occur. If, after a Participant elects to receive a
Short-Term Payout but before the Short-Term Payout occurs, the Participant
becomes entitled to payment of his or her Account Balances (in whole or in
part), such Short-Term Payout shall be of no force and effect to the extent
inconsistent with such other payment.
6.9 UNFORESEEABLE FINANCIAL EMERGENCY. If a Participant (or,
after a Participant's death, his or her Beneficiary) experiences an
Unforeseeable Financial Emergency, the Participant or Beneficiary may request
that the Plan Administrator (i) suspend his or her Deferral Election and (ii)
distribute a partial or full lump sum payment from the Participant's Account
Balances. The payment shall not exceed the amount reasonably needed to satisfy
the Unforeseeable Financial Emergency (and may include an amount equal to any
income taxes and other taxes payable by the Participant or Beneficiary upon
receipt of the amount to be distributed). The request shall be honored by
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the Plan Administrator in its discretion. The lump sum payment shall be paid
promptly after the first Valuation Date after approval of the request.
6.10 WITHDRAWAL ELECTION. A Participant (or, after a
Participant's death, his or her Beneficiary) may elect to withdraw from the Plan
at any time. A Participant or Beneficiary shall make such election in writing
delivered to the Plan Administrator on such form as the Plan Administrator may
prescribe. Except as provided in Section 6.6(b) of this Article 6, upon the
making of such an election, any unvested Matching Stock Units credited to the
Participant's Stock Unit Account shall be immediately forfeited, and the
Participant's Account Balances shall thereafter be reduced by an additional ten
percent (10%). Payment of a Participant's Account Balances shall be in a lump
sum to be paid as soon as practicable following the election; provided, however,
that the Plan Administrator may delay making such payment if necessary to comply
with Rule 16b-3 of the Exchange Act. Upon payment of his or her Account Balances
pursuant to this Section 6.10, a Participant's participation in the Plan shall
terminate and the Participant shall be ineligible to participate in the Plan in
the future.
6.11 EFFECT OF SECTION 162(m) OF THE CODE. If, prior to a
Change in Control, the Plan Administrator determines that any payment under the
Plan to a Participant may not be deductible by the Company under Section 162(m)
of the Code, the Plan Administrator may, to the extent necessary to preserve
such deduction, defer any such payment otherwise payable until the earlier of
(i) the earliest date that such payment is deductible under Section 162(m) or
(ii) a Change in Control. This Section 6.11 shall be of no force and effect upon
and following a Change in Control.
6.12 EFFECT OF SECTION 280G OF THE CODE. If any payment
under the Plan to a Participant would constitute an "excess parachute payment"
(within the meaning of Section 280G of the Code), then such payment shall be
reduced (but not below zero) to such extent; provided, however, that such
Participant may, by notice given to the Plan Administrator, elect to reduce
payments due him or her under other plans, arrangements or agreements of the
Company in lieu of the reduction of one or more payments under the Plan. Any
notice given by a Participant pursuant to this Section 6.12 shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Participant's rights and entitlements to any benefits or
compensation. This Section 6.12 shall not apply to any Participant who, pursuant
to any other plan, arrangement or agreement, is entitled to receive a Gross-Up
Payment from the Company.
6.13 TIMING OF LUMP SUM PAYMENTS. Except as provided in
Sections 6.9 and 6.10 of this Article 6, prior to a Change in Control, any lump
sum payment required to be paid pursuant to the Plan shall be paid by March 1 of
the Plan Year following the Plan Year in which occurs the event giving rise to
such payment. Upon and following a Change in Control, any lump sum payment
required to be paid pursuant to the Plan shall be paid
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within ten (10) business days following the first Valuation Date following the
occurrence of the event giving rise to such payment.
6.14 TIMING OF ANNUAL INSTALLMENTS. A Participant's
initial Annual Installment shall be paid by March 1 of the Plan Year following
the Plan Year in which occurs the event giving rise to such Annual Installment.
Subsequent Annual Installments required to be paid under the Plan shall be paid
as promptly as practicable after the end of each subsequent Plan Year until all
Annual Installments have been paid.
6.15 PRORATION OF PAYMENTS. To the extent that a
Participant has more than one Account Balance at the time a payment is due from
such Account Balances, any payment due such Participant (or such Participant's
Beneficiary) shall be paid pro rata from each Account Balance.
6.16 PAYMENT FROM STOCK UNIT ACCOUNTS. Payments from Stock
Unit Accounts or the stock unit portion of Prior Accounts shall be based on the
Fair Market Value of a share of Common Stock on the Valuation Date immediately
preceding the date of such payment.
ARTICLE 7
ADMINISTRATION
7.1 PLAN ADMINISTRATOR. Except as may be delegated
pursuant to Section 7.2 of this Article 7 and except as provided in Section 7.7
of this Article 7, the Committee shall be the Plan Administrator. 7.2 DELEGATION
TO MANAGEMENT COMMITTEE
The Plan Administrator may delegate one or more of its
functions to a committee composed of three or more senior executives of the
Company; provided, however, that the Plan Administrator may not delegate (i) the
selection of Eligible Employees, (ii) the selection of Investment Choices or
(iii) any other function required by law to be performed by the Committee. Upon
appointment of such a committee and delegation of duties thereto, such committee
shall become the Plan Administrator to the extent of such delegation.
7.3 GENERAL POWERS AND RESPONSIBILITIES OF PLAN
ADMINISTRATOR. The Plan Administrator shall have full authority to construe and
interpret the terms and provisions of the Plan, and to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan and
perform all acts as it shall, from time to time, deem advisable, and otherwise
to supervise the administration of the Plan. The Plan Administrator may correct
any defect, supply any omission or reconcile any inconsistency in the Plan, or
in any Deferral Election hereunder, in the manner and to the extent it shall
deem necessary to effectuate the Plan. Any decision, interpretation or other
action made or
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taken in good faith by or at the direction of the Plan Administrator in
connection with the Plan shall be in the sole and absolute discretion of the
Plan Administrator and shall be final, binding and conclusive on all persons
(including, but not limited to, the Company, employees of the Company and the
Employers, Participants and their respective Beneficiaries, heirs, executors,
administrators, successors and assigns). A Participant who is a member of a
committee that is the Plan Administrator or a person to whom the Plan
Administrator has delegated responsibility pursuant to Section 7.2 of this
Article 7 shall not participate in any decision involving a request made by him
or her or relating in any way to his or her rights, duties, and obligations as a
Participant (unless such decision relates to all Participants generally and in a
similar manner).
7.4 ACTION OF PLAN ADMINISTRATOR. Action taken by the
Plan Administrator shall be taken by a vote of the majority of its members
present at a meeting at which a quorum is present or signed by a majority of its
members in writing without a meeting.
7.5 LIABILITY. No member of the Board, nor the Plan
Administrator nor any employee or agent of the Company, shall be liable for any
act or action hereunder, whether of omission or commission, by any person to
whom duties in connection with the administration of the Plan have been
delegated except in respect of the prudent appointment and periodic monitoring
of such person. Except in circumstances involving bad faith, gross negligence,
willful misconduct or fraud, no person who is a member of the Board, the Plan
Administrator or any employee or agent of the Company shall be liable for
anything done or omitted to be done by him or her. The Company or the Plan
Administrator may consult with legal counsel, who may be counsel for the Company
or other legal counsel with respect to obligations or duties hereunder or with
respect to any action or proceeding or any question of law, and shall not be
liable with respect to any action taken or omitted by it in good faith pursuant
to the advice of such counsel except in respect of the prudent selection of such
counsel.
7.6 INDEMNIFICATION OF PLAN ADMINISTRATOR. The Company
hereby indemnifies the Plan Administrator and each employee to whom
responsibilities are delegated under the Plan against any and all liabilities
and expenses, including attorney's fees, actually and reasonably incurred by
them in connection with any threatened, pending or completed legal action or
judicial or administrative proceeding to which they may be a party, or may be
threatened to be made a party, by reason of being a member of a committee which
is the Plan Administrator or due to a delegation of responsibilities, except
with regard to any matters (i) as to which they shall be adjudged to have failed
to act with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims, and (ii) with respect to any
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action finally adjudged to be a crime, had reasonable cause to believe their
conduct was unlawful.
7.7 ADMINISTRATION UPON CHANGE IN CONTROL. Upon and
following a Change in Control, the Plan Administrator shall be one or more
persons selected by the individual who, immediately prior to the Change in
Control was the Company's chief executive officer; provided, however, that if no
such Plan Administrator has been appointed or accepted such appointment within
ninety (90) days following such Change in Control, the Plan Administrator shall
remain as in effect prior to such Change in Control. The Company's chief
executive officer may appoint himself or herself as Plan Administrator pursuant
to this Section 7.7.
7.8 EMPLOYER INFORMATION. To enable the Plan
Administrator to perform its functions under the Plan, each Employer shall
supply full and timely information to the Plan Administrator regarding all
matters relating to the compensation of Participants, the date and circumstances
of the Retirement, Disability, death and Termination of Participants, and such
other pertinent information as the Plan Administrator may reasonably require.
ARTICLE 8
BENEFICIARY DESIGNATION
8.1 BENEFICIARY. Each Participant shall designate upon
such form as may be prescribed by the Plan Administrator one or more primary
Beneficiaries and one or more contingent Beneficiaries to receive such
Participant's Account Balances upon his or her death.
8.2 CHANGE OF BENEFICIARY; SPOUSAL CONSENT. A Participant
shall have the right to change his or her Beneficiaries upon such form as may be
prescribed by the Plan Administrator. If the Participant names a primary
Beneficiary other than his or her spouse, a spousal consent, in the form
designated by the Plan Administrator, must be signed by the Participant's spouse
and returned to the Plan Administrator.
8.3 ACKNOWLEDGMENT. No designation or change in
designation of a Beneficiary shall be effective until actually received and
acknowledged in writing by the Plan Administrator. Upon such receipt and
acknowledgment, all prior Beneficiary designations of a Participant shall be of
no further force and effect. The Plan Administrator shall be entitled to rely on
the most recent Beneficiary designation in effect prior to a Participant's
death.
8.4 NO BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary as provided in this Article 8, or if all designated
Beneficiaries who are natural
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persons shall have predeceased the Participant or die prior to complete
distribution of the Participant's Account Balances, such Participant's Account
Balances shall be paid to his or her surviving spouse or, if the Participant has
no surviving spouse, to the Participant's estate.
8.5 DOUBT AS TO BENEFICIARY. If the Plan Administrator is
in doubt as to a Participant's Beneficiary, the Plan Administrator may withhold
payments under the Plan until the Plan Administrator has resolved its doubts to
its satisfaction.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE PLAN
9.1 TERMINATION
(a) BY THE COMPANY. Subject to Section
9.1(c) of this Article 9, the Company may terminate the Plan
in whole or in part (including with respect to the
participation of the employees of any Employer) at any time
and for any reason without prior notice to or consent of any
Participant.
(b) BY THE EMPLOYERS. Subject to Section
9.1(c) of this Article 9, each Employer may terminate the Plan
at any time with respect to any or all Participants who are
employees of such Employer.
(c) PAYMENT OF ACCOUNT BALANCES FOLLOWING
PLAN TERMINATION. Upon the termination of the Plan prior to a
Change in Control, Participants shall receive their Account
Balances in a lump sum or in five (5), ten (10) or fifteen
(15) Annual Installments (at the discretion of the Plan
Administrator); provided, however, that if a Participant is
receiving Annual Installments upon termination of the Plan
pursuant to the election of a Payment Method, such Annual
Installments shall continue following termination of the Plan.
Upon termination of the Plan upon or following a Change in
Control, Participants shall receive their Account Balances in
a lump sum promptly following the Valuation Date next
following the date of such termination. Termination of the
Plan shall not adversely affect the Account Balances of any
Participant or Beneficiary; provided, however, that neither
lump sum payment of Account Balances nor a reduced number of
Annual Installments upon termination of the Plan shall be
deemed such an adverse effect.
9.2 AMENDMENT
(a) BY THE COMPANY. Subject to Section
9.2(c) of this Article 9, the Company may amend or modify the
Plan in whole or in part at
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any time and for any reason without prior notice to or consent
of any Participant or Beneficiary; provided, however, that,
unless a Participant or Beneficiary who would be affected by
such amendment shall have consented thereto, the Plan may not
be amended (i) at the request of a third party who has
indicated an intention or taken steps to effect a Change in
Control and who effectuates a Change in Control, (ii) within
six (6) months prior to, or otherwise in connection with, or
in anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs, or (iii)
upon or following a Change in Control.
(b) BY THE PLAN ADMINISTRATOR. Subject to
Section 9.2(c) of this Article 9, prior to a Change in
Control, the Plan Administrator may in good faith amend or
modify the Plan to effectuate its intent or to resolve any
discrepancy among the provisions of the Plan or between the
Plan and other documents describing the Plan; provided,
however, that no such amendment may materially increase the
cost of the Plan to the Company or any Employer.
(c) EFFECT OF AMENDMENT. No amendment or
modification of the Plan shall reduce a Participant's Account
Balances as of the date of such amendment or modification.
9.3 EFFECT OF PAYMENT. The full payment of a
Participant's Account Balances shall completely discharge all obligations to a
Participant and his or her Beneficiaries under the Plan.
ARTICLE 10
CLAIMS PROCEDURES
10.1 PRESENTATION OF CLAIM. Any Participant, Beneficiary
or other person (each such person, a "Claimant") may deliver to the Plan
Administrator a written claim for payment from the Plan. All claims must be made
within one hundred eighty (180) days following the date of the occurrence of the
event giving rise to the claim; provided, however, that, if a claim relates to a
notice given by the Company, such claim must be made within sixty (60) days
following receipt of such notice by the Claimant. The claim must state with
particularity the determination desired by the Claimant.
10.2 NOTIFICATION OF DECISION. The Plan Administrator
shall consider a Claimant's claim, and shall notify the Claimant in writing of
its determination within a reasonable time. Such notice shall set forth (i) one
or more reasons for the grant or denial of the claim or any part of it; (ii) a
description of any additional material or information necessary for the Claimant
to perfect the claim, and an explanation of why such material or
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information is necessary; and (iii) an explanation of the claim review procedure
set forth in Section 10.3 of this Article 10.
10.3 REVIEW OF A DENIED CLAIM. Within sixty (60) days
after receiving a notice from the Plan Administrator that a claim has been
denied in whole or in part, a Claimant (or such Claimant's duly authorized
representative) may file with the Plan Administrator a written request for a
review of the denial of the claim. During such sixty-day period, the Claimant
(or the Claimant's duly authorized representative) (i) may review pertinent
documents, (ii) may submit written comments or other documents to the Plan
Administrator and (iii) may request a hearing.
10.4 DECISION ON REVIEW. The Plan Administrator shall
render its decision on review promptly, and not later than sixty (60) days after
the filing of a written request for review of the denial, unless a hearing is
held or other special circumstances require additional time, in which case the
Plan Administrator's decision must be rendered within one hundred twenty (120)
days after such date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain (i) specific reasons for the
decision, (ii) specific reference(s) to the pertinent Plan provisions upon which
the decision was based, and (iii) such other matters as the Plan Administrator
may deem relevant.
10.5 LEGAL ACTION. In making a Deferral Election under the
Plan, each Participant shall be deemed to have agreed that compliance with the
provisions of this Article 10 is a mandatory prerequisite to commencement of any
legal action with respect to any claim for payment under the Plan.
ARTICLE 11
FUNDING
11.1 ESTABLISHMENT OF THE TRUST. The Company shall
establish a Trust in connection with the Plan, and each Employer may, from time
to time and in its sole discretion, transfer to the Trust assets with respect to
Participants who are employees of such Employer.
11.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The
provisions of the Plan shall govern the rights of a Participant to receive
payment of his or her Account Balances. The provisions of the Trust shall govern
the rights of the Trustee, the Company, the Employers, Participants and the
creditors of the Company or the Employers to the assets held in the Trust.
11.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's
obligations under the Plan may be satisfied with Trust assets distributed
pursuant to the terms of the Trust, and any such distribution shall reduce the
Employer's obligations under the Plan.
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ARTICLE 12
MISCELLANEOUS
12.1 STATUS OF PLAN. The Plan is intended to be a plan
that is not qualified within the meaning of Section 401(a) of the Code and that
"is unfunded and is maintained by an employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees" within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. The Plan shall be administered and interpreted in a manner
consistent with that intent.
12.2 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Company. For
purposes of the payment of benefits under the Plan, any and all of the Company's
assets shall be, and remain, the general, unpledged unrestricted assets of the
Company. The Company's obligation under the Plan shall be merely that of an
unfunded and unsecured promise to pay money in the future.
12.3 ASSETS. This Plan, and the crediting of Deferral
Amounts to Cash Accounts, Stock Unit Accounts and Prior Accounts hereunder,
shall not constitute a trust and shall be an unsecured contractual obligation of
the Company to the Participants. The obligations of the Company hereunder to any
Participant on any date shall be limited to his or her Account Balances as of
the most recent preceding Valuation Date.
12.4 COMPANY LIABILITY. The Company's liability for the
payment of benefits under the Plan shall be defined only by the Plan. The
Company shall have no obligation to a Participant under the Plan except as
expressly provided herein.
12.5 NONASSIGNABILITY. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, any amount payable under the Plan. All
amounts payable under the Plan, and all rights to such amounts, are expressly
declared to be unassignable and non-transferable. Except as provided in Section
12.16 of this Article 12, no part of a Participant's Account Balances shall,
prior to actual payment, be subject to seizure, attachment, garnishment or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by the Participant or any other person, be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency or be transferable to a spouse as a result of a
property settlement or otherwise.
12.6 NOT A CONTRACT OF EMPLOYMENT. The terms and
conditions of the Plan shall not be deemed to establish, constitute or be
evidence of a contract of employment between any Employer and any Participant.
Nothing in the Plan shall be deemed to confer upon a Participant the right to be
retained in the service of any Employer,
21
<PAGE> 26
or in any way to restrict the right of any Employer to discipline or discharge a
Participant at any time.
12.7 FURNISHING INFORMATION. A Participant or his or her
Beneficiary will cooperate with the Plan Administrator by furnishing any and all
information requested by the Plan Administrator and will take such other action
as may be requested in order to facilitate the administration of the Plan and
the payments of benefits hereunder.
12.8 TERMS. Unless the context shall plainly require
otherwise, (i) use of the masculine herein shall be deemed to include the
feminine (and vice versa), (ii) use of the singular shall be deemed to include
the plural (and vice versa) and (iii) use of the conjunctive shall be deemed to
include the disjunctive (and vice versa).
12.9 CAPTIONS. The captions of the articles, sections and
paragraphs of the Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
12.10 GOVERNING LAW. The provisions of the Plan shall be
construed and interpreted according to the internal laws of the State of
Delaware without regard to its conflicts of laws principles, except to the
extent governed by ERISA.
12.11 NOTICE. Any notice or filing required or permitted to
be given to the Company or the Plan Administrator shall be sufficient if in
writing and sent to the following address by (i) hand, (ii) registered or
certified mail or (iii) facsimile:
The Dial Corporation
Attention: Senior Vice President, Human Resources
15501 North Dial Boulevard
Scottsdale, AZ 85260
(Fax: 602-754-1098)
Such notice shall be deemed given as of the date of receipt by the Company or
the Plan Administrator (whichever may apply). The person sending such notice or
filing shall produce satisfactory evidence of receipt by the Company upon the
request of the Plan Administrator, and, if such person fails to produce such
evidence of receipt, the Plan Administrator may give effect to such notice or
filing as it deems appropriate.
Any notice or filing required or permitted to be given to a Participant under
the Plan shall be sufficient if in writing and hand-delivered, or sent by
first-class mail, to the last known address of the Participant.
12.12 SUCCESSORS. The provisions of the Plan shall bind and
inure to the benefit of the Company and its successors and assigns. The
provisions of the Plan shall
22
<PAGE> 27
bind and inure to Participants and, upon the death of a Participant, his or her
Beneficiaries or estate (whichever may apply).
12.13 SPOUSE'S INTEREST. The interest in the Plan of a
spouse of a Participant who is not a Beneficiary shall be subject to the terms
and conditions of Article 8. Without limiting the generality of the foregoing,
the spouse of a Participant shall have no interest in the Plan if such spouse
shall predecease such Participant.
12.14 REFORMATION AND SEVERABILITY. In the event that any
provision of the Plan shall be held illegal, invalid or unenforceable for any
reason, the provision shall be reformed to the extent necessary such that the
provision, as reformed, is legal, valid and enforceable. If a provision of the
Plan shall be held illegal, invalid or enforceable and such reformation is not
possible, such provision shall be ineffective to the extent of such illegality,
invalidity or unenforceability without rendering illegal, invalid or
unenforceable the remaining provisions of the Plan.
12.15 INCOMPETENCE. If the Plan Administrator determines
that a benefit under the Plan is to be paid to a minor, a person declared
incompetent or a person adjudged legally incapable of handling the disposition
of his or her property, the Plan Administrator may direct payment of such
benefit to the guardian, legal representative or other person having the care
and custody of such minor or such incompetent or incapable person. The Plan
Administrator may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior to distribution of such benefit.
Any payment of a benefit shall be a payment for the account of the Participant
or the Participant's Beneficiary, as the case may be, and shall effect a
complete discharge of any liability under the Plan for such payment.
12.16 COURT ORDER. The Plan Administrator is authorized to
make any payments directed by court order in any action in which the Plan, the
Company or the Plan Administrator has been named as a party. Without limiting
the generality of the foregoing, if a court determines that a spouse or former
spouse of a Participant has an interest in the Participant's Account Balances
under the Plan in connection with a property settlement or otherwise, the Plan
Administrator, in its sole discretion, shall have the right, notwithstanding any
election by a Participant of a Payment Method, immediately to distribute the
interest of such spouse or former spouse in the Participant's Account Balances
under the Plan to such spouse or former spouse.
12.17 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any
reason, all or any portion of a Participant's Account Balances becomes taxable
to the Participant prior to receipt, a Participant may request that the Plan
Administrator distribute that portion of his or her Account Balances that has
become taxable. The granting of such a request shall not be unreasonably
withheld. If the request is granted, the distribution for such tax liability
shall be paid within ninety (90) days of the date the request is granted.
23
<PAGE> 28
12.18 TAXES.
(a) UPON DEFERRAL. For each Plan Year in respect of
which a Participant makes a Deferral Election, the Company shall withhold (from
amounts other than Deferral Amounts) an amount equal to the employment taxes on
the Deferral Amounts required to be so withheld.
(b) UPON DISTRIBUTION. When Account Balances are
distributed to Participants, the Company shall withhold from such distributions
any taxes required by federal, state or local law to be so withheld by any
Employer.
12.19 INSURANCE. The Company, on its own behalf or on
behalf of the Trust, in its sole discretion may apply for and procure insurance
policies on the life of Participants, in such amounts and in such forms as the
Trustee may select. The Trust shall be the sole owner and beneficiary of any
such policies. The Participant shall have no interest in any such policies.
12.20 LITIGATION TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL.
Upon or following a Change in Control, litigation in respect of the rights of
Participants and Beneficiaries under the Plan may be commenced as provided in
The Dial Corporation Benefits Protection Trust.
12.21 EFFECT OF THE PLAN. The terms and conditions of the
Plan shall supersede the terms and conditions of The Dial Corporation Deferred
Compensation Plan.
IN WITNESS WHEREOF, the Company has caused the Plan to be
executed by its duly authorized representative effective as of this 14th day of
January, 1998.
THE DIAL CORPORATION
/s/ Malcolm Jozoff
--------------------------
By: Michael Jozoff
------------------------
Its: Chairman of the Board
------------------------
President and
Chief Executive Officer
24
<PAGE> 29
APPENDIX A
DEFINITION OF "CHANGE IN CONTROL"
A "Change in Control" shall mean the occurrence, while the
Plan is in effect, of any of the following:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) below; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding voting shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the
i
<PAGE> 30
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
ii
<PAGE> 1
EXHIBIT 10(m)
RESTATED EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated August 11, 1997, between
The Dial Corporation, a Delaware corporation (the "Company"), and Malcolm Jozoff
(the "Executive").
WHEREAS, on May 13, 1996, the Company and the Executive entered into an
employment agreement for the Executive to serve as Chairman, President and Chief
Executive Officer of the Company; and
WHEREAS, the parties desire to restate the employment agreement in
order to eliminate certain portions which are no longer relevant and to reflect
developments subsequent to the date thereof.
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Company, on the terms and conditions
set forth herein.
2. Term. The term of employment of the Executive by the Company
hereunder shall be for a period commencing on the day this Agreement is signed
by the Executive and the Company and ending May 12, 1999.
3. Nature of Duties. The Executive shall serve as Chairman, President
and Chief Executive Officer of the Company and, subject to the direction of the
Company's Board of Directors (the "Board"), shall have full authority for
management of the Company and all of its operations, financial affairs,
facilities and investments. The Executive shall serve as a member of the Board,
shall act as the duly authorized representative of the Board and shall be an ex
officio member of all committees of the Board. The Executive shall devote
substantially all of his working time and efforts to the business and affairs of
the Company; provided, that the Executive shall be free to serve as a director
or officer or both of such not-for-profit corporations as he may desire, to join
and participate in such committees for community or national affairs as he may
select and to join and serve on business corporation boards of directors, so
long as such activities do not significantly interfere with the performance of
the Executive's duties hereunder and, in the case of public business corporation
boards of which the Executive was not a member when he executed this Agreement,
only with the prior approval of the Board.
4. Place of Performance. The Executive shall be based at the principal
executive offices of the Company in the city of Scottsdale, Arizona, except for
required business travel.
<PAGE> 2
5. Compensation and Related Matters.
(a) Base Salary. During the Executive's employment hereunder,
the Company shall pay to the Executive an annual base salary of $650,000,
effective on the signing of this Agreement, such salary to be paid in conformity
with the Company's policies relating to salaried employees. The base salary
shall apply for each year during the term of this Agreement.
(b) Bonus. In each fiscal year, the Executive shall be
eligible to participate in such bonus programs as are available to senior
executives of the Company. The terms and conditions of such annual bonus
opportunities shall be established by the Compensation Committee; provided,
however, that the aggregate targeted payout level for achievement of targeted
performance objectives shall be at least equal to 70 percent of the Executive's
Base Salary (for this purpose, the Base Salary shall be the Executive's actual
base earnings for the performance period to which such bonus opportunity
pertains).
(c) Stock Options. The Company has made aggregate 1996 grants
of stock options to the Executive covering 950,000 shares. Such stock options
shall be subject to such terms and provisions as are set forth in award
agreements entered into by and between the Executive and the Company.
Stock options granted in 1996 are intended to represent the
Executive's total stock option grants for the 1996, 1997, and 1998 fiscal years
of the Company. It is the intention of the Compensation Committee that the
Executive's next stock option grant pertaining to his annual compensation
opportunities shall be made in 1999, and shall be subject to such terms and
conditions as are deemed appropriate by the Compensation Committee.
(d) Other Benefits. During the Executive's employment
hereunder, the Executive (i) shall be entitled to participate in all employee
benefit plans, which are generally available to the Company's senior executive
employees (subject to, and on a basis consistent with, the terms, conditions and
overall administration of such plans, programs and arrangements); and (ii) shall
receive pension benefits, supplemental executive retirement benefits, health
insurance programs, executive medical benefits, fitness programs, life
insurance, accidental death and dismemberment benefits, vacation time,
reimbursement of club membership expenses, perquisites and other fringe benefits
which are generally available to other executives of the Company. However, if
Executive is still employed by the Company at May 12, 1999, Executive shall
receive, retroactive to his employment date and until termination of Executive's
employment, two years employment credit toward retirement for each one year
employed. In addition, the Executive shall be entitled to the use of a Company
automobile and a Company paid country club membership.
(e) Insurance: Indemnification. During the Executive's
employment hereunder, the Company shall maintain appropriate liability
insurance, including director and officer liability coverage, under which the
Executive shall be an insured party. In addition, the Company, shall, as set
forth in its respective charter and/or By-laws, or in a separate indemnification
agreement, indemnify the Executive to the fullest extent permitted under
Delaware law. The Company shall also indemnify the Executive, to the extent
permitted by law,
2
<PAGE> 3
with respect to public service activities and not-for-profit board membership he
undertakes in accordance with Section 3.
(f) Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable and customary travel and business
expenses he incurs (including, when the Executive deems necessary, expenses
incurred with respect to his spouse) in connection with the Executive's
employment hereunder; provided, that such expenses are accounted for in
accordance with the policies and procedures established by the Company.
(g) Relocation Expenses. The Company shall provide
reimbursement for all moving and related costs of relocation and attorneys' fees
incurred in negotiating this Agreement through December 31, 1997.
Any taxable amounts to the Executive for temporary living
expenses, moving expenses or attorneys' fees will be net of any federal or state
income tax liability and, accordingly, such amounts shall be "grossed up" to
take into account such taxes so that all amounts received are net of taxes.
(h) Change of Control. The Company has executed and entered
into an executive severance agreement with the Executive providing for severance
compensation upon a "change of control" of the Company.
6. Termination. The Company may terminate this Agreement at any
time if:
(a) Executive, by reason of physical or mental illness, shall
have been unable to perform satisfactorily the services to be rendered by him
hereunder for a consecutive period of one hundred eighty (180) days.
(b) Executive should be convicted of a felony or a crime
involving moral turpitude, fraud, or dishonesty, or commit an act which, in the
judgment of a majority of the Board as evidenced by action recorded in the
official minutes of a meeting of the Board, subjects the Company, or
Subsidiaries to public disrespect, scandal or ridicule or materially adversely
affects the utility of the Executive's services to the Company.
(c) The Board may terminate the contract by a unanimous vote,
excluding Executive, as evidenced by action recorded in the official minutes of
a meeting of the Board. The Executive, if so terminated, shall be entitled to
payment of all base salary remaining for the term of this Agreement (including
health insurance programs, executive medical benefits, fitness programs, life
insurance, accidental death and dismemberment expenses, vacation time,
reimbursement of club membership expenses, perquisites and other fringe benefits
for the remaining term of this Agreement) and all other bonuses, options and
benefits accrued to the date of termination.
7. Notices. For purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be given in writing
and shall be deemed to
3
<PAGE> 4
have been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Company:
Jane E. Owens
Senior Vice President and General Counsel
The Dial Corporation
15501 North Dial Boulevard
Scottsdale, Arizona 85260-1619
If to the Executive:
Malcolm Jozoff
Chairman, President and Chief Executive Officer
The Dial Corporation
15501 North Dial Boulevard
Scottsdale, Arizona 85260-1619
cc: Reuven J. Katz
255 East Fifth Street
2400 Chemed Center
Cincinnati, Ohio 45202
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
conditions or provisions of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same time or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Arizona without regard to its conflicts of law principles. This Agreement shall
be binding upon and shall inure to the benefit of the Executive and his estate
and the Company and any successor thereto, but neither this Agreement nor any
rights arising hereunder may be assigned or pledged by the Executive, except to
the extent permitted under the terms of the benefit plans in which the Executive
participates.
9. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability or
any other provision of this Agreement, which shall remain in full force and
effect.
4
<PAGE> 5
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
11. Entire Agreement. This Agreement constitutes the entire agreement
and understanding with respect to the employment of the Executive by the
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
The Dial Corporation
By: /s/ Jane E. Owens
--------------------------------------
Jane E. Owens
Senior Vice President and
General Counsel
Malcolm Jozoff
/s/ Malcolm Jozoff
-----------------------------------------
<PAGE> 1
THE DIAL CORPORATION
EXHIBIT 11 -- COMPUTATION OF EARNINGS PER SHARE
(000 omitted, except for per share data)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
BASIC:
Net income $83,710 $29,912
======= =======
Weighted average shares outstanding 91,918 89,705
======= =======
Net income per share -- basic $ 0.91 $ 0.33
======= =======
DILUTED:
Net income $83,710 $29,912
======= =======
Weighted average shares outstanding 91,918 89,705
Equivalent shares from stock options 2,231 1,269
------- -------
Weighted average common and equivalent
shares outstanding 94,149 90,974
======= =======
Net income per share -- diluted $ 0.89 $ 0.33
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21
THE DIAL CORPORATION
(Delaware)
List of Significant Subsidiaries
None of the Company's subsidiaries constitute "significant
subsidiaries" within the meaning of Rule 1-02(w) of Regulation S-X.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-10149, 333-10153, 333-10157, 333-11037 and 333-13187 of The Dial Corporation
on Form S-8 of our report dated January 22, 1998, appearing in this Annual
Report on Form 10-K of The Dial Corporation for the year ended January 3, 1998.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
45
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 10,089
<SECURITIES> 0
<RECEIVABLES> 67,289
<ALLOWANCES> (6,841)
<INVENTORY> 124,058
<CURRENT-ASSETS> 226,954
<PP&E> 260,928
<DEPRECIATION> 25,644
<TOTAL-ASSETS> 883,852
<CURRENT-LIABILITIES> 238,751
<BONDS> 0
0
0
<COMMON> 1,027
<OTHER-SE> 319,021
<TOTAL-LIABILITY-AND-EQUITY> 883,852
<SALES> 1,362,606
<TOTAL-REVENUES> 1,362,606
<CGS> 718,112
<TOTAL-COSTS> 1,200,436
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,235
<INCOME-PRETAX> 133,935
<INCOME-TAX> 50,225
<INCOME-CONTINUING> 83,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,710
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
