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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(Mark One)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Fee Required)
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(No Fee Required)
For the transition period from ---------- to ----------
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Commission File No. 333-46607-12 Commission File No. 333-46607
WERNER HOLDING CO. (PA), INC. WERNER HOLDING CO. (DE), INC.
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN
ITS CHARTER) ITS CHARTER)
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PENNSYLVANIA 25-0906875 DELAWARE 25-1581345
(STATE OR OTHER (IRS EMPLOYER (STATE OR OTHER (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.) JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR INCORPORATION OR
ORGANIZATION) ORGANIZATION)
93 WERNER RD. 16125 1105 NORTH MARKET ST., 19899
GREENVILLE, PENNSYLVANIA (ZIP CODE) SUITE 1300 (ZIP CODE)
(ADDRESS OF PRINCIPAL WILMINGTON, DELAWARE
EXECUTIVE OFFICES) (ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
(724) 588-2550 (302) 478-5723
(CO-REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE) (CO-REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether each of the co-registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of each of the co-registrants' 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. [ ]
Not applicable
State the aggregate market value of the voting stock held by non-affiliates
of each of the co-registrants. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within 60 days prior to the date of
filing. (See definition of affiliate in Rule 405, 17 CFR 230.405).
Not applicable
Indicate the number of shares outstanding of each of the co-registrants'
classes of common stock, as of December 31, 1999:
Werner Holding Co. (PA), Inc. 1,964.1630 shares of Class A Common
Stock
21,942.6838 shares of Class B Common Stock
4,656.7850 shares of Class C Common Stock
1,000 shares of Class D Common Stock
45,000 shares of Class E Common Stock
Werner Holding Co. (DE), Inc. 1,000 shares of Common Stock
DOCUMENTS INCORPORATED BY REFERENCE.
NONE
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INDEX TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1999
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PAGE NO.
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PART I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Company's Common Equity and Related Stockholder
Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 46
PART III
Item 10. Directors and Executive Officers of the Company 46
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and
Management 55
Item 13. Certain Relationships and Related Transactions 58
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K 58
Signatures 64
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements
which include, among other things, discussions of the Company's (as defined)
business and results of operations, position in its industries, future
operations, liquidity and capital resources, as well as, the impact of the Year
2000 and the Company's plans to address the Year 2000 issue. These
forward-looking statements are based upon estimates and assumptions made by
management of the Company that although believed to be reasonable, are
inherently uncertain. Therefore, undue reliance should not be placed upon such
statements and estimates. No assurance can be given that any of such statements
or estimates will be realized and it is likely that actual results will differ
materially from those contemplated by such forward-looking statements.
------------------------
The information presented in this Annual Report on Form 10-K relates to Werner
Holding Co. (PA), Inc., a Pennsylvania corporation ("Holding (PA)"), its
wholly-owned subsidiary, Werner Holding Co. (DE), Inc. ("Holding (DE)") and
Werner Co., a Pennsylvania corporation and Holding (DE)'s wholly-owned
subsidiary ("Werner"). Holding (PA) has no substantial operations or assets
other than its investment in Holding (DE) and Holding (DE) has no substantial
operations or assets other than its investments in its subsidiaries. As used
herein and except as the context otherwise may require, the "Company" means
Holding (PA), Holding (DE), Werner and all of their consolidated subsidiaries.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Holding (PA), incorporated in 1945 and Holding (DE), incorporated in 1988,
are the holding companies of Werner Co., a corporation engaged in the
manufacture and sale of climbing products and aluminum extruded products.
Management believes that Werner is the nation's largest manufacturer and
marketer of ladders and other climbing products. Werner's climbing products
include aluminum, fiberglass and wood ladders, scaffolding, stages and planks.
The Werner brand name has over a 50-year history, and management believes Werner
is the most recognized name by both professional and consumer end-users of
climbing products. In addition to climbing products, Werner manufactures and
sells aluminum extruded products and more complex fabricated components to a
number of industries, including the automotive, electronics, and architectural
and construction industries.
DESCRIPTION OF THE BUSINESS
The Company operates in two business segments, Climbing Products and
Extruded Products.
Climbing Products
Werner manufactures approximately 1,500 stock keeping units of fiberglass,
aluminum, and wood climbing products and accessories primarily under the Werner,
Keller and Columbia brand names. The Company produces five principal categories
of climbing equipment: (i) single and twin stepladders; (ii) extension,
straight, and multipurpose ladders; (iii) attic ladders; (iv) stages, planks,
work platforms, and scaffolds; and (v) assorted ladder accessories. The majority
of the Company's climbing products sales are of either aluminum or fiberglass
ladders. Through its development of proprietary aluminum extrusion and
fiberglass pultrusion technology, the Company is a leader in the climbing
products industry.
The Company's sales and marketing network is directed by an experienced
in-house sales team of national and regional sales managers. The Company's
climbing products are sold directly and through approximately 50 independent,
commissioned manufacturers representative organizations, which sell to three
major distribution channels: (i) home improvement and other retail, (ii)
hardware and (iii) professional. The Company's sales organization is further
supported by field merchandisers who assist customers with product
merchandising, point-of-purchase signage and sales techniques.
Extruded Products
The Company is also a manufacturer of lineal extruded products and
highly-engineered fabricated parts. The Company targets extruded products
customers who require special metallurgy, tight tolerances, unusual shapes,
painting, finishing and fabrication requirements. Werner has implemented
sophisticated quality systems, and has been awarded ISO-9002 and QS-9000
certifications by Underwriters Laboratories.
Werner sells aluminum extrusions to customers in the automotive,
electronics, architectural and construction industries who use them in a broad
range of products including garage door openers, bicycle frames, pneumatic
cylinders, material handling systems, electrical connectors, curtain walls and
office partitions.
The Company's extruded products sales organization is supplemented by
approximately 15 independent manufacturer's representative organizations. The
Company operates on a "make-to-order" basis with most extruded products
customers.
SEGMENTS
See Note O entitled "Segment Information" in the Notes to Consolidated
Financial Statements which is incorporated herein by reference.
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RAW MATERIALS AND SUPPLIERS
The Company is a major consumer of aluminum and has implemented various
hedging strategies to mitigate the impact of raw material price fluctuations.
The Company has contracts to provide most of its estimated aluminum requirements
with four principal suppliers. These contracts include stipulated prices with
provisions for price adjustments based on market prices. Two of these contracts
will be renegotiable in 2000, one will be renegotiable in 2001, and one will be
renegotiable in 2003. The Company has several alternative sources for its
aluminum requirements and does not believe that any one of these contracts is
material to the Company's operations.
To hedge the risk associated with price fluctuations for a certain
percentage of its forecasted aluminum raw material requirements, the Company
utilizes futures and option contracts. The Company's practice is not to hold
derivative commodity instruments, including aluminum futures and option
contracts, for trading purposes. These futures and option contracts are placed
with established metal brokers and can range up to two years in duration. The
Company has several alternative brokers and does not believe that any one of
these contracts is material to the operations of the Company.
The Company also has contracts to purchase the basic materials required for
fiberglass pultrusion with its principal suppliers, which contracts are
typically one to three years in length. The Company has several alternative
sources for these basic materials and does not believe that any one of these
contracts is material to the operations of the Company.
PATENTS, TRADEMARKS AND LICENSES
No business segment is dependent, to any significant degree, on patents,
licenses, franchises or concessions and the loss of these patents, licenses,
franchises or concessions would not have a material adverse effect on any
business segment. The Company owns numerous patents worldwide, none of which are
material to the Company's operations as a whole. These patents expire from time
to time over the next 20 years. The Company holds licenses, franchises and
concessions, none of which individually or in the aggregate is material to the
Company's operations as a whole. These licenses, franchises and concessions vary
in duration from one to 15 years.
The Company has numerous trademarks that are utilized in its businesses
worldwide. The Werner logo trademark is material to both of the Company's
business segments. This well-known trademark enjoys a reputation for quality and
value, and in the climbing products industry, is among the world's most trusted
brand names. While the Company believes its other trademarks are important to
its business operations, the loss of any of these other trademarks would not
have a material adverse effect on the Company's operations as a whole.
SENSITIVITY TO ECONOMIC CYCLES AND WEATHER CONDITIONS
A significant percentage of the Company's sales of climbing products is
attributable to new residential and nonresidential construction in the United
States, which are affected by such cyclical factors as interest rates,
inflation, consumer spending habits and employment. Similarly, a significant
percentage of the Company's sales of extruded products is attributable to the
new and used automobile and automotive parts markets, which are also affected by
such cyclical factors. Sales of climbing equipment are also sensitive to
prevailing weather conditions. Unusually severe weather can reduce or defer
sales of climbing products by delaying elective home maintenance and
discouraging do-it-yourself projects, which account for a growing portion of the
Company's sales.
BACKLOG
Due to the Company's ability to quickly meet production orders and its
production forecasting systems, the Company has no significant backlog in
climbing products. Most extruded products are produced on a make-to-order basis.
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COMPETITION
Management estimates that, while it is the largest U.S. producer of
climbing products, there were approximately 14 principal competitors in 1999.
The Company competes in its climbing products segment on the basis of its
reputation for product quality, its well-known brands, its emphasis on customer
service, the breadth of its product lines and its commitment to product
innovation.
In its extruded products business, the Company competes with integrated
primary aluminum producers, large independent producers and numerous small
independent producers located throughout the United States. The Company competes
in its extruded products segment on the basis of its specialized extrusion
capabilities, customer service and price.
Some of the Company's competitors in the climbing products and the extruded
products markets have greater financial resources and are less leveraged than
the Company. Some of the Company's extruded products competitors are larger than
the Company.
EMPLOYEES
The Company had approximately 3,400 salaried and hourly employees as of
December 31, 1999. Of the 2,343 hourly employees, approximately 2,000 are
covered by seven collective bargaining agreements, six of which expire in 2000
and one of which expires in 2002. The Company plans to renegotiate and renew
union contracts as they expire. The Company believes that its labor relations
are satisfactory at all of its facilities.
DEPENDENCE ON KEY CUSTOMERS
The Company's 10 largest customers accounted for approximately 55% of the
Company's 1999 total net sales. The Company's two largest climbing products
customers, The Home Depot and Lowe's, accounted for approximately 23% and 13%,
respectively, of the Company's 1999 total net sales. The Company does not have
contractual agreements for the supply of products with most of its climbing
products customers. The loss of certain key customers or a significant decrease
in the volume of products supplied to any of such customers could have a
material adverse effect on the Company. No extruded products customer accounted
for more than 10% of the Company's 1999 total net sales.
ENVIRONMENTAL REGULATION
The Company's operations are subject to a wide variety of federal, state
and local laws and regulations governing, among other things, emissions to air,
discharge to waters, the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and other materials, and employee
health and safety matters. Also, as an owner and/or operator of real property or
a generator of hazardous substances, the Company may be subject to environmental
cleanup liability, regardless of fault, pursuant to the Comprehensive
Environmental Response Compensation and Liability Act or analogous state laws.
The Company believes that its operations and facilities have been and are being
operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations. However, the operation of
manufacturing plants entails risks of financial exposure for environmental
noncompliance and cleanup liabilities. Capital and operating expenditures for
environmental compliance in 1999 were not material. There can be no assurance
that the Company will not incur costs in the future for cleanup and other
remedial activities that will have a material adverse effect on the Company. In
addition, potentially significant expenditures could be required in order to
comply with evolving environmental and health and safety laws, regulations or
requirements that may be adopted or imposed in the future.
RECENT TRANSACTIONS
The Recapitalization. On October 8, 1997, Holding (PA) entered into a
recapitalization agreement, which was amended and restated on October 27, 1997
(the "Recapitalization Agreement") with certain
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affiliates of INVESTCORP S.A. ("Investcorp") and certain other international
investors organized by Investcorp (such affiliates and investors are
collectively referred to as the "Investors"). Pursuant to the Recapitalization
Agreement on November 24, 1997 (the "Recapitalization Closing Date"), Holding
(PA) amended and restated its Articles of Incorporation pursuant to which all of
Holding (PA)'s issued and outstanding capital stock was reclassified. On the
Recapitalization Closing Date, Holding (PA) then redeemed certain shares of the
reclassified stock (representing approximately 85% of the then outstanding
shares of Holding (PA)) for cash totaling in the aggregate approximately $330.7
million and the right to receive upon certain conditions, an additional,
one-time, lump sum payment (the "Market Participation Right"). In addition, on
the Recapitalization Closing Date, Holding (PA) sold to the Investors shares of
the newly created Class C, D and E Common Stock of Holding (PA) for
approximately $122.7 million (the "Cash Equity Investment"). The foregoing
transactions are collectively referred to herein as the "Recapitalization". As a
result of the Recapitalization, the pre-Recapitalization shareholders continue
to own approximately 33% of the outstanding voting equity of Holding (PA) and
the Investors own approximately 67% of the outstanding voting equity of Holding
(PA). Financing for the Recapitalization, together with the repayment of certain
existing indebtedness of the Company was funded by (i) the Cash Equity
Investment, (ii) the offering of $135.0 million principal of 10% Senior
Subordinated Notes due 2007 of Holding (DE) (the "Notes") and (iii) $186.5
million of borrowings under a $320.0 million secured senior credit facility with
a syndicate of banks and financial institutions which included two term loans, a
revolving credit loan and a receivables line of credit (collectively, the
"Senior Credit Facility").
The MIICA Insurance Transfer. Prior to March 31, 1998, the Company operated
Manufacturers Indemnity and Insurance Company of America, a Colorado corporation
("MIICA"), as a captive insurance company to provide product liability, workers'
compensation and environmental insurance to Holding (PA) and its subsidiaries.
In the first quarter of 1998, the Company undertook an extensive evaluation of
the cost and efficiency of providing such insurance through MIICA and determined
to obtain coverage from an external commercial insurance company. On March 31,
1998, the Company entered into an arrangement with a commercial insurance
provider under which MIICA transferred its outstanding product and workers'
compensation liabilities for losses incurred on or prior to March 31, 1998 to a
commercial insurance provider in exchange for the payment of approximately $42.4
million (collectively, the "MIICA Insurance Transfer"). The Company paid this
amount from the proceeds of the liquidation of a substantial portion of MIICA's
insurance fund investments. Under the terms of the agreements governing the
MIICA Insurance Transfer, the commercial insurance provider assumed all MIICA's
product and workers' compensation liabilities for losses incurred prior to March
31, 1998 up to an aggregate limit of $75 million. Holding (PA) has agreed to
indemnify the commercial insurance company for losses in excess of this limit.
In conjunction with the MIICA Insurance Transfer, the Company obtained product
liability and workers' compensation insurance coverage for such losses which
occur on or after April 1, 1998 from an external commercial insurance company.
The Company believes that this insurance coverage is adequate for its current
and future anticipated business needs. As a result of the MIICA Insurance
Transfer, on July 8, 1998 the Company discontinued the operations of and
dissolved MIICA.
Subsidiary Consolidation. In the second quarter of 1998, the Company
undertook a review of the desirability and necessity of operating through all of
Holding (DE)'s direct and indirect subsidiaries, including certain of those
subsidiaries who have guaranteed the Notes (the "Subsidiary Guarantors"). As a
result of this review, Holding (DE) determined to consolidate a number of its
direct and indirect subsidiaries through mergers into Holding (DE) or Werner. On
May 14, 1998, R.D. Arizona Ladder Corp. was merged with Werner, with Werner
remaining as the surviving corporation. On June 30, 1998, Ardee Investment Co.,
Inc. merged with Werner Financial Inc., with Werner Financial Inc. remaining as
the surviving corporation. Werner Financial Inc. was then merged with Holding
(DE) with Holding (DE) remaining as the surviving corporation. In addition, on
June 30, 1998, the following subsidiaries of Holding (DE) were merged with
Werner, with Werner remaining as the surviving corporation: Phoenix Management
Services, Inc.; Werner Management Co.; Florida Ladder Company; Kentucky Ladder
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Company; and Gold Medal Ladder Company. On December 31, 1998, Olympus
Properties, Inc. was merged with Werner, with Werner remaining as the surviving
corporation. This consolidation of Holding (DE)'s subsidiaries was permitted
under the Senior Credit Facility and the Indenture governing the Notes and has
no impact upon holders of the Notes or the consolidated results of operations of
the Company.
Business Acquisition. In October 1999, Werner acquired certain assets of
Keller Ladders, Inc. ("KLI") for a purchase price of approximately $12.2
million. The purchased assets consisted of three climbing products manufacturing
facilities located in Merced, CA, Swainsboro, GA and Goshen, IN; the Keller,
Columbia and Blue Ribbon brand names; and certain equipment, inventory,
intellectual property and other assets used in KLI's climbing products business.
No product or other significant liabilities were assumed in connection with this
acquisition.
ITEM 2. PROPERTIES.
The Company believes its manufacturing, warehouse and office facilities are
suitable, adequate and have sufficient manufacturing capacity for its current
requirements. The Company also believes that its facilities are being utilized
consistently with the Company's plans and do not have substantial excess
capacity. Werner's corporate headquarters offices are located at 93 Werner Rd.,
Greenville, Pennsylvania 16125. The Company's principal facilities consist of
the following:
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OWNED/ APPROX.
LOCATION PRINCIPAL USE LEASE EXPIRATION SQUARE FOOTAGE
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Greenville, PA.............. Office, Manufacturing, Distribution Owned 640,000
Franklin Park, IL........... Office, Manufacturing, Distribution Owned 672,000
Anniston, AL................ Manufacturing, Distribution Owned 410,000
Carrolton, KY............... Manufacturing, Distribution Owned(1) 200,000
Swainsboro, GA.............. Manufacturing, Distribution 10/31/02 240,000
Merced, CA.................. Manufacturing, Distribution 12/31/35(2) 185,115
Goshen, IN.................. Manufacturing, Distribution 8/31/00 98,200
Portland, OR................ Distribution 3/31/00 16,500
Union City, CA.............. Warehouse 10/31/00 38,600
Bell, CA.................... Warehouse 4/30/01 39,100
Phoenix, AZ................. Warehouse 9/30/00 18,500
Dallas, TX.................. Warehouse 6/30/04 16,480
Houston, TX................. Warehouse 2/28/01 40,000
Jefferson, LA............... Warehouse 4/30/03 7,800
Greensboro, NC.............. Warehouse 4/30/01 15,200
Maryland Hgts., MO.......... Warehouse 9/30/00 8,700
Franklin Park, IL........... Warehouse 1/31/00 100,000
Minneapolis, MN............. Warehouse 8/31/05 11,900
Anniston, AL................ Warehouse 2/28/00 75,000
Greenville, PA.............. Warehouse 11/30/02 50,000
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(1) Subject to Variable Rate Industrial Building Revenue Bonds due 2015 issued
by the County of Carroll, Kentucky.
(2) Building and improvements owned by Werner, real property leased under 15
year ground lease with four 5 year renewals.
The Company's facilities at Greenville, PA, Franklin Park, IL, and
Anniston, AL serve both the climbing products and extruded products segments of
its business. All other facilities primarily serve the climbing products segment
of the Company's business.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business. Although it is impossible
to predict the outcome of any pending legal proceeding, the Company believes
that such legal proceedings and claims, individually and in the aggregate, are
either without merit, covered by insurance or adequately reserved for, and will
not have a material adverse effect on its results of operations, financial
position, or cash flows.
In March 1998, an action was filed in the United States District Court for
the Western District of Pennsylvania entitled Elizabeth Werner, et al v. Eric J.
Werner, et al (Civil Action No. 98-503). The plaintiffs of the action are
Elizabeth Werner, Jeffrey R. Ackerman, individually and as trustee under a trust
for the benefit of Elizabeth Werner; Matthew W. Weiss (by his parent Elizabeth
Werner); Timothy F. Burke, Jr., as executor of the estate of Anne L. Werner and
as trustee of certain trusts under Anne L. Werner's last will and testament;
Edward A. Pollock; and all of such plaintiffs derivatively on behalf of Holding
(PA). Defendants include Donald M. Werner, Howard L. Solot, Michael E. Werner,
Eric J. Werner, Michael J. Solot, Craig R. Werner and Bruce D. Werner
(collectively, the "Management Shareholders"), former company officers Richard
L. Werner, Robert I. Werner, Marc L. Werner, certain non-management
shareholders, Holding (PA), Holding (DE) and certain of its subsidiaries
including Werner. The action purports, in part, to be brought derivatively on
behalf of Holding (PA) and, in part, to be brought on behalf of plaintiffs
individually against the Company and certain current and former officers and
directors of the Company. The aspect of the case purportedly brought on behalf
of Holding (PA) alleges breaches of fiduciary duty by various members of the
Company's management arising out of, among other things, the issuance of
restricted stock to management of the Company in 1992 and 1993. Holding (PA)'s
Board of Directors referred the matter to a special committee of disinterested
directors to investigate the merits of the claim and to take appropriate actions
on behalf of Holding (PA). After a detailed investigation, the special committee
recommended that the derivative claims not be pursued by or on behalf of Holding
(PA). Accordingly, all the defendants made motions to dismiss the derivative
claims. Pursuant to an amendment to the complaint filed by plaintiffs on March
29, 1999, the only remaining corporate defendant in this action is Holding (PA).
Pursuant to the same amendment, the only remaining derivative claim asserted by
the plaintiffs is a claim for excessive compensation, not relating to the
restricted stock issuances. The aspect of the case purportedly brought on behalf
of plaintiffs individually against the Company appears to arise out of the 1992
and 1993 restricted stock issuances as well as certain alleged
misrepresentations by representatives of the Company. The plaintiffs seek
monetary damages in an unspecified amount. In May 1999, the magistrate judge
issued a report and recommendation ruling that all of the plaintiffs' claims be
dismissed. The District Court issued a Memorandum Order on August 4, 1999
granting the motion to dismiss all remaining claims against all defendants
without prejudice and adopted the magistrate judge's report as the opinion of
the District Court. The plaintiffs have appealed such decision. Management
believes that the ultimate resolution of this lawsuit will not have a material
adverse effect on the Company's results of operations, financial position, or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the common stock of
either Holding (PA) or Holding (DE). As of December 31, 1999, all of the issued
and outstanding shares of Holding (DE)'s common stock were held by Holding (PA).
The number of shareholders of record of each class of common stock of Holding
(PA) as of December 31, 1999 is as follows:
Class A Common Stock: 25 holders
Class B Common Stock: 106 holders
Class C Common Stock: 31 holders
Class D Common Stock: 11 holders
Class E Common Stock: 12 holders
No dividends have been paid to shareholders of Holding (PA) in the last two
years and no dividends are expected to be declared in the near future. Holding
(DE) declares and pays from time to time, certain cash dividends to its sole
shareholder, Holding (PA), in order to allow Holding (PA) to pay certain
obligations such as taxes and ordinary course operating expenses not exceeding
$2,000,000 in any fiscal year. The Senior Credit Facility and the Indenture
governing the Notes limit the Company's ability to pay dividends on its capital
stock.
Holding (DE) has not issued or sold any equity securities within the past
three years that were not registered under the Securities Act of 1933, as
amended (the "Securities Act"). Holding (PA) has not issued or sold any equity
securities within the past three years that were not registered under the
Securities Act, except as follows:
(a) On the Recapitalization Closing Date, and as part of the
Recapitalization, Holding (PA) sold to the Investors shares of Class C, D
and E Common Stock at a price per share of $2,421.29, or an aggregate
offering price of $122,700,000. See Business -- "The Recapitalization".
(b) On the Recapitalization Closing Date, and as part of the
Recapitalization, Holding (PA) issued and sold a Class E Stock Purchase
Warrant to Investcorp Bank E.C. for $10.00, which allows Investcorp Bank
E.C. the right to purchase a number of shares of Common Stock from Holding
(PA) upon the occurrence of a sale or initial public offering of the
Company.
(c) On various dates from the Recapitalization Closing Date through
December 31, 1999, pursuant to Holding (PA)'s Stock Option Plan, Holding
(PA) has granted to key employees of Werner non-qualified incentive stock
options, exercisable at $2,421.29 per share, to purchase up to an aggregate
of 7,600 shares of Class C Common Stock. See Note H entitled "Stock
Incentive Plans" in the Notes to Consolidated Financial Statements in this
report.
(d) On various dates from January 1, 1999 to December 31, 1999,
certain members of Werner's management purchased shares of Holding (PA)'s
Class C Common Stock at a purchase price of $2,421.29 per share, or an
aggregate of approximately $1,932,189 pursuant to Management Stock Purchase
Agreements. Certain of these individuals received secured loans from the
Company pursuant to its Stock Loan Plan to finance a portion of the
purchase price paid for the shares of Class C Common Stock in an aggregate
amount of approximately $685,000. See Note H entitled "Stock Incentive
Plans" in the Notes to Consolidated Financial Statements in this report.
The transactions set forth in paragraphs (a), (b) and (d) above were
undertaken in reliance upon the exemption from the registration requirements of
the Securities Act afforded by Section 4(2) thereof and/or Regulation D
promulgated thereunder, as sales not involving a public offering. The
transactions set forth in paragraph (c) above were undertaken in reliance upon
the exemption from the registration requirements of the Securities Act afforded
by Rule 701 promulgated thereunder, as sales by an issuer to employees,
directors or officers pursuant to written compensatory benefit plans or written
contracts relating to the compensation of such persons. The Company believes
that exemptions other than those specified above may exist with respect to the
transactions set forth above.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data is that of Holding (PA).
Holding (PA) is a guarantor of the Notes and has no substantial operations or
assets other than its investment in Holding (DE). As a result, the consolidated
financial condition and results of operations of Holding (PA) are substantially
the same as those of Holding (DE). This table contains selected financial data
and is qualified by the more detailed Consolidated Financial Statements and
Notes thereto of Holding (PA). The selected financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.................................. $484.6 $436.1 $416.3 $366.9 $336.0
Cost of sales.............................. 348.6 322.5 303.4 268.0 251.4
------ ------ ------ ------ ------
Gross profit............................ 136.0 113.6 112.9 98.9 84.6
General and administrative expenses(a)..... 29.9 31.6 27.6 23.8 22.2
Selling and distribution expenses.......... 58.0 50.2 49.1 47.9 47.2
Recapitalization expense(b)................ -- -- 22.7 -- --
Non-cash compensation charge(c)............ -- -- 78.5 -- --
------ ------ ------ ------ ------
Operating profit (loss).................... 48.1 31.8 (65.0) 27.2 15.2
MIICA investment gains (losses)(d)......... -- (1.5) (14.6) 9.5 1.3
Other income (expense), net................ (2.0) 2.2 (1.2) 0.2 2.7
------ ------ ------ ------ ------
Income (loss) before interest and taxes.... 46.1 32.5 (80.8) 36.9 19.2
Interest expense(e)........................ 27.1 30.6 9.0 7.5 7.2
------ ------ ------ ------ ------
Income (loss) before provision for income
taxes................................... 19.0 1.9 (89.8) 29.4 12.0
Income taxes............................... 7.7 1.8 0.7 10.0 5.1
------ ------ ------ ------ ------
Income (loss) before extraordinary
charge.................................. 11.3 0.1 (90.5) 19.4 6.9
Extraordinary charge(f).................... -- -- -- -- 0.6
------ ------ ------ ------ ------
Net income (loss).......................... $ 11.3 $ 0.1 $(90.5) $ 19.4 $ 6.3
====== ====== ====== ====== ======
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents....................... $ 0.9 $ 9.4 $ 3.1 $ 1.0 $ 0.6
Insurance fund investments(g).............. -- -- 58.6 80.9 68.2
Working capital............................ 61.5 53.6 30.1 49.2 59.4
Total assets............................... 255.4 212.8 288.2 261.2 234.6
Reserve for product liability and workers'
compensation claims (including
current)(g)............................. 29.8 14.3 49.6 45.3 41.5
Total debt (including current
maturities)............................. 278.9 279.9 322.5 83.4 83.5
Common shareholders' equity (deficit)(h)... (143.9) (154.4) (153.7) 75.1 62.1
OTHER FINANCIAL DATA:
Cash flow provided by (used in) operating
activities.............................. $ 27.6 $ 51.8 $ 17.2 $ 19.5 $ (1.4)
Cash flows used in investing activities.... (32.5) (2.6) (3.6) (15.8) (18.9)
Cash flows (used in) provided by financing
activities.............................. (3.6) (42.9) (11.5) (3.3) 20.8
Depreciation and amortization(i)........... 13.3 17.5 11.2 9.1 7.7
Capital expenditures....................... 20.5 8.9 11.7 13.0 12.5
Dividends declared per share............... -- -- 10.50 11.25 10.20
EBITDA(j).................................. 60.8 51.5 (69.6) 46.0 26.9
</TABLE>
See Notes to Selected Consolidated Historical Financial Data.
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA. (CONTINUED)
NOTES TO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
<TABLE>
<C> <S>
(a) General and administrative expenses in 1999 and 1998 include
$1.0 and $6.6, respectively, of amortization of certain
non-recurring expenses associated with the Recapitalization.
(b) Represents Recapitalization expense of $22.7 consisting of
investment banker fees, transaction fees, legal and
accounting fees, transaction bonuses paid to certain Company
employees and other miscellaneous costs incurred in
connection with the Recapitalization.
(c) Reflects the non-recurring non-cash compensation charge (and
a corresponding credit to shareholders' equity) of $78.5
associated with (a) the accelerated vesting, as a result of
the Recapitalization, of outstanding restricted
Pre-Recapitalization Class B Stock previously granted to
certain key management employees; (b) the accelerated
vesting, as a result of the Recapitalization, of outstanding
restricted Pre-Recapitalization Class B Stock previously
granted to a former key management employee upon his
separation from the Company; and (c) changes in the terms of
the plan under which such stock was granted.
(d) 1998 includes three months of MIICA investment losses
(January 1, 1998 through March 31, 1998, the date of the
MIICA Insurance Transfer).
(e) Reflects a full year of interest expense in 1999 and 1998 on
the debt incurred to finance the Recapitalization.
(f) Reflects expenses incurred in regard to the early
extinguishment of debt, net of income tax benefits of $0.4.
(g) Decreases in 1998 are primarily due to the MIICA Insurance
Transfer which occurred on March 31, 1998.
(h) The shareholders' deficit at December 31, 1997 was the
result of the Recapitalization and the recording of related
expenses, net of income tax benefits. In connection with the
Recapitalization, the Investors made an equity investment of
approximately $122.7, representing approximately 67% of the
outstanding capital stock and voting power of the Company.
(i) Depreciation and amortization is comprised of the following
components in 1999 and 1998: depreciation of property, plant
and equipment, $8.9 and $8.5, respectively; amortization of
certain non-recurring expenses associated with the
Recapitalization, $1.0 and $6.6, respectively; and other
amortization, $3.4 and $2.4, respectively. Depreciation and
amortization excludes amortization of deferred financing
fees and original issue discount.
(j) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. EBITDA is presented because
it is commonly used by certain investors to analyze and
determine a company's ability to service and/or incur debt.
However, EBITDA should not be considered in isolation or as
a substitute for net income, cash flows or other income or
cash flows data prepared in accordance with generally
accepted accounting principles or as a measure of a
company's profitability or liquidity. EBITDA for both 1999
and 1998 excludes $1.5 of accounts receivable securitization
expense. EBITDA for 1999 includes: (a) non-recurring
recruiting, relocation and other costs of $2.2 due to the
transition in chief executive officers of the Company, (b)
costs of $2.1 related to the Keller business described in
Note R to the Consolidated Financial Statements and, (c)
other non-recurring expenses of $1.2 primarily related to a
former employee and the discontinued operations of a former
subsidiary. EBITDA for 1998 includes non-recurring expenses
of $.5 to shutdown an extrusion paint and thermal production
line. EBITDA for 1997 includes: (a) the non-recurring,
non-cash compensation charge of $78.5; and (b)
recapitalization expense of $22.7 and other non-recurring
adjustments.
</TABLE>
9
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Historical Financial Data," and the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
Annual Report on Form 10-K.
GENERAL
Werner is a manufacturer and marketer of ladders and other climbing
products. Werner also manufactures and sells aluminum extruded products and more
complex fabricated components.
The Recapitalization. Pursuant to the Recapitalization Agreement, on
November 24, 1997, the Company (a) amended and restated its Articles of
Incorporation pursuant to which the Company's capital stock was reclassified,
(b) redeemed for cash certain shares of the reclassified stock totaling $330.7
million and (c) sold to the Investors shares of newly created Class C, D and E
Common Stock of the Company totaling $122.7 million. As a result of the
Recapitalization, the Pre-Recapitalization shareholders continue to own
approximately 33% of the outstanding voting equity of the Company and the
Investors own approximately 67% of the outstanding voting equity of the Company.
Recapitalization Financing. The Recapitalization was funded by (a) $186.5
million of borrowings under the Senior Credit Facility, (b) the issuance of
$135.0 million of Notes and (c) proceeds from the sale of certain shares of the
Company's stock to the Investors.
Recapitalization Accounting. The transaction was accounted for as a
recapitalization and as such, the historical basis of the Company's assets and
liabilities was not affected. Recapitalization related costs totaling $22.7
million were expensed and reflected as a component of operating income in 1997.
The MIICA Insurance Transfer. In the first quarter of 1998, the Company
obtained commercial insurance coverage for its product liability and workers'
compensation claims as opposed to providing insurance for such claims through
MIICA, the Issuer's captive insurance subsidiary. On March 31, 1998 the Company
entered into the MIICA Insurance Transfer pursuant to which a commercial
insurance provider agreed to assume product liability and workers' compensation
losses which occurred on or before March 31, 1998 and to extinguish the
Company's liability in regard to such losses. The Company paid approximately
$42.4 million for this insurance coverage from the proceeds of the liquidation
of certain of MIICA's insurance fund investments. Immediately prior to the MIICA
Insurance Transfer, the Company had a reserve for such losses of approximately
$47.5 million. As a result of the MIICA Insurance Transfer the Company
recognized a gain of approximately $4.5 million, which is included in other
income (expense), net. Such gain is net of costs incurred to discontinue the
operations of MIICA. MIICA was dissolved in the third quarter of 1998. The
Company has also obtained third party insurance coverage, subject to certain
deductible provisions, for product liability and workers' compensation claims
which occur on or after April 1, 1998.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales. Net sales increased $48.5 million, or 11.1%, to $484.6 million
for 1999 from $436.1 million for 1998.
Net sales of climbing products increased $50.2 million, or 15.2%, to $380.2
million in 1999 from $330.0 million in 1998. This increase was primarily due to
increased sales volume in both fiberglass and aluminum climbing products, which
was achieved through the ongoing successful growth of the Com-
10
<PAGE> 13
pany's customer base, the addition of new customers, including $6.6 million
related to the acquisition of certain assets of Keller Ladders, Inc., new
product development and increased marketing efforts, particularly to large home
improvement retailers.
Net sales of extruded products of $104.4 million for 1999 declined by $1.7
million or 1.6% compared to 1998 primarily due to lower aluminum prices.
Gross Profit. Gross profit increased to $136.0 million for 1999 from
$113.6 million for 1998. Gross profit margin was 28.1% for 1999 and 26.1% for
1998. The increase was primarily due to greater sales of higher margin climbing
products and the benefits of spreading fixed costs over higher production
volumes.
General and Administrative Expense. General and administrative expense
decreased $1.8 million, or 5.7%, to $29.8 million for 1999 from $31.6 million
for 1998. The decrease was primarily due to certain non-recurring costs in 1998
associated with the Recapitalization, partially offset by increases in
recruiting and relocation expenses and increases in consulting expenses related
to certain cost reduction initiatives.
Selling and Distribution Expense. Selling and distribution expense
increased $7.8 million, or 15.7%, to $58.0 million for 1999 from $50.2 million
for 1998. The increase was primarily due to increases in advertising and
distribution expenses.
Operating Profit (Loss). Operating profit increased $16.3 million to $48.1
million for 1999 from $31.8 million in 1998. Operating profit of the Climbing
Products segment increased $6.9 million or 19.0% to $43.3 million in 1999 from
$36.4 million in 1998. This increase was primarily attributable to the increased
sale of higher margin climbing products partially offset by related increases in
advertising and distribution expenses. Operating profit of the Extruded Products
segment increased $2.0 million or 30.9% to $8.5 million from $6.5 million in
1998. This increase was primarily attributable to improvements in the
profitability of the product mix. Corporate and Other expenses decreased $7.4
million from $11.1 million in 1998 to $3.7 million in 1999. This decrease was
primarily due to certain non-recurring expenses in 1998 associated with the
Recapitalization.
Other (Expense) Income, Net. Other (expense) income, net decreased by $2.7
million from net income of $0.6 million for 1998 to net expense of $2.1 million
in 1999. The increase in expense is primarily attributable to a decrease in
1999, compared to 1998, of $1.5 million in MIICA investment losses, the gain
recognized on the MIICA Insurance Transfer offset by provisions for remaining
MIICA assets in 1998, and other expenses in 1999, primarily attributable to
certain non-recurring expenses with respect to a former employee and expenses
associated with the discontinued operations of a former subsidiary.
Interest Expense. Interest expense decreased $3.5 million to $27.1 million
for 1999 from $30.6 million for 1998. The decrease was primarily due to lower
interest rates.
Income Taxes. Income taxes increased $5.8 million to $7.6 million for 1999
from $1.8 million for 1998. This increase was primarily due to an increase in
taxable income in 1999 as compared to the year ended 1998.
Net Income. Net income was $11.3 million for 1999 compared to a net income
of $0.1 million for 1998. The change was due to a combination of the above
factors.
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales. Net sales increased $19.8 million, or 4.8%, to $436.1 million
for 1998 from $416.3 million for 1997.
11
<PAGE> 14
Net sales of climbing products increased $15.8 million, or 5.0%, to $330.0
million in 1998 from $314.2 million in 1997. This increase was primarily due to
increased sales volume in both fiberglass and aluminum climbing products, which
was achieved through the ongoing successful growth of the Company's customer
base, new product development and increased marketing efforts, particularly to
large home improvement retailers.
Net sales of extruded products increased $4.0 million, or 3.9%, to $106.1
million for 1998 from $102.1 million for 1997. The increase is due to growth of
extrusions sold to customers in the building products and transportation
sectors.
Gross Profit. Gross profit increased slightly to $113.6 million for 1998
from $112.9 million for 1997. Gross profit margin was 26.1% for 1998 and 27.1%
for 1997, reflecting general market conditions.
General and Administrative Expense. General and administrative expense
increased $4.0 million, or 14.4%, to $31.6 million for 1998 from $27.6 million
for 1997. This increase was primarily due to the amortization of certain
non-recurring costs associated with the Recapitalization of $6.6 million offset
by decreases in certain costs of $2.6 million.
Selling and Distribution Expense. Selling and distribution expense
increased $1.1 million, or 2.2%, to $50.2 million for 1998 from $49.1 million
for 1997.
Non-Cash Compensation Charge. A non-cash compensation charge of $78.5
million, primarily relating to the accelerated vesting of Pre-Recapitalization
Class B Stock in connection with the Recapitalization, was recorded in 1997.
Operating Profit (Loss). Operating profit increased $96.8 million to $31.8
million for 1998 from an operating loss of $65.0 million in 1997. Operating
profit of the Climbing Products segment decreased $1.8 million or 4.7% to $36.4
million in 1998 from $38.2 million in 1997. This decrease was primarily
attributable to increases in sales-based advertising and promotional expense.
Operating profit of the Extruded Products segment increased $0.6 million or
11.1% to $6.5 million from $5.9 million in 1997. This increase was primarily
attributable to the growth of extrusions sold to customers in the building and
transportation sectors. The remaining increase in operating profit of $98.0
million between 1998 and 1997 was primarily the result of the Recapitalization
expense and the non-cash compensation charge incurred in 1997.
Other Income (Expense), Net. Other income (expense), net decreased by
$16.5 million from net expense of $15.8 million for 1997 to net income of $0.7
million in 1998. The decrease in expense is primarily attributable to a decrease
of $13.1 million in MIICA investment losses, between 1998 and 1997, and the gain
of $4.5 million recognized on the MIICA Insurance Transfer offset by provisions
for remaining MIICA assets and other expenses.
Interest Expense. Interest expense increased $21.6 million to $30.6
million for 1998 from $9.0 million for 1997. The increase was primarily due to
the additional interest on the debt resulting from the Recapitalization.
Income Taxes. Income taxes increased $1.1 million to $1.8 million for 1998
from $0.7 million for 1997. This increase was primarily due to: an increase in
taxable income in 1998 as compared to the year ended 1997 due to the inclusion
in 1997 of charges associated with the Recapitalization; the inclusion in 1997
of the non-cash compensation charge of $78.5 million which was not deductible
for income tax purposes; and an increase of $1.7 million in the valuation
allowance in 1998 relating to the realization of certain deferred tax assets.
Net Income. Net income was $0.1 million for 1998 compared to a net loss of
$90.5 million for 1997. The change was due to a combination of the above
factors.
12
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred a significant amount of indebtedness in connection
with the Recapitalization. At December 31, 1999, the Company had approximately
$278.9 million of consolidated indebtedness, including $131.8 million of
indebtedness, net of the original issue discount, pursuant to the Notes, and
$142.1 million of borrowings under the Senior Credit Facility. The Senior Credit
Facility provides for $145.0 million of Term Loan Facilities, and a $100.0
million Revolving Facility. At December 31, 1999 $93.9 million was available for
borrowing under the Revolving Facility.
In May 1998, the Company entered into a five-year $50.0 million receivables
purchase agreement with a financial institution and its affiliate (the
"Receivables Purchase Agreement") and refinanced outstanding amounts borrowed
under the receivables portion of the Senior Credit Facility. As of December 31,
1999, the Company sold $89.5 million of accounts receivable in exchange for
$20.0 million in cash and an undivided interest in the accounts receivable of
$69.5 million. As of December 31, 1999, an additional $30.0 million of financing
was available under the Receivables Purchase Agreement.
The Company satisfies its debt service requirements and meets its
operating, working capital and capital expenditure needs through a combination
of operating cash flow and funds available under the Senior Credit Facility and
the Receivables Purchase Agreement.
In connection with the Recapitalization, the Company refinanced all of its
existing debt except for the Variable Rate Demand Industrial Building Revenue
Bonds due 2015 (the "IRBs") with the proceeds from the Notes and the Senior
Credit Facility.
Net cash flows from operating activities decreased $24.2 million to $27.6
million for the year ended December 31, 1999 from $51.8 million for the year
ended 1998. The decrease is primarily attributable to the net proceeds from the
sale of accounts receivable under the Receivables Purchase Agreement of $20.0
million in 1998. Net cash flows from operating activities increased $34.6
million to $51.8 million for the year ended December 31, 1998 from $17.2 million
for the year ended 1997. This is primarily attributable to: the decrease in
operating working capital (receivables, inventory, accounts payable and accrued
expenses) of $9.3 million; the decrease in the payment of product liability and
workers' compensation claims of $7.3 million; and the net proceeds from the sale
of accounts receivable under the Receivables Purchase Agreement of $20.0
million. Operating working capital also primarily decreased as a result of this
sale of receivables. The payment of product liability and workers' compensation
claims decreased as a result of the MIICA Insurance Transfer. Cash flow used in
investing activities increased $29.9 million to $32.5 million in 1999 from $2.6
million in 1998. This increase was due primarily to an increase in capital
expenditures of $11.5 million and the acquisition of certain assets of Keller
Ladders, Inc. for $12.2 million.
The Company's ability to make scheduled payments of principal ($1.5 million
for each of the years 2000 through 2002), or to pay interest (expected to range
from $25.1 million to $25.3 million annually for years 2000 to 2002, assuming
current interest rates and debt levels, net of scheduled principal payments),
on, or to refinance its indebtedness (including the Notes), or to fund planned
capital expenditures or finance acquisitions, will depend on its future
financial and operating performance, which to a certain extent is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based on the current and anticipated level
of operations, management believes that cash flow from operations and available
cash, together with available borrowings under the Senior Credit Facility and
sales of accounts receivable under the Receivables Purchase Agreement, will be
adequate to meet the Company's anticipated future requirements for working
capital, budgeted capital expenditures, and scheduled payments of principal and
interest on its indebtedness, including the Notes, for the next twelve months.
The Company, however, may need to refinance all or a portion of the principal of
the Notes on or prior to maturity. There can be no assurance that the Company's
business will generate sufficient cash flows from operations or that future
borrowings will be available under the Senior Credit Facility and the
Receivables Purchase Agreement in an amount sufficient to enable the Company to
service its indebtedness, including the Notes, or make anticipated
13
<PAGE> 16
capital expenditures and fund potential future acquisitions. In addition, there
can be no assurance that the Company will be able to effect any refinancing on
commercially reasonable terms, or at all.
Capital Expenditures
The Company's capital expenditures were $20.5 million, $8.9 million and
$11.7 million, in 1999, 1998 and 1997, respectively. Approximately $5 million of
the amount expended in each of such years has been for the renewal and
replacement of existing facilities and equipment; thus in an economic downturn,
the Company believes it will be able to adjust the amount spent on capital
expenditures without compromising the base need of its operations. The Company
expects to spend approximately $35 million in 2000 for various capital projects,
including information systems, quality enhancement, cost improvement, efficiency
improvement, and increased capacity.
Seasonality, Working Capital and Cyclicality
Sales of certain products of the Company are subject to seasonal variation.
Demand for the Company's ladder products is affected by residential housing
starts and existing home sales, commercial construction activity, and overall
home improvement expenditures. Due to seasonal factors associated with the
construction industry, sales of products and working capital are typically
higher during the second and third quarters than at other times of the year. The
Company expects to use the Senior Credit Facility and the Receivables Purchase
Agreement to meet any seasonal variations in its working capital requirements.
The residential and commercial construction markets are sensitive to cyclical
changes in the economy.
Raw Material Costs and Inflation
The rate of inflation over recent years has been relatively low and has not
had a significant effect on the Company's results of operations. The Company
purchases aluminum, glass and other raw materials from various suppliers. While
all such materials are available from numerous independent suppliers, commodity
raw materials are subject to price fluctuations. There have been historical
periods of rapid and significant movements in the price of aluminum, both upward
and downward. Historically, the Company has entered into futures contracts with
respect to its purchases of aluminum to minimize or hedge commodity price
fluctuations. See "Business -- Raw Materials and Suppliers".
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS No. 133), Accounting
for Derivative Instruments and Hedging Activities, which was originally required
to be adopted by the Company in 2000. In September 1999, the FASB issued SFAS
No. 137 (SFAS No. 137), Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of SFAS No. 133. SFAS No. 137
deferred the date by which the Company is required to adopt SFAS No. 133 to
2001. SFAS No. 133 requires that the Company recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of such derivatives will either be
offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in accumulated other non-owner
equity changes until the hedged item is recognized in earnings. The portion of a
derivative's change in fair value, if unrelated to a hedge, will be immediately
recognized in earnings. The Company has not yet determined what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.
YEAR 2000 READINESS PROGRAM
The Year 2000 issue arose because many computer hardware and software
systems used only the last two digits to represent a year. As a result, these
systems may not have properly processed dates
14
<PAGE> 17
beyond 1999 which could have caused errors in information or system failures. If
the Company's computer systems did not correctly recognize and process date
information beyond the year 1999, the Year 2000 issue could have had a material
adverse impact on the operations of the Company.
Based on all current information, the Company has not experienced any
significant events in connection with Year 2000 issues. The Company will
continue to monitor for potential issues with its own internal computer systems,
as well as those of its customers and suppliers, in order to minimize any
potential risk. The Company now believes that any potential Year 2000 issue that
might arise would not have a significant impact on its operations and would most
likely be an isolated, short-term event.
Program Completion. In 1996, the Company commenced a program intended to
mitigate and prevent the adverse effect of the Year 2000 issue. This program
consisted of the following phases:
AWARENESS PHASE -- development of a detailed strategic approach to
address the Year 2000 issue;
ASSESSMENT PHASE -- an assessment of all computer systems, software,
building infrastructure components and equipment with embedded technology
to identify each item that requires date code remediation and an assessment
and certification of third parties' Year 2000 compliance;
REMEDIATION PHASE -- implementation of code enhancements, hardware and
software upgrades, system replacements, vendor and customer assurances,
contingency planning and other associated changes; and
VALIDATION PHASE -- testing of systems for Year 2000 readiness.
The Company completed all phases of the program in advance of December 31,
1999.
Costs. The Company primarily utilized internal resources to reprogram,
replace and test its computer systems, software, equipment and building
infrastructure components for Year 2000 modifications. The Company's Year 2000
expenditures approximated $1.6 million and were funded by normal operating cash
flow. All Year 2000 expenditures were expensed as incurred and did not have a
material effect on results of operations, liquidity or capital resources.
Approximately $0.5 million and $0.9 million of the project costs were incurred
in 1999 and 1998, respectively. The Company does not expect to incur any
additional significant direct costs related to the Year 2000 issue during the
current year.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosures. The following discussion about the Company's
market risk disclosures involves forward looking statements. Actual results
could differ materially from those projected in the forward looking statements.
The Company is exposed to market risk related to changes in interest rates,
foreign currency exchange rates and commodity prices. The Company does not use
derivative financial instruments for speculative or trading purposes.
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations. The Company manages such risk through the use of a
combination of fixed and variable rate debt. Currently, the Company does not use
derivative financial instruments to manage its interest rate risk.
The following table provides information about the Company's debt
obligations and financial instruments that are sensitive to changes in interest
rates. For debt obligations, the table presents principal
15
<PAGE> 18
cash flows and related weighted-average interest rates by expected maturity
dates or applicable floating rate index.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- FAIR VALUE
2000 DECEMBER 31,
THROUGH -------------------
2002 2003 2004 THEREAFTER TOTAL 1999 1998
------- ------- ------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term debt, including Current Portion
Fixed Rate.................................... $135,000 $135,000 $132,300 $133,650
Average Interest Rate......................... 10.00%
Variable Rate................................. $1,450 $30,550 $56,050 $ 56,150 $147,100 $147,100 $148,550
Average Interest Rate......................... LIBOR+ LIBOR+ LIBOR+ LIBOR+
2.00% 2.00% 2.00% 2.00%
to to to to
2.25% 2.25% 2.25% 2.25%
</TABLE>
The Company has no operations in foreign countries. International sales
were not material to the Company's operations for the year ended December 31,
1999. Accordingly, the Company is not subject to material foreign currency
exchange rate risk. To date, the Company has not entered into any foreign
currency forward exchange contracts or other derivative financial instruments
relative to foreign currency exchange rates.
The Company is exposed to market risk from changes in the price of
aluminum. The Company manages such risk through the use of aluminum futures and
option contracts. At December 31, 1999, the Company had purchased futures
contracts, maturing in 2000, for the delivery of 15.2 million pounds of aluminum
at a weighted average settlement price of $.6215 per pound. The fair value of
such futures contracts was $11.4 million at December 31, 1999. At December 31,
1998, the Company had purchased futures contracts, maturing in 1999, for the
delivery of 64.9 million pounds of aluminum at a weighted average settlement
price of $.6573 per pound and contracts, maturing in 2000, for 2.7 million
pounds of aluminum at a weighted average settlement price of $.5990 per pound.
The fair value of such futures contracts was $38.7 million at December 31, 1998.
At December 31, 1999, the Company had purchased call option contracts and sold
put option contracts, maturing in 2000, covering 59.1 million pounds of aluminum
at strike prices ranging from $.6463 to $.7484 per pound. The fair value of such
option contracts was $1.8 million at December 31, 1999. The Company did not
utilize option contracts during 1998.
16
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Reports of Independent Accountants.......................... 18
Consolidated Balance Sheets................................. 19
Consolidated Statements of Operations....................... 21
Consolidated Statements of Changes in Shareholders' Equity
(Deficit)................................................. 22
Consolidated Statements of Cash Flows....................... 23
Notes to Consolidated Financial Statements.................. 24
</TABLE>
17
<PAGE> 20
REPORTS OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of Werner Holding Co. (PA), Inc.:
In our opinion, the accompanying consolidated balance sheet as of December
31, 1999 and the related consolidated statements of operations, of changes in
shareholders' equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of Werner Holding Co. (PA), Inc. and
subsidiaries at December 31, 1999, and the results of their operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States. 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 audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
As discussed in Note B, the Company changed its method of computing
depreciation prospectively as of January 1, 1999.
/s/ PRICEWATERHOUSECOOPERS LLP
Pittsburgh, PA
February 25, 2000
Shareholders and Board of Directors
Werner Holding Co. (PA), Inc.
Greenville, Pennsylvania
We have audited the accompanying consolidated balance sheet of Werner
Holding Co. (PA), Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, changes in shareholders' equity (deficit)
and cash flows for each of the two years in the period ended December 31, 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Werner Holding
Co. (PA), Inc. and subsidiaries at December 31, 1998, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 28, 1999
18
<PAGE> 21
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 866 $ 9,387
Undivided interest in accounts receivable................. 68,393 46,298
Allowance for doubtful accounts........................... (1,900) (1,600)
Refundable income taxes................................... 697 1,132
Inventories............................................... 58,348 46,777
Deferred income taxes..................................... 2,420 2,830
Other..................................................... 1,907 1,520
-------- --------
Total current assets........................................ 130,731 106,344
Other assets:
Deferred income taxes..................................... 10,972 5,355
Deferred financing fees, net.............................. 11,474 13,745
Other..................................................... 18,756 21,642
-------- --------
41,202 40,742
Property, plant and equipment:
Land and improvements..................................... 7,307 7,262
Buildings................................................. 42,470 34,077
Machinery and equipment................................... 114,422 102,019
-------- --------
164,199 143,358
Less accumulated depreciation and amortization............ 91,504 83,455
-------- --------
72,695 59,903
Capital projects in progress.............................. 10,812 5,790
-------- --------
83,507 65,693
-------- --------
TOTAL ASSETS................................................ $255,440 $212,779
======== ========
</TABLE>
19
<PAGE> 22
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 31,065 $ 22,742
Accrued liabilities....................................... 36,679 28,583
Current maturities of long-term debt...................... 1,450 1,450
-------- --------
Total current liabilities................................... 69,194 52,775
Long-term obligations:
Long-term debt -- less current maturities (net of
unamortized original issue discount of $3,216 in 1999
and $3,617 in 1998).................................... 277,434 278,483
Reserve for product liability and workers' compensation
claims................................................. 29,247 13,639
Other long-term obligations............................... 23,441 22,279
-------- --------
330,122 314,401
Shareholders' deficit:
Common stock:
Class A -- $.01 par value; voting; 5,000 shares
authorized;
1,964 shares issued and outstanding in 1999 and
2,059 shares issued and outstanding in 1998....... -- --
Class B -- $.01 par value; voting; 25,000 shares
authorized;
21,943 shares issued and outstanding in 1999 and
22,438 shares issued and outstanding in 1998...... -- --
Class C -- $.01 par value; non-voting; 45,000 shares
authorized;
4,657 shares issued and outstanding in 1999 and
4,682 shares issued and outstanding in 1998....... -- --
Class D -- $.01 par value; voting; 1,000 shares
authorized;
1,000 shares issued and outstanding............... -- --
Class E -- $.01 par value; non-voting; 50,000 shares
authorized; 45,000 shares issued and outstanding.... 1 1
Additional paid-in capital................................ 198,786 198,847
Accumulated deficit....................................... (341,718) (351,607)
Accumulated other non-owner changes in equity............. (260) (1,638)
Notes receivable arising from stock loan plan............. (685) --
-------- --------
Total shareholders' deficit................................. (143,876) (154,397)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT................. $255,440 $212,779
======== ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................... $484,646 $436,091 $416,321
Cost of sales........................................... 348,643 322,451 303,354
-------- -------- --------
Gross profit............................................ 136,003 113,640 112,967
General and administrative expense...................... 29,839 31,626 27,652
Selling and distribution expense........................ 58,029 50,165 49,075
Recapitalization expense................................ -- -- 22,714
Non-cash compensation charge............................ -- -- 78,527
-------- -------- --------
Operating profit (loss)................................. 48,135 31,849 (65,001)
Other (expense) income, net............................. (2,067) 645 (15,813)
-------- -------- --------
Income (loss) before interest and taxes................. 46,068 32,494 (80,814)
Interest expense........................................ 27,102 30,591 8,979
-------- -------- --------
Income (loss) before provision for income taxes......... 18,966 1,903 (89,793)
Income taxes............................................ 7,649 1,757 714
-------- -------- --------
NET INCOME (LOSS)....................................... $ 11,317 $ 146 $(90,507)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
WERNER HOLDING CO. (PA), INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-RECAPITALIZATION
COMMON STOCK POST-RECAPITALIZATION COMMON STOCK
-------------------------------------- -----------------------------------
CLASS A CLASS B CLASS A CLASS B
----------------- ------------------ ---------------- ----------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997........................ 13,227 $13 148,473 $148 $ $
Net (loss)........................................
Unrealized losses on investments (net of deferred
tax benefit of $5,934)...........................
Reclassification adjustment for losses realized
included in net loss (net of tax)................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (55) -- (574) --
Dividends declared ($10.50 per share).............
Redemption and reclassification of common stock in
connection with the Recapitalization............. (13,172) (13) (147,899) (148) 2,059 -- 22,438 --
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196...........................................
Non-cash compensation charge......................
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1997...................... -- -- -- -- 2,059 -- 22,438 --
Net income........................................
Unrealized losses on investments (net of deferred
tax benefit of $1,243)...........................
Reclassification adjustment for losses realized
included in net income (net of tax)..............
Adjustment to minimum pension liability (net of
deferred tax of $980)............................
Total other non-owner changes in equity...........
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1998...................... -- -- 2,059 -- 22,438 --
Net income
Unrealized gains on investments (net of deferred
tax of $46)......................................
Reclassification adjustment for gains realized in
net income (net of tax)..........................
Adjustment to minimum pension liability (net of
deferred tax of $827)............................
Total other non-owner changes in equity...........
Repurchase of common stock........................ (95) (495)
Notes receivable arising from stock loan plan.....
------- --- -------- ---- ----- --- ------ ---
Balance at December 31, 1999...................... $-- $ -- 1,964 $-- 21,943 $--
======= === ======== ==== ===== === ====== ===
<CAPTION>
POST-RECAPITALIZATION COMMON STOCK
------------------------------------------------------
CLASS C CLASS D CLASS E ADDITIONAL
---------------- ---------------- ---------------- PAID-IN RETAINED
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS CAPITAL EARNINGS
------ ------- ------ ------- ------ ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997........................ $ $ $ $ 1,316 $ 70,402
Net (loss)........................................ (90,507)
Unrealized losses on investments (net of deferred
tax benefit of $5,934)...........................
Reclassification adjustment for losses realized
included in net loss (net of tax)................
Adjustment to minimum pension liability...........
Total other non-owner changes in equity...........
Amortization of deferred compensation.............
Repurchase of common stock........................ (731)
Dividends declared ($10.50 per share)............. (1,691)
Redemption and reclassification of common stock in
connection with the Recapitalization............. (1,515) (329,226)
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196........................................... 4,682 -- 1,000 -- 45,000 1 120,519
Non-cash compensation charge...................... 78,527
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1997...................... 4,682 -- 1,000 -- 45,000 1 198,847 (351,753)
Net income........................................ 146
Unrealized losses on investments (net of deferred
tax benefit of $1,243)...........................
Reclassification adjustment for losses realized
included in net income (net of tax)..............
Adjustment to minimum pension liability (net of
deferred tax of $980)............................
Total other non-owner changes in equity...........
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1998...................... 4,682 -- 1,000 -- 45,000 1 198,847 (351,607)
Net income 11,317
Unrealized gains on investments (net of deferred
tax of $46)......................................
Reclassification adjustment for gains realized in
net income (net of tax)..........................
Adjustment to minimum pension liability (net of
deferred tax of $827)............................
Total other non-owner changes in equity...........
Repurchase of common stock........................ (25) (61) (1,428)
Notes receivable arising from stock loan plan.....
----- --- ----- --- ------ -- -------- ---------
Balance at December 31, 1999...................... 4,657 $-- 1,000 $-- 45,000 $1 $198,786 $(341,718)
===== === ===== === ====== == ======== =========
<CAPTION>
ACCUMULATED OTHER
NON-OWNER
CHANGES IN EQUITY
----------------------------------
UNREALIZED NOTES
GAINS RECEIVABLE
MINIMUM (LOSSES) ARISING FROM
PENSION ON STOCK LOAN
LIABILITY INVESTMENTS TOTAL PLAN OTHER TOTAL
--------- ----------- ----- ------------ ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997........................ $ (275) $ 3,807 $ 3,532 $ $(332) $75,079
Net (loss)........................................ (90,507)
Unrealized losses on investments (net of deferred
tax benefit of $5,934)........................... (12,962) (12,962) (12,962)
Reclassification adjustment for losses realized
included in net loss (net of tax)................ 10,609 10,609 10,609
Adjustment to minimum pension liability........... (1,946) (1,946) (1,946)
---------
Total other non-owner changes in equity........... (94,806)
Amortization of deferred compensation............. 133 133
Repurchase of common stock........................ (731)
Dividends declared ($10.50 per share)............. (1,691)
Redemption and reclassification of common stock in
connection with the Recapitalization............. 199 (330,703)
Issuance of common stock in connection with the
Recapitalization, net of issuance costs of
$2,196........................................... 120,520
Non-cash compensation charge...................... 78,527
------- -------- -------- -------- ----- ---------
Balance at December 31, 1997...................... (2,221) 1,454 (767) -- -- (153,672)
Net income........................................ 146
Unrealized losses on investments (net of deferred
tax benefit of $1,243)........................... (2,302) (2,302) (2,302)
Reclassification adjustment for losses realized
included in net income (net of tax).............. 808 808 808
Adjustment to minimum pension liability (net of
deferred tax of $980)............................ 623 623 623
---------
Total other non-owner changes in equity........... (725)
------- -------- -------- -------- ----- ---------
Balance at December 31, 1998...................... (1,598) (40) (1,638) -- -- (154,397)
Net income 11,317
Unrealized gains on investments (net of deferred
tax of $46)...................................... 84 84 84
Reclassification adjustment for gains realized in
net income (net of tax).......................... (44) (44) (44)
Adjustment to minimum pension liability (net of
deferred tax of $827)............................ 1,338 1,338 1,338
---------
Total other non-owner changes in equity........... 12,695
Repurchase of common stock........................ (1,489)
Notes receivable arising from stock loan plan..... (685) (685)
------- -------- -------- -------- ----- ---------
Balance at December 31, 1999...................... $ (260) $ -- $ (260) $ (685) $ -- $(143,876)
======= ======== ======== ======== ===== =========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 11,317 $ 146 $(90,507)
Reconciliation of net income (loss) to net cash provided by
operating activities:
Recapitalization expense................................ 22,714
Non-cash compensation charge............................ 78,527
Net gain on transfer of loss reserves and discontinuance
of MIICA.............................................. (4,506)
Depreciation............................................ 8,774 8,465 8,371
Amortization of deferred financing fees and original
issue discount........................................ 2,672 2,611 320
Amortization of Recapitalization costs and other........ 4,478 9,079 2,809
Provision for losses on accounts receivable............. 709 599 (115)
Provision for product liability and workers'
compensation claims................................... 17,710 17,023 15,841
Payment of product liability and workers' compensation
claims................................................ (2,102) (4,206) (11,517)
Deferred income taxes................................... (6,058) 9,640 (8,044)
Realized net (gains) losses on disposition and
impairment of investments............................. 2,520 16,407
Net purchases of trading securities..................... (1,975)
Net proceeds from sale of accounts receivable........... 20,000
Changes in operating assets and liabilities:
Accounts receivable................................... 43,811 (16,521)
Undivided interest in accounts receivable............. (22,095) (46,298)
Refundable income taxes............................... 435 (312) 1,196
Inventories........................................... (5,964) (2,107) (263)
Accounts payable...................................... 8,323 (2,162) 3,213
Accrued liabilities................................... 9,845 (3,183) (1,267)
Other (net)........................................... (487) 686 (1,957)
-------- -------- --------
Net cash provided by operating activities................... 27,557 51,806 17,232
INVESTING ACTIVITIES
Capital expenditures........................................ (20,452) (8,940) (11,710)
Acquisition of certain assets of Keller Ladders, Inc........ (12,209)
Available-for-sale securities:
Purchases of debt and equity securities................... (572) (79,484)
Sale of debt and equity securities........................ 59,497
Net sales of other investments.............................. 207 6,936 24,073
Other....................................................... 4,062
-------- -------- --------
Net cash used in investing activities....................... (32,454) (2,576) (3,562)
FINANCING ACTIVITIES
Redemption of common stock.................................. (332,899)
Issuance of common stock.................................... 122,716
Payment of Recapitalization fees and expenses............... (37,952)
Refinancing of debt......................................... (65,571)
Issuance of Senior Subordinated Notes, net.................. 130,950
Borrowings under Senior Credit Facility..................... 186,500
Net repayments under revolving credit agreements............ (6,300)
Repayment of receivables facility........................... (41,500)
Repayments of long-term debt................................ (1,450) (1,450) (6,571)
Repurchase of common stock.................................. (1,489) (731)
Dividends paid.............................................. (1,691)
Issuance of notes receivable arising from stock loan plan,
net....................................................... (685)
-------- -------- --------
Net cash used in financing activities....................... (3,624) (42,950) (11,549)
-------- -------- --------
Net (decrease) increase in cash and equivalents............. (8,521) 6,280 2,121
Cash and equivalents at beginning of year................... 9,387 3,107 986
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR......................... $ 866 $ 9,387 $ 3,107
======== ======== ========
CASH PAID (RECEIVED) DURING THE YEAR FOR
Interest.................................................... $ 24,732 $ 26,112 $ 7,752
======== ======== ========
Income taxes................................................ $ 13,272 $ (7,567) $ 9,955
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A. DESCRIPTION OF BUSINESS
Werner Holding Co. (PA), Inc. through its subsidiaries is a manufacturer of
climbing equipment which includes aluminum, fiberglass and wood ladders,
scaffolding, stages, and planks; and aluminum extruded products. The Company
operates in two business segments, Climbing Products and Extruded Products,
which are located in the United States.
B. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements of Werner
Holding Co. (PA), Inc. include its accounts and the accounts of its wholly-owned
subsidiary, Werner Holding Co. (DE), Inc., and its wholly-owned subsidiaries
(collectively the "Company"). Werner Holding Co. (PA), Inc. has no substantial
operations or assets, other than its investment in Werner Holding Co. (DE), Inc.
The consolidated financial condition and results of operations of Werner Holding
Co. (PA), Inc. are substantially the same as those of Werner Holding Co. (DE),
Inc. Intercompany accounts and transactions have been eliminated.
Revenue Recognition -- Sales are recorded when products are shipped and
title passes to the customer.
Accounts Receivable -- The Company provides credit, in the normal course of
business, to its customers. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations. Write-offs of
uncollectible accounts receivable have totaled $621, $72 and $565 in 1999, 1998
and 1997, respectively.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Inventories -- Inventories are stated at the lower of cost or market (net
realizable value). Cost is determined by the last-in, first-out (LIFO) method
for approximately 93% and 95% of the inventories at December 31, 1999 and 1998,
respectively.
Derivative Commodity Instruments -- The Company utilizes commodity futures
and option contracts to hedge the market risk of changing prices associated with
a certain percentage of its anticipated aluminum raw material requirements.
These contracts obligate the Company to make or receive a payment equal to the
net change in value of the contract at its maturity. Such contracts are
designated as hedges, correspond to the commitment period and are effective in
hedging the Company's exposure to changes in aluminum prices during that cycle.
At December 31, 1999 and 1998, the Company had futures contracts to purchase
aluminum totaling $9,454 and $44,297, respectively. The fair value of these
contracts was approximately $11,388 and $38,732 at December 31, 1999 and 1998,
respectively. At December 31, 1999, the Company had purchased call option
contracts and sold put option contracts covering 59.1 million pounds of
aluminum. The fair value of these contracts was approximately $1,811 at December
31, 1999. The Company did not utilize option contracts during 1998.
All gains and losses on qualifying hedge transactions are deferred and are
reported as a component of the underlying transaction (the deferral accounting
method). Cash flows related to these
24
<PAGE> 27
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
transactions are recognized in the statement of cash flows in a manner
consistent with the underlying transactions.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. The straight-line method of depreciation was adopted for all property,
plant and equipment placed into service after January 1, 1999. For property,
plant and equipment placed into service prior to January 1, 1999, depreciation
is computed using accelerated methods. The Company believes the new method will
more appropriately reflect its financial results by better allocating costs of
new property over the estimated useful lives of these assets. In addition, the
new method more closely conforms with that prevalent in the industries in which
the Company operates. The effect of this change was not material to the results
of operations or financial position of the Company for the year ended December
31, 1999. The estimated useful lives for buildings range from 40 to 45 years and
for machinery and equipment range from 3 to 14 years.
Long-lived assets are reviewed for impairment. Impairment is recognized
when events or changes in circumstances indicate that the carrying amount of the
asset, or related group of assets, may not be recoverable. If the expected
future undiscounted cash flows are less than the carrying amount of the asset,
an impairment loss is recognized at that time. Measurement of impairment may be
based upon appraisals, market values of similar assets or discounted cash flows.
Insurance Fund Investments -- Until March 31, 1998, the Company's captive
insurance subsidiary, Manufacturers Indemnity and Insurance Company of America
("MIICA"), maintained an investment fund which consisted of debt securities,
equity securities, real estate, cash and equivalents, and other investments.
MIICA's investments in debt and equity securities were available for sale;
therefore, these securities were reported at market value. Investments in real
estate were recorded at depreciated value and short-term and other investments
were stated primarily at cost which approximated market. Investments in special
expiration price options were classified as trading securities and were reported
at market value.
Realized gains and losses on the sale of investments were recognized in
operations. The cost of securities sold was based on the specific identification
method. Changes in market values of debt and equity securities were reflected as
unrealized gains or losses directly in shareholders' equity and accordingly, had
no effect on operations until sold unless such losses were other than temporary,
at which time such losses were recognized in operations. Changes in market
values of special expiration price options were reported directly in operations.
Substantially all of the MIICA insurance fund investments were liquidated as
part of the discontinuance of MIICA -- see Note M.
Reserve for Product Liability and Workers' Compensation Claims -- Until
March 31, 1998, MIICA maintained reserves for the product liability, workers'
compensation and environmental liability claims of the Company. On March 31,
1998, the Company obtained third party commercial insurance coverage for its
product liability and workers' compensation claims previously provided for by
MIICA. Under the terms of this insurance coverage, the commercial insurance
provider agreed to assume losses which occurred on or before March 31, 1998,
capped at a maximum of $75,000 in losses and extinguished the Company's
liability in regard to such losses -- see Note M. Additionally, on April 1,
1998, the Company obtained third party insurance coverage, subject to certain
deductible provisions, for product liability and workers' compensation claims
which occur on or after that date and maintains a reserve for the insurance
deductibles related to such claims. The reserve for product liability and
workers' compensation claims includes an amount determined from loss reports for
individual cases and an amount, based on past experience, for losses incurred
but not reported. Such reserve is necessarily based on estimates and, while
management believes that the amount is adequate, the ultimate liability may be
in
25
<PAGE> 28
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
excess of or less than the amount provided. The methods for making such
estimates and for establishing the resulting reserve are continually reviewed,
and any adjustments are reflected in earnings currently.
Deferred Financing Fees -- Amortization of deferred financing fees is
computed using the effective interest method.
Advertising -- The Company expenses all advertising as incurred. These
expenses for the years ended December 31, 1999, 1998 and 1997 totaled $12,858,
$8,606, and $8,001, respectively.
Stock-Based Compensation -- The Company accounts for stock-based
compensation in accordance with the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees.
Statement of Cash Flows -- Cash and equivalents include cash on hand,
demand deposits and short-term highly liquid debt instruments purchased with an
original maturity of three months or less, exclusive of investments that were
held by MIICA.
Recently Issued Accounting Standards -- In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement No. 133 (SFAS No. 133),
Accounting for Derivative Instruments and Hedging Activities, which was
originally required to be adopted by the Company in 2000. In September 1999, the
FASB issued SFAS No. 137 (SFAS No. 137), Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133. SFAS
No. 137 deferred the date by which the Company is required to adopt SFAS No. 133
to 2001. SFAS No. 133 requires that the Company recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of such derivatives will either be
offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in accumulated other non-owner
equity changes until the hedged item is recognized in earnings. The portion of a
derivative's change in fair value, if unrelated to a hedge, will be immediately
recognized in earnings. The Company has not yet determined what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.
Comprehensive Income -- The Company adopted SFAS No. 130, Reporting
Comprehensive Income on January 1, 1998. SFAS No. 130 requires that an
enterprise classify items of other comprehensive income or "other non-owner
changes in equity" as referred to by the Company, by their nature in a financial
statement and display the accumulated other non-owner changes in equity
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet.
Fair Values of Financial Instruments -- The Company's disclosures for
financial instruments are as follows:
Cash and equivalents -- The carrying amounts reported in the balance
sheet for cash and equivalents bear interest at prevailing market rates and
therefore approximate fair value.
Long-term debt -- The carrying amounts of the Company's borrowings
under its credit agreements and the Variable Rate Demand Industrial
Building Revenue Bonds, bear interest at prevailing market rates and
therefore approximate their fair value at December 31, 1999 and 1998. The
fair value (based upon prevailing market rates) of the outstanding
borrowings of the Senior Subordinated Notes at December 31, 1999 and 1998
was $132,300 and $133,650, respectively.
26
<PAGE> 29
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Internal Use Software -- In March 1998, the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. The SOP, which has been adopted
prospectively as of January 1, 1999, requires the capitalization of certain
costs applicable to internal use software, including external direct material
and service costs, employee payroll and payroll-related costs. Prior to the
adoption of SOP 98-1, the Company expensed most of these costs as incurred. The
effect of adopting the SOP was not material to the results of operations or
financial position of the Company for the year ended December 31, 1999.
Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year presentation in the consolidated financial
statements.
C. RECAPITALIZATION
In October 1997, the Company entered into a recapitalization agreement (the
"Recapitalization Agreement") with certain affiliates of INVESTCORP S.A.
("Investcorp") and certain other international investors organized by Investcorp
(collectively the "Investors"). Pursuant to the Recapitalization Agreement, on
November 24, 1997, (the "Recapitalization Closing Date") the Company (a) amended
and restated its Articles of Incorporation pursuant to which the Company's
capital stock was reclassified, (b) redeemed for cash and the Market
Participation Right (as hereinafter described) certain shares of the
reclassified stock totaling $330,700 and (c) sold to the Investors shares of
newly created Class C, D and E Common Stock of the Company totaling $122,700
(all of which actions together constituted the "Recapitalization"). As a result
of the Recapitalization, the Pre-Recapitalization shareholders continue to own
approximately 33% of the outstanding voting equity of the Company and the
Investors own approximately 67% of the outstanding voting equity of the Company.
Recapitalization Financing -- The Recapitalization was funded by (a)
$186,500 of borrowings under a senior credit facility with a syndicate of banks
which included term loans, a revolving line of credit, and a facility providing
for borrowings collateralized by accounts receivable (collectively the "Senior
Credit Facility") (b) the issuance of $135,000 in principal amount of Senior
Subordinated Notes (the "Notes") and (c) proceeds from the sale of certain
shares of the Company's stock to the Investors.
The proceeds from these financings funded: the payment of approximately
$330,700 to holders of the reclassified stock; the repayment of approximately
$66,000 of outstanding indebtedness under the then existing credit facility and
notes; and the payment of approximately $45,200 of fees and expenses associated
with the Recapitalization.
Market Participation Right -- If, prior to the tenth anniversary of the
Recapitalization Closing Date: (i) there is an initial underwritten public
offering of at least 10% of the common equity of the Company, or the Investors
sell a majority of their shares of the Company and (ii) at the time of such
initial public offering or sale of shares, the Company's equity value equals or
exceeds certain target values that imply significant annual compound rates of
return (between 20% and 40%) to the Post-Recapitalization shareholders, then
those persons who have the Market Participation Right shall be entitled to
receive an aggregate amount equal to up to 5% of the Company's equity value (the
"Payment"). The Payment will be payable in cash, provided that the Company, in
its discretion, may make up to half of the Payment in notes or similar
obligations with market terms which the Company's Board of Directors in good
faith believes are of equivalent value. The Payment will be treated as an equity
distribution to those persons who have the Market Participation Right.
27
<PAGE> 30
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
C. RECAPITALIZATION -- CONTINUED
Voting Rights -- Holders of the Class A Common Stock and Class B Common
Stock are entitled to one vote per share and holders of the Class D Common Stock
are entitled to approximately 50.7 votes per share. Class C Common Stock and
Class E Common Stock have no voting rights. Upon the occurrence of a sale of
100% of the outstanding equity securities of the Company, a sale of
substantially all the assets of the Company or a public offering of any equity
securities of the Company ("Triggering Event"), each outstanding share of Class
A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock
and Class E Common Stock will convert into one share of Common Stock of the
Company. An additional class of common stock with a par value of $.01 per share
is authorized (131,000 shares), but no shares were issued or outstanding at
December 31, 1999 and 1998. When issued, this class of Common Stock of the
Company will have one vote per share.
Recapitalization Accounting -- The transaction was accounted for as a
recapitalization and as such, the historical basis of the Company's assets and
liabilities was not affected. Recapitalization related costs of $22,700
consisting of investment banker fees, transaction fees, legal and accounting
fees, cash transaction bonuses, and other miscellaneous costs were expensed in
1997. Additionally, approximately $2,200 of Recapitalization costs incurred
related to the issuance of shares of stock to the Investors was netted against
the proceeds of approximately $122,700.
Other Arrangements -- The Company also entered into employee protection
agreements whereby certain management employees received cash payments
aggregating approximately $6,600 upon completion of one year of service from the
Recapitalization Closing Date. This amount was included in other current assets
and liabilities at December 31, 1997, and was amortized to expense during 1998.
Additionally, as a result of the Recapitalization, payments totaling $3,708
related to consulting agreements entered into in December 1996 with four senior
executive officers/shareholders were accelerated and paid on the
Recapitalization Closing Date. Such amounts were expensed and were included as
part of the Recapitalization costs above.
Included in the Recapitalization related costs above is approximately
$6,000 of advisory fees paid to Investcorp International, Inc., an affiliate of
Investcorp, and $6,000 of standby commitment fees paid to Invifin S.A., an
affiliate of Investcorp. The Company also entered into an agreement for
management and consulting services for a five-year term with Investcorp
International, Inc., pursuant to which the Company prepaid Investcorp
International, Inc. $5,000 upon the consummation of the Recapitalization. This
amount is being amortized to expense over the five-year period.
D. NON-CASH COMPENSATION CHARGE
In 1997, the Company recorded a non-cash compensation charge of $78,500,
with an offsetting credit to additional paid-in capital. Such charge resulted
from changes made to the terms of the plan under which restricted
Pre-Recapitalization Class B Common Stock was issued to certain key employees of
the Company. Approximately $74,300 of this charge related to the accelerated
vesting, as a result of the Recapitalization, of restricted Pre-Recapitalization
stock previously granted to certain key employees of the Company and $4,200 of
the charge related to the accelerated vesting, as a result of the
Recapitalization, of restricted Pre-Recapitalization stock previously granted to
a former key management employee upon his separation from the Company. Such
charges represent the fair value of the shares at the date of the
Recapitalization ($2,421.29 per share) less the amount of the previously
recognized compensation under the plan.
28
<PAGE> 31
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
E. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1999 1998
------- -------
<S> <C> <C>
Finished goods.............................................. $30,470 $26,887
Work in process............................................. 15,267 12,339
Raw materials and supplies.................................. 22,296 17,808
------- -------
Total inventories, which approximates replacement cost...... 68,033 57,034
Less excess of cost over LIFO stated values................. 9,685 10,257
------- -------
NET INVENTORIES............................................. $58,348 $46,777
======= =======
</TABLE>
F. DEBT AND CREDIT ARRANGEMENTS
Debt and credit arrangements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
<S> <C> <C>
Variable Rate Demand Industrial Building Revenue Bonds, due
2015..................................................... $ 5,000 $ 5,000
Secured Credit Facility:
Term loan facility....................................... 142,100 143,550
Senior Subordinated Notes, due 2007, net of unamortized
discount................................................. 131,784 131,383
-------- --------
Total debt and credit arrangements......................... 278,884 279,933
Less current maturities.................................... 1,450 1,450
-------- --------
DEBT CLASSIFIED AS LONG-TERM............................... $277,434 $278,483
======== ========
</TABLE>
As part of the Recapitalization, the Company entered into the Senior Credit
Facility, and pursuant to an indenture dated November 24, 1997, issued the
Notes. Each of the Company's subsidiaries (except for MIICA and Werner Funding
Corporation) have guaranteed the Senior Credit Facility and the Notes. Such
guarantee of the Notes is subordinate to the guarantee of the Senior Credit
Facility.
The Notes:
The $135,000 of Notes mature on November 15, 2007. Interest at 10% on the
Notes is payable semi-annually in arrears on May 15 and November 15 and
commenced on May 15, 1998. The Notes are general unsecured obligations of the
Company ranking subordinate in right of payment to all existing and future
senior indebtedness of the Company. The Notes rank pari passu in right of
payment with all other indebtedness of the Company that is subordinated to
senior indebtedness of the Company.
The Notes are not redeemable at the Company's option prior to November 15,
2002. The Notes are redeemable at the Company's option at 105.000% during the
twelve months beginning November 15, 2002, 103.333% during the twelve months
beginning November 15, 2003, 101.667% during the twelve months beginning
November 15, 2004 and at 100% thereafter (expressed as a percentage of principal
amount). In addition, prior to November 15, 2002, up to 35% of the Notes may be
redeemed at 110% of the principal amount out of the proceeds of certain equity
offerings.
Senior Credit Facility:
The Senior Credit Facility originally consisted of $145,000 in term loan
facilities; a $100,000 revolving credit facility; and a $75,000 receivables
credit facility.
29
<PAGE> 32
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
Term Loan Facilities. The Term Loan Facilities consists of two tranches of
term loans in an aggregate principal amount of $145,000. The Tranche B term
loans are in an aggregate principal amount of $90,000, and the Tranche C term
loans are in an aggregate principal amount of $55,000. These loans were made in
a single drawing as part of the Recapitalization. The Tranche B and C term loans
mature on November 30, 2004 and 2005, respectively. Installments of the Tranche
B term loans are due in aggregate principal amounts of $900 per annum for the
first five years, $30,000 for the sixth year, and $55,500 for the seventh year.
Installments of the Tranche C term loans are due in aggregate principal amounts
of $550 for the first seven years and $51,150 for the eighth year.
Revolving Credit Facility. The Revolving Credit Facility consists of a
revolving credit facility in an aggregate principal amount of $100,000 under
which no amounts were borrowed at December 31, 1999 or 1998 except for amounts
under the letter of credit subfacility mentioned below. The Company is entitled
to draw amounts under the Revolving Facility for general corporate purposes and
working capital requirements. The Revolving Facility includes sub-limits for
letters of credit and swing line loans available on same-day notice. The
Revolving Facility matures on November 30, 2003. Available borrowings under this
arrangement are reduced by amounts issued under a letter of credit subfacility
which totaled $6,122 and $5,755 at December 31, 1999 and 1998, respectively.
Receivables Facility. The Receivables Facility consisted of a revolving
credit facility in an aggregate principal amount of $75,000, which was subject
to a borrowing base limit not to exceed 80% of eligible accounts receivable. At
December 31, 1997 $41,500 was outstanding under the Receivables Facility and was
classified as short-term bank debt. In May 1998, the Company refinanced the
outstanding amounts borrowed under the Receivables Facility with proceeds from a
sale of its accounts receivable under the Receivables Purchase Agreement -- see
Note P. Upon such refinancing, the Receivables Facility was terminated.
Borrowings under the Senior Credit Facility bear interest at alternative
floating rate structures at management's option (ranging from 7.88% to 8.21% and
8.13% to 8.46% at December 31, 1999 on Tranche B Term Loans and Tranche C Term
Loans, respectively) and are collateralized by all of the capital stock of each
of the Company's subsidiaries and substantially all of the inventory and
property, plant and equipment of the Company and its subsidiaries, except for
Werner Funding Corporation. The Senior Credit Facility requires an annual
commitment fee of 0.3% on the average daily unused amount of the Term Loan
Facility, and the Revolving Credit Facility.
Industrial Building Revenue Bonds:
Variable Rate Demand Industrial Building Revenue Bonds were issued in order
to finance the Company's acquisition of land and equipment and the subsequent
construction of a climbing products manufacturing facility. Under a lease
agreement, the Company makes rental payments to the issuer in amounts sufficient
to meet the debt service payments on the bonds. The bonds bear interest at a
variable rate established weekly which may not exceed 15% per annum (5.7% at
December 31, 1999). The interest rate on the bonds may be converted to a fixed
rate upon the satisfaction of certain conditions. Prior to a conversion to a
fixed rate, the bonds are subject to purchase from the holder upon demand at a
price equal to principal plus accrued interest. On or prior to the date of
conversion to a fixed rate, the bonds are subject to redemption, in whole or in
part, at the option of the Company. After conversion to a fixed rate, the bonds
are subject to redemption, as a whole or in part, at the Company's option, on or
after the tenth anniversary of the conversion, at annual redemption prices
varying from 103% to 100% of the principal outstanding. Certain property and
equipment having an original cost of $3,889 are pledged as collateral for the
bonds.
30
<PAGE> 33
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
The Senior Credit Facility and the Notes contain various restrictive
covenants including restrictions on additional indebtedness, mergers, asset
dispositions, restricted payments, prepayment and amendments of subordinated
indebtedness. These covenants also prohibit, among other things, the payment of
dividends. The financial covenants of the Senior Credit Facility require the
Company to meet specific interest coverage, maximum leverage, minimum EBITDA,
and capital expenditure requirements.
No short-term borrowings were outstanding at December 31, 1999 or 1998.
The aggregate amount of principal payments is $1,450 in each of the years
2000 through 2002, $30,550 in 2003 and $56,050 in 2004.
G. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Advertising, promotions and allowances.............. $13,777 $ 7,037
Payroll............................................. 10,546 8,128
Deferred management transaction bonuses............. -- 1,804
Interest............................................ 4,054 3,387
Other............................................... 8,302 8,227
------- -------
$36,679 $28,583
======= =======
</TABLE>
H. STOCK INCENTIVE PLANS
In November 1997, the Company adopted the Werner Holding Co. (PA), Inc.
1997 Stock Incentive Plan which was subsequently amended (the "Stock Option
Plan"). The Stock Option Plan is administered by the Company's Board of
Directors. Pursuant to the Stock Option Plan, certain directors, employees and
officers of the Company are given an opportunity to acquire shares of the
Company's Class C Common Stock (the "Class C Stock") through the grant of
non-qualified and qualified stock options, stock appreciation rights and
restricted stock. The options granted under the Stock Option Plan are
exercisable at no less than the fair market value of the Class C Stock at the
time of grant and vest upon the seventh anniversary of the grant with the
possibility for accelerated vesting based, in part, on the achievement of
certain financial targets as provided for in the Stock Option Plan. The Stock
Option Plan also provides for vesting of certain percentages of the options in
the event of an Initial Public Offering or Approved Sale as defined in the Stock
Option Plan. Options issued pursuant to the Stock Option Plan expire on the
thirtieth day following the seventh anniversary of the grant date. A total of
7,600 shares of Class C Stock have been reserved for issuance under the Plan.
31
<PAGE> 34
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
H. STOCK INCENTIVE PLANS -- CONTINUED
Presented below is a summary of the Stock Option Plan activity:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
STOCK EXERCISE
OPTIONS PRICE
------- --------
<S> <C> <C>
Outstanding at December 31, 1997..................... -- $ --
Granted............................................ 4,955 2,421.29
Exercised.......................................... -- --
Forfeited.......................................... -- --
----- ---------
Outstanding at December 31, 1998..................... 4,955 2,421.29
Granted............................................ 2,065 2,421.29
Exercised.......................................... -- --
Forfeited.......................................... 570 2,421.29
----- ---------
Outstanding at December 31, 1999..................... 6,450 $2,421.29
===== =========
</TABLE>
No options were granted prior to 1998. The weighted average remaining
contractual life of the options at December 31, 1999 and 1998 was approximately
5.3 and 5.9 years, respectively. The weighted average fair value of the options
at December 31, 1999 and 1998 was $798.13 and $577.86 per share, respectively.
As of December 31, 1999, 460 options were exercisable. No options were
exercisable prior to December 31, 1999.
The Company measures compensation cost using the intrinsic value method of
accounting pursuant to APB No. 25. Had the compensation cost for options granted
in 1999 and 1998 been determined using the fair market value method of SFAS No.
123, Accounting for Stock Based Compensation, compensation expense (net of
related taxes) would have been $479 and $2 resulting in pro forma net income of
$10,838 and $144, respectively.
For purposes of fair market value disclosures, the fair market value of an
option grant is determined on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Risk-free interest rate..................................... 6.54% 4.73%
Average life of options (years)............................. 6.3 5.9
Volatility.................................................. 0% 0%
Dividend yield.............................................. 0% 0%
</TABLE>
In November 1997, the Company authorized entering into certain Management
Stock Purchase Agreements, pursuant to which, certain members of the Company's
management were given the opportunity to purchase shares of the Company's Class
C Stock from certain of the Investors (the "Stock Purchase Plan"). In 1999 and
1998, shares of Class C Stock purchased under the Stock Purchase Plan were 773
and 0, respectively. The Class C Stock purchased pursuant to the Stock Purchase
Plan carry certain restrictions. In conjunction with the adoption of the Stock
Purchase Plan, the Company also adopted the Werner Holding Co. (PA), Inc. Stock
Loan Plan (the "Stock Loan Plan") to finance a portion of the purchase price
paid for the shares acquired under the Stock Purchase Plan. At December 31, 1999
and 1998, notes outstanding under the Stock Loan Plan were $685 and $0,
respectively. The notes bear interest at rates tied to interest rates paid on
the Company's third party credit arrangements and are due no later than November
24, 2004 or upon sale of the shares. All
32
<PAGE> 35
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
H. STOCK INCENTIVE PLANS -- CONTINUED
shares purchased pursuant to the terms of the Stock Loan Plan are pledged to the
Company. The notes are classified as a deduction to shareholders' equity in the
Company's consolidated balance sheet.
Effective August 1999, the Company adopted the Werner Co. Deferred Stock
Plan (the "Deferred Stock Plan"), pursuant to which, Dennis G. Heiner (the
"Participant") is given the opportunity on or before December 31 of each year,
to make an irrevocable election to defer all or part of his salary and/or bonus
for the ensuing year (subject to approval by a committee of the Board of
Directors of the Company) and receive Stock Units determined by dividing the
Participant's deferred salary and/or bonus by the fair market value of a share
of Class C Common Stock as of the applicable pay date. The distribution of
benefits under the Deferred Stock Plan is to be made to the Participant in
shares of Class C Common Stock following his termination from service or upon a
change in control of the Company. Under the Deferred Stock Plan as of December
31, 1999, Mr. Heiner has earned 275 Stock Units from salary and bonus
compensation. In addition, Mr. Heiner is entitled to receive 1,033 Stock Units
pursuant to his employment agreement. Such Stock Units will be vested over a
three year period from the date of his employment through June 15, 2002 and the
Company recognizes the related compensation expense over the three-year vesting
period.
Until the date of the Recapitalization, the Company maintained a restricted
stock plan. Amortization of unearned compensation was $133 in 1997. As discussed
in Note D, in connection with the Recapitalization the restricted stock awards
which were outstanding at that date became fully vested.
I. INCOME TAXES
The components of income taxes (benefit) at December 31 are presented
below:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal........................................ $12,655 $(8,241) $ 8,093
State and local................................ 1,052 358 665
------- ------- -------
13,707 (7,883) 8,758
Deferred taxes:
Federal........................................ (5,439) 10,527 (7,859)
State and local................................ (619) (887) (185)
------- ------- -------
(6,058) 9,640 (8,044)
------- ------- -------
TOTAL............................................ $ 7,649 $ 1,757 $ 714
======= ======= =======
</TABLE>
Income taxes (benefit) for financial reporting purposes varied from income
taxes (benefit) at the federal statutory rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Income taxes (benefit) at federal statutory
rate........................................... $ 6,638 $ 667 $(31,428)
Non-cash compensation charge..................... 27,484
State and local income taxes, net of federal
benefit........................................ 341 (529) 481
Adjustments to estimated income tax accruals..... 500 (127) 3,071
Change in federal capital loss carryforward...... (972)
Change in valuation allowance.................... 972 1,746 1,106
Other -- net..................................... 170
------- -------- --------
INCOME TAXES..................................... $ 7,649 $ 1,757 $ 714
======= ======== ========
</TABLE>
33
<PAGE> 36
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
I. INCOME TAXES -- CONTINUED
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $ 5,675 $ 5,157
Estimated income tax accruals............................. 5,115 4,824
Capitalized supplies...................................... 1,539 1,325
Other..................................................... 819 409
------- -------
Total deferred tax liabilities.............................. 13,148 11,715
Deferred tax assets:
Provision for product liability and workers' compensation
claims................................................. 10,635 5,183
Accrued vacation.......................................... 1,451 1,437
Accrued employee retirement benefits...................... 2,864 3,435
Deferred compensation..................................... 4,882 4,379
Accrued expenses.......................................... 5,136 4,683
Capital losses............................................ 1,880 2,852
State net operating loss carryforward, net of federal
benefit................................................ 1,137 759
Other..................................................... 435 24
------- -------
28,420 22,752
Valuation allowance....................................... (1,880) (2,852)
------- -------
Total deferred tax assets................................... 26,540 19,900
------- -------
NET DEFERRED TAX ASSETS..................................... $13,392 $ 8,185
======= =======
</TABLE>
SFAS No. 109, Accounting for Income Taxes, requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As
realization of deferred tax assets relating to certain capital losses is
considered uncertain, a valuation allowance has been recorded. The Company
believes that it will have taxable income in future periods sufficient to fully
recognize its remaining deferred tax assets.
The Company has state net operating loss carryforwards which expire as
follows: $1,655 in 2003; $10,249 in 2008; $3,377 in 2013 and $6,597 in 2018.
J. LEASES
The Company leases certain real estate and various equipment under
long-term operating leases. Total rent expense for all leases amounted to
$5,156, $4,551 and $4,970 for 1999, 1998, and 1997, respectively.
34
<PAGE> 37
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
J. LEASES -- CONTINUED
Future minimum rental commitments as of December 31, 1999 for all
noncancellable operating leases are as follows:
<TABLE>
<S> <C>
2000............................................ $ 4,031
2001............................................ 2,582
2002............................................ 1,758
2003............................................ 761
2004............................................ 461
Thereafter...................................... 2,488
-------
TOTAL........................................... $12,081
=======
</TABLE>
K. COMMITMENTS AND CONTINGENCIES
The Company has contracts to provide most of its estimated aluminum
requirements with four principal suppliers. These contracts include stipulated
prices, with provisions for price adjustments based on market. The four
contracts are renegotiable, two in 2000, one in 2001, and one in 2003.
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business. Although it is impossible
to predict the outcome of any pending legal proceeding, the Company believes
that such legal proceedings and claims individually and in the aggregate are
either without merit, covered by insurance or adequately reserved for, and will
not have a material adverse effect on its results of operations, financial
position, or cash flows.
In March 1998, an action was filed in the United States District Court for
the Western District of Pennsylvania entitled Elizabeth Werner, et al v. Eric J.
Werner, et al (Civil Action No. 98-503). The plaintiffs of the action are
Elizabeth Werner, Jeffrey R. Ackerman, individually and as trustee under a trust
for the benefit of Elizabeth Werner; Matthew W. Weiss (by his parent Elizabeth
Werner); Timothy F. Burke, Jr., as executor of the estate of Anne L. Werner and
as trustee of certain trusts under Anne L. Werner's last will and testament;
Edward A. Pollock; and all of such plaintiffs derivatively on behalf of Holding
(PA). Defendants include the Management Shareholders, former company officers
Richard L. Werner, Robert I. Werner, Marc L. Werner, certain non-management
shareholders, Holding (PA), Holding (DE) and certain of its subsidiaries
including, Werner Co. The action purports, in part, to be brought derivatively
on behalf of Holding (PA) and, in part, to be brought on behalf of plaintiffs
individually against the Company and certain current and former officers and
directors of the Company. The aspect of the case purportedly brought on behalf
of Holding (PA) alleges breaches of fiduciary duty by various members of the
Company's management arising out of, among other things, the issuance of
restricted stock to management of the Company in 1992 and 1993. Holding (PA)'s
Board of Directors has referred the matter to a special committee of
disinterested directors to investigate the merits of the claim and to take
appropriate actions on behalf of Holding (PA). After a detailed investigation,
the special committee has recommended that the derivative claims not be pursued
by or on behalf of Holding (PA). Accordingly, all the defendants have made
motions to dismiss the derivative claims. Pursuant to an amendment to the
complaint filed by plaintiffs on March 29, 1999, the only remaining corporate
defendant in this action is Holding (PA). Pursuant to the same amendment the
only remaining derivative claim asserted by the plaintiffs is a claim for
excessive compensation, not relating to the restricted stock issuances. The
aspect of the case purportedly brought on behalf of plaintiffs individually
against the Company appears to arise out of the 1992 and 1993 restricted stock
issuances as well as certain alleged misrepresentations by representatives of
the Company. The plaintiffs seek monetary damages in an unspecified amount. In
May 1999, the magistrate judge issued a report and recommendation ruling that
all of the plaintiffs' claims be dismissed. The District Court issued a
Memorandum
35
<PAGE> 38
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
K. COMMITMENTS AND CONTINGENCIES -- CONTINUED
Order on August 4, 1999 granting the motion to dismiss all remaining claims
against all defendants without prejudice and adopted the magistrate judge's
report as the opinion of the District Court. The plaintiffs have appealed such
decision. Management believes that the ultimate resolution of this lawsuit will
not have a material adverse effect on the Company's results of operations,
financial position, or cash flows.
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS
Effective December 31, 1998, the Company adopted SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. SFAS No. 132
addresses disclosure requirements only and did not change the way the Company
recognizes or measures its pension and post-retirement obligations.
The Company sponsors two non-contributory defined benefit pension plans to
provide retirement benefits for substantially all of its employees. The pension
plans provide benefits based upon the participant's years of service and
compensation or stated amounts for each year of service. The Company's funding
policy is to contribute at least the amount that is sufficient to meet the
minimum funding requirements of applicable federal law. Plan assets consist
primarily of listed common stocks, corporate and government bonds and short-term
investments.
The Company also sponsors two unfunded non-qualified supplemental
retirement plans to provide to certain officers a defined pension benefit in
excess of limits imposed by federal tax law.
Additionally, the Company sponsors several unfunded postretirement life and
health-care benefits to certain of its key employees. Benefits are determined
based on varying formulas using age at retirement and years of active service.
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the plans.
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------- -----------------------
1999 1998 1999 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Benefit obligation at January 1............ $ 56,184 $ 54,251 $ 2,121 $ 4,622
Service cost............................... 1,825 1,878 100 130
Interest cost.............................. 3,707 3,553 141 168
Amendments................................. -- -- -- (1,112)
Actuarial (gain)/loss...................... (4,813) (1,402) 376 (1,605)
Benefits paid.............................. (2,375) (2,096) (141) (82)
-------- -------- ------- -------
Benefit obligation at December 31.......... 54,528 56,184 2,597 2,121
CHANGE IN PLAN ASSETS
Fair value of assets at January 1.......... 36,417 32,238 -- --
Actual return on plan assets............... 5,941 5,285 -- --
Employer contributions..................... 1,706 990 141 82
Benefits paid.............................. (2,375) (2,096) (141) (82)
-------- -------- ------- -------
Fair value of assets at December 31........ 41,689 36,417 -- --
-------- -------- ------- -------
</TABLE>
36
<PAGE> 39
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------- -----------------------
1999 1998 1999 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
FUNDED STATUS (UNDER-FUNDED)............... (12,839) (19,767) (2,597) (2,121)
Unrecognized transition (asset)
obligation............................... (354) (420) 531 566
Unrecognized prior service cost............ 46 50 -- --
Unrecognized net actuarial (gain) loss..... (4,133) 3,728 287 (92)
-------- -------- ------- -------
NET AMOUNT RECOGNIZED...................... $(17,280) $(16,409) $(1,779) $(1,647)
======== ======== ======= =======
Amounts recognized in the Consolidated
Balance Sheets consist of:
Other long-term obligations.............. $(19,026) $(20,632) $(1,779) $(1,647)
Intangible asset......................... 1,334 1,646 -- --
Accumulated other non-owner changes in
equity................................ 412 2,577 -- --
-------- -------- ------- -------
NET AMOUNT RECOGNIZED...................... $(17,280) $(16,409) $(1,779) $(1,647)
======== ======== ======= =======
</TABLE>
The combined projected benefit obligation includes the projected benefit
obligations of the unfunded plans of $12,911 in 1999 and $13,587 in 1998. The
accumulated benefit obligation of these unfunded non-qualified supplemental
pension plans was $12,276 at December 31, 1999 and $12,860 at December 31, 1998.
The remaining projected benefit obligation relates to the Company's two funded
pension plans. At December 31, 1999 and 1998, one of these plans had an
accumulated benefit obligation exceeding the fair value of the assets related to
the plan of $5,851 and $6,362, respectively. The fair value of the assets
related to this plan were $5,766 and $4,740 at December 31, 1999 and 1998,
respectively.
The change in the discount rate and the rate of compensation increase in
1999 from 1998 decreased the accumulated benefit obligation of the
non-contributory defined benefit plans and the non-qualified supplemental
retirement plans by $4,617 and $1,261, respectively, at December 31, 1999.
The assumed health care trend rate for 2000 is 7.00% decreasing ratably to
6.75% in the year 2001 and thereafter. The effect of a one percentage point
increase (decrease) in the accrued health-care cost trend rate assumption would
increase (decrease) the accumulated postretirement benefit obligation by $124
and ($118), respectively, at December 31, 1999. The effect on the postretirement
benefit cost would not be material.
37
<PAGE> 40
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
Net periodic pension and other postretirement benefit costs consist of the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------------- -----------------------
1999 1998 1997 1999 1998 1997
----------- ------------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COST
Service cost.................. $ 1,825 $ 1,878 $ 1,792 $100 $130 $189
Interest cost................. 3,708 3,553 3,453 141 168 326
Expected return on plan
assets...................... (2,990) (2,650) (2,858) -- -- --
Amortization of transition
obligation.................. (67) (67) (67) 35 69 147
Amortization of prior service
cost........................ 3 3 3 -- -- --
Amortization of actuarial loss
(gain)...................... 99 133 36 (3) (14) 16
Additional expense for lump
sum payments................ -- -- 3,336 -- -- --
----------- ------------ ------- ----- ----- -----
Net periodic benefit cost..... $ 2,578 $ 2,850 $ 5,695 $273 $353 $678
=========== ============ ======= ===== ===== =====
Weighted-average assumptions
as of December 31
Discount rate............... 7.75% 6.75% 7.00% 7.75% 6.75% 7.00%
Expected return on plan
assets.................... 7.5%-8.5% 7.50%-9.00% 9.00%
Rate of compensation
increase.................. 5.00% 4.00% 5.00%
</TABLE>
Pension expense in 1997 includes $3,336 of special retirement benefits paid
to certain former key management employees.
The Company also sponsors various defined contribution plans which cover
substantially all of its employees. For certain employees covered by contract,
contributions are based on negotiated rates and hours worked; for others,
contributions are a percentage of employees' contributions. The expense related
to these plans was $1,694, $1,698 and $1,515 in 1999, 1998 and 1997,
respectively.
M. RESERVE FOR PRODUCT LIABILITY AND WORKER'S COMPENSATION CLAIMS AND INSURANCE
FUND INVESTMENTS
On March 31, 1998, the Company obtained third party commercial insurance
coverage for its product liability and workers' compensation claims. Previously,
the Company provided insurance for such claims through MIICA. Under the terms of
the commercial insurance coverage, the commercial insurance provider agreed to
assume losses which occurred on or before March 31, 1998, capped at a maximum of
$75,000 in losses, and extinguished the Company's liability in regard to such
losses (the "MIICA Insurance Transfer"). The Company paid approximately $42,400
for the commercial insurance coverage from the proceeds of liquidating certain
of MIICA's insurance fund investments. As of the date of the MIICA Insurance
Transfer, the Company had a reserve for such losses of approximately $47,500. As
a result of the MIICA Insurance Transfer, the Company recognized a gain of
approximately $4,500, which is net of costs to discontinue the operations of
MIICA. The Company has obtained third party commercial insurance coverage for
its product liability and workers' compensation claims occurring on or after
April 1, 1998, subject to certain deductible provisions, for which the Company
has provided reserves of $29,885 and $14,277 at December 31, 1999 and 1998,
respectively. Prior to the date of the MIICA Insurance Transfer, MIICA
maintained a reserve for the product liability and workers' compensa-
38
<PAGE> 41
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
M. RESERVE FOR PRODUCT LIABILITY AND WORKER'S COMPENSATION CLAIMS -- CONTINUED
tion claims of the Company and the related claim payments were made from MIICA's
insurance fund investments.
The gross realized gains and (losses) on sales of available-for-sale
securities totaled $2,019 and $(463) for 1998, and $4,118 and $(2,949) for 1997,
respectively. During 1998 and 1997, the change in net unrealized holding gain
(loss) on available-for-sale securities that has been included as a separate
component of shareholders' equity totaled $(1,346) net of deferred taxes of $727
and $(2,636) net of deferred taxes of $1,420, respectively.
In 1998 and 1997, MIICA recorded impairment losses of $3,732 and $9,884,
respectively, relating to available-for-sale equity securities deemed by
management to be other-than-temporarily impaired.
Trading Securities
MIICA also owned special expiration price options which were classified as
trading securities. Those outstanding at December 31, 1996 were either sold,
exercised or allowed to expire in 1997. The net realized (losses) on sales of
these investments totaled $(8,798) in 1997.
N. OTHER (EXPENSE) INCOME, NET
Other (expense) income, net is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Accounts receivable securitization expense........... $(1,458) $ (1,454) $ --
MIICA investment (loss) income:
Realized losses and impairment losses........... -- (2,520) (17,513)
Other investment earnings....................... -- 1,061 2,952
------- -------- --------
Investment loss, net............................ -- (1,459) (14,561)
Net gain on transfer of loss reserves and
discontinuance of MIICA............................ -- 4,506 --
Miscellaneous expense, net........................... (609) (948) (1,252)
------- -------- --------
Total other (expense) income, net.................... $(2,067) $ 645 $(15,813)
======= ======== ========
</TABLE>
O. SEGMENT INFORMATION
Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures
About Segments of an Enterprise and Related Information which changed the way
the Company reports information about its operating segments. Certain expenses
previously classified as corporate and other in 1998 and 1997 were allocated to
the operating segments in 1999. Accordingly, the information for 1998 and 1997
has been reclassified to conform to the 1999 presentation.
The Company classifies its business into two segments: Climbing Products,
which includes aluminum, fiberglass and wood ladders, scaffolding, stages and
planks; and Extruded Products, which includes aluminum extrusions and fabricated
components. The Company's reportable segments are based on the characteristics
of the product and the markets and distribution channels through which the
products are sold. The Company evaluates segment performance based on operating
earnings. The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies.
39
<PAGE> 42
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SEGMENT INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET SALES
Climbing Products...................................... $380,211 $329,965 $314,216
Extruded Products...................................... 104,435 106,126 102,105
-------- -------- --------
$484,646 $436,091 $416,321
======== ======== ========
OPERATING PROFIT (LOSS)
Climbing Products...................................... $ 43,309 $ 36,383 $ 38,162
Extruded Products...................................... 8,548 6,530 5,878
Corporate & Other...................................... (3,722) (11,064) (109,041)
-------- -------- --------
$ 48,135 $ 31,849 $(65,001)
======== ======== ========
DEPRECIATION & AMORTIZATION
Climbing Products...................................... $ 10,767 $ 7,981 $ 7,361
Extruded Products...................................... 1,358 1,067 1,111
Corporate & Other...................................... 3,799 11,107 3,028
-------- -------- --------
$ 15,924 $ 20,155 $ 11,500
======== ======== ========
IDENTIFIABLE ASSETS
Climbing Products...................................... $189,636 $152,524 $162,962
Extruded Products...................................... 39,396 32,631 44,345
Corporate & Other...................................... 26,408 27,624 80,878
-------- -------- --------
$255,440 $212,779 $288,185
======== ======== ========
EXPENDITURES FOR LONG-LIVED ASSETS, NET
Climbing Products...................................... $ 14,259 $ 4,629 $ 6,972
Extruded Products...................................... 3,641 1,673 1,315
Corporate & Other...................................... 2,552 2,638 3,423
-------- -------- --------
$ 20,452 $ 8,940 $ 11,710
======== ======== ========
</TABLE>
Corporate & Other includes various corporate expenses, Recapitalization
expense, non-cash compensation charge, and eliminations.
Climbing Products net sales to two significant customers individually
exceeded 10% of the Company's total net sales in 1999 and 1998 as follows: 23%
and 21%, and 13% and 11% of net sales, respectively. In 1997, only one Climbing
Products customer with net sales of 19% accounted for more than 10% of total net
sales. No customer included in the Extruded Products segment accounted for more
than 10% of the Company's net sales in those years.
Revenues included in the consolidated financial statements of the Company
are primarily derived from customers domiciled in the United States.
Substantially all of the Company's long-lived assets are located in the United
States.
40
<PAGE> 43
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
P. SALE OF ACCOUNTS RECEIVABLE
In May 1998, the Company entered into a five-year Receivables Purchase
Agreement (the "Receivables Purchase Agreement") with a financial institution
and its affiliate to provide additional financing capacity (maximum availability
$50,000) and repay the outstanding amounts borrowed under the receivables
portion of the Senior Credit Facility. Under the Receivables Purchase Agreement,
the Company established a consolidated wholly-owned subsidiary, Werner Funding
Corporation ("Funding"), which is a special purpose bankruptcy-remote entity
that acquires, on a daily basis, a variable percentage interest of certain
eligible trade receivables generated by the Company. The purchases by Funding
are financed through the sale of an undivided percentage ownership interest in
such receivables to the affiliate of the financial institution. As of December
31, 1999 and 1998, the Company had transferred $88,393 and $66,298 of accounts
receivable in exchange for $20,000 in cash and an undivided interest in the
accounts receivable of $68,393 and $46,298, respectively.
In accordance with the provisions of SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, the
transactions have been recorded as a sale of receivables to a qualified special
purpose entity. The ongoing cost associated with the Receivables Purchase
Agreement, which represents a return to investors in the purchased interests, as
well as the cost of implementation, is reported in the accompanying consolidated
statements of operations in "Other income (expense), net". The interest rates on
the purchased interests at December 31, 1999 and 1998 were 6.18% and 5.40%,
respectively.
The accompanying consolidated balance sheets at December 31, 1999 and 1998
reflect an allowance for doubtful accounts that relates, in large part, to
accounts receivable representing the undivided interest in the assets of the
financial institution affiliate.
Q. OTHER LONG-TERM OBLIGATIONS
Other long-term obligations are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1999 1998
------- -------
<S> <C> <C>
Accrued employee retirement benefits........................ $20,805 $22,279
Other....................................................... 2,636 --
------- -------
$23,441 $22,279
======= =======
</TABLE>
R. BUSINESS ACQUISITION
In October 1999, the Company acquired certain assets of Keller Ladders,
Inc. in a business combination accounted for as a purchase. No product or other
significant liabilities were assumed in connection with this acquisition. The
results of operations of the Keller business are included in the accompanying
consolidated financial statements since the date of acquisition. The total cost
of the acquisition was $12,209, which approximated the fair value of the assets
acquired.
Had the acquisition been made at the beginning of 1998, the Company's pro
forma unaudited results would have been:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Net sales................................................... $529,164 $484,349
Net income (loss)........................................... $ 11,047 $ (3,133)
</TABLE>
41
<PAGE> 44
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
R. BUSINESS ACQUISITION -- CONTINUED
The above amounts reflect adjustments for depreciation on revalued
property, plant and equipment, the use of the LIFO method to determine inventory
costs, interest related to the cost of the acquisition, and taxes at an
estimated effective tax rate of 38%. The unaudited pro forma results are not
necessarily indicative of the results that would have been attained had the
acquisition occurred at the beginning of 1998 or of results which may occur in
the future.
S. SUPPLEMENTAL GUARANTOR INFORMATION
As discussed in Note F, the Company in November 1997 refinanced
substantially all of its outstanding debt through borrowings under the Senior
Credit Facility and the Notes. The issuer of the refinanced debt is Werner
Holding Co. (DE), Inc. (the "Issuer"). The Issuer's wholly-owned subsidiaries,
except for MIICA and Funding, (collectively, the "Guarantor Subsidiaries"),
along with Werner Holding Co. (PA), Inc., its parent, have provided full,
unconditional, joint and several guarantees of the Senior Credit Facility and
the Notes.
Following is condensed consolidated financial information for Werner
Holding Co. (PA), Inc. (the "Parent Company"), the Issuer, the Guarantor
Subsidiaries and MIICA and Funding (MIICA and Funding are called collectively,
the "Non-Guarantor Subsidiaries," and individually, a "Non-Guarantor
Subsidiary"). Separate financial statements of the Guarantor Subsidiaries are
not presented because management has determined that they would not provide
additional information that is material to investors. Therefore, the Guarantor
Subsidiaries are combined in the presentation below. Further, separate financial
statements of the Issuer have not been provided as management has determined
that they would not provide information that is material to investors, as the
Issuer has no substantial operations or assets, other than its investment in its
subsidiaries.
Investments in subsidiaries are accounted for on the equity method of
accounting. Earnings at subsidiaries are, therefore, reflected in the Company's
investment account. The elimination entries eliminate investment in subsidiaries
and intercompany balances and transactions. Income taxes are allocated generally
on a separate return basis with reimbursement for losses utilized on a
consolidated basis in accordance with a tax sharing agreement between the
Company and each of its subsidiaries.
42
<PAGE> 45
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
S. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
ASSETS
Current assets:
Undivided interest in accounts
receivable......................... $68,393 $ 68,393
Inventories, net..................... $ 58,348 58,348
Other current assets................. $ 37 $ 473 3,468 12 3,990
--------- --------- -------- ------- -------- --------
Total current assets............. 37 473 61,816 68,405 130,731
Property, plant and equipment, net..... 2 83,505 83,507
Investment in subsidiaries............. (154,535) (135,033) 5,686 $283,882
Other assets........................... 5 10,961 30,136 100 41,202
--------- --------- -------- ------- -------- --------
TOTAL ASSETS $(154,493) $(123,597) $181,143 $68,505 $283,882 $255,440
========= ========= ======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Other current liabilities............ $ 421 $ 9,034 $ 59,577 $ 162 $ 69,194
Intercompany (receivable) payable.... (11,038) (250,530) 198,911 62,657
--------- --------- -------- ------- -------- --------
Total current liabilities........ (10,617) (241,496) 258,488 62,819 69,194
Long-term debt......................... 272,434 5,000 277,434
Other long-term liabilities............ 52,688 52,688
Total equity (deficit)........... (143,876) (154,535) (135,033) 5,686 $283,882 (143,876)
--------- --------- -------- ------- -------- --------
TOTAL LIABILITIES AND EQUITY
(DEFICIT)...................... $(154,493) $(123,597) $181,143 $68,505 $283,882 $255,440
========= ========= ======== ======= ======== ========
DECEMBER 31, 1998
ASSETS
Current assets:
Undivided interest in accounts
receivable......................... $46,298 $ 46,298
Inventories, net..................... $ 46,777 46,777
Other current assets................. $ 1 $ 2,706 10,561 1 13,269
--------- --------- -------- ------- -------- --------
Total current assets............. 1 2,706 57,338 46,299 106,344
Property, plant and equipment, net..... 2 65,691 65,693
Investment in subsidiaries............. (166,607) (154,397) 5,343 $315,661
Other assets........................... 5 6,775 33,862 100 40,742
--------- --------- -------- ------- -------- --------
TOTAL ASSETS $(166,601) $(144,914) $162,234 $46,399 $315,661 $212,779
========= ========= ======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Other current liabilities............ $ 349 $ 3,758 $ 49,181 $ (513) $ 52,775
Intercompany (receivable) payable.... (12,553) (255,548) 226,532 41,569
--------- --------- -------- ------- -------- --------
Total current liabilities........ (12,204) (251,790) 275,713 41,056 52,775
Long-term debt......................... 273,483 5,000 278,483
Other long-term liabilities............ 35,918 35,918
Total equity (deficit)........... (154,397) (166,607) (154,397) 5,343 $315,661 (154,397)
--------- --------- -------- ------- -------- --------
TOTAL LIABILITIES AND EQUITY
(DEFICIT)...................... $(166,601) $(144,914) $162,234 $46,399 $315,661 $212,779
========= ========= ======== ======= ======== ========
</TABLE>
43
<PAGE> 46
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
S. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1999
Net sales......................... $484,646 $484,646
Cost of sales..................... 348,643 348,643
-------- -------- -------- -------- -------- --------
Gross profit...................... 136,003 136,003
Selling, general and
administrative expenses......... $ 15 87,853 87,868
-------- -------- -------- -------- -------- --------
Operating (loss) profit........... (15) 48,150 48,135
Other income (expense), net....... $10,727 18,202 (6,490) $ 4,541 $(29,047) (2,067)
Interest income (expense)......... 1,018 (2,361) (21,959) (3,800) (27,102)
-------- -------- -------- -------- -------- --------
Income before provision for income
taxes........................... 11,745 15,826 19,701 741 (29,047) 18,966
Income taxes...................... 428 5,132 1,675 414 7,649
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS)............... $11,317 $ 10,694 $ 18,026 $ 327 $(29,047) $ 11,317
======== ======== ======== ======== ======== ========
FOR THE YEAR ENDED DECEMBER 31,
1998
Net sales......................... $436,091 $436,091
Cost of sales..................... 322,451 322,451
-------- -------- -------- -------- -------- --------
Gross profit...................... 113,640 113,640
Selling, general and
administrative expenses......... $ 54 81,737 81,791
-------- -------- -------- -------- -------- --------
Operating (loss) profit........... (54) 31,903 31,849
Other (expense) income, net....... $ (497) 7,797 (8,485) $ 2,719 $ (889) 645
Interest income (expense)......... 1,062 (2,058) (27,373) (2,222) (30,591)
-------- -------- -------- -------- -------- --------
Income (loss) before provision for
income taxes.................... 565 5,685 (3,955) 497 (889) 1,903
Income taxes...................... 419 6,182 (5,010) 166 1,757
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS)............... $ 146 $ (497) $ 1,055 $ 331 $ (889) $ 146
======== ======== ======== ======== ======== ========
FOR THE YEAR ENDED DECEMBER 31,
1997
Net sales......................... $416,321 $ 2,705 $ (2,705) $416,321
Cost of sales..................... 303,354 303,354
-------- -------- -------- -------- -------- --------
Gross profit...................... 112,967 2,705 (2,705) 112,967
Selling, general and
administrative expenses......... $ 13 75,246 2,501 (1,033) 76,727
Recapitalization expense.......... 22,714 22,714
Non-cash compensation charge...... $74,335 4,192 78,527
-------- -------- -------- -------- -------- --------
Operating (loss) profit........... (74,335) (13) 10,815 204 (1,672) (65,001)
Other (loss) income, net.......... (16,224) (14,490) (1,300) (14,513) 30,714 (15,813)
Interest income (expense)......... 85 (720) (8,296) (48) (8,979)
-------- -------- -------- -------- -------- --------
(Loss) income before provision for
income taxes.................... (90,474) (15,223) 1,219 (14,357) 29,042 (89,793)
Income taxes...................... 33 1,001 3,588 (3,908) 714
-------- -------- -------- -------- -------- --------
NET (LOSS) INCOME............... $(90,507) $(16,224) $ (2,369) $(10,449) $ 29,042 $(90,507)
======== ======== ======== ======== ======== ========
</TABLE>
44
<PAGE> 47
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
S. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING
STATEMENT OF CASH FLOWS
-------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY CONSOLIDATED
--------- --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1999
Net cash from operating activities... $ 658 $ (5,769) $ 32,661 $ 7 $ 27,557
Net cash from investing activities... 1,515 5,018 (38,987) (32,454)
Net cash from financing activities... (2,174) (1,450) (3,624)
--------- --------- -------- ------- --------
Net (decrease) increase in cash and
equivalents........................ (1) (2,201) (6,326) 7 (8,521)
Cash and equivalents at beginning of
year............................... 1 2,618 6,768 9,387
--------- --------- -------- ------- --------
Cash and equivalents at end of
year............................... $ 417 $ 442 $ 7 $ 866
========= ========= ======== ======= ========
FOR THE YEAR ENDED DECEMBER 31, 1998
Net cash from operating activities... $ 1,033 $ (1,552) $ 58,689 $(6,364) $ 51,806
Net cash from investing activities... (1,049) 47,114 (55,005) 6,364 (2,576)
Net cash from financing activities... (42,950) (42,950)
--------- --------- -------- ------- --------
Net (decrease) increase in cash and
equivalents........................ (16) 2,612 3,684 6,280
Cash and equivalents at beginning of
year............................... 17 6 3,084 3,107
--------- --------- -------- ------- --------
Cash and equivalents at end of
year............................... $ 1 $ 2,618 $ 6,768 $ 9,387
========= ========= ======== ======= ========
FOR THE YEAR ENDED DECEMBER 31, 1997
Net cash from operating activities... $ (1,734) $ 26,052 $(7,086) $ 17,232
Net cash from investing activities... $ 212,278 (277,771) 57,845 4,086 (3,562)
Net cash from financing activities... (212,605) 279,498 (81,442) 3,000 (11,549)
--------- --------- -------- ------- --------
Net (decrease) increase in cash and
equivalents........................ (327) (7) 2,455 2,121
Cash and equivalents at beginning of
year............................... 344 13 629 986
--------- --------- -------- ------- --------
Cash and equivalents at end of
year............................... $ 17 $ 6 $ 3,084 $ 3,107
========= ========= ======== ======= ========
</TABLE>
45
<PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, age and principal position of each
of the directors of Holding (PA), Holding (DE) and the executive officers of the
Company. The individuals who constitute the Board of Directors of Holding (PA)
also constitute the Board of Directors of Holding (DE).
Each director of Holding (PA) and Holding (DE) will hold office until the
next annual meeting of shareholders of Holding (PA) and Holding (DE),
respectively or until his successor has been elected and qualified. Officers of
the Company are appointed by the respective Boards of Directors of Holding (PA)
and its subsidiaries and serve at the discretion of such Boards, subject to any
applicable employment agreements.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Donald M. Werner.......................... 66 Chairman of the Board of Directors (1)
Dennis G. Heiner.......................... 56 President and Chief Executive Officer, and
Director (2)
Robert P. Tamburrino...................... 43 Vice President, Chief Financial Officer
and Treasurer
Michael E. Werner......................... 40 President, Werner Ladder Co.
Joseph J. Despoy.......................... 60 President, Werner Extruded Products
Michael D. Isacco......................... 62 Vice President, Manufacturing
Eric J. Werner............................ 37 Chief Administrative Officer, Secretary
and General Counsel
James O. Egan............................. 51 Director
Charles K. Marquis........................ 57 Director
Charles J. Philippin...................... 49 Director
Howard L. Solot........................... 62 Director
Christopher J. Stadler.................... 35 Director
Thomas J. Sullivan........................ 37 Director
</TABLE>
(1) Mr. Heiner assumed the position of President and Chief Executive Officer of
Holding (PA) on January 1, 2000.
(2) Until January 1, 2000, Mr. Werner was President and Chief Executive Officer
of Holding (PA).
Donald M. Werner served as President and Chief Executive Officer of Holding
(PA) from May 1997 until his retirement in January 2000. From 1995 to 1997, Mr.
Werner was President of Werner Ladder Co. Prior to 1995, Mr. Werner served in
various positions with the Company including Sales Manager, Vice President --
Marketing and Senior Vice President -- Corporate Sales and Marketing. Mr. Werner
also holds various directorships and officerships at subsidiaries of Holding
(PA). Prior to commencing his 42 year career with the Company, Mr. Werner was an
aircraft structural design engineer for Grumman Aircraft Co. Mr. Werner served
as Chairman of the American Hardware Manufacturers Association and served on the
boards of directors of the Scaffolding Industry Association and the Hardware
Group Association. Mr. Werner is the father of Eric J. Werner, the uncle of
Michael E. Werner and the cousin of Howard L. Solot.
Dennis G. Heiner has served as President and Chief Executive Officer of
Holding (PA) since January 1, 2000 and Holding (DE) and Werner since June 1999.
Prior to joining the Company Mr. Heiner served as Executive Vice President of
Black & Decker Corporation since 1989 and most recently as its
President -- Building Products Worldwide. Mr. Heiner was President -- Security
Hard-
46
<PAGE> 49
ware Worldwide from 1992 to 1998, President -- Household Products Worldwide from
1986 to 1992 and Group Vice President -- U.S. Household Products from 1985 to
1986. Prior to Black & Decker, Mr. Heiner served as Division President for
Beatrice Companies Inc. Window Coverings Division and as Vice
President -- Finance and then President for their Del Mar Window Coverings
Division. Mr. Heiner also holds various directorships and officerships at
subsidiaries of Holding (PA).
Robert P. Tamburrino joined the Company as Vice President, Chief Financial
Officer and Treasurer in December 1998. Mr. Tamburrino also holds various
officerships at subsidiaries of Holding (PA). Prior to joining the Company, Mr.
Tamburrino served as Chief Financial Officer for the steel service center group
of Usinor from 1997 to 1998. From 1991 to 1997, he served Usinor subsidiaries as
Senior Vice President and Chief Financial Officer of Francosteel Corporation and
Executive Vice President and Chief Financial Officer of Edgcomb Metals Company.
Mr. Tamburrino held financial and chief executive officer positions with Rome
Cable Corp., a manufacturer and distributor of copper electrical wire and cable
from 1984 to 1990 and was employed by KPMG Peat Marwick from 1978 to 1984.
Michael E. Werner has served as President of the Company's Werner Ladder
Co. business unit since 1997. Mr. Werner joined the Company in 1988 and has held
several positions including Vice President -- National Accounts and Vice
President -- Sales & Marketing. Mr. Werner also holds various officerships at
subsidiaries of Holding (PA). Prior to joining the Company, Mr. Werner served as
Vice President for Mergers, Acquisitions and Investments at Pacific Holding Co.
and, prior to that, as an associate in the Mergers & Acquisitions Department of
Goldman, Sachs & Co. Mr. Werner is the nephew of Donald M. Werner and the cousin
of Eric J. Werner.
Joseph J. Despoy has served as President of the Company's Werner Extruded
Products business unit since 1995. Mr. Despoy joined the Company in 1984 and has
served in various positions including: Marketing Manager, Extruded Products;
Sales Manager, Mill Products Division; and Vice President, Mill Products
Sales -- Northern Division. Prior to joining Werner, Mr. Despoy held several
administrative and marketing positions including Vice President -- Marketing
with the Aluminum Association in Washington, D.C.
Michael D. Isacco has served as Vice President, Manufacturing of the
Company since April 1995. Mr. Isacco joined the Company in 1981 as Engineering
Administrator and has held a variety of positions with the Company, including
Manager of Engineering Administration and Greenville Division Plant Manager.
Prior to joining the Company, Mr. Isacco spent twenty years in various positions
with the United States Army, retiring in 1979 with the rank of Lieutenant
Colonel.
Eric J. Werner joined the Company in 1988 as Secretary and Corporate
Counsel. He has served as Chief Administrative Officer of the Company since 1995
and General Counsel of the Company since 1993. Mr. Werner also holds various
officerships at subsidiaries of Holding (PA). Prior to joining the Company, Mr.
Werner was an associate at the law firm of O'Connor, Broude, Snyder and Aronson.
Mr. Werner also serves as a director of FNB Corporation. Mr. Werner is the son
of Donald M. Werner and the cousin of Michael E. Werner.
James O. Egan has served as director of Holding (PA) since May 1999. Mr.
Egan has been an executive officer of Investcorp or one of its wholly-owned
subsidiaries since January 1999. Prior to joining Investcorp, Mr. Egan was a
partner in the accounting firm of KPMG from October 1997 to December 1998. Prior
to that, Mr. Egan was a Senior Vice President and Chief Financial Officer of
Riverwood International, a paperboard, packaging and machinery company, from May
1996 to September 1997. Prior to that, Mr. Egan was a partner in the accounting
firm of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP). Mr. Egan is a
director of CSK Auto Corporation and Harborside Healthcare Corporation.
Charles K. Marquis has served as director of Holding (PA) since May 1999.
Mr. Marquis has been a consultant to Investcorp or one or more of its
wholly-owned subsidiaries since January 1999. Prior to joining Investcorp, Mr.
Marquis was a partner in the law firm of Gibson, Dunn & Crutcher, LLP. Mr.
Marquis is a director of CSK Auto Corporation and Tiffany & Co.
47
<PAGE> 50
Charles J. Philippin has served as director of Holding (PA) since November
1997. He has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since July 1994. Prior to joining Investcorp, Mr. Philippin was a
partner of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP). Mr.
Philippin is a director of Saks Incorporated, CSK Auto Corporation and The
William Carter Company.
Howard L. Solot has served as director of Holding (PA) since 1974. He
recently served as Executive Vice President and Chief Operating Officer of
Holding (PA) from 1995 to his retirement in March of 1999. He joined the Company
in 1959 and has held various planning, systems, engineering and manufacturing
related positions, including Plant Manager, Division General Manager, Vice
President -- Engineering and Corporate Planning and Senior Vice President --
Manufacturing. Mr. Solot also holds various director positions at subsidiaries
of Holding (PA). Mr. Solot served as a member of the board of directors of the
Aluminum Extruders Council. Mr. Solot is the cousin of Donald M. Werner.
Christopher J. Stadler has served as director of Holding (PA) since
November 1997. He has been an executive of Investcorp or one or more of its
wholly-owned subsidiaries since April 1996. Prior to joining Investcorp, Mr.
Stadler was a director with CS First Boston Corporation. Mr. Stadler is a
director of CSK Auto Corporation and The William Carter Company.
Thomas J. Sullivan has served as director of Holding (PA) since July 1999.
Mr. Sullivan has been an executive of Investcorp or one or more of its
wholly-owned subsidiaries since April 1996. Prior to joining Investcorp, Mr.
Sullivan was Vice President and Treasurer of the Leslie Fay Companies, Inc. (now
Leslie Fay Company, Inc.).
DIRECTOR COMPENSATION
Neither Holding (PA) nor Holding (DE) pay any additional remuneration to
its employees or to executives of Investcorp for serving as directors. Holding
(PA) and Holding (DE) do reimburse their respective directors for any expenses
incurred in attending meetings. See " -- Executive Compensation."
SHAREHOLDER RIGHTS AGREEMENT
Pursuant to the Shareholder Rights Agreement entered into on the
Recapitalization Closing Date, (i) Class D Investors have a right to designate
at least a majority of Holding (PA)'s Board, (ii) the Chief Executive Officer of
Holding (PA) shall be a director, and, (iii) the Management Shareholders are
entitled to designate a minimum of one director and up to that number of
directors equal to one third of the authorized number of directors minus one.
See "Certain Relationships and Related Transactions -- Agreements with Certain
Shareholders -- Shareholder Rights Agreement."
48
<PAGE> 51
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning annual and long-term
compensation for the last three fiscal years awarded to, earned by or paid to
the Chief Executive Officer of Holding (PA), the Chief Executive Officer of
Holding (DE) and Werner and each of the other four most highly compensated
executive officers whose remuneration exceeded $100,000 (collectively, the
"Named Executive Officers"). The current compensation arrangements for each of
these officers are described in " -- Employment Arrangements" below.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION ($) SECURITIES
------------------------------ DEFERRED UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTION/SARS ALL OTHER
POSITIONS YEAR SALARY BONUS COMPENSATION UNITS($)(a) (SHARES) COMPENSATION(b)
------------------ ---- ------- ------- ------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald M. Werner(1)....... 1999 412,647 373,500 114,047 -- -- --
President, Chief 1998 407,093 95,000 107,633 -- 585 630,000
Executive Officer of 1997 414,923 163,013 100,104 -- -- 2,000,000
Holding (PA) until
January 1, 2000
Dennis G. Heiner(2)....... 1999 141,346 525,000 277,140 455,000 1,250 --
President, Chief
Executive Officer of
Holding (PA) since
January 1, 2000 and
Holding (DE) and Werner
Robert P. Tamburrino(3)... 1999 250,000 200,000 7,490 -- 200 --
Vice President, 1998 5,769 -- -- -- 300 --
Chief Financial Officer
and Treasurer
Michael E. Werner(4)...... 1999 245,537 225,000 24,032 -- -- --
President of Werner 1998 234,630 75,000 34,426 -- 500 351,000
Ladder Co. 1997 222,942 73,162 182,137 -- -- --
Eric J. Werner(5)......... 1999 188,907 114,600 23,898 -- -- --
Chief Administrative 1998 183,493 45,000 36,873 -- 300 326,250
Officer, Secretary, 1997 214,961 61,906 28,775 -- -- --
General Counsel
Joseph J. Despoy(6)....... 1999 180,169 104,200 46,955 -- -- --
President of Werner 1998 175,471 20,000 56,260 -- 100 262,500
Extruded Products 1997 169,288 36,225 54,719 -- -- --
</TABLE>
- ---------------
(a) See the following section "Deferred Stock Plan" for a detailed explanation
of amounts in this column.
(b) See the following section "Compensation Relating to the Recapitalization"
for a detailed explanation of amounts in this column.
(1) The amount shown for Mr. Werner under Other Annual Compensation reflects
payments of $74,674, $75,902 and $67,972 in respect of life insurance
premiums paid by the Company in 1999, 1998 and 1997, respectively, $5,000,
$5,000 and $4,750 in respect of matching contributions made under the 401(k)
Plan in 1999, 1998 and 1997, respectively, $12,114, $8,863 and $11,873 in
respect of accruals under postretirement benefit plans in 1999, 1998 and
1997, respectively, $3,563, $3,063 and $2,625 of imputed income arising from
the personal use of a Company provided automobile in 1999, 1998 and 1997,
respectively, $18,696, $14,805 and $6,798 for financial planning services in
1999, 1998 and 1997, respectively, and $0, $0 and $6,086 of imputed interest
in 1999, 1998 and 1997, respectively. The amount shown for Mr. Werner under
All Other Compensation reflects payments of $630,000 relating to payments
made under his Employee Protection Agreement in 1998 and $2,000,000 relating
to the acceleration of additional pension and consulting payments as part of
the Recapitalization in 1997.
(2) The amount shown for Mr. Heiner under Salary and Bonus for 1999 was not paid
but was deferred by Mr. Heiner under the Deferred Stock Plan for which he
received 275 Stock Units. The amount
49
<PAGE> 52
shown for Mr. Heiner under Other Annual Compensation reflects payments of $1,101
in respect of life insurance premiums paid by the Company in 1999, $1,032 of
imputed income arising from the personal use of a Company provided automobile in
1999, $67,007 for moving expenses in 1999, and $208,000 for retention
incentive compensation in 1999 as set forth in his employment contract.
(3) The amount shown for Mr. Tamburrino under Other Annual Compensation reflects
payments of $746 and $0 in respect of life insurance premiums paid by the
Company in 1999 and 1998, respectively, $2,308 and $0 in respect of matching
contributions made under the 401(k) Plan in 1999 and 1998, respectively,
$4,307 and $0 in respect of accrual under postretirement benefit plans in
1999 and 1998, respectively, and $129 and $0 of imputed income arising from
the personal use of a Company provided automobile in 1999 and 1998,
respectively.
(4) The amount shown for Mr. Werner under Other Annual Compensation reflects
payments of $8,463, $8,374 and $8,044 in respect of life insurance premiums
paid by the Company in 1999, 1998 and 1997, respectively, $4,532, $4,463 and
$3,062 in respect of matching contributions made under the 401(k) Plan in
1999, 1998 and 1997, respectively, $5,132, $6,368 and $6,382 in respect of
accruals under postretirement benefit plans in 1999, 1998 and 1997,
respectively, $2,625, $3,063 and $3,889 of imputed income arising from the
personal use of a Company provided automobile in 1999, 1998 and 1997,
respectively, $50,391 of moving expense in 1997, $107,119 of special pay in
1997 and $3,280, $12,158 and $3,250 of financial planning services in 1999,
1998 and 1997, respectively. The amount shown under All Other Compensation
reflects payments of $351,000 made under his Employee Protection Agreement
in 1998.
(5) The amount shown for Mr. Werner under Other Annual Compensation reflects
payments of $7,471, $7,811 and $6,935 in respect of life insurance premiums
paid by the Company in 1999, 1998 and 1997, respectively, $3,484, $5,000 and
$4,750 in respect of matching contributions made under the 401(k) Plan in
1999, 1998 and 1997, respectively, $4,208, $5,533 and $5,431 in respect of
accruals under postretirement benefit plans in 1999, 1998 and 1997,
respectively, $6,363, $7,399 and $4,766 of imputed income arising from the
personal use of a Company provided automobile in 1999, 1998 and 1997,
respectively, and $2,372, $11,130 and $6,893 of financial planning services
in 1999, 1998 and 1997, respectively. The amount shown under All Other
Compensation reflects payments of $326,250 made under his Employee
Protection Agreement in 1998.
(6) The amount shown for Mr. Despoy under Other Annual Compensation reflects
payments of $28,148, $28,507 and $26,841 in respect of life insurance
premiums paid by the Company in 1999, 1998 and 1997, respectively, $5,000,
$4,890 and $2,716. In respect of matching contributions made under the
401(k) Plan in 1999, 1998 and 1997, respectively, $11,361, $19,689 and
$22,319 in respect to accruals under postretirement benefit plans in 1999,
1998 and 1997, respectively, $1,713, $1,174 and $1,098 of imputed income
arising from the personal use of a Company provided automobile in 1999, 1998
and 1997, respectively, and $733, $2,000 and $1,745 of financial planning
services in 1999, 1998 and 1997, respectively. The amount shown under All
Other Compensation reflects payments of $262,500 made under his Employee
Protection Agreement in 1998.
50
<PAGE> 53
COMPENSATION RELATED TO THE RECAPITALIZATION
Consulting Agreements
As part of the Company's succession plan, the Company's Board determined in
December 1996 to provide to certain key executives including Donald M. Werner, a
Consulting Agreement and an additional supplemental pension to be entered into
or paid (as the case may be) at the time that each of them retires from the
Company subject to certain acceleration provisions. Pursuant to the December
1996 awards, a change of control of Holding (PA) results in the acceleration of
such payments. Pursuant to the December 1996 awards, Donald M. Werner and
another executive each became entitled to receive, at the time of the
Transactions, all amounts that they would have received had they retired as of
such time, pursuant to the terms of additional supplemental pensions and the
acceleration of their Consulting Agreements. Such amounts totalling $2,000,000
each were paid to Donald M. Werner and the other executive by Holding (PA) on
the Recapitalization Closing Date. See "-- Pension Plans." After all such
payments were made pursuant to the acceleration, the Consulting Agreements
terminated pursuant to their terms.
Employee Protection Agreements
In connection with the Recapitalization, Holding (PA) entered into Employee
Protection Agreements with approximately 50 employees, including certain of the
Named Executive Officers and the Company's other senior management. The Employee
Protection Agreements provided for payments ranging from 50% to 150% of a year's
salary to be paid to each covered employee (i) who remains employed on the first
anniversary of a change in control of Holding (PA) or (ii) prior to such
anniversary (A) whose employment is terminated by Holding (PA) other than for
cause or (B) who suffers a "material employment change" (as defined in the
Employee Protection Agreements). The Company made cash payments aggregating
approximately $6,600,000 in 1998 in accordance with the Employee Protection
Agreements.
EMPLOYMENT ARRANGEMENTS
Pursuant to the Recapitalization Agreement, Holding (PA) entered into
employment agreements with each of Donald M. Werner, Michael E. Werner, Eric J.
Werner and four other senior managers of the Company. In addition, in December
1998, the Company entered into an Employment Agreement with Robert P. Tamburrino
and in June 1999, the Company entered into an Employment Agreement with Dennis
G. Heiner. The employment agreements for all of these officers are collectively
referred to as the "Employment Agreements." Each of the Employment Agreements is
for a term of three years except for Dennis G. Heiner's agreement which is for a
term of five and one-half years. The Employment Agreements provide for a base
annual salary in the following amounts: $525,000 for Dennis G. Heiner, $406,000
for Donald M. Werner, $183,000 for Eric J. Werner, $234,000 for Michael E.
Werner and $250,000 for Robert P. Tamburrino. In addition to such executive's
salary, the Employment Agreements also provide for an annual bonus payment up to
a maximum of 100% of annual salary for Dennis G. Heiner, 90% of annual salary
for Donald M. Werner, 60% of annual salary for Eric J. Werner, 70% of annual
salary for Michael E. Werner and 60% of annual salary for Robert P. Tamburrino.
This bonus is reduced, within a range of board discretion, to the extent that
the Company falls short of EBITDA targets specified in the Employment
Agreements. The Employment Agreements further provide for an additional cash
bonus payable at the discretion of the Company Board. The employment agreement
for Dennis G. Heiner also provides for retention incentive compensation each
year up to an additional $360,000 contingent upon Mr. Heiner remaining in the
employ of the Company until the fifth anniversary of his commencement date.
Under the Employment Agreements, Holding (PA) may only terminate such
executives' employment, without obligation for severance, for cause. Except with
respect to Dennis G. Heiner, if an executive's employment is terminated without
cause or if an executive terminates his employment for good reason, the Company
must (i) pay such executive a lump sum equal to 12 months' base salary, and the
most recent annual bonus paid (or earned but not yet paid) prior to termination
of employment, and (ii) continue such executive's employee benefits for 12
months. With respect to Dennis
51
<PAGE> 54
G. Heiner, if Mr. Heiner's employment is terminated without cause or if he
terminates his employment for good reason, the Company must (i) pay Mr. Heiner a
lump sum equal to the sum of $1,050,000 and two times the most recent annual
bonus paid (or earned but not yet paid) prior to his termination of employment
and (ii) continue his employee benefits for a period of twenty-four months or
until Mr. Heiner receives similar benefits from subsequent employment whichever
occurs earlier. The Employment Agreements define "cause" as conviction of
embezzlement or other felony involving fraud with respect to performance of
duties and, subject to notice and opportunity to cure, willful engagement in
gross misconduct concerning duties. "Good reason" is defined as a reduction in
salary, bonus opportunities or employee benefits from the level in effect as of
the commencement date of the respective employment contract, adverse changes in
duties and forced relocation.
MANAGEMENT STOCK INCENTIVE PLAN
Pursuant to the Recapitalization Agreement, Holding (PA) adopted a stock
incentive plan, pursuant to which options to purchase Class C Common Stock may
be granted to employees and directors of the Company. On December 15, 1998 the
Company issued options representing approximately 6.6% of the outstanding
post-Recapitalization common stock to certain members of senior management,
including certain of the Named Executive Officers. The exercise price for
options granted is $2,421.29 per share. Awards granted under the plan to
employees include a provision terminating the award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including any change of control of
Holding (PA). Each option is subject to certain vesting provisions. To the
extent not earlier vested or terminated, all options will vest on the seventh
anniversary of the date of grant and will expire 30 days thereafter if not
exercised. Upon the termination of an optionee's employment with the Company,
Holding (PA) has certain rights to repurchase, and the optionee has certain
rights to require an affiliate of Investcorp to repurchase (subject to the
right, granted to Holding (PA), to repurchase such shares instead of the
Investcorp affiliate), the Class C Common Stock purchased by the optionee
pursuant to the exercise of his option(s).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT
OPTION/SAR GRANTED TO EMPLOYEES EXERCISE EXPIRATION DATE
NAME GRANTED IN FISCAL YEAR PRICE DATE VALUE(1)
---- -------------------- -------------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Dennis G. Heiner
President, Chief
Executive Officer
of Holding (PA)
since
January 1, 2000
and Holding (DE)
and Werner 1,250 60.5% $2,421.29 12/30/2007 $1,119,350.00
Robert P. Tamburrino
Vice President,
Chief
Financial Officer
and
Treasurer 200 9.7% $2,421.29 12/24/2004 $ 126,124.00
</TABLE>
- --------------------------------------------------------------------------------
(1) For purposes of fair market value disclosures, the fair market value of an
option grant is determined using the Black-Scholes option pricing model. See
Note H to the Company's Consolidated Financial Statements.
52
<PAGE> 55
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS THE-MONEY OPTIONS/SARS
SHARES AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis G. Heiner -- -- 250 1,000 -- --
Robert P. Tamburrino -- -- 125 375 -- --
</TABLE>
STOCK LOAN PLAN
Pursuant to the Recapitalization Agreement, Holding (PA) adopted a Stock
Loan Plan in order to make loans to certain members of management entering into
certain stock purchase agreements between management participants and the
Investors (the "Loan Participants") in amounts that do not exceed the sum of (i)
50% of the purchase price of the shares of Class C Common Stock purchased by the
Loan Participant and (ii) the amount of the retention bonus to be paid by
Holding (PA) to the Loan Participant pursuant to the respective Employee
Protection Agreement. Loans made pursuant to the Stock Loan Plan mature in seven
years, and bear interest at the Company's effective borrowing rate using the
rates under the Revolving Facility of the Senior Credit Facility and the
Receivables Purchase Agreement. Holding (PA) will negotiate with each Loan
Participant the amount of principal to be paid from such Loan Participant's
annual bonus. The Stock Loan Plan requires each Loan Participant to enter into a
pledge agreement and to execute a secured promissory note. Shares with an
aggregate fair market value of $1,932,189 were purchased in 1999 pursuant to the
Stock Loan Plan and management stock purchase agreements.
DEFERRED STOCK PLAN
Effective August 1999, the Company adopted the Werner Co. Deferred Stock
Plan (the "Deferred Stock Plan"). The Deferred Stock Plan is administered by a
committee of the Board of Directors of the Company (the "Committee"). Pursuant
to the Deferred Stock Plan, Dennis G. Heiner (the "Participant") is given the
opportunity on or before December 31 of each year to make an irrevocable
election to defer all or part of his salary and/or bonus for the next year
subject to the approval of the Committee. If the Participant makes, and the
Committee approves, such an election, the Committee shall grant to the
Participant Stock Units (as hereinafter defined) determined by dividing the
portion of the Participant's deferred salary and/or bonus by the fair market
value of a share of Class C Common Stock as of the applicable pay date. Under
the Deferred Stock Plan, the Participant is entitled to receive Stock Units
which are defined as non-voting units of measurement which are deemed for
recordkeeping purposes to be equivalent to shares of Class C Common Stock, such
that, one Stock Unit is equal to one outstanding share of the Company's Class C
Common Stock. Distribution of benefits under the Deferred Stock Plan shall be
made to the Participant on the first business day of the first month following
his termination of service, or immediately upon a change in control, and shall
be made in an equivalent whole number of shares of Class C Common Stock. The
Company has certain rights to repurchase the shares of Class C Common Stock
distributed to the Participant upon the cessation of his employment or upon a
sale or initial public offering of the Company as defined in the Deferred Stock
Plan. Under the Deferred Stock Plan as of December 31, 1999, Mr. Heiner has
earned 275 Stock Units from salary and bonus compensation. In addition, Mr.
Heiner is entitled to receive 1,033 Stock Units pursuant to his employment
agreement. Such Stock Units will be vested over a three-year period from the
date of his employment through June 15, 2002 and the Company recognizes the
related compensation expense over the three-year vesting period. In 1999, the
Company recognized $455,000 of compensation expense related to Mr. Heiner's
Stock Units. At December 31, 1999, the fair market value of a share of Class C
Common Stock for purposes of the Deferred Stock Plan was $2,421.29.
53
<PAGE> 56
PENSION PLANS
The Company's salaried employees receive an annual lifetime pension (up to
$130,000, as adjusted) benefit based on years of service and salary under the
Werner Holding Co. (DE), Inc. Salaried Employees' Pension Plan, a funded,
tax-qualified defined benefit plan covering all salaried employees (the
"Retirement Plan"). Certain Named Executive Officers also receive pension
benefits under the Werner Holding Co. (DE), Inc. Supplemental Pension Plan A
and/or the Werner Holding Co. (DE), Inc. Supplemental Pension Plan B. The
following tables show the estimated aggregate annual benefits payable at age 65
to Named Executive Officers retiring at age 65 with the indicated average
compensation and years of credited service from both the Retirement Plan and the
applicable Supplemental Pension Plans.
A. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,322 $12,644 $ 18,966 $ 25,288 $ 31,610 $ 37,932 $ 45,081 $ 52,229 $ 59,378
200,000 13,471 26,941 40,412 53,882 67,353 80,823 95,120 109,417 123,714
300,000 20,619 41,238 61,857 82,476 103,095 123,714 145,160 166,606 188,051
400,000 27,768 55,535 83,303 111,070 138,838 166,606 195,200 223,794 252,388
500,000 34,916 69,832 104,748 139,665 174,581 209,497 245,239 280,982 316,725
</TABLE>
B. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE AS AN OFFICER
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000 $ 0 $14,297 $ 21,446 $ 28,594 $ 35,743 $ 42,891 $ 50,040 $ 57,188 $ 64,337
400,000 0 19,063 28,594 38,125 47,657 57,188 66,720 76,251 85,782
500,000 0 23,828 35,743 47,657 59,571 71,485 83,399 95,314 107,228
600,000 0 28,594 42,891 57,188 71,485 85,782 100,079 114,376 128,673
700,000 0 33,360 50,040 66,720 83,399 100,079 116,759 133,439 150,119
800,000 0 38,125 57,188 76,251 95,314 114,376 133,439 152,502 171,565
900,000 0 42,891 64,337 85,782 107,228 128,673 150,119 171,565 193,010
</TABLE>
The benefits listed in the tables are not subject to any deduction for
Social Security. The benefits listed in Table A are computed on the basis of the
average salary of the employee (excluding bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average. The benefits listed in Table B are computed on the basis of
the average salary of the employee (including bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average. The total benefit is the sum of Table A and Table B.
Supplemental Pension Plans A and B are unfunded, non-qualified plans which
provide lifetime annual pension benefits to certain stated executives in excess
of benefits payable under the Retirement Plan, due to Retirement Plan
limitations imposed by Employee Retirement Income Saving Act (ERISA), plus
additional other benefits. Supplemental Pension Plan A covers all members of the
Company's former Management Committee and Supplemental Pension Plan B covers all
the elected corporate officers. Supplemental Pension Plan benefits are a
function of service and final average compensation. Executives must have spent
at least ten years as either an elected salaried corporate officer or a member
of the former Management Committee of the Company which includes all of the
named executive officers to be eligible. Eligibility for supplemental plans is
conditioned upon participants' compliance with a non-competition agreement.
54
<PAGE> 57
The compensation used for pension formula purposes is annual base pay alone
for the qualified Retirement Plan (subject to IRS limits, currently at $160,000
per year) and both base pay and annual bonus (without regard to any limits) for
the nonqualified Supplemental Plans. The base salaries and bonuses of each of
the named executive officers for 1999 are set forth in the Summary Compensation
Table.
The respective years of credited service for the Named Executive Officers
as of December 31, 1999 are: Donald M. Werner, 41; Dennis G. Heiner, 6 months;
Robert P. Tamburrino, 1; Michael E. Werner, 11; and Eric J. Werner, 11.
COMMITTEES OF THE BOARD OF DIRECTORS;
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors of Werner determines the compensation for
management of Werner. Dennis G. Heiner and Donald M. Werner are members of the
Board of Directors of Werner. The compensation for the Named Executive Officers
is determined under each such officer's employment agreement.
None of the executive officers of the Company served on the Board of
Directors or on the compensation committee of any other entity, the officers of
which served on any of the Boards of Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
All of the outstanding voting stock of Holding (DE) is owned by Holding
(PA). The following table sets forth certain information regarding the
beneficial ownership of the capital stock of Holding (PA).
The Class A Stock, Class B Stock and Class D Common Stock are the only
classes of Holding (PA)'s capital stock that have the power to vote. The Class A
Stock and Class B Stock each possesses the right to one vote per share. The
Class D Common Stock possesses the right to 50.6818 votes per share.
The table sets forth for such periods (i) each person known by the Company
to be the beneficial owner of more than 5% of each class of voting stock of
Holding (PA), (ii) each person who is a director of Holding (PA) or Named
Executive Officer of the Company who is expected to beneficially own shares of
voting stock of Holding (PA) and (iii) all directors of Holding (PA) and
executive officers of the Company as a group. Unless otherwise indicated, each
of the shareholders shown in the table below has sole voting and investment
power with respect to the shares beneficially owned.
Investcorp and the Investors beneficially own approximately 67% of the
outstanding voting stock of Holding (PA) and the pre-Recapitalization existing
shareholders, including certain members of management, now own approximately 33%
of the outstanding voting stock of Holding (PA). In addition, the Investors own
3,952 shares of Class C Common Stock and 45,000 shares of Class E Common Stock.
See "Certain Relationships and Related Transactions -- Agreements with Certain
Shareholders."
<TABLE>
<CAPTION>
NUMBER %
OF SHARES(1) OF CLASS
------------ --------
<S> <C> <C>
CLASS A VOTING STOCK
Noel Berk-Rauch............................................. 142 7.2
Aleena R. Shapiro(2)........................................ 110 5.6
Howard L. Solot(3).......................................... 277 14.1
Donald M. Werner............................................ 388 19.7
Richard L. Werner(4)........................................ 331 16.9
Ronald E. Werner(5)......................................... 240 12.2
All directors and executive officers as a group, including
certain of the above named persons........................ 800 40.7
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
NUMBER %
OF SHARES(1) OF CLASS
------------ --------
<S> <C> <C>
CLASS B VOTING STOCK
Howard L. Solot(6).......................................... 1,083 4.9
Bruce D. Werner Trust(7).................................... 1,399 6.4
Craig R. Werner Trust(8).................................... 1,508 6.9
Michael E. Werner Revocable Trust(9)........................ 1,496 6.8
Donald M. Werner(10)........................................ 769 3.5
Eric J. Werner(11).......................................... 1,384 6.3
Ronald E. Werner(12)........................................ 1,746 8.0
All directors and executive officers as a group, including
certain of the above named persons........................ 4,732 21.6
CLASS D VOTING STOCK
INVESTCORP S.A.(13)(14)..................................... 1,000 100.0
SIPCO Limited(15)........................................... 1,000 100.0
CIP Limited(16)(17)......................................... 920 92.0
Ballet Limited(16)(17)...................................... 92 9.2
Denary Limited(16)(17)...................................... 92 9.2
Gleam Limited(16)(17)....................................... 92 9.2
Highlands Limited(16)(17)................................... 92 9.2
Noble Limited(16)(17)....................................... 92 9.2
Outrigger Limited(16)(17)................................... 92 9.2
Quill Limited(16)(17)....................................... 92 9.2
Radial Limited(16)(17)...................................... 92 9.2
Shoreline Limited(16)(17)................................... 92 9.2
Zinnia Limited(16)(17)...................................... 92 9.2
INVESTCORP Investment Equity Limited(14).................... 80 8.0
</TABLE>
(1) As used in the table above, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship, or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial ownership of
such security within 60 days.
(2) Ms. Shapiro does not directly own any stock in Holding (PA). The number of
shares shown as owned are held in the name of Rauch Trust of which Aleena
R. Shapiro is Trustee. Ms. Shapiro disclaims the beneficial ownership of
such shares.
(3) Includes 36.47 shares of Class A Stock held in the name of Mr. Solot's
spouse, Janet F. Solot.
(4) Includes 331.05 shares of Class A Stock held in the name of Richmond Drive
Enterprises, L.P., a limited partnership, the general partners of which are
Mr. Werner and Lois S. Werner. Lois S. Werner is the spouse of Mr. Werner.
(5) Includes 238.85 shares of Class A Stock held in the name of the Florence J.
Werner Irrevocable Trust of which Ronald E. Werner is the trustee. Mr.
Werner disclaims the beneficial ownership of such shares.
(6) Includes 826 shares of Class B Stock held in the name of Alligator
Partners, L.P., a limited partnership, the general partners of which are
Mr. Solot and Janet F. Solot, and 212.17 shares of Class B Stock held in
the name of Mr. Solot's spouse, Janet F. Solot.
(7) Includes 17.30 shares of Class B Stock held as joint tenant with Tammy H.
Werner and 391.01 shares of Class B Stock held in the name of the Bruce D.
Werner Family Limited Partnership.
(8) Includes 582.16 shares of Class B Stock owned by the Craig R. Werner Family
Limited Partnership.
56
<PAGE> 59
(9) Includes 179.98 shares of Class B Stock held in the name of the Laura W.
Werner Revocable Trust, 102.92 shares of Class B Stock held in the name of
the Jonathan C. Werner Gift Trust, 57.65 shares of Class B Stock held in
the name of the Margot A. Werner Gift Trust and 102.92 shares of Class B
Stock held in the name of the Stephanie N. Werner Gift Trust.
(10) Includes 22 shares of Class B Stock owned with Barbara Werner as joint
tenants and 88 shares of Class B Stock held in the name of Barbara Werner.
(11) Includes 29.48 shares of Class B Stock owned with Melanie R. Werner as
joint tenants, 274.56 shares of Class B Stock held in the name of Melanie
R. Werner, Custodian for Isabelle N. Werner and 274.56 shares of Class B
Stock held in the name of Melanie R. Werner, Custodian for Sophia K.
Werner.
(12) Includes 1,035.74 shares of Class B Stock held in the name of the Robert I.
Werner Irrevocable Trust and 200.17 shares of Class B Stock held in the
name of the Florence J. Werner Irrevocable Trust. Mr. Werner disclaims the
beneficial ownership of all of these shares.
(13) Investcorp does not directly own any stock in Holding (PA). The number of
shares shown as owned by Investcorp includes all of the shares owned by
INVESTCORP Investment Equity Limited (see (14) below). Investcorp owns no
stock in Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited, Zinnia Limited, or in the beneficial owners of these entities (see
(17) below). Investcorp may be deemed to share beneficial ownership of the
shares of voting stock held by these entities because the entities have
entered into revocable management services or similar agreements with an
affiliate of Investcorp, pursuant to which each such entity has granted
such affiliate the authority to direct the voting and disposition of the
Holding (PA) voting stock owned by such entity for so long as such
agreement is in effect. Investcorp is a Luxembourg corporation with its
address at 37 rue Notre-Dame, Luxembourg.
(14) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
wholly-owned subsidiary of Investcorp, with its address at P.O. Box 1111,
West Wind Building, George Town, Grand Cayman, Cayman Islands.
(15) SIPCO Limited may be deemed to control Investcorp through its ownership of
a majority of a company's stock that indirectly owns a majority of
Investcorp's shares. SIPCO Limited's address is P.O. Box 1111, West Wind
Building, George Town, Grand Cayman, Cayman Islands.
(16) CIP Limited ("CIP") owns no stock in Holding (PA). CIP indirectly owns less
than 0.1% of the stock in each of Ballet Limited, Denary Limited, Gleam
Limited, Highlands Limited, Noble Limited, Outrigger Limited, Quill
Limited, Radial Limited, Shoreline Limited and Zinnia Limited (see (17)
below). CIP may be deemed to share beneficial ownership of the shares of
voting stock of Holding (PA) held by such entities because CIP acts as a
director of such entities and the ultimate beneficial shareholders of each
of those entities have granted to CIP revocable proxies in companies that
own those entities' stock. None of the ultimate beneficial owners of such
entities beneficially owns individually more than 5% of Holding (PA)'s
voting stock.
(17) Each of CIP Limited, Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited is a Cayman Islands
corporation with its address at P.O. Box 2197, West Wind Building, George
Town, Grand Cayman, Cayman Islands.
Right of First Offer; Tag-Along Rights
Pursuant to the Restated Articles, prior to an initial public offering of
the capital stock of Holding (PA), any holder of Class A Stock or Class B Stock
that intends to sell any shares of such stock will be required to furnish notice
to Holding (PA) of such holder's intent to sell such shares. Following the
receipt of such notice, Holding (PA) will have the option to purchase such stock
on the same terms as the proposed sale. In addition, if any holder of Class D
Common Stock proposes to transfer shares of such stock, holders of the other
classes of Holding (PA) capital stock will have certain tag-along rights
57
<PAGE> 60
with respect thereto. Any shares for which any holders elect to exercise such
tag-along rights but whose shares are not sold in connection therewith will have
such shares redeemed by Holding (PA), to the extent it is legally permitted to
do so.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
AGREEMENTS WITH CERTAIN SHAREHOLDERS
Consulting and Financial Services Agreements
In connection with the Recapitalization the Company entered into an
agreement for management advisory and consulting services for a five-year term
with Investcorp International, Inc. ("III"), pursuant to which the Company
prepaid III $5.0 million upon closing.
On January 1, 2000, in connection with Donald M. Werner's retirement, the
Company entered into a consulting agreement with Mr. Werner. Pursuant to this
consulting agreement, Mr. Werner will provide certain consulting services to the
Company for a period of one year in exchange for payment at a rate of $150,000
per year. The consulting agreement is automatically renewed for successive
one-year periods unless either party provides written notice thirty (30) days
prior to the expiration of the current term.
Shareholder Rights Agreement
On the Recapitalization Closing Date, Holding (PA) executed the Shareholder
Rights Agreement with each of the Management Shareholders and each holder of
Class D Common Stock ("Class D Investors"). The Shareholder Rights Agreement
contains the following provisions: (i) the right, following an initial public
offering of Holding (PA)'s capital stock, in favor of the Class D Investors to
require the Management Shareholders to sell their remaining equity interests in
Holding (PA) if the Class D Investors decide to sell as a group 85% or more of
their remaining equity interests in the Company and the Class D Investors hold
at that time (prior to giving effect to the proposed sale) more than 80% of the
shares of Class D Common Stock purchased by the Investors in the
Recapitalization, (ii) the right in favor of all holders of Holding (PA)'s
capital stock, during the period beginning immediately after the Closing Date
and continuing until, but ending prior to, an initial public offering, to
participate on a pro rata basis in equity financings by the Company (other than
issuances of equity securities in connection with stock incentive or
compensation plans approved by Holding (PA)'s Board of Directors or in
connection with business acquisitions by Holding (PA)) if the securities to be
issued by the Company are not being issued at fair market value as determined in
good faith by Holding (PA)'s Board of Directors, (iii) certain demand and
piggy-back registration rights in favor of the Class D Investors and certain
piggy-back registration rights in favor of all other shareholders of Holding
(PA), (iv) the obligation of the Management Shareholders to enter into certain
customary "lock-up" agreements with underwriters in future public offerings, and
(v) an agreement by the Class D Investors and the Management Shareholders to
vote their respective shares such that (a) at least a majority of Holding (PA)'s
Board will consist of persons designated by the Class D Investors, (b) the Chief
Executive Officer of Holding (PA) shall be a director and (c) the Management
Shareholders shall be entitled to designate a minimum of one director and up to
that number of directors equal to one third of the authorized number of
directors (rounded to the nearest whole number) minus one.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements
The financial statements set forth in the Index are filed as part of
this Annual Report on Form 10-K.
(b) Reports on Form 8-K:
None.
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<PAGE> 61
(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
2 Amended and Restated Recapitalization Agreement, dated as of
October 27, 1997, by and among Holding (PA) and certain
investors organized by Investcorp S.A. (filed as Exhibit 2
to Holding (DE)'s Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.1 Certificate of Incorporation of Werner Holding Co. (DE),
Inc. (filed as Exhibit 3.1 to Holding (DE)'s Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
3.2 By-laws of Werner Holding Co. (DE), Inc. (filed as Exhibit
3.2 to Registrant's Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.2.1 Certificate of Ownership and Merger of Werner Holding Co.
(DE), Inc. regarding merger of Werner Financial Inc. with
and into Werner Holding Co. (DE), Inc. (filed as Exhibit
3.2.1 to Holding (DE)'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and incorporated herein
by reference).
3.3 Amended and Restated Articles of Incorporation of Werner
Holding Co. (PA), Inc. (filed as Exhibit 3.3 to Holding
(DE)'s Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
3.4 Amended and Restated By-laws of Werner Holding Co. (PA),
Inc. (filed as Exhibit 3.1 to Holding (DE)'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999 and
incorporated herein by reference).
3.5 Articles of Incorporation of Werner Co. (filed as Exhibit
3.5 to Holding (DE)'s Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
3.5.1 Articles of Merger of Werner Co. regarding merger of R.D.
Arizona Ladder Corp. with and into Werner Co. (filed as
Exhibit 3.5.1 to Holding (DE)'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 and incorporated
herein by reference).
3.5.2 Articles of Merger of Werner Co. regarding merger of Phoenix
Management Services, Inc., Werner Management Co., Florida
Ladder Company, Kentucky Ladder Company and Gold Medal
Ladder Company with and into Werner Co. (filed as Exhibit
3.5.2 to Holding (DE)'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and incorporated herein
by reference).
3.5.3 Articles of Merger of Werner Co. regarding merger of Olympus
Properties, Inc. with and into Werner Co. (filed as Exhibit
3.5.3 to Holding (DE)'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and incorporated herein
by reference).
3.6 By-laws of Werner Co. (filed as Exhibit 3.6 to Holding
(DE)'s Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
3.7 Certificate of Incorporation of WIP Technologies, Inc.
(filed as Exhibit 3.19 to Holding (DE)'s Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
3.8 By-laws of WIP Technologies, Inc. (filed as Exhibit 3.20 to
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
3.9 Certificate of Incorporation of Werner Funding Corporation
(filed as Exhibit 3.9 to Holding (DE)'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 and
incorporated herein by reference).
3.10 By-laws of Werner Funding Corporation (filed as Exhibit 3.10
to Holding (DE)'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 and incorporated herein by
reference).
3.11 Amendment to By-laws of WIP Technologies, Inc.
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
4.1 Indenture between the Company and IBJ Schroder Bank & Trust
Company, as Trustee, dated as of November 24, 1997 (filed as
Exhibit 4.1 to Holding (DE)'s Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
4.2 Form of Note (included as Exhibit B to Exhibit 4.1 in
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
4.3 Registration Rights Agreement among the Company, Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co. dated November 24, 1997
(filed as Exhibit 1.2 in Holding (DE)'s Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
4.4 Form of Letter of Transmittal (filed as Exhibit 1.3 in
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.1 Form of Employee Protection Agreements between Holding (PA)
and certain employees (filed as Exhibit 10.1 to Holding
(DE)'s Amendment No. 1 to Form S-4 Registration Statement
No. 333-46607 and incorporated herein by reference).
10.2 Shareholder Agreement, dated as of November 24, 1997, by and
among Holding (PA), Investcorp Investment Equity Limited,
certain other holders of shares of Class D Common Stock of
Holding (PA) and the other individuals listed on the
signature pages thereto (filed as Exhibit 10.2 to Holding
(DE)'s Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.3 Form of Employment Agreement, dated as of November 24, 1997,
between Werner Management Co. and certain named executive
officers (filed as Exhibit 10.3 to Holding (DE)'s Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.4 Management Stock Incentive Plan, established by Werner
Holding Co. (PA), Inc. as of November 24, 1997 (filed as
Exhibit 10.4 to Holding (DE)'s Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.5 Form of Stock Option Agreements pursuant to Stock Incentive
Plan between Werner Holding Co. (PA), Inc. and certain
employees (filed as Exhibit 10.5 to Holding (DE)'s Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.6 Trust Indenture, dated as of September 1, 1990, between the
County of Carroll, Kentucky and Dai-Ichi Kangyo Trust
Company (filed as Exhibit 10.6 to Holding (DE)'s Amendment
No. 1 to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.7 Variable Rate Demand Industrial Building Revenue Bonds
issued by the County of Carroll, Kentucky (filed as Exhibit
10.7 to Holding (DE)'s Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.8 Lease Agreement, dated as of September 1, 1990, between
County of Carroll, Kentucky and Kentucky Ladder Company
(filed as Exhibit 10.8 to Holding (DE)'s Amendment No. 1 to
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.9 Employment Agreement between Werner Co. and Robert P.
Tamburrino (filed as Exhibit 10.9 to Holding (DE)'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1998 and incorporated herein by reference).
10.10 Master Registration Rights Agreement, dated as of November
24, 1997, by Werner Holding Co. (PA), Inc. for the benefit
of certain shareholders (filed as Exhibit 10.10 to Holding
(DE)'s Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.11 Werner 1997 Stock Loan Plan (filed as Exhibit 10.11 to
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.12 Credit Agreement, dated as of November 24, 1997, among the
Company, Bankers Trust Company, as Administrative Agent and
Co-Arranger, Merrill Lynch Capital Corporation, as
Syndication Agent and as Co-Arranger, The Chase Manhattan
Bank, as Documentation Agent, and Goldman Sachs Credit
Partners L.P., as Co-Agent (filed as Exhibit 10.12 to
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.13 Amended and Restated Pension Plan for Certain Hourly
Bargaining Unit Employees of Werner Co.
10.14 Amended and Restated Retirement Plan for Salaried Employees
of Werner Holding Co. (DE), Inc.
10.15 Supplemental Pension Plan A Applicable to Key Executives of
Werner Holding Co. (DE), Inc., its Parent and Subsidiaries
(filed as Exhibit 10.15 to Holding (DE)'s Amendment No. 1 to
Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.16 Supplemental Pension Plan B Applicable to Elected Salaried
Corporate Officers of Werner Holding Co. (DE), Inc., its
Parent and Subsidiaries (filed as Exhibit 10.16 to Holding
(DE)'s Amendment No. 1 to Form S-4 Registration Statement
No. 333-46607 and incorporated herein by reference).
10.17 Amendment to the Supplemental Pension Plan B Applicable to
Elected Salaried Corporate Officers of Werner Holding Co.
(DE), Inc., its Parent and Subsidiaries (filed as Exhibit
10.17 to Holding (DE)'s Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.18 Werner Holding Co. (DE), Inc. Employee Savings Plan (filed
as Exhibit 10.18 to Holding (DE)'s Amendment No. 1 to Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.19 Form of Management Stock Purchase Agreement between Stepup
Limited, Werner Holding Co. (PA), Inc. and certain
individuals (filed as Exhibit 10.19 to Holding (DE)'s Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.20 Form of Loan and Pledge Agreement of Werner Holding Co.
(PA), Inc. (filed as Exhibit 10.20 to Holding (DE)'s Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.21 Agreement for Management Advisory, Strategic Planning and
Consulting Services between the Company and Investcorp
International, Inc. (filed as Exhibit 10.21 to Holding
(DE)'s Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.22 Financing Advisory Agreement between the Company and
Investcorp International Inc. (filed as Exhibit 10.22 to
Holding (DE)'s Form S-4 Registration Statement No. 333-46607
and incorporated herein by reference).
10.23 Stand-By Commitment Letter of Invifin S.A. (filed as Exhibit
10.23 to Holding (DE)'s Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
10.24 Reinsurance Agreement, dated March 31, 1998, among
Manufacturer's Indemnity and Insurance Company of America
and National Union Fire Insurance Company of Pittsburgh, PA.
(filed as Exhibit No. 10.24 to Holding (DE)'s Amendment No.
1 to Form S-4 Registration Statement No. 333-46607 and
incorporated herein by reference).
10.25 Agreement, dated March 31, 1998, among National Union Fire
Insurance Company of Pittsburgh, PA, Manufacturer's
Indemnity and Insurance Company of America and the
Reinsurers named therein (filed as Exhibit No. 10.25 to
Holding (DE)'s Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
</TABLE>
61
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.26 Assumption Agreement, dated March 31, 1998, among National
Union Fire Insurance Company of Pittsburgh, PA,
Manufacturer's Indemnity and Insurance Company of America
and Werner Holding Co. (PA), Inc. (filed as Exhibit No.
10.26 to Holding (DE)'s Amendment No. 1 to Form S-4
Registration Statement No. 333-46607 and incorporated herein
by reference).
10.27 Novation and Assumption Agreement, dated March 31, 1998,
among Insurance Company of North America, National Union
Fire Insurance Company of Pittsburgh, PA and Werner Holding
Co. (PA), Inc. (filed as Exhibit No. 10.27 to Holding (DE)'s
Amendment No. 1 to Form S-4 Registration Statement No.
333-46607 and incorporated herein by reference).
10.28 Commutation Agreement, dated March 31, 1998, between
Insurance Company of North America, Pacific Employers
Insurance Company and CIGNA Insurance Company of Illinois,
and Manufacturer's Indemnity and Insurance Company (filed as
Exhibit No. 10.28 to Holding (DE)'s Amendment No. 1 to Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.29 Indemnity Agreement, dated March 31, 1998, between National
Union Fire Insurance Company of Pittsburgh, PA and Werner
Holding Co. (PA), Inc. (filed as Exhibit No. 10.29 to
Holding (DE)'s Amendment No. 1 to Form S-4 Registration
Statement No. 333-46607 and incorporated herein by
reference).
10.30 Novation Agreement, dated March 31, 1998, among The
Travelers Indemnity Company of Hartford, Connecticut,
certain of its subsidiaries and affiliates, Werner Holding
Co. (PA), Inc. and certain of its subsidiaries, and National
Union Fire Insurance Company of Pittsburgh, PA. (filed as
Exhibit No. 10.30 to Holding (DE)'s Amendment No. 1 to Form
S-4 Registration Statement No. 333-46607 and incorporated
herein by reference).
10.31 Receivables Purchase Agreement dated as of May 29, 1998
among Werner Funding Corporation, Werner Co., Market Street
Funding Corporation and PNC Bank, National Association
(filed as Exhibit 10.1 to Holding (DE)'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.32 Purchase and Sale Agreement dated as of May 29, 1998 between
Werner Funding Corporation and Werner Co. (filed as Exhibit
10.2 to Holding (DE)'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by
reference).
10.33 Third Amendment to the Werner Holding Co. (DE), Inc.
Employee Savings Plan (filed as Exhibit 10.1 to Holding
(DE)'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 and incorporated herein by reference).
10.34 Amendment No. 1 to Stock Loan Plan (filed as Exhibit 10.1 to
Holding (DE)'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference).
10.35 Second Amendment to the Supplemental Pension Plan B
Applicable to Elected Salaried Corporate Officers of Werner
Holding Co. (DE), Inc., its Parent and its Subsidiaries
(filed as Exhibit 10.1 to Holding (DE)'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 and
incorporated herein by reference).
10.36 Premium Conversion Plan of Werner Holding Co. (DE), Inc.
(filed as Exhibit 10.36 to Holding (DE)'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 and
incorporated herein by reference).
10.37 Employment Agreement dated as of May 26, 1999, between
Werner Co. and Dennis G. Heiner (filed as Exhibit 10.2 to
Holding (DE)'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 and incorporated herein by reference).
</TABLE>
62
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.38 Fourth Amendment to Werner Holding Co. (DE), Inc. Employee
Savings Plan (filed as Exhibit 10.1 to Holding (DE)'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 and incorporated herein by reference).
10.39 Form of Amendment No. 1 to Employment Agreement, dated as of
January 1, 1999, by and between Werner Co., successor by
merger to Werner Management Co. and certain named executive
officers.
10.40 Amendment No. 1 to Werner Holding Co. (PA), Inc. Stock
Incentive Plan.
10.41 Werner Co. Deferred Stock Plan.
10.42 Management Stock Purchase Agreement between Investcorp
Werner Holdings, L.P., Werner Holding Co. (PA), Inc. and
Dennis G. Heiner dated December 30, 1999.
10.43 Stock Option Agreement between Werner Holding Co. (PA), Inc.
and Dennis G. Heiner dated December 30, 1999.
10.44 Amendment No. 2 to Werner Holding Co. (PA), Inc. Stock
Incentive Plan.
16 Letter from Ernst & Young LLP regarding change in
independent accountant (filed as Exhibit 1 to Holding (DE)'s
Current Report on Form 8-K on September 7, 1999 and
incorporated herein by reference).
18 Letter from Independent Auditors Regarding Preferability of
Accounting Principle Changes (filed as Exhibit 18.1 to
Holding (DE)'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference).
21 Subsidiaries of the Company (filed as Exhibit 21 to Holding
(DE)'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and incorporated herein by reference).
27 Financial Data Schedule.
</TABLE>
63
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Co-registrants have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized.
WERNER HOLDING CO. (PA), INC.
By: /s/ DENNIS G. HEINER
------------------------------------
Dennis G. Heiner
President
WERNER HOLDING CO. (DE), INC.
By: /s/ DENNIS G. HEINER
------------------------------------
Dennis G. Heiner
President
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
Co-registrants and in the capacities indicated on March 30, 2000.
<TABLE>
<S> <C>
/s/ DONALD M. WERNER Chairman of the Board of Directors of Co-registrants
- -----------------------------------------------------
Donald M. Werner
/s/ DENNIS G. HEINER Chief Executive Officer and President of Holding (PA)
- ----------------------------------------------------- and Holding (DE) (Principal Executive Officer of
Dennis G. Heiner Co-registrants), Director
/s/ ROBERT P. TAMBURRINO Vice President, Chief Financial Officer and Treasurer
- ----------------------------------------------------- (Principal Financial Officer and Principal Accounting
Robert P. Tamburrino Officer of Co-registrants)
/s/ HOWARD L. SOLOT Director
- -----------------------------------------------------
Howard L. Solot
/s/ JAMES O. EGAN Director
- -----------------------------------------------------
James O. Egan
/s/ CHARLES K. MARQUIS Director
- -----------------------------------------------------
Charles K. Marquis
/s/ CHARLES J. PHILIPPIN Director
- -----------------------------------------------------
Charles J. Philippin
/s/ CHRISTOPHER J. STADLER Director
- -----------------------------------------------------
Christopher J. Stadler
/s/ THOMAS J. SULLIVAN Director
- -----------------------------------------------------
Thomas J. Sullivan
</TABLE>
64
<PAGE> 1
Exhibit 3.11
AMENDMENT TO BY-LAWS OF WIP TECHNOLOGIES, INC.
Adopted by Unanimous Written Consent of Shareholder
November 12, 1999
The Corporation's By-laws be, and hereby are, amended, by striking out
Article II, Section 2.01 which reads as follows:
SECTION 2.01. NUMBER, ELECTION AND TERM OF OFFICE. The number
of directors which shall constitute the full Board of
Directors shall be determined by resolution of the board of
directors or by the stockholders at the annual meeting
provided, however, that in no event shall the number of
directors be less than three or more than eleven. Each
director shall hold office for the term for which he is
elected and thereafter until his successor is duly elected or
until his prior death, resignation or removal. Directors need
not be stockholders.
and replacing with the following new Article II, Section 2.01:
SECTION 2.01. NUMBER, ELECTION AND TERM OF OFFICE. The number
of directors which shall constitute the full Board of
Directors shall be determined by resolution of the board of
directors or by the stockholders provided, however, that in no
event shall the number of directors be less than two or more
than eleven. Each director shall hold office for the term for
which he is elected and thereafter until his successor is duly
elected or until his prior death, resignation or removal.
Directors need not be stockholders.
<PAGE> 1
Exhibit 10.13
PENSION PLAN FOR
CERTAIN HOURLY BARGAINING UNIT EMPLOYEES OF
WERNER CO.
(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)
October 1999
<PAGE> 2
CONTENTS PAGE
PREAMBLE v
ARTICLE I DEFINITIONS
1.01 Accrued Benefit 1
1.02 Adjustment Factor 1
1.03 Annuity Starting Date 1
1.04 Beneficiary 1
1.05 Board 2
1.06 Code 2
1.07 Date of Employment or Reemployment 2
1.08 Disability Retirement Age 3
1.09 Disability Retirement Date 3
1.10 Early Retirement Age 3
1.11 Early Retirement Date 3
1.12 Employee 3
1.13 Employer 3
1.14 ERISA 3
1.15 Hour of Service 3
1.16 Joint and Survivor Annuity 5
1.17 Limitation Year 5
1.18 Normal Pension 5
1.19 Normal Retirement Benefit 5
1.20 Normal Retirement Age 5
1.21 Normal Retirement Date 5
1.22 Participant 6
1.23 Pension Board 6
1.24 Plan 6
1.25 Plan Administrator 6
1.26 Plan Year 6
1.27 Prior Plan 6
1.28 Related Employer 6
1.29 Restatement Date 7
i
<PAGE> 3
CONTENTS
(continued)
1.30 Service 7
1.31 Severance From Service 8
1.32 Total and Permanent Disability 9
1.33 Trust Agreement and Trust 10
1.34 Trust Fund 10
1.35 Trustee 10
1.36 Union 11
1.37 Vested Interest 11
1.38 Vesting Service 11
ARTICLE II ELIGIBILITY AND PARTICIPATION
2.01 Participation 13
2.02 Reemployment of a Participant 13
ARTICLE III CONTRIBUTIONS
3.01 Trustee and Trust Agreement 14
3.02 Employer Contributions 14
3.03 Forfeitures 14
3.04 Reversion of Employer Contributions 14
ARTICLE IV BENEFITS
4.01 Normal Retirement Benefit 16
4.02 Postponed Retirement Benefit 17
4.03 Early Retirement Benefit 18
4.04 Termination of Vested Participant 18
4.05 Disability Retirement Benefit 19
4.06 Minimum Benefits 21
4.07 Maximum Benefits 21
4.08 Combined Maximum Limitations 26
4.09 Definition of Compensation for Purposes of 29
Sections 4.07 and 4.08
4.10 Reemployment After Receipt of Benefits 31
ii
<PAGE> 4
CONTENTS
(continued)
ARTICLE V FORM AND PAYMENT OF BENEFITS
5.01 Normal Pension 34
5.02 Joint and Survivor Annuity 34
5.03 Election Not to Receive Normal Pension 34
5.04 Election Not to Receive Joint and Survivor 35
Annuity
5.05 Additional Rules Applicable to Benefit Elections 36
5.06 Payment in Optional Form on Retirement 38
5.07 Pre-retirement Survivor Annuity 39
5.08 Administrative Powers Relating to Payments 42
5.09 No Guaranty of Benefits 42
5.10 Time of Payment 42
5.11 Death Distribution Requirements 44
5.12 Direct Rollovers 45
5.13 Lost Participants 46
ARTICLE VI FIDUCIARY RESPONSIBILITY
6.01 Fiduciary Responsibility Provisions 47
ARTICLE VII PENSION BOARD
7.01 Appointment and Acceptance 49
7.02 Duties and Authority 49
7.03 Decisions of the Pension Board 52
7.04 Differences as to Disability 53
7.05 Pension Board Procedures 54
7.06 Expenses and Assistance 54
7.07 Participants and Other Payees - Data 54
7.08 Resignation and Removal of Member of 54
Pension Board
7.09 Appointment of Successor 55
7.10 Plan Administration - Miscellaneous 55
iii
<PAGE> 5
CONTENTS
(continued)
ARTICLE VIII RESTRICTIONS ON BENEFITS
8.01 Restrictions on Plan Termination 58
8.02 Restriction on Distributions 58
ARTICLE IX AMENDMENT AND TERMINATION
9.01 Right to Amend or Terminate 60
9.02 Termination 61
9.03 Partial Termination 62
9.04 Method of Payment 63
9.05 Notice of Amendment, Termination, or 63
Partial Termination
ARTICLE X MISCELLANEOUS
10.01 No Contract of Employment 64
10.02 Merger or Consolidation of Plan, Transfer 64
of Assets
10.03 Data 64
10.04 Restrictions Upon Assignments and 65
Creditors' Claims
10.05 Restriction of Claims Against Trust Fund 65
10.06 Benefits Payable only from Fund 66
10.07 Successor to Employer 66
10.08 Applicable Law 66
10.09 Internal Revenue Service Approval 67
ARTICLE XI TOP-HEAVY PROVISIONS
11.01 General 68
11.02 Definitions 68
11.03 Minimum Accrued Benefit 72
11.04 Vesting Requirements 74
11.05 Special 415 Limitations 75
iv
<PAGE> 6
PENSION PLAN FOR
CERTAIN HOURLY BARGAINING UNIT EMPLOYEES OF
WERNER CO.
PREAMBLE
Werner Co. has hereby amended and restated, effective January 1, 1999, the
pension plan for its eligible Employees known as the Pension Plan for Certain
Hourly Bargaining Unit Employees of Werner Co. (the "Plan"). The Plan
constitutes a continuation and restatement of the Pension Plan for Certain
Hourly Bargaining Unit Employees of R. D. Werner Co., Inc. originally effective
as of October 1, 1958, and as amended from time to time.
The Plan was last restated effective October 1, 1989 in order to comply with
changes promulgated under the Tax Reform Act of 1986 and certain subsequent
legislation (such prior restatement along with any subsequent Plan amendment
effective prior to January 1, 1999 hereinafter referred to as the "Prior Plan").
The Plan is hereby restated in order to comply with changes promulgated under
the Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act, the Small Business Job Protection Act of 1996 and the
Taxpayer Relief Act of 1997.
This restatement of the Prior Plan shall not in any way affect the rights of
Employees who participated in the Prior Plan in accordance with its provisions.
All matters relating to the benefits, if any, payable to such Employees (or
their Beneficiaries) based upon events occurring prior to January 1, 1999 shall,
except as otherwise expressly provided herein, be determined in accordance with
the applicable provisions of the Prior Plan.
v
<PAGE> 7
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by the context. All masculine terms shall include the feminine and all
singular terms shall include the plural, unless the context clearly indicates
the gender or the number.
1.01 ACCRUED BENEFIT means the amount computed under the formula set forth
in Section 4.01 of the Plan payable at Normal Retirement Date.
1.02 ADJUSTMENT FACTOR means the appropriate adjustment factor(s) that may
be applicable to a Participant's retirement income in accordance with
the terms of the Plan as shown on the tables attached hereto and made
a part hereof.
1.03 ANNUITY STARTING DATE means the first day of the first period for
which an amount is payable as an annuity or in any other form.
1.04 BENEFICIARY means the person or persons designated by a Participant
to receive any benefits under the Plan which may be due upon the
Participant's death. Notwithstanding anything to the contrary, if a
Participant is married on the date of his death, the Beneficiary of
such Participant shall be his spouse unless:
(a) The Participant's spouse consents in writing not to be said
Beneficiary, such written consent is witnessed by either a
representative of the Plan or a notary public and such
consent acknowledges the effect of the Participant's
selection of a Beneficiary other than his spouse;
1
<PAGE> 8
(b) The foregoing consent may not be obtained because such
spouse cannot be located; or
(c) Such other circumstances exist as the Pension Board may, in
accordance with applicable regulations, deem appropriate to
waive the foregoing spousal consent requirement.
The spouse's consent will apply with respect to a specific alternate
Beneficiary only, and change of Beneficiary will require a new
spousal consent. If no person or entity has been designated by the
Participant as Beneficiary, or if no named original or successive
Beneficiary survives the Participant, any payments owed to a
Beneficiary shall be made:
(a) To the Participant's surviving spouse;
(b) After the death of the surviving spouse, to the
Participant's surviving children, in equal shares; or
(c) If none of the foregoing survives to the end of such period,
to the personal representative of his estate.
1.05 BOARD means the Board of Directors of Werner Co.
1.06 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
1.07 DATE OF EMPLOYMENT or REEMPLOYMENT means the first day an Employee
performs an Hour of Service.
2
<PAGE> 9
1.08 DISABILITY RETIREMENT AGE means the age at which a Participant
terminates his employment by reason of a Total and Permanent
Disability, provided he was actively employed and accruing service
and had completed at least fifteen (15) years of Vesting Service on
the date he became Totally and Permanently Disabled.
1.09 DISABILITY RETIREMENT DATE means the first day of the seventh month
following the date a Participant attains his Disability Retirement
Age.
1.10 EARLY RETIREMENT AGE means the age at which a Participant completes
at least fifteen (15) years of Vesting Service and has attained the
age which is five (5) years prior to his Normal Retirement Age.
1.11 EARLY RETIREMENT DATE means the first day of any month coincident
with or immediately following the date a Participant terminates
employment other than for death, after attaining his Early Retirement
Age, but prior to his Normal Retirement Date.
1.12 EMPLOYEE means any person employed by the Employer. Employee shall
also include any leased employee deemed to be an Employee of the
Employer as provided in Section 414(n) of the Code.
1.13 EMPLOYER means Werner Co.
1.14 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.15 HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid or entitled to payment
for the
3
<PAGE> 10
performance of duties for the Employer or for a Related
Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are
performed; and
(b) Each hour for which an Employee is paid or entitled to payment
by the Employer or a Related Employer on account of a period
of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or other approved leave of
absence. No more than five hundred one (501) Hours of Service
shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a
single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor regulations, which are incorporated
herein by reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or a
Related Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c). These hours shall
be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than
the computation period in which the award, judgment or payment
is made.
(d) An Employee on an approved leave of absence under the Family
and Medical Leave Act of 1993 shall be credited with Hours of
Service only to the extent required under such Act. An
Employee shall be credited with Hours of Service for his
period of qualified military service as defined in the
Uniformed Services Employment and Reemployment
4
<PAGE> 11
Rights Act of 1994 upon such Employee's return to work with
the Employer or a Related Employer to the extent required
under such Act.
1.16 JOINT AND SURVIVOR ANNUITY means an annuity which is payable monthly
to the Participant for his life with a survivor annuity payable to
his spouse for the life of such spouse in an amount equal to one-half
(1/2) of the monthly amount payable during the life of the
Participant. The Participant's monthly income under the Joint and
Survivor Annuity shall be an amount equal to the amount payable under
the Normal Pension, multiplied by the applicable Adjustment Factor,
and based upon the age of the Participant and that of his spouse as
of the date benefits commence under the Joint and Survivor Annuity.
1.17 LIMITATION YEAR means the Plan Year.
1.18 NORMAL PENSION means a retirement benefit payable monthly to the
Participant for his lifetime only.
1.19 NORMAL RETIREMENT BENEFIT means the amount of retirement income
computed under Section 4.01 of the Plan that would be payable in the
normal form under the conditions described in Section 5.01 of the
Plan, commencing upon the Participant's Normal Retirement Date, if he
is then entitled to receive a retirement income under the terms of
the Plan.
1.20 NORMAL RETIREMENT AGE means the later of the Participant's
sixty-fifth birthday or the fifth anniversary of the date he
commenced participation in the Plan.
1.21 NORMAL RETIREMENT DATE means the first day of the month coincident
with or immediately following the date a Participant attains his
Normal Retirement Age.
5
<PAGE> 12
1.22 PARTICIPANT means an Employee who meets the requirements of
participation in the Plan as provided in Article II.
1.23 PENSION BOARD means the pension plan board appointed by the Board to
administer the Plan.
1.24 PLAN means the Pension Plan for Certain Hourly Bargaining Unit
Employees of Werner Co.
1.25 PLAN ADMINISTRATOR means the Pension Board.
1.26 PLAN YEAR means the calendar year.
1.27 PRIOR PLAN means the Plan as it existed on December 31, 1998, prior
to this amendment and restatement.
1.28 RELATED EMPLOYER means any corporation or other business entity which
is included in a controlled group of corporations within which the
Employer is also included, as provided in Section 414(b) of the Code
(as modified, for purposes of Sections 4.07 and 4.08 of the Plan, by
Section 415(h) of the Code), or which is a trade or business under
common control with the Employer, as provided in Section 414(c) of
the Code (as modified, for purposes of Sections 4.07 and 4.08 of the
Plan, by Section 415(h) of the Code), or which constitutes a member
of an affiliated service group within which the Employer is also
included, as provided in Section 414(m) of the Code, or which is
required to be aggregated with the Employer pursuant to regulations
issued under Section 414(o) of the Code.
6
<PAGE> 13
1.29 RESTATEMENT DATE means January 1, 1999, the effective date of this
amendment and restatement of the Plan.
1.30 SERVICE means the period commencing on the Employee's Date of
Employment or Reemployment, whichever is applicable, and ending on
his Severance From Service date, as determined in accordance with the
following rules:
(a) An Employee's total period of Service shall be equal to his
total number of whole years of Service, whether or not all
periods of Service were completed consecutively. For
purposes of this aggregation, thirty (30) days shall equal
one (1) month and twelve (12) months shall equal one (1)
year with fractional months rounded to the next highest
month.
(b) An Employee who transfers from an ineligible to an eligible
class of Employees shall be credited with all of his
Service, both before and after such transfer. Such Service
shall be counted for both vesting and benefit accrual
purposes.
(c) An Employee who has been retired due to Total and Permanent
Disability and who, upon recovery from such Total and
Permanent Disability and discontinuance of his pension, is
reemployed shall be credited with his Service as of the date
of his prior retirement for the purpose of calculating any
subsequent pension benefit to which he may become entitled.
(d) Anything herein to the contrary notwithstanding, if an
Employee is absent on account of military duty, then such
absence shall be counted as Service while the Employee's
reemployment rights are protected by law, provided the
Employee returns to work within ninety (90) days after he is
7
<PAGE> 14
eligible for release from active duty.
(e) An Employee on an approved leave of absence under the Family
and Medical Leave Act of 1993 shall be credited with Service
only to the extent required under such Act. An Employee
shall be credited with Service for his period of qualified
military service as defined in the Uniformed Services
Employment and Reemployment Rights Act of 1994 upon such
Employee's return to work with the Employer or a Related
Employer.
1.31 SEVERANCE FROM SERVICE means the earliest of the following dates:
(a) The date on which an Employee terminates employment, is
discharged, retires, or dies;
(b) The date which is three (3) years after the first day on
which the Employee is absent because of disability;
provided, however, that an Employee who is injured while on
duty shall accumulate credit for Service until the end of
the period for which statutory compensation is payable to
him if later;
(c) The first anniversary of the date when the Employee is first
absent from Service because of leave of absence authorized
by the Employer, provided the Employee fails to return to
work by the second anniversary of such date;
(d) The second anniversary of the date the Employee is absent
because of maternity or paternity reasons;
8
<PAGE> 15
(e) The date on which his period of absence due to layoff equals
his prior period of Service, but such date shall not be less
than two (2) years nor more than five (5) years from the
date the layoff began; however, no continuous period of
layoff that exceeds two (2) years shall be included as
Service; or
(f) The first anniversary of the date the Employee is absent
for any other reason (e.g., sickness, vacation).
For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence:
(a) By reason of the pregnancy of the individual;
(b) By reason of a birth of a child of the individual;
(c) By reason of the placement of a child with the individual in
connection with the adoption of such child by such
individual; or
(d) For purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Employer's leave policy shall be applied in a uniform and
non-discriminatory manner to all Employees under similar
circumstances.
1.32 TOTAL AND PERMANENT DISABILITY means total and permanent disability
by bodily injury or disease from some unavoidable cause so as to be
prevented from engaging in any occupation or employment for
remuneration or profit, which, in the opinion of a
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<PAGE> 16
qualified physician, will be permanent and continuous during the
remainder of the Employee's life. Disability shall be deemed to have
resulted from an unavoidable cause unless it:
(a) Was contracted, suffered, or incurred while the Employee
was engaged in, or resulted from his having been engaged
in, a criminal enterprise;
(b) Resulted from an intentionally self-inflicted injury; or
(c) Resulted from habitual drunkenness or addiction to
narcotics.
Total and permanent disability resulting from any of such enumerated
causes, or from future service in the armed forces which prevents an
Employee from returning to employment with the Employer and for which
he receives a military pension, shall not entitle an Employee to
benefits due to Total and Permanent Disability under Section 4.05 of
the Plan.
A Participant will not cease to be deemed disabled solely because he
engages in gainful employment for purposes of rehabilitation as
approved by the Employer in a consistent and nondiscriminatory
manner.
1.33 TRUST AGREEMENT and TRUST mean the agreement between the Trustee and
the Employer governing the administration of the Trust Fund, as it
may be amended from time to time, and the Trust established
thereunder.
1.34 TRUST FUND means all money, securities, and other property held by
the Trustee for the purposes of the Plan, together with the income
therefrom.
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<PAGE> 17
1.35 TRUSTEE means the person, persons, entity, or entities appointed by
the Board to act as trustee of the Trust.
1.36 UNION means the United Steelworkers of America.
1.37 VESTED INTEREST means that portion of a Participant's Accrued Benefit
which is nonforfeitable and vested, based upon the number of years of
Vesting Service credited to the Participant.
1.38 VESTING SERVICE means a Participant's credit for purposes of
determining his right to a nonforfeitable benefit under the Plan.
Such Vesting Service shall mean the Employee's Service determined in
accordance with the following rules:
(a) If an Employee is reemployed by the Employer within the
twelve (12) consecutive month period beginning on the date
that the Employee quit, was discharged, retired, or began a
leave of absence per Contract, then the period of time
during which he was not employed shall count as Service.
(b) If an Employee returns to work within twenty-four (24)
months after a leave of absence authorized by the Employer
commenced, the period of time during which he was not at
work shall count as Service.
(c) If an Employee returns to work within twelve (12) months
after his sickness, vacation, disability or layoff
commenced, then the period of time during which he was not
at work shall count as Service.
(d) If an Employee does not complete an Hour of Service during
the twelve
11
<PAGE> 18
(12) consecutive month period beginning on his Severance
From Service date, then his Severance From Service date
shall be considered his "break-in-service" date and, unless
the former Employee is subsequently reemployed by the
Employer, he shall not be credited with any additional
Service.
(e) If an individual described in subparagraph (d) above is
later reemployed by the Employer, the special rules
described below shall apply:
Service prior to the Employee's most recent Severance From
Service date shall be counted along with Service earned
after the Employee's Date of Reemployment if:
(1) The Employee had any Vested Interest in his Accrued
Benefit prior to his most recent Severance From
Service date; or
(2) The Employee did not have any Vested Interest in his
Accrued Benefit at his most recent Severance From
Service date, but the Employee's period of Service
prior to his most recent Severance From Service date
exceeds the greater of five (5) years or the latest
period of severance during which the Employee was
not employed by the Employer.
If a reemployed Employee does not meet either test in (1) or
(2) above, then any Service earned prior to the Severance
From Service date shall be disregarded.
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<PAGE> 19
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION
Every Employee who was a Participant in the Prior Plan on December
31, 1998 shall continue to participate in the Plan on the Restatement
Date if, as of such date, he is both:
(a) In an hourly job classification of the Employer; and
(b) A member of a collective bargaining unit represented by
Local 3713 of the United Steelworkers of America.
Effective June 1, 1987, the Plan was frozen with respect to new
participation and Employees hired on or after such date shall not be
eligible for participation in the Plan. In addition, leased
employees, as defined in Section 414(n) of the Code, are not eligible
to participate in the Plan.
2.02 REEMPLOYMENT OF A PARTICIPANT
A Participant who incurs a Severance From Service shall be a
Participant immediately upon his Date of Reemployment, if he meets
the requirements of Sections 2.01(a) and 2.01(b) above.
13
<PAGE> 20
ARTICLE III
CONTRIBUTIONS
3.01 TRUSTEE AND TRUST AGREEMENT
The Plan shall be funded through the Trust Fund. The Trustee shall
have the rights, powers, and duties set forth in the Trust Agreement,
under which agreement the Trustee shall receive contributions from
the Employer to the Trust Fund.
3.02 EMPLOYER CONTRIBUTIONS
Except as otherwise provided by mutual agreement between the Employer
and the Union, during the continuance of the Plan, the Employer will
pay to the Trustee, to be held or applied under the Trust Agreement,
such amounts as shall comply with the funding requirements of the
Code.
3.03 FORFEITURES
Any forfeiture under the Plan shall be applied to reduce Employer
contributions and not to increase the benefits any Participant would
otherwise receive under the Plan.
3.04 REVERSION OF EMPLOYER CONTRIBUTIONS
At no time shall any part of the corpus or income of the Trust Fund
be used for or diverted to purposes other than for the exclusive
benefit of Participants and their Beneficiaries and to pay the
reasonable expenses of administration of the Plan and Trust, to the
extent that such expenses are not paid by the Employer, and no part
of the Trust Fund shall revert or be repaid to the Employer, either
directly or indirectly, except for such part of the Trust
14
<PAGE> 21
Fund, if any, which remains in the event the Plan is terminated and
after the satisfaction of all liabilities to persons entitled to
benefits under the Plan. Notwithstanding the foregoing, (a) if a
contribution is made by mistake of fact, then it shall be returned to
the Employer within one (1) year after the contribution was made; and
(b) all contributions by the Employer are made on the condition that
they meet the requirements for deductibility under Section 404 of the
Code and, to the extent disallowed as a deduction, shall be returned
to the Employer within one (1) year after disallowance.
15
<PAGE> 22
ARTICLE IV
BENEFITS
4.01 NORMAL RETIREMENT BENEFIT
A Participant who retires at his Normal Retirement Age shall be
entitled to a monthly retirement income payable as provided in
Article V of the Plan, commencing upon his Normal Retirement Date, in
an amount equal to one-twelfth (1/12) of: One hundred eighty-six
dollars ($186) multiplied by the number of the Participant's years of
Service, not to exceed forty (40).
If any Participant is or shall become, or upon application would
become, entitled to any other retirement income or payment in the
nature of a pension (other than primary old age insurance benefits or
disability insurance benefits provided under the Social Security Act)
from any source or fund, to which source or fund the Employer shall
have directly or indirectly contributed, then the amount of the
retirement income payable to such Participant for any period shall be
reduced by the amount of any such other retirement income paid or
payable to him or that would upon application become payable to him
during the time any retirement income is payable under this Plan;
provided, however, if such Participant shall have contributed to the
source or fund out of which such other retirement income shall be
paid or become payable or would become payable upon application, the
amount by which the retirement income payable under this Plan shall
be reduced for any period shall be decreased by the amount
attributable to the contributions that such Participant shall have
made to such source or fund.
Notwithstanding anything to the contrary in the preceding paragraphs
of this section, if a Participant is entitled to a benefit from the
Employer's individual account retirement plan, then the retirement
income payable to the Participant under this Plan shall not be
reduced by the benefit from the individual account retirement plan.
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<PAGE> 23
In no event will the total yearly amount of retirement income to be
provided for a reemployed Participant on account of all periods of
employment be greater than the yearly amount of retirement income
that would have been provided for him if his prior Severance From
Service had not occurred.
4.02 POSTPONED RETIREMENT BENEFIT
If a Participant remains in the employ of the Employer after his
Normal Retirement Date, his Postponed Retirement Date shall be the
first day of the month next following the date on which he actually
retires from employment. A Participant who retires on a Postponed
Retirement Date shall be entitled to a retirement income payable as
provided in Article V of the Plan, commencing on his Postponed
Retirement Date, in the amount determined under the formula set forth
in Section 4.01 of the Plan, based on his years of Service at his
Postponed Retirement Date, to a maximum of forty (40) years. A
Participant who remains in the employ of the Employer after his
Normal Retirement Date shall be notified by the Plan Administrator,
in writing by personal delivery or first-class mail, during the
calendar month during which his Normal Retirement Date occurs, that
he will not be entitled to receive any benefit for any calendar month
of employment during which he is scheduled to work forty (40) or more
Hours of Service or receives from the Employer or a Related Employer
payment for any Hours of Service performed on each of eight (8) or
more days in such month (or separate work shifts), provided that the
Plan has not determined or used the actual number of Hours of
Service. The benefit of such Participant shall be actuarially
increased to reflect the benefit payable to such Participant for any
calendar month during which he does not complete forty (40) Hours of
Service or receive from the Employer or a Related Employer payment
for any Hours of Service performed on each of eight (8) or more days
in such month (or separate work shifts), provided the Plan has not
determined or used the actual number of Hours of Service. If such
Participant dies before the commencement of his benefit, as so
increased, a single sum equal to the aggregate benefit
17
<PAGE> 24
payable to the Participant for each month after his Normal Retirement
Date during which he did not complete at least forty (40) Hours of
Service shall be paid to his surviving spouse, and if none, to his
estate. However, the benefit the Participant accrued under this
Section 4.02 during a period in which he worked less than forty (40)
Hours of Service a month will be offset by the value of the single
sum death benefit described in the preceding sentence. If the
Participant is not given notice of suspension of benefits as
described above, then, upon retirement, the Participant shall be
entitled to receive a benefit calculated by actuarially increasing
the benefit payable at Normal Retirement Date to the date of
retirement if such benefit is greater than the benefit otherwise
payable under the Plan.
4.03 EARLY RETIREMENT BENEFIT
A Participant who has reached his Early Retirement Age may retire at
any time prior to his Normal Retirement Age. A Participant who
retires on or after his Early Retirement Age, but prior to his Normal
Retirement Age, shall be entitled to a retirement income for life,
commencing upon his Normal Retirement Date, in an amount equal to his
Accrued Benefit. However, the Participant may elect to have his
retirement income begin on the first day of any month on or after his
Early Retirement Date, in which event he shall be entitled to receive
a retirement income for life in an amount equal to his Accrued
Benefit, multiplied by the applicable Adjustment Factor shown on the
attached Table I.
4.04 TERMINATION OF VESTED PARTICIPANT
A Participant who has completed at least five (5) years of Vesting
Service and who incurs a Severance From Service before he becomes
eligible to retire at his Normal Retirement Age, his Disability
Retirement Age, or his Early Retirement Age shall be entitled to
receive a retirement income for life commencing upon his Normal
Retirement Date in an amount equal to his Accrued Benefit. However,
the Participant, if he has completed at
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<PAGE> 25
least fifteen (15) years of Vesting Service, may elect to have his
retirement income begin on the first day of any month within the five
(5) year period immediately preceding his Normal Retirement Date, in
which event he shall be entitled to receive a retirement income for
life in an amount equal to his Accrued Benefit, multiplied by the
applicable Adjustment Factor shown on the attached Table I. A
Participant who incurs a Severance From Service before he completes
five (5) years of Vesting Service or before his Normal Retirement Age
shall not be entitled to any benefits under the Plan, except as
provided in Article IX, and his Accrued Benefit shall be forfeited on
the date he incurs a Severance From Service of five (5) years.
4.05 DISABILITY RETIREMENT BENEFIT
(a) A Participant who incurs a Severance From Service on or
after his Disability Retirement Age shall be entitled to a
disability retirement pension, which shall commence on his
Disability Retirement Date. The monthly amount of such
Participant's disability retirement pension is the monthly
retirement income computed in accordance with Section 4.01
(based on the Participant's Service and the benefit
multiple in effect on his date of Total and Permanent
Disability). If the Participant's disability retirement
pension is to commence after a period of time when he
receives statutory compensation, his disability retirement
pension shall be based on his Service when his disability
retirement pension is to begin.
The monthly amount of disability retirement pension will,
however, be reduced by the monthly value of any periodic
payment provided for the Participant under any workers'
compensation law or similar law that becomes payable while
he is receiving disability benefits under the Plan.
19
<PAGE> 26
(b) A Participant applying for or receiving a disability
retirement pension may be required to submit to an
examination by a competent physician acceptable to the
Employer and may be required to submit to such
reexaminations at reasonable intervals as shall be
determined by the Pension Board to make a determination
concerning his physical condition. If a Participant
refuses to submit to periodic medical examinations, his
benefits shall be discontinued until he completes the
examination. If, on the basis of such an examination, it
is found that the Participant is no longer Totally and
Permanently Disabled, payment of his disability retirement
pension shall be terminated. Payment of the disability
retirement pension will be made until the earliest of the
following dates:
(1) The date the Participant ceases to be disabled;
(2) The Participant's Normal Retirement Date; or
(3) The date of the Participant's death.
(c) In the case of a Participant who is unmarried at the time
his disability retirement pension commences, the benefit
shall be in the form of a pension payable during his
lifetime only, but ceasing with the cessation of Total and
Permanent Disability, prior to Normal Retirement Date.
In the case of a Participant who is married and has not
attained Normal Retirement Age at the time his disability
retirement pension commences, the benefit shall be in the
form of a pension payable during his lifetime only, and
ceasing with the cessation of Total and Permanent
Disability.
20
<PAGE> 27
A Participant who is receiving a disability retirement
pension as of his Normal Retirement Date shall be eligible
to receive retirement income in accordance with Article V
(based on the Participant's Service and the Plan as in
effect as of the Participant's date of Total and Permanent
Disability). If a Participant ceases to be disabled before
his Normal Retirement Date and if he promptly returns to
the employment of the Employer, he will not be considered
to have interrupted his employment but he will not have
accrued Service during the period of his Disability. If a
Participant ceases to be disabled before his Normal
Retirement Date and does not promptly return to the
employment of his Employer, he will be considered to have
terminated his employment on the date he became disabled
and his Vested Interest will be determined in accordance
with the terms of the Plan on the date he became disabled.
4.06 MINIMUM BENEFITS
In no event shall any Participant who was participating in the Prior
Plan prior to January 1, 1999 receive a benefit less than the benefit
he would have been entitled to receive under the Prior Plan.
4.07 MAXIMUM BENEFITS
For purposes of compliance with Section 415 of the Code (or any
successor to said Section), the following limitations on Plan
benefits are hereby imposed:
(a) The retirement benefits payable to a Participant in any
Limitation Year shall not exceed an annual sum equal to
the least of:
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<PAGE> 28
(1) Ninety thousand dollars ($90,000) (or such other
amount as may be determined by Treasury regulations
issued pursuant to Section 415 of the Code).
(2) The Participant's average annual compensation (as
defined in Section 4.09) over the three (3)
consecutive calendar years during which his
compensation (as defined in Section 4.09) from the
Employer or a Related Employer was the highest.
(3) If the Participant has less than ten (10) years of
participation in the Plan, the amount determined
under Section 4.07(a)(1) multiplied by a fraction,
the numerator of which is the number (not less than
one (1)) of years (or parts thereof) of
participation in the Plan and the denominator of
which is ten (10); provided, however, that for
purposes of Section 4.08, the limitation shall be
based on Vesting Service rather than on years of
participation.
(4) If the Participant has less than ten (10) years of
Service, the amount determined under Section
4.07(a)(2) multiplied by a fraction, the numerator
of which is the Participant's number (not less than
one (1)) of years of Service and the denominator of
which is ten (10).
Notwithstanding the foregoing, in the event that a
Participant has never participated in any defined
contribution plan maintained by the Employer or a Related
Employer, the annual pension payable to such Participant
shall not be deemed to exceed the limitations of this
section if it does not
22
<PAGE> 29
exceed ten thousand dollars ($10,000) multiplied by a
fraction, the numerator of which is the number (not less than
one (1)) of the Participant's years of Vesting Service and
the denominator of which is ten (10).
Pensions payable in a form other than a straight life annuity
shall be adjusted to an actuarially equivalent straight life
annuity before applying the limitations of this Section 4.07.
For distributions occurring prior to January 1, 1995, the
straight life annuity shall equal the greater of (1) such
annuity determined using the interest rate and mortality
table specified in Section 1.02 and (2) such annuity
determined using an interest rate of five percent (5%) and
the mortality table specified in Section 1.02. Effective
January 1, 1995, to determine actuarial equivalence for this
purpose where the benefit is NOT subject to Section 417(e)(3)
of the Code, the actuarially equivalent straight life annuity
shall equal the greater of (1) such annuity determined using
the Plan's interest rate and mortality table specified in
Section 1.02 and (2) such annuity determined using the 83 GAM
unisex mortality table and an interest rate of five percent
(5%). For purposes of adjusting any benefit subject to
Section 417(e)(3) of the Code effective January 1, 1995, the
straight life annuity will be equal to the greater of (i) the
equivalent straight life annuity computed using the interest
rate and mortality table specified in Section 1.02 and (ii)
the equivalent straight life annuity computed using the
applicable interest rate as defined in Section 417(e)(3) of
the Code and the GAM 83 unisex mortality table or any
successor mortality table prescribed by the Secretary of the
Treasury for purposes of Section 415 of the Code. No
actuarial adjustment to the benefit is required for the value
of a Joint and Survivor Annuity form.
23
<PAGE> 30
(b) If payments begin prior to a Participant's Social Security
Retirement Age but on or after age sixty-two (62), the
limitation in subparagraph (a)(1) shall be adjusted as
follows.
(1) If a Participant's Social Security Retirement Age is
sixty-five (65), the limitation for benefits commencing
on or after age sixty-two (62) is determined by
reducing the limitation in subparagraph (a)(1) by 5/9
of one percent for each month by which benefits
commence before the month in which the Participant
attains age sixty-five (65).
(2) If a Participant's Social Security Retirement Age is
greater than age sixty-five (65), the limitation for
benefits commencing on or after age sixty-two (62) is
determined by reducing the limitation in subparagraph
(a)(1) by 5/9 of one percent for each of the first
thirty-six (36) months and 5/12 of one percent for each
of the additional months (up to twenty-four (24)
months) by which benefits commence before the month in
which the Participant attains his Social Security
Retirement Age.
(c) If benefit payments begin prior to a Participant's
attainment of age sixty-two (62), the Plan Administrator
shall reduce the limitation in subparagraph (a)(1) at age
sixty-two (62) (as calculated pursuant to subparagraph (b))
on an actuarially equivalent basis for each month by which
benefits commence before the month in which the Participant
attains age sixty-two (62) as follows:
(1) For distributions occurring prior to January 1, 1995,
the Plan Administrator shall use an interest rate
assumption
24
<PAGE> 31
equal to the greater of five percent (5%) per annum or the
rate specified in Section 1.02 and shall use the mortality
table specified in Section 1.02.
(2) For distributions commencing on or after January 1, 1995,
the reduced dollar limitation in subparagraph (a)(1) shall
be the lesser of (i) the actuarial equivalent of the
limitation in subparagraph (a)(1) at age sixty-two (62)
determined on the basis of the interest rate and mortality
table specified in Section 1.02, or (ii) the actuarial
equivalent of the dollar limitation at age sixty-two (62)
computed using five (5%) percent interest and the GAM 83
unisex mortality table or any successor mortality table
prescribed by the Secretary of the Treasury.
(d) If benefit payments begin after a Participant's Social Security
Retirement Age, the Plan Administrator shall increase the
limitation in subparagraph (a)(1) at Social Security Retirement
Age on an actuarially equivalent basis, as follows:
(1) For distributions occurring prior to January 1, 1995, the
Plan Administrator shall use an interest rate assumption
equal to the lesser of five percent (5%) per annum or the
rate specified in Section 1.02 and shall use the mortality
table specified in Section 1.02.
(2) For distributions commencing on or after January 1, 1995,
the increased dollar limitation in subparagraph
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<PAGE> 32
(a)(1) shall be the lesser of (i) the actuarial equivalent
of the limitation of subparagraph (a)(1) at Social Security
Retirement Age determined on the basis of the interest rate
and mortality table specified in Section 1.02; or (ii) the
actuarial equivalent of the limitation under subparagraph
(a)(1) at Social Security Retirement Age computed using five
(5) percent interest and the GAM 83 unisex mortality table
or any successor mortality table prescribed by the Secretary
of the Treasury.
(e) Notwithstanding the foregoing, determinations under Code
Section 415(b)(2)(E) that are made before January 1, 2000
shall be made on the basis of Code Section 415(b)(2)(E) as
in effect on December 7, 1994 and the provisions of the Plan
as in effect on December 7, 1994.
(f) For purposes of Section 4.07(e) of this Plan, "Social
Security Retirement Age" shall mean the age used as the
retirement age for the Participant under Section 216(l) of
the Social Security Act, except that such section shall be
applied without regard to the age increase factor and as if
the early retirement age under Section 216(l)(2) of such Act
were sixty-two (62).
4.08 COMBINED MAXIMUM LIMITATIONS
In the event any Participant is also participating in any other
qualified defined contribution plan (within the meaning of Section
401 of the Internal Revenue Code) maintained by the Employer or a
Related Employer, then for any Limitation Year the sum of the
"Defined Benefit Plan Fraction" and the "Defined Contribution Plan
Fraction" for such Limitation Year shall not exceed 1.0. For purposes
of this Section 4.08, such sum shall be determined
26
<PAGE> 33
in accordance with the following:
(a) The "Defined Benefit Plan Fraction" for any year is a fraction:
(1) The numerator of which is a projected annual benefit of the
Participant under each defined benefit plan (determined as
of the close of the year); and
(2) The denominator of which is the lesser of the maximum dollar
limitation in effect under Section 415(b)(1)(A) of the Code
for such Limitation Year times 1.25, or the amount which may
be taken into account under Section 415(b)(1)(B) of the Code
for such Limitation Year times 1.4.
(b) The "Defined Contribution Plan Fraction" for any year is a
fraction:
(1) The numerator of which is the sum of the annual additions to
the Participant's account under each defined contribution
plan as of the close of the year; and
(2) The denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and
each prior year of service with the Employer or a Related
Employer:
(A) The product of 1.25 multiplied by the dollar limitation
in effect under Section
27
<PAGE> 34
415(c)(1)(A) of the Code for such Limitation Year; or
(B) The product of 1.4 multiplied by the amount which may
be taken into account under Section 415(c)(1)(B) of the
Code for such Limitation Year.
The annual additions for any Limitation Year beginning before October
1, 1987 shall not be recomputed to treat all employee contributions
as annual additions.
For purposes of this Section 4.08, all defined benefit or defined
contribution plans shall be treated as one (1) plan by class. In the
event the above limitation would otherwise be exceeded in any
Limitation Year, the Participant's benefits under this Plan are to be
limited.
If the Plan satisfied the applicable requirements of Section 415 of
the Code as in effect for all Limitation Years beginning before
October 1, 1987, an amount shall be subtracted from the numerator of
the Defined Contribution Plan Fraction (not exceeding such
numerator), as prescribed by the Secretary of the Treasury, so that
the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction computed under Section 415(e)(1) of the
Code does not exceed one (1).
Notwithstanding the foregoing, effective for Limitation Years
beginning after December 31, 1999, this Section 4.08 shall be of no
force and effect.
28
<PAGE> 35
4.09 DEFINITION OF COMPENSATION FOR PURPOSES OF SECTIONS 4.07 AND 4.08
(a) Solely for the purpose of applying the limitations of Sections
4.07 and 4.08, the compensation of a Participant includes:
(1) A Participant's wages, salaries, fees for professional
services, and other amounts received (without regard to
whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with
the Employer or Related Employer to the extent that the
amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe
benefits, reimbursements, and expense allowances); provided,
however, that the compensation of a Participant effective
January 1, 1998 shall include the Participant's elective
deferrals under Section 402(g)(3) and Section 125 of the
Code;
(2) In the case of a Participant who is an employee within the
meaning of Section 401(c)(1) of the Code and the regulations
thereunder, the Participant's earned income (as described in
Section 401(c)(2) of the Code and the regulations
thereunder);
(3) Amounts described in Sections 104(a)(3), 105(a), and 105(h)
of the Code, but only to the extent these amounts
29
<PAGE> 36
are includable in the gross income of the Employee;
(4) Amounts paid or reimbursed by the Employer for
moving expenses incurred by an Employee, but only
to the extent that these amounts are not deductible
by the Employee under Section 217 of the Code;
(5) The value of a nonqualified stock option granted to
an Employee by the Employer, but only to the extent
that the value of the option is includable in the
gross income of the Employee for the taxable year
in which granted; and
(6) The amount includable in the gross income of an
Employee upon making the election described in
Section 83(b) of the Code.
(b) Solely for the purpose of applying the limitations of
Sections 4.07 and 4.08, the compensation of a Participant
excludes:
(1) Contributions made by the Employer or a Related
Employer to a plan of deferred compensation which
are not included in the Participant's gross income
for the taxable year in which contributed
(effective January 1, 1998, other than as described
in Section 402(g)(3) of the Code), Employer
contributions under a simplified employee pension
plan to the extent such contributions are excluded
from the Participant's gross income, or any
distributions from a plan of deferred compensation;
30
<PAGE> 37
(2) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock
(or property) held by the Participant either
becomes freely transferable or is no longer subject
to substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified
stock option; and
(4) Other amounts which received special tax benefits,
or contributions made by the Employer (whether or
not under a salary reduction agreement) toward the
purchase of an annuity described in Code Section
403(b) (whether or not the amounts are actually
excludable from the gross income of the Employee),
and effective January 1, 1998, other than those
excluded from the gross income of the Employee by
reason of Section 125 of the Code.
4.10 REEMPLOYMENT AFTER RECEIPT OF BENEFITS
(a) A Participant who terminates employment and is rehired
without having received retirement benefits and who once
again becomes a Participant in the Plan may later retire and
receive benefits based upon his entire period of Service
both before and after such termination and reemployment, to
the extent not disregarded under Section 1.38.
(b) A Participant who retires and is rehired prior to his Normal
Retirement Date after beginning to receive retirement
benefits shall have such payments suspended.
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In the event that a reemployed, retired Participant accrues
further periods of Service, he may later retire again to
receive benefits based upon his total period of Service both
before and after such termination and reemployment. However,
the subsequent retirement benefits shall be reduced by the
Actuarial Equivalent of the benefits he received prior to
his reemployment.
(c) A Participant who retires and is rehired after his Normal
Retirement Date and after beginning to receive retirement
benefits shall have such payments suspended. No payment
shall be suspended unless the Plan Administrator gives
written notice to the Employee by personal delivery or
first-class mail, during the month in which his reemployment
occurs, that he will not receive any benefit for any
calendar month of employment during which he works forty
(40) or more Hours of Service for the Employer or a Related
Employer or receives from the Employer or a Related Employer
payment for any Hours of Service performed on each of eight
(8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service. The benefit of such Participant
shall be actuarially increased to reflect the benefit
payable to such Participant for any calendar month during
which he does not complete forty (40) Hours of Service for
the Employer or a Related Employer or receive from the
Employer or a Related Employer payment for any Hours of
Service performed on each of eight (8) or more days in such
month (or separate work shifts), provided that the Plan has
not determined or used the actual number of Hours of
Service. If such Participant dies before the commencement of
his benefit, as so increased, a single sum equal to the
aggregate benefit payable to the Participant for each month
after his Normal Retirement Date during which he did not
complete at least forty (40) Hours of Service for the
Employer or a Related Employer or receive
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from the Employer or a Related Employer payment for any
Hours of Service performed on each of eight (8) or more days
in such month (or separate work shifts), provided that the
Plan has not determined or used the actual number of Hours
of Service shall be paid to his surviving spouse, and if
none, to his estate. However, the benefit the Participant
accrued under Section 4.02 during a period in which he
worked less than forty (40) Hours of Service a month will be
offset by the value of the single sum death benefit
described in the preceding sentence. Hours of Service in
this subsection are hours as defined under Department of
Labor Regulation Section 2530.200b-2(a).
In the event that a reemployed, retired Participant accrues
further periods of Service, he may later retire again, to
receive benefits based upon his total period of Service both
before and after such termination and reemployment. However,
the subsequent retirement benefits shall be reduced by the
Actuarial Equivalent of the benefits he received prior to
his Normal Retirement Date. In the event that, by mistake,
suspension occurs without notice as provided in this
subsection, the Participant shall be entitled to receive a
benefit calculated by actuarially increasing the benefit
payable at Normal Retirement Date to the date of subsequent
retirement if such benefit is greater than the benefit
described in this paragraph.
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ARTICLE V
FORM AND PAYMENT OF BENEFITS
5.01 NORMAL PENSION
If a Participant is unmarried as of his Annuity Starting Date, the
benefit payments determined under Article IV shall be in the form of
a Normal Pension, unless the Participant elects the optional form of
payment provided in the Plan in accordance with the procedures of
Section 5.03. The benefit formula in Section 4.01 yields payments in
the form of a Normal Pension.
5.02 JOINT AND SURVIVOR ANNUITY
If a Participant is married on his Annuity Starting Date, benefit
payments determined under Article IV shall be in the form of a Joint
and Survivor Annuity, unless the Participant, with the consent of the
Participant's spouse, elects either the Normal Pension or the
optional form of payment provided in the Plan in accordance with the
procedures of Section 5.04.
5.03 ELECTION NOT TO RECEIVE NORMAL PENSION
An unmarried Participant may elect in writing, during the ninety (90)
day period ending on his Annuity Starting Date, to waive the
automatic Normal Pension form of benefit described in Section 5.01
and to make a qualified election of the optional form of payment
permitted under the Plan. No less than thirty (30) days and no more
than ninety (90) days prior to the Participant's Annuity Starting
Date and consistent with such regulations as the Secretary of the
Treasury may prescribe, the Pension Board shall provide the
Participant with a written explanation of:
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(a) The terms and conditions of the Normal Pension;
(b) The Participant's right to make and the effect of an election to
waive the Normal Pension;
(c) The right of the Participant to revoke such election and the
effect of such revocation; and
(d) The relative value of the optional form of benefit available
under the Plan.
5.04 ELECTION NOT TO RECEIVE JOINT AND SURVIVOR ANNUITY
(a) A Participant may, with his spouse's written consent, elect in
writing, during the ninety (90) day period ending on his Annuity
Starting Date, to waive the automatic Joint and Survivor Annuity
form of payment described in Section 5.02 and to make a qualified
election of either the Normal Pension or the optional form of
payment permitted under the Plan. The spouse's consent must
acknowledge the effect of such election and be witnessed by a
Plan representative or notary public. The spouse must also
consent both to the specific optional form of benefit chosen and
to the specific Beneficiary designated, if applicable.
Notwithstanding the foregoing, this paragraph (a) shall not apply
if it is established to the Pension Board's satisfaction that the
spouse cannot be located or that other circumstances set forth in
regulations promulgated under Section 417 of the Code which
preclude the necessity of the spouse's consent are present with
respect to the Participant.
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(b) No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent
with such regulations as the Secretary of the Treasury may
prescribe, the Pension Board shall provide the Participant with a
written explanation of:
(1) The terms and conditions of the Joint and Survivor Annuity;
(2) The Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity;
(3) The right of the Participant's spouse to consent to any
election to waive the Joint and Survivor Annuity;
(4) The right of the Participant to revoke such election and the
effect of such revocation; and
(5) The relative values of the forms of benefit available under
the Plan.
5.05 ADDITIONAL RULES APPLICABLE TO BENEFIT ELECTIONS
Notwithstanding the provisions of Sections 5.03 and 5.04 above, the
following procedures shall apply to the distribution of benefits
hereunder. If the Participant, after having received the written
explanation of Normal Pension or Joint and Survivor Annuity as
applicable, affirmatively elects a form of distribution and the spouse
consents in writing to that form of distribution, if necessary, the
Annuity Starting Date may be less than thirty (30) days after the
written explanation was provided to the
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Participant, and the written explanation may be provided after the
Annuity Starting Date, provided that the following requirements are
met:
(a) The Pension Board provides information to the Participant clearly
indicating that the Participant has a right to at least thirty
(30) days to consider whether to waive the Normal Pension or
Joint and Survivor Annuity and consent to an alternative form of
distribution. The Participant (and, if the Participant is
married, and if payment is to be made in a form other than the
Joint and Survivor Annuity, the Participant's spouse)
affirmatively waives the requirement that the written explanation
be provided at least thirty (30) days before the Annuity Starting
Date. In such event, payment may commence less than thirty (30)
days after the written explanation is provided to the
Participant. If the written explanation is provided after the
Annuity Starting Date, the Participant (and, if the Participant
is married and if payment is to be made in a form other than the
Joint and Survivor Annuity, the Participant's spouse)
affirmatively waives the requirement that distribution must
commence at least thirty (30) days after the written explanation
is provided. In such event, payment may commence less than thirty
(30) days after the written explanation is provided to the
Participant.
(b) The Participant is permitted to revoke an affirmative
distribution election at least until the Annuity Starting Date,
or, if later, at any time prior to the expiration of the
seven-day period that begins the day after the explanation of the
Normal Pension or Joint and Survivor Annuity is provided to the
Participant.
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(c) Distribution in accordance with the affirmative election does not
commence before the expiration of the seven-day period that
begins the day after the explanation of the Normal Pension or
Joint and Survivor Annuity is provided to the Participant. If a
written explanation is provided after the Annuity Starting Date,
payments retroactive to such date shall be made to the
Participant when distribution commences.
5.06 PAYMENT IN OPTIONAL FORM ON RETIREMENT
(a) As an optional form of payment, a Participant may elect to have
his retirement income paid in the form of a contingent annuitant
option. A contingent annuitant option is a reduced monthly income
payable to the Participant during his lifetime with payments to
continue after his death to his designated Beneficiary for the
lifetime of the Beneficiary in an amount equal to fifty percent
(50%) of the reduced monthly amount to the Participant during his
lifetime. The Participant's monthly income under the contingent
annuitant option shall be an amount equal to the amount payable
under the Normal Pension, multiplied by the applicable Adjustment
Factor as shown on Table II attached hereto.
A Participant's life expectancy may be recalculated no more
frequently than annually; however, the life expectancy of a
nonspouse Beneficiary may not be recalculated.
All distributions shall be determined and made in accordance with
Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirements of Section 1.401(a)(9)-2 of the
Proposed Regulations.
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(b) If a Participant's Annuity Starting Date precedes his Normal
Retirement Date, then such Participant must consent in
writing to the early commencement of benefits. His spouse
must also consent in writing to the early commencement of
benefits unless payment is made in the form of a Joint and
Survivor Annuity.
(c) A Participant who has elected an alternative form of benefit
payment may revoke such election at any time before his
Annuity Starting Date without the consent of his spouse, if
any. Another election to receive his retirement income in
another form must be made in accordance with this Article V.
If a Participant who has elected an optional form of benefit
dies prior to his Annuity Starting Date, retirement income
payments shall be made in accordance with the provisions of
the Plan as if no optional form of retirement income had
been elected. If a Participant who has elected an optional
form of benefit dies either on or after his Annuity Starting
Date, retirement income payments shall be made in accordance
with the optional form elected.
5.07 PRE-RETIREMENT SURVIVOR ANNUITY
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and if he is survived by a spouse to whom he has been
married throughout the twelve (12) month period preceding his death,
such spouse shall be eligible to receive a Pre-retirement Survivor
Annuity under this Section 5.07, payable as set forth in subsection
(a) or (b) below, whichever is applicable:
(a) If a Participant dies during employment on or after the
attainment of his Early Retirement Age, the Pre-retirement
Survivor Annuity shall be a
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monthly income payable for the life of the spouse, equal to the
benefit that would have been payable to the spouse had the
deceased Participant retired on the day before death and elected
immediate commencement of benefits in the Joint and Survivor
Annuity (fifty percent [50%]) form. Payment to the spouse will
begin on the first day of the month coinciding with or next
following the Participant's date of death unless the spouse
elects to defer distribution. The last monthly payment shall be
made for the month in which death of such spouse occurs. The
spouse may elect to defer commencement of benefits, but not
beyond the date the Participant would have attained age seventy
and one-half (70 1/2).
(b) If a Participant dies during employment but prior to the
attainment of his Early Retirement Age, or, in the case of the
death of a former Participant, the following rules shall apply:
(1) If a Participant or former Participant was eligible to
immediately commence receipt of his retirement income as of
the date of his death, the Pre-retirement Survivor Annuity
shall be a monthly income payable for the life of the
spouse, equal to the benefit that would have been payable to
the spouse had such Participant retired on the day before
death and elected immediate commencement of benefits in the
Joint and Survivor Annuity (fifty percent [50%]) form.
Payment to the spouse will begin on the first day of the
month coinciding with or next following the Participant's
date of death unless the spouse elects to defer
distribution. The last monthly payment shall be made for the
month in which death of such spouse occurs. The spouse may
elect to defer commencement of benefits, but
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not beyond the date the Participant would have attained age
seventy and one-half (70 1/2).
(2) If a Participant or former Participant was not eligible to
immediately commence receipt of benefits hereunder as of the
date of his death, the Pre-retirement Survivor Annuity shall
be a monthly income payable for the life of the spouse,
equal to the benefit that would have been payable to such
spouse had the Participant terminated employment on his date
of death (except, where termination of employment occurred
prior to his death, the Participant's date of termination of
employment shall be used) and then survived and retired on
the first date upon which he could have elected immediate
benefits and elected immediate commencement of benefits in
the Joint and Survivor Annuity (fifty percent [50%]) form.
Payment to the spouse will begin on the first day of the
month in which the Participant could have elected immediate
benefits had he survived unless the spouse elects to defer
distribution. The last monthly payment shall be made for the
month in which death of such spouse occurs. The spouse may
elect to defer commencement of benefits, but not beyond the
date the Participant would have attained age seventy and
one-half (70 1/2).
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5.08 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
If a Participant or Beneficiary is under a legal disability or, by
reason of illness or mental or physical disability, is unable, in the
opinion of the Pension Board, to attend properly to his personal
financial matters, the Trustee may make such payments in such of the
following ways as the Pension Board shall direct:
(a) Directly to such Participant or Beneficiary; or
(b) To the legal representative of such Participant or Beneficiary.
Any payment made pursuant to this Section 5.08 shall be in complete
discharge of the obligation for such payment under the Plan.
5.09 NO GUARANTY OF BENEFITS
The benefits provided under the Plan shall be paid solely from the
assets of the Trust Fund. Nothing contained in the Plan or the Trust
Agreement shall constitute a guaranty by the Employer or the Trustee
that the assets of the Trust Fund will be sufficient to pay any
benefit to any person.
5.10 TIME OF PAYMENT
Unless the Participant elects otherwise, payment shall be made or
shall commence not later than the sixtieth day after the close of the
Plan Year in which the latest of the following occurs:
(a) The Participant attains age sixty-five (65);
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(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(c) The Participant terminates his employment with the Employer.
Payment of retirement income to any Participant shall commence no
later than the April 1 of the calendar year following the calendar
year in which the Participant attains age seventy and one-half (70
1/2), whether or not such Participant has retired. Payment shall be
made in a form of payment provided under Section 5.01, 5.02 or 5.06,
and such forms of payment do not extend beyond the life of the
Participant or over the lives of the Participant and a designated
Beneficiary (or the life expectancy of the Participant or the life
expectancies of the Participant and a designated Beneficiary.) The
preceding two sentences shall not apply to a Participant who:
(a) Has made a written election to receive his benefits under
the Plan at a later date in accordance with Section 242(b)
of the Tax Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before
January 1, 1988 and was not a five percent (5%) owner of the
Employer or a Related Employer at any time during the Plan
Year ending with or within the calendar year in which such
individual attained age sixty-six and one-half (66 1/2) or
any subsequent Plan Year.
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5.11 DEATH DISTRIBUTION REQUIREMENTS
(a) In addition to any other requirements specified in the Plan, if
the Participant dies after his Annuity Starting Date, the
remaining portion of his retirement income will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(b) In addition to any other requirements specified in the Plan, if
the Participant dies before distribution of his interest
commences, the Participant's entire interest payable pursuant to
his death, if any, will be distributed no later than five (5)
years after the Participant's death except to the extent one of
the exceptions below is satisfied:
(1) If any portion of the Participant's interest is payable to a
designated Beneficiary, pursuant to an election made under
Section 5.06(a), distributions may be made in substantially
equal installments over the life or life expectancy of the
designated Beneficiary commencing no later than one (1) year
after the Participant's death;
(2) If the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the date
on which the Participant would have attained age seventy and
one-half (70 1/2), and if the spouse dies before payments
begin, subsequent distributions shall be made as if the
spouse had been the Participant.
This Section 5.11(b) is included solely as required under
Section 401(a)(9) of the Code and Regulations thereunder
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and
does not provide for a death benefit or distribution option
not otherwise provided under the Plan.
5.12 DIRECT ROLLOVERS
A Distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan in the form
of a Direct Rollover. Notwithstanding the above, an Eligible Rollover
Distribution of less than two hundred dollars ($200) is not eligible
for a Direct Rollover. Further, a Distributee may elect to have an
Eligible Rollover Distribution paid to only one Eligible Retirement
Plan in a Direct Rollover.
For purposes of this Section 5.12, the following definitions apply:
(a) "Distributee" means a Participant or former Participant, his
surviving spouse, his spouse, or his former spouse who is
the Alternate Payee under a Qualified Domestic Relations
Order.
(b) "Eligible Rollover Distribution" means any distribution of
all or any portion of the Participant's vested Accrued
Benefit, except that an Eligible Rollover Distribution
does not include any distribution that is one (1) of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Participant, or the joint lives (or
joint life expectancies) of the Participant and his
designated Beneficiary, or for a specified period of ten
(10) years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the
Code; and the portion of any distribution that is not
includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect
to employer securities).
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(c) "Eligible Retirement Plan" means an individual retirement
account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a)
of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is limited to an individual
retirement account or individual retirement annuity.
(d) "Direct Rollover" means a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
(e) The Pension Board shall clearly inform the Distributee
that he has a right to a period of at least thirty (30)
days after receiving the notice required by Section 402(f)
of the Code to consider the decision of whether or not to
elect a distribution and, if so, to make a Direct
Rollover. The Distributee may thereafter waive the
thirty-day period by electing a distribution prior to the
expiration of such period.
5.13 LOST PARTICIPANTS
Any benefit payable under this Plan shall be forfeited if the Pension
Board, after reasonable effort, is unable to locate the Participant
or Beneficiary to whom payment is due. Any such benefit shall be
restored, without actuarial adjustment or earnings, if a claim for
the forfeited benefit is made by the Participant or Beneficiary to
whom such benefit was payable. Such forfeited amounts shall be used
to reduce Employer Contributions, as provided in Section 3.03.
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ARTICLE VI
FIDUCIARY RESPONSIBILITY
6.01 FIDUCIARY RESPONSIBILITY PROVISIONS
As required by ERISA, the Employer has appointed certain named
fiduciaries of this Plan and, until otherwise changed by action of
the Board, such named fiduciary is the Pension Board.
The named fiduciary or fiduciaries, as the case may be, shall have
the authority to control and manage the operation of this Plan, and
shall be responsible for establishing and carrying out a funding
policy and method consistent with the objectives of this Plan and the
requirements of ERISA. If more than one fiduciary has been named,
this authority and responsibility shall be jointly and severally
shared.
Any person or group of persons may serve in more than one (1)
fiduciary capacity with respect to this Plan. A named fiduciary (or a
fiduciary designated by a named fiduciary) may employ one (1) or more
persons to render advice with regard to any responsibilities such
fiduciary has under the Plan. A person who is a named fiduciary with
respect to control and management of the assets of the Plan may
appoint an investment manager or managers to manage any assets of the
Plan. The insurance carrier's liability as a fiduciary is limited to
that arising from its management of any assets of the Plan held by
the insurance carrier in one (1) or more of its separate accounts.
The Employer may allocate fiduciary responsibilities (other than
trustee responsibilities) among named fiduciaries if there is more
than one (1). Provision may be made for named fiduciaries to
designate persons other than named fiduciaries to carry out fiduciary
responsibilities under the Plan. If any fiduciary responsibility of a
named fiduciary is allocated to any person or a person is designated
to carry out such responsibility, then such
47
<PAGE> 54
named fiduciary shall not be liable for any act or omission of such
person in carrying out such responsibility except as provided by
ERISA.
No fiduciary guarantees the Fund in any manner against investment
loss or depreciation of asset value.
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ARTICLE VII
PENSION BOARD
7.01 APPOINTMENT AND ACCEPTANCE
As required by ERISA, the Employer has appointed an administrative
Pension Board of this Plan by designating individuals to act in this
capacity and/or offices or positions whose occupants will act in this
capacity.
Each member of the Pension Board shall be deemed to be a fiduciary
within the meaning of ERISA, and each shall signify his acceptance of
his function by filing written notice with the Employer. No member of
the Pension Board who is an Employee shall receive compensation with
respect to his services on the Pension Board.
7.02 DUTIES AND AUTHORITY
The Pension Board shall administer the Plan on behalf of the Employer
in a nondiscriminatory manner for the exclusive benefit of
Participants and their Beneficiaries and with the care, skill
prudence and diligence under the circumstances then prevailing that a
prudent man 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.
The Pension Board shall perform all such duties as are necessary to
operate, administer, and manage the Plan in accordance with the terms
thereof, including but not limited to the following:
(a) To determine all questions relating to a Participant's
coverage under the Plan;
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<PAGE> 56
(b) To maintain all necessary records for the administration
of the Plan;
(c) To compute and authorize the payment of retirement income
and other benefit payments to eligible Participants and
Beneficiaries; subject, however, to the provisions of
Section 7.03;
(d) To interpret and construe the provisions of the Plan and to
make regulations that are not inconsistent with the terms
thereof; subject, however, to the provisions of Section
7.03; and
(e) To advise or assist Participants regarding any rights,
benefits, or elections available under the Plan.
(f) Subject to Section 7.03, the Pension Board shall have full
and complete discretionary authority to determine
eligibility for benefits, to construe the terms of the
Plan, and to decide any matter presented through the
claims review procedure. Any final determination by the
Pension Board shall be binding on all parties. If
challenged in court, such determination shall not be
subject to de novo review and shall not be overturned
unless proven to be arbitrary and capricious based upon
the evidence considered by the Pension Board at the time
of such determination.
The Pension Board annually shall prepare a report, which shall be
submitted to the Board, showing in reasonable summary the assets and
liabilities of the Plan and giving a brief account of the operation
of the Plan for the past year.
In addition, the Pension Board shall also furnish annually to the
Joint Committee, to be established under Section 7.10(g), a report
regarding the operation of the Plan and such additional information
as may be reasonably required.
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The Pension Board, either as a board or as individuals, shall not be
liable for any loss or depreciation of the Trust Fund or for any
insufficiency therein. All payments of pensions as provided in this
Plan shall be made solely out of the Trust Fund and the Pension Board
shall not be in any manner liable therefor.
The members of the Pension Board and the Employer and its officers
and directors shall be entitled to rely upon all tables, valuations,
certificates, and reports furnished by any actuary, upon all
certificates and reports made by any accountant, and upon all
opinions given by any legal counsel, selected or approved by the
Pension Board or the Employer, and the members of the Pension Board
and the Employer and its officers and directors shall be fully
protected in respect of any action taken or suffered by them in good
faith in reliance on any such tables, valuations, certificates,
reports, opinions, or any other advice of such actuary, accountant,
or counsel, and all action so taken or suffered shall be conclusive
upon all Employees and pensioners.
The Employer shall select a qualified actuary to make periodic
actuarial valuations of the Plan for the purpose of determining
whether the "monthly pension unit" can be maintained by the assets of
the Trust Fund and by the level of future contributions. A copy of
the report of the actuary shall be furnished to the Employer and the
Joint Committee. Following the submission of the actuary's report and
its review by the Employer and Joint Committee, the parties shall
meet to consider any changes which might have been indicated as
necessary or desirable by the actuary's report. No changes in the
"monthly pension unit" or other provisions of the Plan shall be made
except with the agreement of both parties; provided, however, that
pensions once granted shall not be reduced, except as provided in
this Plan.
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The Pension Board shall take such actions as are necessary to
establish and maintain the Plan as a retirement program that is at
all times in full and timely compliance with any law or regulation
having pertinence to this Plan.
The Pension Board shall be granted by the Employer all reasonable
powers necessary or appropriate to accomplish its duties as an
administrative Pension Board.
7.03 DECISIONS OF THE PENSION BOARD
Decisions of the Pension Board shall be final and binding on all
Employees, except as provided in this Section 7.03. If any difference
shall arise between the Employer or the Board and any Employee who
shall be an applicant for retirement income as to:
(a) The number of years of Service of such applicant in the
employ of the Employer;
(b) The age of such applicant;
(c) The propriety of or correctness of calculations of any
deductions from retirement income under the provisions of
this Plan;
(d) Whether an applicant, who shall have been determined to be
permanently incapacitated and who shall have at least
fifteen (15) years of such Service but shall not have
attained his Normal Retirement Date, shall have become so
permanently incapacitated through some unavoidable cause;
or
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(e) Calculations of retirement income under this Plan, and
agreement cannot be reached between the Pension Board and
a representative of the Union, such question shall be
referred to an impartial umpire to be selected by the
Pension Board and the Union. The impartial umpire shall
have authority only to decide the question pursuant to the
provisions of this Plan applicable to the question, but he
shall not have authority in any way to alter, add to, or
subtract from any of such provisions. The decision of the
impartial umpire on any such question shall be binding on
the Employer, the Pension Board, the Union and the
Employee. The fees and expenses of the impartial umpire
shall be shared equally by the Employer and the Union.
7.04 DIFFERENCES AS TO DISABILITY
If any difference shall arise between the Employer and any Employee
as to whether such Employee is or continues permanently incapacitated
within the meaning of Section 1.32, such difference shall be resolved
as follows:
The Employee shall be examined by a physician appointed for the
purpose by the Employer and by a physician appointed for the purpose
by a duly authorized representative of the Union. If they shall
disagree concerning whether the Employee is permanently
incapacitated, that question shall be submitted to a third physician
selected by such two (2) physicians. The medical opinion of the third
physician, after examination of the Employee and consultation with
the other two (2) physicians, shall decide such question. The fees
and expenses of the third physician shall be shared equally by the
Employer and the Union.
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7.05 PENSION BOARD PROCEDURES
The Pension Board shall act by a majority of its members in office at
any time and may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs.
7.06 EXPENSES AND ASSISTANCE
All reasonable expenses necessary to operate and administer the Plan
shall be borne by the Employer. The Employer shall furnish the
Pension Board with such clerical and other assistance as is required
in the performance of its duties.
7.07 PARTICIPANTS AND OTHER PAYEES - DATA
Participants and other persons affected by the Plan shall furnish the
Pension Board upon request such documents, evidence, or information
which the Pension Board considers necessary or desirable for the
purpose of administering the Plan. The Pension Board may cause to be
withheld any benefit payments, otherwise due the Participant or other
person, until the required document, evidence, or other information
is so furnished.
7.08 RESIGNATION AND REMOVAL OF MEMBER OF PENSION BOARD
A member of the Pension Board may resign at any time by delivering to
the Employer a written notice or resignation, to take effect at a
date specified therein. Such date should not be less than thirty (30)
days after the delivery of the resignation, unless waived by the
Employer.
A member of the Pension Board may be removed with or without cause by
the Employer through delivery to him of written notice of removal, to
take effect at a date specified therein.
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7.09 APPOINTMENT OF SUCCESSOR
In the event any position on the Pension Board is vacant, the
Employer shall promptly designate a successor member of the Pension
Board who must signify acceptance of this position in writing.
7.10 PLAN ADMINISTRATION - MISCELLANEOUS
(a) FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary
shall notify the Pension Board of a claim for benefits under
the Plan. Such request may be in any form adequate to give
reasonable notice to the Pension Board and shall set forth
the basis of such claim and shall authorize the Pension
Board to conduct such examinations as may be necessary to
determine the validity of the claim and to take such steps
as may be necessary to facilitate the payment of any
benefits to which the Participant or Beneficiary may be
entitled under the Plan.
(b) DENIAL OF CLAIM. Whenever a claim for benefits by any
Participant or Beneficiary has been denied, written notice
prepared in a manner calculated to be understood by the
Participant or Beneficiary will be provided, setting forth
the specific reasons for the denial and explaining the
procedure for an appeal and review of the decision by the
Pension Board.
(c) MASCULINE AND FEMININE, SINGULAR AND PLURAL. In construing
the text of this Plan, the masculine shall include the
feminine and the singular shall include the plural, and the
plural the singular wherever the context shall plainly so
require.
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(d) REFERENCE TO LAWS. Any reference herein to any section of
the Code, ERISA, or any other statute or law shall be deemed
to include any successor statute or law of similar import.
(e) LIMITATION. Participation in the Plan shall not grant any
Participant the right to be retained in the service of the
Employer or any other rights other than those to which he is
entitled under relevant law or regulations.
(f) DIVESTMENT OF BENEFITS FOR CAUSE PRECLUDED. In no event
may a Participant be divested for cause of retirement
income or other benefits which he is eligible to receive.
(g) JOINT COMMITTEE. The Joint Committee under this Plan shall
consist of six (6) members, three (3) of whom shall be
designated by the Employer and three (3) of whom shall be
designated by the Union. The several members of the Joint
Committee shall serve until their respective successors
have been selected in like manner. The Joint Committee
shall be entitled to receive from the Pension Board an
annual report regarding the operation of the Plan and the
benefits thereunder insofar as they affect the Employees
of the Employer and such additional information as shall
be reasonably required for the purpose of enabling the
Committee to be properly informed. The Joint Committee may
make such recommendations as in its discretion it deems
advisable to the Pension Board and the Union.
(h) CLERICAL ERROR. If any fact pertaining to eligibility for
or amounts of benefits payable under the Plan to a
Participant or other payee has been misstated, or in the
event of clerical error, the benefits will be adjusted on
the basis of the correct facts in a manner precluding
individual selection.
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(i) ADMINISTRATIVE AND INTERPRETIVE AUTHORITY. The Pension
Board shall have the sole responsibility for the
administration of the Plan, and, except as herein
expressly provided, the Pension Board shall have the
exclusive right to interpret the provisions of the Plan
and to determine any question arising hereunder or in
connection with the administration of the Plan, including
the remedying of any omission, inconsistency, or
ambiguity, and its decision or action in respect thereof
shall be conclusive and binding upon any and all
Participants, former Participants, Beneficiaries, heirs,
distributees, executors, administrators, and assigns,
subject to the provisions of Article VII. Specifically
included within the Pension Board's exclusive right to
interpret Plan provisions shall be the right to make a
determination on a non-discriminatory basis that an
Employee is eligible to participate or remain a
Participant hereunder and that a Participant has
terminated employment with the Employer or Related
Employer, if applicable. If challenged in court, any
determinations by the Pension Board shall not be subject
to DE NOVO ------- review and shall not be overturned
unless proven to be arbitrary and capricious based upon
the evidence considered by the Pension Board at the time
of such determination.
(j) DOMESTIC RELATIONS ORDERS. The Pension Board shall
establish reasonable procedures to determine whether a
Domestic Relations Order is a Qualified Domestic Relations
Order. Such procedures must be in writing, must provide
for the prompt notification of each person specified in
the order as being entitled to payment of benefits under
the Plan, and must permit an alternate payee, as defined
in Code Section 414(p)(8), to designate a representative
for receipt of copies of notices that are sent to the
alternate payee with respect to a Domestic Relations
Order.
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ARTICLE VIII
RESTRICTIONS ON BENEFITS
8.01 RESTRICTIONS ON PLAN TERMINATION
In the event of Plan termination, the benefit of any Participant or
former Participant who is a highly compensated employee shall be
limited to a benefit that is nondiscriminatory under Section
401(a)(4) of the Code.
For purposes of this Article VIII, "highly compensated employee"
shall mean highly compensated employee as defined under Section
414(q) of the Code.
8.02 RESTRICTION ON DISTRIBUTIONS
(a) The annual payments to a restricted Participant shall be
limited to an amount equal to the payments that would be
made on behalf of such restricted Participant under a single
life annuity that is the Actuarial Equivalent of the sum of
the restricted Participant's Accrued Benefit and other
benefits under the Plan.
Notwithstanding the foregoing, the restriction set forth in
this Section 8.02 shall not apply in the event that either
of the following requirements is met:
(1) The value of Plan assets equals or exceeds one
hundred ten percent (110%) of the value of the
Plan's current liabilities, as defined under Section
412(l)(7) of the Code, after payment to a restricted
Participant of his "Benefits"
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as described in paragraph (b) below; or
(2) The value of "Benefits," as described in paragraph
(b) below, of a restricted Participant is less than
one percent (1%) of the value of the Plan's current
liabilities, as defined in Section 412(l)(7) of the
Code.
For purposes of this Section 8.02(a), "restricted
Participant" means a Participant or former Participant who
is among the twenty-five (25) highest paid highly
compensated employees.
"Benefits," for purposes of this Section 8.02(a), include
loans in excess of the amounts set forth in Section
72(p)(2)(A) of the Code, any periodic income, the value of
any withdrawals made by the Participant, in the event the
Participant is still living, and any death benefits not
provided for by insurance on the Participant's life.
(b) Notwithstanding any other provision of the Plan, no
prohibited payments shall be made during any period the
Plan has a liquidity shortfall. For this purpose, a plan
has a liquidity shortfall during the period that there is
an underpayment of an installment under Code Section
412(m) by reason of paragraph (5)(A) thereof. A prohibited
payment for this purpose means (1) any payment in excess
of the monthly amount paid under a single life annuity to
a Participant or Beneficiary whose Annuity Starting Date
occurs during the period of the liquidity shortfall or (2)
any payment for the purchase of an irrevocable commitment
from an insurer to pay benefits.
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ARTICLE IX
AMENDMENT AND TERMINATION
9.01 RIGHT TO AMEND OR TERMINATE
This Plan may be amended or modified in whole or in part from time to
time upon agreement between the Employer and the Union; provided,
however, that no amendment:
(a) Shall have the effect of vesting in the Employer or any
Related Employer any interest in or control of any funds,
securities or other property subject to the terms of the
Trust;
(b) Shall authorize or permit at any time any part of the
corpus or income of the Trust Fund to be used for or
diverted to purposes other than for the exclusive benefit
of Participants and their Beneficiaries, except as
provided in Section 3.04;
(c) Shall have any retroactive effect as to deprive any
Participant, former Participant or Beneficiary of any
benefit already accrued, save only that no amendment made
in conformance with the provisions of the Code or any
other statute relating to employees' trusts, or of any
official regulation or rulings issued pursuant thereto,
shall be considered prejudicial to the rights of any
Participant or Beneficiary; or
(d) Shall eliminate an optional form of benefit or decrease an
Accrued Benefit.
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Notwithstanding the foregoing, the Employer shall have the authority
to amend the Plan as necessary or appropriate to preserve the
qualification of the Plan under Section 401(a) of the Code, and its
accompanying trust under Section 501(a) of the Code, which amendments
may be retroactive if necessary or appropriate.
9.02 TERMINATION
(a) It is the expectation of the Employer that it will
continue this Plan and the payment of contributions
hereunder indefinitely, but the continuation of the Plan
is not assumed as a contractual obligation of the
Employer, and the right is reserved by the Employer at any
time to discontinue permanently its contributions
hereunder. In the event that the Plan is terminated in
whole or in part or if contributions by the Employer are
discontinued completely, the benefits then accrued for all
affected Participants shall be fully vested and
nonforfeitable. Notwithstanding the previous sentence, a
person shall have recourse in seeking satisfaction of his
benefits against only the Trust Fund and the PBGC. No
Participant or Beneficiary shall have a claim against the
Employer, the Trust or any Plan fiduciary for any benefit
in excess of the amount funded on the date of the Plan
termination.
(b) This Plan may be terminated by the Board at any time, but
the Employer must notify the PBGC of its intention to
terminate the Plan. Such termination shall become
effective as set forth in ERISA.
(c) The funds are to be allocated in such manner as:
(1) To continue benefits which began to be paid
three (3) years before the termination date
under the provisions of
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the Plan in effect during the five (5) years
prior to termination which would provide the
smallest benefit. Benefits which would be in
this category if the Participant eligible for
benefits had elected to begin receipt of such
benefit payments at least three (3) years prior
to the termination shall also be provided;
(2) Then to provide all other insured benefits
guaranteed by the PBGC, including benefits for
a substantial owner who owns directly or
indirectly more than ten percent (10%) of the
Employer's voting stock;
(3) Then to provide all other nonforfeitable
benefits;
(4) Then to provide all other benefits under the
Plan; and
(5) Then to provide a return to the Employer of any
balance due to actuarial error if any assets
remain after all liabilities with respect to
Participants, former Participants and
Beneficiaries have been satisfied.
This allocation is intended to fulfill the requirements of ERISA, and
assets shall be allocated on the basis of ERISA should the above
provisions and ERISA differ.
9.03 PARTIAL TERMINATION
In the event the Plan is partially terminated, the Participants
affected shall have a nonforfeitable right to the benefits accrued to
the date of the partial termination.
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Notwithstanding the foregoing, upon the termination of the Plan, the
benefits of any missing participants, as defined in Section 4050 of
ERISA, shall be transferred to the PBGC in accordance with Section
401(a)(34) of the Code and Section 4050 of ERISA.
9.04 METHOD OF PAYMENT
Amounts allocated to affected individuals upon termination or partial
termination of the Plan shall be paid through the purchase of annuity
contracts; provided, however, that if the single sum value of an
individual's benefit is five thousand dollars ($5,000) (three
thousand five hundred dollars ($3,500) prior to January 1, 1998) or
less, payment shall be made in a single sum in cash. The single sum
value shall be determined based on the 1983 Group Annuity Mortality
Table, as set forth in Revenue Ruling 95-6, as it may be updated from
time to time and the annual interest rate on thirty-year (30)
Treasury securities for the month that is two (2) months prior to the
first day of the Plan Year that includes the Annuity Starting Date.
9.05 NOTICE OF AMENDMENT, TERMINATION, OR PARTIAL TERMINATION
Affected Participants shall be notified of an amendment, termination
or partial termination of the Plan as required by the applicable
provisions of ERISA. In the event that any amendment to the Plan
would change the provisions of Section 4.04 with respect to
eligibility for a nonforfeitable benefit, each Participant who has
completed at least three (3) years of Vesting Service shall be
entitled to elect, in accordance with ERISA, to have his right to a
nonforfeitable benefit computed under the Plan without regard to such
amendment.
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ARTICLE X
MISCELLANEOUS
10.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract
of employment between the Employer and any Employee. The employment
records of the Employer and the Trustee's records shall be final and
binding upon all Employees as to liability and participation.
10.02 MERGER OR CONSOLIDATION OF PLAN, TRANSFER OF ASSETS
Any merger or consolidation of the Plan with another plan or transfer
of Plan assets or liabilities to any other plan shall be effected, in
accordance with such regulations, if any, as may be issued pursuant
to Section 208 of ERISA, in such a manner that each Participant in
the Plan would receive, if the merged, consolidated or transferred
plan were terminated immediately following such event, a benefit
which is equal to or greater than the benefit he would have been
entitled to receive if the Plan had terminated immediately before
such event. Notwithstanding the foregoing, compliance with the
applicable regulations under Section 414(l) shall be deemed in
compliance with this Section 10.02.
10.03 DATA
It shall be a condition precedent to the payment of all benefits
under the Plan that each Participant, former Participant and
Beneficiary must furnish to the Employer such documents, evidence or
information as the Employer considers necessary or desirable for the
purpose of administering the Plan, or to protect the Employer or the
Trustee.
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10.04 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS' CLAIMS
Except as otherwise provided in the Plan, no Participant, former
Participant or any Beneficiary, or the estate of any such person,
shall have the power to assign, pledge, encumber or transfer any
interest in the Trust Fund while the same shall be in possession of
the Trustee. Any such attempt at alienation shall be void. No such
interest shall be subject to attachment, garnishment, execution, levy
or any other legal or equitable proceeding or process, and any
attempt to do so shall be void. The preceding shall apply also to the
creation, assignment or recognition of any right to any benefit
payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified
domestic relations order, as defined in Section 414(p) of the Code. A
domestic relations order entered before January 1, 1985 will be
treated as a qualified domestic relations order if payment of
benefits pursuant to the order has commenced as of such date and may
be treated as a qualified domestic relations order if payment of
benefits has not commenced as of such date, even though the order
does not satisfy the requirements of Section 414(p) of the Code.
Effective with respect to judgments, orders and decrees issued, and
settlement agreements entered into, on or after August 5, 1997, the
preceding provisions, as set forth in Section 401(a)(13)(A) of the
Code, shall not apply to any offset of a Participant's benefits under
the Plan against an amount that the Participant is ordered or
required to pay to the Plan if such offset meets the requirements of
Section 401(a)(13)(C) of the Code.
10.05 RESTRICTION OF CLAIMS AGAINST TRUST FUND
The Trust Fund under this Plan and Trust Agreement from its inception
shall be a separate entity aside and apart from the Employer and its
assets. The Trust and the corpus and income thereof shall in no event
and in no manner whatsoever be subject to the rights or claims of any
creditor of the Employer. Neither the establishment of the Trust
Fund, the
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modification thereof, the creation of any fund or account nor the
payment of any benefits shall be construed as giving any Participant
or any other person whomsoever any legal or equitable rights against
the Employer or the Trustee unless the same shall be specifically
provided for in this Plan.
10.06 BENEFITS PAYABLE ONLY FROM TRUST FUND
The benefits under the Plan shall be only such as can be provided by
the Trust Fund. Except as may be provided by law, no liability for
the payment of benefits hereunder to Participants or their surviving
spouses shall be imposed upon the Company or any Employer, its
officers or shareholders, and there shall be no liability or
obligation on the part of the Company or any Employer to make any
further contributions in the event of termination of the Plan.
10.07 SUCCESSOR TO EMPLOYER
In the event that any successor to the Employer, by merger,
consolidation, purchase or otherwise, shall elect to adopt the Plan,
such successor shall be substituted hereunder for the Employer upon
filing in writing with the Trustee its election to do so.
10.08 APPLICABLE LAW
The Plan shall be construed and administered in accordance with
ERISA, and any judicial review thereunder shall be governed by the
"arbitrary and capricious" standard, and with the laws of the state
where the Employer has its principal office, to the extent that such
laws are not preempted by ERISA.
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10.09 INTERNAL REVENUE SERVICE APPROVAL
This amendment and restatement of the Plan shall be effective as of
January 1, 1999 provided that the Employer shall obtain a favorable
determination letter from the Internal Revenue Service that this Plan
and the related Trust Agreement qualify under Sections 401(a) and
501(a) of the Code, as amended. Any modification or amendment of this
Plan may be made retroactive as necessary or appropriate in order to
secure or maintain such qualification.
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ARTICLE XI
TOP-HEAVY PROVISIONS
11.01 GENERAL
Notwithstanding anything herein to the contrary, the following
provisions shall apply with respect to any Plan Year in which the Plan
is deemed to be Top-heavy.
11.02 DEFINITIONS
DETERMINATION DATE
With respect to any Plan Year, the last calendar day of the immediately
preceding Plan Year, or, in the case of the first Plan Year, the last
calendar day of the first Plan Year.
KEY EMPLOYEE
Any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the Plan Year or any of the four (4)
immediately preceding Plan Years (or, if fewer, the total number of
Plan Years during which the Plan has been in effect) is or was:
(a) An officer of an Employer or a Related Employer who has an
annual compensation in excess of fifty percent (50%) of the
dollar limitation under Section 415(b)(1)(A) of the Code for
such Plan Year.
(b) An owner (or considered an owner under Section 318 of the
Code) of one (1) of the ten (10) largest interests in an
Employer or a Related Employer if such individual's
compensation exceeds the dollar limitation under Section
415(c)(1)(A) of the Code;
(c) A five percent (5%) owner of an Employer; or
(d) A one percent (1%) owner of an Employer who has an annual
compensation in excess of one hundred fifty thousand dollars
($150,000).
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An officer is defined as an actual officer of an Employer or a Related
Employer, provided that not more than the greater of three (3)
Employees or ten percent (10%) of the Employees (but in no event more
than fifty (50) Employees) shall be considered as officers in
determining whether a plan is Top-heavy.
NON-KEY EMPLOYEE
Any Employee who is not included in the definition of Key Employee.
TOP-HEAVY PLAN
For any Plan Year, this Plan is Top-heavy if any of the following
conditions exist:
(a) If the Top-heavy Ratio for this Plan exceeds sixty percent (60%)
and this Plan is not a part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(b) If this Plan is a part of a Required Aggregation Group of plans
(but is not a part of a Permissive Aggregation Group of plans)
and the Top-heavy Ratio for the group of plans exceeds sixty
percent (60%).
(c) If this Plan is a part of a Required Aggregation Group of plans
and a part of a Permissive Aggregation Group of plans and the
Top-heavy Ratio for the Permissive Aggregation Group of plans
exceeds sixty percent (60%).
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TOP-HEAVY RATIO
(a) If an Employer maintains one (1) or more defined benefit plans
and an Employer has never maintained any defined contribution
plans (including any simplified employee pension plan) which,
during the five (5) year period ending on the Determination Date,
has or has had account balances, the Top-heavy Ratio for this
Plan alone or for the Required or Permissive Aggregation Group,
as appropriate, is a fraction, the numerator of which is the sum
of the Present Value of accrued benefits of all Key Employees
under the aggregated defined benefit plans as of the
Determination Date (including any part of any accrued benefit
distributed in the five (5) year period ending on the
Determination Date), and the denominator of which is the sum of
the Present Value of all accrued benefits (including any part of
any accrued benefit distributed in the five (5) year period
ending on the Determination Date) of all Participants as of the
Determination Date, both computed in accordance with Section 416
of the Code. The numerator and denominator of the Top-heavy Ratio
shall be adjusted to reflect any contribution not actually made
as of the Determination Date, but which is required to be taken
into account on that date under Section 416 of the Code.
(b) If an Employer maintains or has maintained one (1) or more
defined benefit plans and an Employer maintains or has maintained
one (1) or more defined contribution plans (including any
simplified employee pension plan) which, during the five (5) year
period ending on the Determination Date, has or has had any
account balances, the Top-heavy Ratio for any Required or
Permissive Aggregation Group, as appropriate, is a fraction, the
numerator of which is the sum of the account balances under the
aggregated defined contribution plans for all Key Employees as of
the Determination Date and the Present Value of accrued benefits
under the aggregated defined benefit plans for all Key Employees
as of the Determination Date, and the denominator of which is the
sum of the account balances under the aggregated defined
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contribution plans for all Participants and the Present Value of
accrued benefits under the aggregated defined benefit plans for
all Participants as of the Determination Date, determined in
accordance with Section 416 of the Code. Both the numerator and
denominator of the Top-heavy Ratio shall be adjusted for any
distribution of an account balance or accrued benefit made in the
five (5) year period ending on the Determination Date and any
contributions due but unpaid as of the Determination Date.
(c) For purposes of (a) and (b) above, the value of account balances
and the Present Value of accrued benefits shall be determined as
of the most recent Valuation Date occurring within the twelve
(12) month period ending on the Determination Date, except as
provided in Section 416 of the Code for the first and second Plan
Years of a defined benefit plan. The accrued benefits of Non-key
Employees shall be determined under the method which is used for
accrual purposes for all plans of the Employer or, if there is no
such method, then as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
accrual rate of Code Section 411(b)(1)(C). The account balances
and accrued benefits of a Participant who is not a Key Employee
but who was a Key Employee in a prior year or, effective for Plan
Years beginning on or after September 1, 1985, who has not
performed services for the Employer at any time during the five
(5) Plan Year period ending on the Determination Date shall be
disregarded. The calculation of the Top-heavy Ratio and the
extent to which distributions, rollovers and direct transfers are
taken into account will be made in accordance with Section 416 of
the Code. When aggregating plans, the value of account balances
and accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year.
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PERMISSIVE AGGREGATION GROUP
The Required Aggregation Group of plans plus any other plan or
plans of the Employer or a Related Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Sections 401(a)(4) and
410 of the Code.
REQUIRED AGGREGATION GROUP
(a) Each qualified plan of the Employer or a Related Employer
in which at least one (1) Key Employee participates; and
(b) Any other qualified plan of the Employer or a Related
Employer which enables a plan described in (a) to meet the
requirements of Section 401(a)(4) or 410 of the Code.
PRESENT VALUE
Present Value will be determined on the basis of the actuarial
assumptions then being used for funding purposes.
VALUATION DATE
The same Valuation Date used for computing Plan costs for
minimum funding, regardless of whether an actuarial valuation is
performed that year.
11.03 MINIMUM ACCRUED BENEFIT
(a) Notwithstanding any other provision in this Plan except
subparagraphs (c) and (e) below, for any Plan Year in which
this Plan is Top-heavy, each Participant who is not a Key
Employee and who has completed one thousand (1,000) Hours
of Service will accrue a benefit (to be provided solely by
Employer contributions and expressed as a life annuity
commencing at Normal Retirement Date) of not less than two
percent
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(2%) of his highest average compensation for the five (5)
consecutive years for which the Participant had the highest
compensation. The minimum accrual is determined without
regard to any Social Security contribution. The minimum
accrual applies even though under other Plan provisions the
Participant would not otherwise be entitled to receive an
accrual, or would have received a lesser accrual for the
year because the Non-key Employee's compensation is less
than a stated amount, the Non-key Employee is not employed
on the last day of the accrual computation period or the
Plan is integrated with Social Security.
(b) For purposes of computing the minimum accrued benefit,
compensation will mean compensation as defined in Section
4.09 of the Plan.
(c) No additional benefit accruals shall be provided pursuant to
(a) above to the extent that the total accruals on behalf of
the Participant attributable to Employer contributions will
provide a benefit expressed as a life annuity commencing at
Normal Retirement Date that equals or exceeds twenty percent
(20%) of the Participant's highest average compensation for
the five (5) consecutive years for which the Participant had
the highest compensation.
(d) If the form of benefit is other than a life annuity, the
Employee must receive an amount that is the Actuarial
Equivalent of the minimum life annuity benefit. If the
benefit commences at a date other than at Normal Retirement
Date, the Employee must receive at least an amount that is
the Actuarial Equivalent of the minimum life annuity benefit
commencing at Normal Retirement Date.
(e) The provisions in (a) above shall not apply to any
Participant to the extent that the Participant is covered
under any other plan or plans of the Employer and the
Employer has provided that the minimum benefit
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requirement applicable to this Top-heavy Plan will be met in
the other plan or plans.
(f) The minimum accrued benefit required (to the extent required
to be nonforfeitable under Section 416(b) of the Code) may
not be forfeited or suspended under Section 411(a)(3)(B) or
Section 411(a)(3)(D) of the Code.
11.04 VESTING REQUIREMENTS
With respect to any Plan Year that the Plan is a Top-heavy plan,
the Plan shall have the following vesting schedule:
YEARS OF SERVICE FOR VESTING VESTED PERCENTAGE
---------------------------- -----------------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
The minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code except those
attributable to employee contributions, including benefits
accrued before the effective date of Section 416 of the Code and
benefits accrued before the Plan became Top-heavy. Further, no
reduction in vested benefits may occur in the event the Plan's
status as Top-heavy changes for any Plan Year. However, this
Section does not apply to the Accrued Benefits of any Employee
who does not have an Hour of Service after the Plan has
initially become Top-heavy, and such Employee's Accrued Benefits
attributable to Employer contributions will be determined
without regard to this section.
74
<PAGE> 81
This minimum vesting schedule applies only to the extent that it
provides more favorable vesting than the vesting schedule
provided in Section 4.04.
11.05 SPECIAL 415 LIMITATIONS
For purposes of Section 4.08, in any Plan Year in which the Plan
is deemed to be a Top-heavy plan, the number 1.25 shall be
replaced by the number 1.0 to the extent required under Code
Section 416(h); provided, however, that such adjustment will not
occur if the Top-heavy Ratio does not exceed ninety percent
(90%) and additional benefits are provided for Non-key Employees
in accordance with the provisions of Section 416(h)(2)(A) and
Section 416(h)(2)(B) of the Code. In such case, the minimum
accrued benefit provided in Section 11.03(a) shall be increased
to three percent (3%) of the Participant's average compensation
for the five (5) consecutive years for which the Participant had
the highest compensation and the maximum accrual provided in
Section 11.03(c) shall be increased to thirty percent (30%).
75
<PAGE> 82
<TABLE>
<CAPTION>
TABLE I
EARLY RETIREMENT ADJUSTMENT FACTORS
NUMBER OF YEARS AND MONTHS FROM RETIREMENT DATE
TO NORMAL RETIREMENT DATE
MONTHS Years: 0 1 2 3 4 5
------ - - - - - -
<S> <C> <C> <C> <C> <C> <C>
0 92.8% 85.6% 78.4% 71.2% 64.0%
1 99.4% 92.2% 85.0% 77.8% 70.6% 63.7%
2 98.8% 91.6% 84.4% 77.2% 70.0% 63.4%
3 98.2% 91.0% 83.8% 76.6% 69.4% 63.1%
4 97.6% 90.4% 83.2% 76.0% 68.8% 62.8%
5 97.0% 89.8% 82.6% 75.4% 68.2% 62.5%
6 96.4% 89.2% 82.0% 74.8% 67.6% 62.2%
7 95.8% 88.6% 81.4% 74.2% 67.0% 61.9%
8 95.2% 88.0% 80.8% 73.6% 66.4% 61.6%
9 94.6% 87.4% 80.2% 73.0% 65.8% 61.3%
10 94.0% 86.8% 79.6% 72.4% 65.2% 61.0%
11 93.4% 86.2% 79.0% 71.8% 64.6% 60.7%
MONTHS Years: 6 7 8 9 10
------ - - - - --
0 60.4% 56.8% 53.2% 49.6% 46.0%
1 60.1% 56.5% 52.9% 49.3%
2 59.8% 56.2% 52.6% 49.0%
3 59.5% 55.9% 52.3% 48.7%
4 59.2% 55.6% 52.0% 48.4%
5 58.9% 55.3% 51.7% 48.1%
6 58.6% 55.0% 51.4% 47.8%
7 58.3% 54.7% 51.1% 47.5%
8 58.0% 54.4% 50.8% 47.2%
9 57.7% 54.1% 50.5% 46.9%
10 57.4% 53.8% 50.2% 46.6%
11 57.1% 53.5% 49.9% 46.3%
</TABLE>
76
<PAGE> 83
<TABLE>
<CAPTION>
TABLE II
JOINT AND SURVIVOR ADJUSTMENT FACTORS
50% CONTINUATION TO SPOUSE & CONTINGENT ANNUITANT
Participant's Age
Spouse's --------------------------------------------------------------------------------------------------------------------
Age 55 56 57 58 59 60 61 62 63 64 65 66
------ -- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 84.7 83.6 82.4 81.3 80.2 79.0 77.7 76.3 74.8 73.4 72.0 70.8
46 85.1 84.0 82.9 81.8 80.6 79.4 78.1 76.7 75.3 73.9 72.5 71.3
47 85.6 84.5 83.4 82.3 81.1 79.9 78.6 77.2 75.8 74.5 73.1 71.9
48 86.1 85.0 83.9 82.8 81.6 80.4 79.2 77.8 76.4 75.0 73.6 72.4
49 86.5 85.4 84.3 83.3 82.2 81.0 79.7 78.3 76.9 75.6 74.2 73.0
50 87.0 85.9 84.8 83.8 82.7 81.5 80.2 78.8 77.5 76.1 74.7 73.5
51 87.5 86.4 85.3 84.3 83.2 82.0 80.7 79.4 78.0 76.7 75.3 74.1
52 88.0 87.0 85.9 84.8 83.7 82.5 81.3 80.0 78.6 77.3 75.9 74.7
53 88.5 87.5 86.4 85.4 84.3 83.1 81.9 80.6 79.2 77.9 76.5 75.3
54 88.9 87.9 86.9 85.9 84.9 83.7 82.5 81.2 79.8 78.5 77.2 76.0
55 89.4 88.4 87.4 86.4 85.4 84.3 83.1 81.8 80.4 79.1 77.8 76.6
56 89.9 88.9 87.9 87.0 86.0 84.9 83.7 82.4 81.0 79.7 78.4 77.2
57 90.4 89.4 88.4 87.5 86.5 85.4 84.3 83.0 81.7 80.4 79.1 77.9
58 90.8 89.9 89.0 88.1 87.1 86.0 84.9 83.6 82.3 81.1 79.8 78.6
59 91.3 90.4 89.5 88.6 87.6 86.6 85.5 84.2 83.0 81.7 80.5 79.3
60 91.7 90.9 90.0 89.1 88.2 87.2 86.1 84.9 83.6 82.4 81.2 80.0
61 92.2 91.4 90.5 89.7 88.8 87.8 86.7 85.5 84.3 83.1 81.9 80.7
62 92.6 91.8 90.9 90.1 89.3 88.3 87.3 86.1 84.9 83.8 82.6 81.4
63 93.0 92.2 91.4 90.6 89.8 88.9 87.9 86.7 85.6 84.5 83.3 82.1
64 93.4 92.6 91.8 91.1 90.3 89.4 88.4 87.3 86.2 85.2 84.1 82.8
65 93.8 93.1 92.3 91.6 90.8 89.9 89.0 87.9 86.9 85.8 84.8 83.5
66 94.2 93.5 92.8 92.1 91.3 90.5 89.6 88.6 87.5 86.5 85.5 84.2
67 94.6 93.9 93.2 92.5 91.8 91.0 90.2 89.2 88.2 87.2 86.2 84.9
68 94.9 94.3 93.6 93.0 92.3 91.5 90.7 89.8 88.8 87.9 86.9 85.6
69 95.3 94.7 94.1 93.5 92.8 92.1 91.3 90.4 89.5 88.6 87.7 86.3
70 95.6 95.4 95.1 94.5 93.9 93.4 92.8 91.0 90.1 89.3 88.4 87.0
*Age nearest birthday on Retirement Date.
Factors for other age combinations will be determined in a manner consistent
with the manner used in determining these factors.
</TABLE>
<PAGE> 1
Exhibit 10.14
RETIREMENT PLAN FOR
SALARIED EMPLOYEES OF
WERNER HOLDING CO. (DE), INC.
(AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1999)
November 1999
<PAGE> 2
CONTENTS
PREAMBLE IV
ARTICLE I DEFINITIONS 1
1.01 Accrued Benefit 1
1.02 Actuarial Equivalent 1
1.03 Annuity Starting Date 2
1.04 Beneficiary 2
1.05 Board 3
1.06 Break In Service 3
1.07 Code 3
1.08 Compensation 3
1.09 Covered Compensation 4
1.10 Credited Service 5
1.11 Date Of Employment Or Reemployment 5
1.12 Disability Retirement Age 5
1.13 Disability Retirement Date 5
1.14 Early Retirement Age 6
1.15 Early Retirement Date 6
1.16 Employee 6
1.17 Employer 6
1.18 ERISA 7
1.19 Final Average Earnings 7
1.20 Hour Of Service 8
1.21 Joint And Survivor Annuity 9
1.22 Limitation Year 10
1.23 Normal Pension 10
1.24 Normal Retirement Benefit 10
1.25 Normal Retirement Age 10
1.26 Normal Retirement Date 11
1.27 Participant 11
1.28 Plan 11
1.29 Plan Administrator 11
1.30 Plan Year 11
1.31 Prior Plan 11
1.32 Related Employer 11
1.33 Restatement Date 11
1.34 Retirement Plan Board 11
1.35 Severance From Service 12
1.36 Total And Permanent Disability 13
1.37 Trust Agreement And Trust 13
1.38 Trust Fund 13
1.39 Trustee 13
1.40 Vested Interest 13
1.41 Vesting Service 14
1.42 Year Of Service 16
i
<PAGE> 3
ARTICLE II ELIGIBILITY AND PARTICIPATION 17
2.01 Participation 17
2.02 Reemployment Of A Participant 17
ARTICLE III CONTRIBUTIONS 19
3.01 Trustee And Trust Agreement 19
3.02 Employer Contributions 19
3.03 Forfeitures 19
3.04 Reversion Of Employer Contributions 19
3.05 Special Rules Relating To Reemployed Veterans 20
ARTICLE IV BENEFITS 21
4.01 Normal Retirement Benefit 21
4.02 Postponed Retirement Benefit 22
4.03 Early Retirement Benefit 23
4.04 Termination Of Vested Participant 24
4.05 Disability Retirement Benefit 25
4.06 Minimum Benefits 25
4.07 Maximum Benefits 26
4.08 Combined Maximum Limitations 30
4.09 Definition Of Compensation For Purposes Of
Sections 4.07 And 4.08 32
4.10 Reemployment After Receipt Of Benefits 34
4.11 Transfers 36
ARTICLE V FORM AND PAYMENT OF BENEFITS 38
5.01 Normal Pension 38
5.02 Joint And Survivor Annuity 38
5.03 Election Not To Receive Normal Pension 38
5.04 Election Not To Receive Joint And Survivor Annuity 39
5.05 Payment In Optional Form On Retirement 40
5.06 Pre-Retirement Survivor Annuity 44
5.07 Pre-Retirement Death Benefit For Unmarried
Participants 46
5.08 Administrative Powers Relating To Payments 47
5.09 No Guaranty Of Benefits 47
5.10 Time Of Payment 47
5.11 Death Distribution Requirements 48
5.12 Direct Rollovers 49
5.13 Additional Rules Relating To Payments 50
5.14 Lost Participants 52
ii
<PAGE> 4
ARTICLE VI PLAN ADMINISTRATION 53
6.01 Plan Administrator 53
6.02 Duties 53
6.03 Directions To Trustee 54
6.04 Nondiscrimination 54
6.05 Agents 54
6.06 Limitations 55
6.07 Unstated Rules And Procedures 55
6.08 Named Fiduciary 55
6.09 Exercise Of The Plan Administrator's Duties 55
6.10 Indemnification 56
ARTICLE VII CLAIMS PROCEDURES 57
7.01 Claims Review 57
7.02 Appeals Procedure 57
ARTICLE VIII RESTRICTIONS ON BENEFITS 59
8.01 Restrictions On Plan Termination 59
8.02 Restriction On Distributions 59
ARTICLE IX AMENDMENT AND TERMINATION 61
9.01 Right To Amend Or Terminate 61
9.02 Termination 62
9.03 Partial Termination 64
9.04 Method Of Payment 64
9.05 Notice Of Amendment, Termination, Or Partial
Termination 64
ARTICLE X MISCELLANEOUS 65
10.01 No Contract Of Employment 65
10.02 Merger Or Consolidation Of Plan, Transfer Of Assets 65
10.03 Data 65
10.04 Restrictions Upon Assignments And Creditors' Claims 65
10.05 Restriction Of Claims Against Trust Fund 66
10.06 Benefits Payable Only From Trust Fund 67
10.07 Successor To Employer 67
10.08 Applicable Law 67
10.09 Internal Revenue Service Approval 67
ARTICLE XI TOP-HEAVY PROVISIONS 68
11.01 General 68
11.02 Definitions 68
11.03 Minimum Accrued Benefit 72
11.04 Vesting Requirements 74
11.05 Special 415 Limitations 74
iii
<PAGE> 5
RETIREMENT PLAN FOR
SALARIED EMPLOYEES OF
WERNER HOLDING CO. (DE), INC.
PREAMBLE
Werner Holding Co. (DE), Inc. has hereby amended and restated, effective January
1, 1999, the pension plan for its eligible Employees known as the Retirement
Plan for Salaried Employees of Werner Holding Co. (DE), Inc. (the "Plan"). The
Plan constitutes a continuation and restatement of the Retirement Plan for
Salaried Employees of RD Werner Co., Inc., effective as of September 1, 1966,
and as amended from time to time.
The Plan was last restated effective September 1, 1989 in order to comply with
changes promulgated under the Tax Reform Act of 1986 and certain subsequent
legislation. (Such prior restatement along with any Plan amendment effective
prior to January 1, 1999 hereinafter referred to as the "Prior Plan."). The Plan
is hereby restated in order to comply with changes promulgated under the Uruguay
Round Agreements Act, the Uniformed Services Employment and Reemployment Rights
Act, the Small Business Job Protection Act of 1996, and the Taxpayer Relief Act
of 1997.
This restatement of the Prior Plan shall not in any way affect the rights of
Employees who participated in the Prior Plan in accordance with its provisions.
All matters relating to the benefits, if any, payable to such Employees (or
their Beneficiaries) based upon events occurring prior to January 1, 1999 shall,
except as otherwise expressly provided herein, be determined in accordance with
the applicable provisions of the Prior Plan.
iv
<PAGE> 6
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by the context. All masculine terms shall include the feminine and all
singular terms shall include the plural, unless the context clearly indicates
the gender or the number.
1.01 ACCRUED BENEFIT means the amount computed under the formula set forth
in Section 4.01 of the Plan payable at Normal Retirement Age,
considering the Participant's Final Average Earnings and years of
Credited Service as of the date the Participant's Accrued Benefit is
being calculated at his termination of employment.
1.02 ACTUARIAL EQUIVALENT means a benefit of equal value to another benefit
as determined based upon the following mortality table and interest
rate:
(a) The 1983 Group Annuity Mortality Table for Males, with a two
(2) year setback for the Participant and a four (4) year
setback for any spouse or Beneficiary (to be used regardless
of the sex of the Participant, spouse, or Beneficiary).
(b) An interest rate of six percent (6%) per annum; provided,
however, that the interest rate or rates used for any Plan
Year in conjunction with the mortality table to determine the
Actuarial Equivalent of lump sum payments and the Actuarial
Equivalent of benefits related to a qualified domestic
relations order, as defined in Section 414(p) of the Code,
shall be equal to the interest rate published by the Pension
Benefit Guaranty Corporation pursuant to Section 4062 of ERISA
used in calculating immediate or deferred annuities in effect
on the first day of the Plan Year in which the date of
distribution occurs.
Notwithstanding the foregoing, the Actuarial Equivalent of the Accrued
Benefit on or after September 1, 1985 shall be the greater of:
1
<PAGE> 7
(a) The Actuarial Equivalent of the Accrued Benefit as of
September 1, 1985 computed on the basis of the Plan as in
effect on August 31, 1985; or
(b) The Actuarial Equivalent of the total Accrued Benefit as of
the computation date determined on the basis of the Plan as in
effect on such date.
Further, notwithstanding the foregoing, for purposes of determining the
Actuarial Equivalent lump sum value of distributions payable pursuant
to the terms of the Plan for Annuity Starting Dates occurring on or
after January 1, 1997, Actuarial Equivalent means the lump sum
equivalent value of another benefit based on the 1983 Group Annuity
Mortality Table, as set forth in Revenue Ruling 95-6, as it may be
updated from time to time and the annual interest rate on thirty-year
(30) Treasury securities for the month that is two (2) months prior to
the first day of the Plan Year that includes the Annuity Starting Date.
1.03 ANNUITY STARTING DATE means the first day of the first period for which
an amount is payable as an annuity or in any other form.
1.04 BENEFICIARY means the person or persons designated by a Participant to
receive any benefits under the Plan which may be due upon the
Participant's death. A Participant may not name more than one primary
beneficiary. Notwithstanding anything to the contrary, if a Participant
is married on the date of his death, the Beneficiary of such
Participant shall be his spouse unless:
(a) The Participant's spouse consents in writing not to be said
Beneficiary, such written consent is witnessed by either a
representative of the Plan or a notary public and such consent
acknowledges the effect of the Participant's selection of a
Beneficiary other than his spouse;
(b) The foregoing consent may not be obtained because such spouse
cannot be located; or
2
<PAGE> 8
(c) Such other circumstances exist as the Retirement Plan Board
may, in accordance with applicable regulations, deem
appropriate to waive the foregoing spousal consent
requirement.
The spouse's consent will apply with respect to a specific alternate
Beneficiary only, and change of Beneficiary will require a new spousal
consent. If no person or entity has been designated by the Participant
as Beneficiary, or if no named primary or successor Beneficiary
survives the Participant, any payments owed to a Beneficiary shall be
made:
(a) To the Participant's surviving spouse;
(b) If there is no surviving spouse to the personal representative
of the Participant's estate.
1.05 BOARD means the Board of Directors of Werner Holding Co. (DE), Inc.
1.06 BREAK IN SERVICE means a twelve consecutive month period beginning on
an Employee's Date of Employment (or Date of Reemployment, if
applicable) or any anniversary of that date during which an Employee
completes five hundred (500) or fewer Hours of Service.
1.07 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
1.08 COMPENSATION, for all purposes of the Plan and Trust except for
Sections 4.07 and 4.08, means the aggregate of all payments by the
Employer to a Participant in a Plan Year for services rendered,
excluding any amounts paid to him as bonus, overtime pay, commissions,
cost-of-living allowance, contributions to this or any other benefit
plan made by the Employer, or any other additional, special, fringe, or
supplemental payments. Compensation in excess of two hundred thousand
dollars ($200,000) or such other amount as may be established by the
Secretary of the Treasury in any year shall be disregarded for all
purposes of the Plan.
3
<PAGE> 9
Notwithstanding anything herein to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each
Participant taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit
is $150,000, adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code. The cost
of living adjustment in effect for a calendar year applies to any
period, not exceeding twelve (12) months, over which Compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than twelve (12) months, the
OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination
period, and the denominator of which is twelve (12). For Plan Years
beginning on or after January 1, 1994, any reference in this Plan to
the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision. If
Compensation for any prior determination period is taken into account
in determining a Participant's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject
to the OBRA '93 annual compensation limit in effect for that prior
determination period. In determining the Compensation of a Participant
for purposes of this limitation for Plan Years beginning prior to
January 1, 1997, the rules of Section 414(q)(6) of the Code relating to
the treatment of certain family members shall apply, except that, in
applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have
not attained age nineteen (19) before the close of the applicable Plan
Year.
1.09 COVERED COMPENSATION means the average of the FICA taxable wage bases
in effect under the Social Security Act for each year in the
thirty-five (35) year period ending with the earlier of the year the
Employee reaches the Social Security retirement age, as defined under
Section 415(b)(8) of the Code, or the year of termination or
retirement.
4
<PAGE> 10
1.10 CREDITED SERVICE means the total number of years and months during
which a Participant is employed by an Employer. Credited Service shall
be equal to the sum of (a) and (b) below:
(a) If an Employee was employed by an Employer on August 31, 1976,
the years of credited service earned as of that date under the
Plan as in effect on August 31, 1976; and
(b) An Employee's Vesting Service after August 31, 1976.
The foregoing notwithstanding, Credited Service shall not be granted
for employment by any Employee of Florida Ladder Company rendered to
Florida Ladder Company prior to January 1, 1989, the date Florida
Ladder Company became an Employer under the Plan; for employment by any
Employee of Gold Medal Ladder Company rendered to Gold Medal Ladder
Company prior to March 7, 1987, the date Gold Medal Ladder Company was
acquired by the predecessor to the Employer; for employment by any
Employee of the Anniston division of Werner Co., rendered to the
Anniston division of National Aluminum Corporation prior to November
30, 1989, the date the Anniston division becomes an Employer under the
Plan; and for employment by any Employee of Kentucky Ladder Company
rendered to Kentucky Ladder Company prior to March 14, 1989, the date
Kentucky Ladder Company became an Employer under the Plan.
1.11 DATE OF EMPLOYMENT or REEMPLOYMENT means the first day an Employee
performs an Hour of Service.
1.12 DISABILITY RETIREMENT AGE means the age at which a Participant
terminates his active employment with an Employer on or after attaining
the age of forty (40), after completing at least fifteen (15) years of
Vesting Service, and by reason of a Total and Permanent Disability.
1.13 DISABILITY RETIREMENT DATE means the first day of the seventh month
following the date a Participant attains his Disability Retirement Age.
5
<PAGE> 11
1.14 EARLY RETIREMENT AGE means the age at which a Participant completes at
least fifteen (15) years of Vesting Service and has attained age
fifty-five (55).
1.15 EARLY RETIREMENT DATE means the first day of the month coincident with
or immediately following the date a Participant terminates employment
with an Employer other than for death, after attaining his Early
Retirement Age, but prior to his Normal Retirement Date.
1.16 EMPLOYEE means any person employed by an Employer, but excluding any
employee who is covered under a collective bargaining agreement with an
Employer, unless said agreement provides for his inclusion in this
Plan, and excluding all persons compensated on an hourly basis who are
employed by the Anniston division of Werner Co., and Kentucky Ladder
Company. Employee shall also include any leased employee deemed to be
an Employee of an Employer as provided in Section 414(n) of the Code.
1.17 EMPLOYER means Werner Holding Co. (DE), Inc.; Werner Co., and effective
November 30, 1989, its Anniston division; Gold Medal Ladder Company;
Manufacturers Indemnity and Insurance Company of America; Werner
Management, Inc.; Florida Ladder Company; Kentucky Ladder Company,
effective March 14, 1989; and any Related Employer which, with the
approval of the Board, shall adopt this Plan for the benefit of its
Employees, according to an appropriate written resolution of the Board
of Directors of such Related Employer. Where, in the context of the
Plan, Employer refers to a single entity, the Employer shall mean
Werner Holding, Co. (DE), Inc. Employer shall not include the following
entities as of the date shown below:
December 15, 1993 - Gold Medal Ladder Company
May 18, 1998 - R.D. Arizona Ladder Corp.
June 30, 1998 - Florida Ladder Company
June 30, 1998 - Werner Management Co.
6
<PAGE> 12
June 30 1998 - Kentucky Ladder Company
June 30, 1998 - Phoenix Management Services, Inc.
July 8, 1998 - Manufacturers Indemnity and Insurance Company of America
1.18 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.19 FINAL AVERAGE EARNINGS means the average Compensation of the
Participant from an Employer during the three (3) consecutive full
calendar years out of the last ten (10) full calendar years prior to
the Participant's date of termination of employment that provide the
highest average. If the Participant shall have completed less than
three (3) consecutive full years of employment, his average
Compensation during his period of continuous employment shall be used.
1.20 HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid or entitled to payment
for the performance of duties for an Employer or for a Related
Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are
performed; and
(b) Each hour for which an Employee is paid or entitled to payment
by an Employer or a Related Employer on account of a period of
time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or other approved leave of
absence. No more than five hundred one (501) Hours of Service
shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a
single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor regulations, which are incorporated
herein by reference; and
7
<PAGE> 13
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer or a
Related Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c). These hours shall
be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than
the computation period in which the award, judgment or payment
is made.
(d) Solely for purposes of determining whether a Break in Service
has occurred, an Employee who is absent from work for
maternity or paternity reasons shall receive credit for the
Hours of Service that would otherwise have been credited to
him but for such absence or, in any case in which such Hours
of Service cannot be determined, eight (8) Hours of Service
per day of such absence. For purposes of this paragraph (d) an
absence from work for maternity or paternity reasons means an
absence:
(1) By reason of the pregnancy of the Employee;
(2) By reason of a birth of a child of the Employee;
(3) By reason of the placement of a child with the
Employee in connection with the adoption of such
child by the Employee; or
(4) For purposes of caring for such child for a period
beginning immediately following such birth or
placement.
Any hour under this paragraph (d) which is considered an Hour of
Service under paragraph (b) shall not be considered under this
paragraph (d). The Hours of Service credited under this paragraph
(d) shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a Break
in Service in that period or, in all other cases, in the
immediately following computation period. Notwithstanding
8
<PAGE> 14
the foregoing, no credit shall be given for Hours of Service
under this paragraph (d) unless the Employee furnishes the Plan
Administrator such timely information as the Plan Administrator
may reasonably require to establish that the absence from work
is because of maternity or paternity leave and the number of
days for which there was such an absence.
(e) An Employee on an approved leave of absence under the Family and
Medical Leave Act of 1993 shall be credited with Hours of
Service only to the extent required under such Act. An Employee
shall be credited with Hours of Service for his period of
qualified military service as defined in the Uniformed Services
Employment and Reemployment Rights Act of 1994 upon such
Employee's return to work with the Employer or a Related
Employer to the extent required under such Act.
1.21 JOINT AND SURVIVOR ANNUITY means an annuity which is payable monthly to
the Participant for his life with a survivor annuity payable to his
spouse for the life of such spouse in an amount equal to one-half (1/2)
of the monthly amount payable during the life of the Participant. The
Participant's monthly income under the Joint and Survivor Annuity shall
be an amount equal to the amount payable under the Normal Pension,
multiplied by the applicable factor shown below, and based upon the age
of the Participant and that of his spouse as of the date benefits
commence under the Joint and Survivor Annuity:
<TABLE>
<CAPTION>
Based on Age,
Spouse Is Factor
--------- ------
<S> <C> <C>
5 .925
4 .928
Years younger 3 .931
than Participant 2 .934
1 .937
0 .940
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
Based on Age,
Spouse Is Factor
--------- ------
<S> <C> <C>
1 .943
Years older than 2 .946
Participant 3 .949
4 .952
5 .955
</TABLE>
For each additional year beyond five (5) that the spouse is younger
than the Participant, the factor shall be reduced by .003 for each such
year from the factor of .925, but shall not be less than a factor of
.502. For each additional year beyond five (5) that the spouse is older
than the Participant, the factor shall be increased by .003 for each
such year from the factor of .955, but shall not be greater than a
factor of .997.
1.22 LIMITATION YEAR means the Plan Year.
1.23 NORMAL PENSION means a retirement benefit payable monthly to the
Participant for a period certain of sixty (60) months and during his
lifetime thereafter, with payments to continue to a Beneficiary
designated by the Participant for the balance of the sixty (60) month
period if he should die within such period.
1.24 NORMAL RETIREMENT BENEFIT means the amount of retirement income
computed under Section 4.01 of the Plan that would be payable in the
normal form under the conditions described in Section 5.01 of the Plan,
commencing upon the Participant's Normal Retirement Date, if he is then
entitled to receive a retirement income under the terms of the Plan.
1.25 NORMAL RETIREMENT AGE means a Participant's sixty-fifth birthday
(without regard to his years of Vesting Service at that time); provided
that, for an Employee who first performs an Hour of Service after
having attained age sixty (60), Normal Retirement Age means the fifth
anniversary of the date the Employee becomes a
10
<PAGE> 16
Participant or would have become a Participant had the Employee not
been excluded from participation on account of first performing an Hour
of Service after having attained age sixty (60).
1.26 NORMAL RETIREMENT DATE means the first day of the month coincident with
or immediately following the date a Participant attains his Normal
Retirement Age.
1.27 PARTICIPANT means an Employee who meets the requirements of
participation in the Plan as provided in Article II.
1.28 PLAN means the Retirement Plan for Salaried Employees of Werner Holding
Co. (DE), Inc.
1.29 PLAN ADMINISTRATOR means the Retirement Plan Board.
1.30 PLAN YEAR means the calendar year.
1.31 PRIOR PLAN means the Plan as it existed on December 31, 1998.
1.32 RELATED EMPLOYER means any corporation or other business entity which
is included in a controlled group of corporations within which the
Employer is also included, as provided in Section 414(b) of the Code
(as modified, for purposes of Sections 4.07 and 4.08 of the Plan, by
Section 415(h) of the Code), or which is a trade or business under
common control with the Employer, as provided in Section 414(c) of the
Code (as modified, for purposes of Sections 4.07 and 4.08 of the Plan,
by Section 415(h) of the Code), or which constitutes a member of an
affiliated service group within which the Employer is also included, as
provided in Section 414(m) of the Code, or which is required to be
aggregated with the Employer pursuant to regulations issued under
Section 414(o) of the Code.
1.33 RESTATEMENT DATE means January 1, 1999, the effective date of this
amendment and restatement of the Plan.
1.34 RETIREMENT PLAN BOARD means the retirement plan board appointed by the
Board to administer the Plan.
11
<PAGE> 17
1.35 SEVERANCE FROM SERVICE means the earlier of the following dates:
(a) The date on which an Employee terminates employment, is
discharged, retires or dies; or
(b) The first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
with an Employer or a Related Employer for any reason other
than one (1) listed in paragraph (a); provided, however, that
an Employee who fails to return to employment at the
expiration of a leave of absence approved by the Employer
shall be deemed to have incurred a Severance From Service on
the expiration of his leave and not upon the first anniversary
of the first day of his absence.
Notwithstanding anything herein to the contrary, an Employee shall not
incur a Severance From Service due to an absence for maternity or
paternity reasons until the second anniversary of the first date of
such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence:
(a) By reason of the pregnancy of the individual;
(b) By reason of a birth of a child of the individual;
(c) By reason of the placement of a child with the individual in
connection with the adoption of such child by such individual;
or
(d) For purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Employee shall be required to furnish the Retirement Plan Board
with such timely information as the Retirement Plan Board may
reasonably require to establish both that the absence from work is for
maternity or paternity reasons and the number of days for which there
was such an absence.
12
<PAGE> 18
1.36 TOTAL AND PERMANENT DISABILITY means total and permanent disability by
bodily injury or disease from some unavoidable cause so as to be
prevented from engaging in any occupation or employment for
remuneration or profit, which, in the opinion of a qualified physician,
will be permanent and continuous during the remainder of the Employee's
life. Disability shall be deemed to have resulted from an unavoidable
cause unless it:
(a) Was contracted, suffered, or incurred while the Employee was
engaged in, or resulted from his having been engaged in, a
criminal enterprise; or
(b) Resulted from an intentionally self-inflicted injury.
Total and permanent disability resulting from any of such enumerated
causes, or from future service in the armed forces and which prevents
an Employee from returning to employment with the Employer and for
which he receives a military pension, shall not entitle an Employee to
benefits due to Total and Permanent Disability under Section 4.05 of
the Plan.
1.37 TRUST AGREEMENT and TRUST mean the agreement between the Trustee and
the Employer governing the administration of the Trust Fund, as it may
be amended from time to time, and the Trust established thereunder.
1.38 TRUST FUND means all money, securities, and other property held by the
Trustee for the purposes of the Plan, together with the income
therefrom.
1.39 TRUSTEE means the person, persons, entity, or entities appointed by the
Board to act as trustee of the Trust.
1.40 VESTED INTEREST means that portion of a Participant's Accrued Benefit
which is nonforfeitable and vested, based upon the number of years of
Vesting Service credited to the Participant.
13
<PAGE> 19
1.41 VESTING SERVICE means a Participant's credit for purposes of
determining his right to a nonforfeitable benefit under the Plan. Such
Vesting Service shall mean service as an Employee with an Employer or
Related Employer, as follows:
(a) For periods of employment prior to September 1, 1976, Vesting
Service means the number of years of "Continuous Service"
earned under the Plan prior to September 1, 1976 as such term
was defined under the Plan as in effect prior to September 1,
1976.
(b) For periods of employment after August 31, 1976, Vesting
Service means, as of any date, the number of years and
completed months of employment, equal to the aggregate of such
Employee's periods of employment with the Employer to the
extent provided in this Section 1.41.
(c) Subject to paragraph (d) below, each Employee shall be
credited with Vesting Service during any period of employment
with an Employer or Related Employer, beginning on his Date of
Employment or Reemployment, as applicable, and extending to
the date he incurs a Severance From Service or, if earlier,
the first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
with an Employer or Related Employer.
(d) Notwithstanding anything herein to the contrary, if a
Participant who does not have any nonforfeitable right to an
Accrued Benefit shall have incurred a Severance From Service,
he shall be considered a new Employee for all purposes of the
Plan, and his prior Vesting Service and Credited Service shall
be disregarded, except:
(1) If he is reemployed before twelve (12) months have
elapsed after the date he is first absent from
service, the Credited Service and Vesting Service he
had at the date such absence commenced shall be
reinstated upon his reemployment, and
14
<PAGE> 20
he shall receive credit for Credited Service and
Vesting Service for the period between the date his
absence commenced and his reemployment; or
(2) If the continuous period between his Severance From
Service and his reemployment does not equal or exceed
the greater of five (5) years (or one (1) year for a
Severance From Service prior to September 1, 1985) or
the years of Vesting Service he had at such Severance
From Service, the Credited Service and Vesting
Service he had at such Severance From Service shall
be reinstated on his Date of Reemployment.
(e) Vesting Service shall include the following absences from
employment:
(1) Military leave while the Employee's reemployment
rights are protected by law, provided he returns to
active employment within ninety (90) days after
release from active duty;
(2) Any authorized leave of absence for any reason
approved by an Employer in accordance with rules of
uniform application applicable to all Employees; and
(3) Absence due to layoff or suspension, but not in
excess of two (2) years.
(f) Specifically, and notwithstanding any contrary provision,
Vesting Service shall not include service by an Employee of
Florida Ladder Company rendered to Florida Ladder Company
prior to January 1, 1987, the time Florida Ladder Company was
acquired by the predecessor to the Employer, and service by an
Employee of Gold Medal Ladder Company rendered to Gold Medal
Ladder Company prior to March 7, 1987, the date Gold Medal
Ladder Company was acquired by the predecessor to the
Employer.
15
<PAGE> 21
(g) Specifically, and notwithstanding any contrary provision,
Vesting Service shall include service by an Employee of the
Anniston division or Kentucky Ladder Company from his Date of
Employment or Reemployment, as applicable, and extending to
the date he incurs a Severance From Service or, if earlier,
the first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
with an Employer or Related Employer.
1.42 YEAR OF SERVICE means a twelve consecutive month period beginning on an
Employee's Date of Employment (or Date of Reemployment, if applicable)
or any anniversary of that date during which an Employee completes at
least one thousand (1,000) Hours of Service.
16
<PAGE> 22
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION
(a) Every Employee who was a Participant in the Prior Plan on the
day prior to the Restatement Date shall continue to
participate in the Plan on the Restatement Date if still
employed by an Employer on the Restatement Date.
(b) Each full-time Employee will become a Participant in the Plan
on the later of (i) the January 1 coincident with or next
following his Date of Employment, provided he is employed by
an Employer on that January 1, or (ii) the date the Employee's
Employer becomes an Employer under the Plan. Each other
Employee of an Employer will become a Participant in the Plan
on the first day of the month coincident with or next
following his completion of one (1) Year of Service. For
purposes of this Section 2.01(b), a full-time employee is one
who is regularly scheduled to work thirty (30) hours per week.
(c) Leased employees, as defined in Section 414(n) of the Code,
are not eligible to participate in the Plan.
2.02 REEMPLOYMENT OF A PARTICIPANT
A Participant who incurs a Severance From Service shall be a
Participant immediately upon his Date of Reemployment if his Date of
Reemployment occurs before twelve (12) months have elapsed after such
Severance From Service. A Participant who incurs a Severance From
Service and whose Date of Reemployment occurs after twelve (12) months
have elapsed from such Severance From Service shall become a
Participant as of his Date of Reemployment, provided that he had a
Vested Interest at his Severance From Service or his continuous period
between his Severance From Service and his Date of Reemployment does
not equal or exceed the greater of five
17
<PAGE> 23
(5) years (or one (1) year for a Severance From Service prior to
September 1, 1985) or the years of Vesting Service he had at such
Severance From Service. Any Employee or any Participant who incurs a
Severance From Service prior to obtaining a Vested Interest, who again
is employed by an Employer, and whose continuous period between his
Severance From Service and his Date of Reemployment equals or exceeds
the greater of five (5) years (or one (1) year for a Severance From
Service prior to September 1, 1985) or the years of Vesting Service he
had at such Severance From Service shall commence participation after
he satisfies the requirements set forth in Section 2.01, based on his
Date of Reemployment.
Notwithstanding the foregoing provisions of this Section 2.02, the
following provisions apply in the case of an Employee who is other than
a full-time Employee. An Employee who terminates employment before
becoming a Participant and is reemployed without incurring a Break in
Service shall become a Participant when he meets the eligibility
requirements of Section 2.01, based on his Date of Employment. An
Employee who terminates employment before becoming a Participant and is
reemployed after incurring a Break in Service shall become a
Participant when he meets the eligibility requirements of Section 2.01,
based on his Date of Reemployment.
18
<PAGE> 24
ARTICLE III
CONTRIBUTIONS
3.01 TRUSTEE AND TRUST AGREEMENT
The Plan shall be funded through the Trust Fund. The Trustee shall have
the rights, powers, and duties set forth in the Trust Agreement, under
which agreement the Trustee shall receive contributions from the
Employer to the Trust Fund.
3.02 EMPLOYER CONTRIBUTIONS
During the continuance of the Plan, the Employer intends from time to
time to pay to the Trustee, to be held or applied under the Trust
Agreement, such amounts as shall comply with the funding requirements
of the Code. No contributions shall be made by Participants.
3.03 FORFEITURES
Any forfeiture under the Plan shall be applied to reduce Employer
contributions and not to increase the benefits any Participant would
otherwise receive under the Plan.
3.04 REVERSION OF EMPLOYER CONTRIBUTIONS
(a) At no time shall any part of the corpus or income of the Trust
Fund be used for or diverted to purposes other than for the
exclusive benefit of Participants and their Beneficiaries and
to pay the reasonable expenses of administration of the Plan
and Trust, to the extent that such expenses are not paid by
the Employers, and no part of the Trust Fund shall revert or
be repaid to the Employer, either directly or indirectly,
except for such part of the Trust Fund, if any, which remains
in the event the Plan is terminated and after the satisfaction
of all liabilities to persons entitled to benefits under the
Plan.
19
<PAGE> 25
(b) Notwithstanding the above, if a contribution is made by an
Employer by a mistake in fact, such contribution shall be
returned to such Employer within one (1) year after the
payment of the contribution to the Trust Fund. Contributions
are conditioned upon their deductibility under Section 404(a)
of the Code, and, to the extent the deduction is disallowed,
such a contribution shall be returned to the Employer within
one (1) year after the disallowance of the deduction.
3.05 SPECIAL RULES RELATING TO REEMPLOYED VETERANS
Notwithstanding any provision in this Plan to the contrary, effective
December 12, 1994, contributions, benefits, and service credit with
respect to qualified military service will be provided in accordance
with Section 414(u) of the Code.
20
<PAGE> 26
ARTICLE IV
BENEFITS
4.01 NORMAL RETIREMENT BENEFIT
A Participant who retires at his Normal Retirement Age shall be
entitled to a monthly retirement income payable as provided in Article
V of the Plan, commencing upon his Normal Retirement Date, in an amount
equal to one-twelfth (1/12) of the greater of (a) or (b) below:
(a) (1) One percent (1%) of Final Average Earnings not in
excess of Covered Compensation; plus
(2) One and five-tenths percent (1.5%) of Final Average
Earnings in excess of Covered Compensation;
multiplied by
(3) Years of Credited Service (up to thirty-five (35)
years); plus
(4) One percent (1%) of Final Average Earnings multiplied
by Credited Service in excess of thirty-five (35)
years.
(b) (1) Participant's Accrued Benefit as of August 31, 1989;
plus
(2) Ninety-six dollars ($96.00) multiplied by Credited
Service earned after August 31, 1989.
Notwithstanding the foregoing, each Participant's Accrued Benefit under
this Plan will be the greater of (c) or (d) below:
(c) The Participant's Accrued Benefit determined with respect to the
benefit formula (i.e., (a) or (b) above) applicable for the Plan
Year beginning on or after January 1, 1994, as applied to the
Participant's total years of Credited Service; or
21
<PAGE> 27
(d) The sum of:
(1) The Participant's Accrued Benefit as of December 31,
1993, frozen in accordance with Section
1.401(a)(4)-13 of the regulations; and
(2) The Participant's Accrued Benefit determined under
the benefit formula (i.e., (a) or (b) above)
applicable for the Plan Year beginning on or after
January 1, 1994, as applied to the Participant's
years of Credited Service earned on or after January
1, 1994.
4.02 POSTPONED RETIREMENT BENEFIT
If a Participant remains in the employ of an Employer after his Normal
Retirement Date, his Postponed Retirement Date shall be the first day
of the month coincident with or next following the date on which he
actually retires from employment. A Participant who retires on a
Postponed Retirement Date shall be entitled to a retirement income
payable as provided in Article V of the Plan, commencing on his
Postponed Retirement Date, in the amount determined under the formula
set forth in Section 4.01 of the Plan, using his Final Average
Earnings, Covered Compensation, and years of Credited Service as of his
Postponed Retirement Date.
A Participant who remains in the employ of the Employer after his
Normal Retirement Date shall be notified by the Plan Administrator, in
writing by personal delivery or first-class mail, during the calendar
month during which his Normal Retirement Date occurs, that he will not
be entitled to receive any benefit for any calendar month of employment
during which he is scheduled to work forty (40) or more Hours of
Service or receives from the Employer or a Related Employer payment for
any Hours of Service performed on each of eight (8) or more days in
such month (or separate work shifts), provided that the Plan has not
determined or used the actual number of Hours of Service. The benefit
of such Participant shall be actuarially increased to reflect the
benefit payable to such Participant for any calendar month
22
<PAGE> 28
during which he does not complete forty (40) Hours of Service or
receive from the Employer or a Related Employer payment for any Hours
of Service performed on each of eight (8) or more days in such month
(or separate work shifts), provided the Plan has not determined or used
the actual number of Hours of Service. If such Participant dies before
the commencement of his benefit, as so increased, a single sum equal to
the aggregate benefit payable to the Participant for each month after
his Normal Retirement Date during which he did not complete at least
forty (40) Hours of Service shall be paid to his surviving spouse, and
if none, to his estate. However, the benefit the Participant accrued
under this Section 4.02 during a period in which he worked less than
forty (40) Hours of Service a month will be offset by the value of the
single sum death benefit described in the preceding sentence. If the
Participant is not given notice of suspension of benefits as described
above, then, upon retirement, the Participant shall be entitled to
receive a benefit calculated by actuarially increasing the benefit
payable at Normal Retirement Date to the date of retirement if such
benefit is greater than the benefit otherwise payable under the Plan.
4.03 EARLY RETIREMENT BENEFIT
A Participant who has reached his Early Retirement Age may retire at
any time prior to his Normal Retirement Age. A Participant who retires
on or after his Early Retirement Age, but prior to his Normal
Retirement Date, shall be entitled to a retirement income for life,
commencing upon his Normal Retirement Date, in an amount equal to his
Accrued Benefit. However, the Participant may elect, by giving at least
one hundred twenty (120) days' prior written notice to the Retirement
Plan Board, to have his retirement income begin on or after his Early
Retirement Date, in which event he shall be entitled to receive a
retirement income for life in an amount equal to his Accrued Benefit,
but multiplied by the applicable factor shown below which corresponds
to the number of years (or fractions thereof) by which his date of
benefit commencement precedes his Normal Retirement Date:
23
<PAGE> 29
Number of Years By Which Date
of Benefit Commencement
Precedes Normal Retirement Date Factor
-------------------------------- ------
1 .9200
2 .8400
3 .7600
4 .6800
5 .6000
6 .5600
7 .5200
8 .4800
9 .4400
10 .4000
The above factors will be adjusted proportionately to allow for
fractional parts of a year.
4.04 TERMINATION OF VESTED PARTICIPANT
A Participant who has completed at least five (5) years of Vesting
Service and who incurs a Severance From Service before he becomes
eligible to retire at his Normal Retirement Age, his Disability
Retirement Age, or his Early Retirement Age shall be entitled to
receive a retirement income for life commencing upon his Normal
Retirement Date in an amount equal to his Accrued Benefit. However, the
Participant, if he has completed at least fifteen (15) years of Vesting
Service, may elect, by giving at least one hundred twenty (120) days'
prior written notice to the Retirement Plan Board, to have his
retirement income begin on the first day of any month on or after the
date he attains age fifty-five (55), in which event he shall be
entitled to receive a retirement income for life in an amount equal to
his Accrued Benefit, but reduced by the applicable factors set forth in
Section 4.03. A Participant who incurs a Severance
24
<PAGE> 30
From Service before he completes five (5) years of Vesting Service or
before his Normal Retirement Age shall not be entitled to any benefits
under the Plan, except as provided in Article IX, and his Accrued
Benefit shall be forfeited on the date he incurs a Severance From
Service of five (5) years.
4.05 DISABILITY RETIREMENT BENEFIT
(a) A Participant who terminates active employment upon attainment
of his Disability Retirement Age shall be entitled to a
disability retirement pension which shall commence on his
Disability Retirement Date. A Participant's disability
retirement pension under this paragraph (a) shall be equal to
his Accrued Benefit determined under the formula set forth in
Section 4.01 of the Plan, using his Final Average Earnings,
Covered Compensation, and years of Credited Service as of his
Disability Retirement Date.
(b) A Participant applying for or receiving a disability
retirement pension may be required to submit to an examination
by a competent physician acceptable to the Employer and may be
required to submit to such reexaminations at reasonable
intervals as shall be determined by the Retirement Plan Board
to make a determination concerning his physical or mental
condition. If a Participant refuses to submit to periodic
medical examinations, his benefits shall be discontinued until
he completes the examination. If, on the basis of such an
examination, it is found that the Participant is no longer
Totally and Permanently Disabled, payment of his disability
retirement pension shall be terminated.
4.06 MINIMUM BENEFITS
In no event shall any Participant who was participating in the Prior
Plan receive a benefit less than the benefit he would have been
entitled to receive under the Prior Plan as constituted on December 31,
1998, based on his average Compensation, Vesting Service, and Credited
Service on December 31, 1998, and taking into
25
<PAGE> 31
consideration the actuarial factors for calculating optional forms of
benefits provided for in the Prior Plan.
4.07 MAXIMUM BENEFITS
Effective September 1, 1987, for purposes of compliance with Section
415 of the Code (or any successor to said Section), the following
limitations on Plan benefits are hereby imposed:
(a) The retirement benefits payable to a Participant in any
Limitation Year shall not exceed an annual sum equal to the
least of:
(1) Ninety thousand dollars ($90,000) (or such other
amount as may be determined by Treasury regulations
issued pursuant to Section 415 of the Code).
(2) The Participant's average annual compensation (as
defined in Section 4.09) over the three (3)
consecutive calendar years during which his
compensation (as defined in Section 4.09) from the
Employer or a Related Employer was the highest.
(3) If the Participant has less than ten (10) years of
participation in the Plan, the amount determined
under Section 4.07(a)(1) multiplied by a fraction,
the numerator of which is the number (not less than
one (1)) of years (or parts thereof) of participation
in the Plan and the denominator of which is ten (10).
(4) If the Participant has less than ten (10) years of
Vesting Service, the amount determined under Section
4.07(a)(2) multiplied by a fraction, the numerator of
which is the Participant's number (not less than one
(1)) of years of Vesting Service and the denominator
of which is ten (10).
26
<PAGE> 32
Notwithstanding the foregoing, in the event that a Participant
has never participated in any defined contribution plan
maintained by the Employer or a Related Employer, the annual
pension payable to such Participant shall not be deemed to exceed
the limitations of this section if it does not exceed ten
thousand dollars ($10,000) multiplied by a fraction, the
numerator of which is the number (not less than one (1)) of the
Participant's years of Vesting Service and the denominator of
which is ten (10).
Pensions payable in a form other than a straight life annuity
shall be adjusted to an actuarially equivalent straight life
annuity before applying the limitations of this Section 4.07. For
distributions occurring prior to January 1, 1995, the straight
life annuity shall equal the greater of (1) such annuity
determined using the interest rate and mortality table specified
in Section 1.02 and (2) such annuity determined using an interest
rate of five percent (5%) and the mortality table specified in
Section 1.02. Effective January 1, 1995, to determine actuarial
equivalence for this purpose where the benefit is not subject to
Section 417(e)(3) of the Code, the actuarially equivalent
straight life annuity shall equal the greater of (1) such annuity
determined using the Plan's interest rate and mortality table
specified in Section 1.02 and (2) such annuity determined using
the 83 GAM unisex mortality table and an interest rate of five
percent (5%). For purposes of adjusting any benefit subject to
Section 417(e)(3) of the Code effective January 1, 1995, the
straight life annuity will be equal to the greater of (i) the
equivalent straight life annuity computed using the interest rate
and mortality table specified in Section 1.02 and (ii) the
equivalent straight life annuity computed using the applicable
interest rate as defined in Section 417(e)(3) of the Code and the
GAM 83 unisex mortality table or any successor mortality table
prescribed by the Secretary of the Treasury for purposes of
Section 415 of the Code. No
27
<PAGE> 33
actuarial adjustment to the benefit is required for the value
of a Joint and Survivor Annuity form.
(b) If payments begin prior to a Participant's Social Security
Retirement Age, but on or after age sixty-two (62), the
limitation in subparagraph (a)(1) shall be adjusted as
follows:
(1) If a Participant's Social Security Retirement Age is
sixty-five (65), the limitation for benefits
commencing on or after age sixty-two (62) is
determined by reducing the limitation in subparagraph
(a)(1) by 5/9 of one percent for each month by which
benefits commence before the month in which the
Participant attains age sixty-five (65).
(2) If a Participant's Social Security Retirement Age is
greater than sixty-five (65), the limitation for
benefits commencing on or after age sixty-two (62) is
determined by reducing the limitation in subparagraph
(a)(1) by 5/9 of one percent for each of the first
thirty-six (36) months and 5/12 of one percent for
each of the additional months (up to twenty-four (24)
months) by which benefits commence before the month
in which the Participant attains his Social Security
Retirement Age.
(c) If benefit payments begin prior to a Participant's attainment
of age sixty-two (62), the Plan Administrator shall reduce the
limitation in subparagraph (a)(1) at age sixty-two (62) (as
calculated pursuant to subparagraph (b)) on an actuarially
equivalent basis for each month by which benefits commence
before the month in which the Participant attains age
sixty-two (62) as follows:
(1) For distributions occurring prior to January 1, 1995,
the Plan Administrator shall use an interest rate
assumption equal to
28
<PAGE> 34
the greater of five percent (5%) per annum or the rate
specified in Section 1.02 and shall use the mortality table
specified in Section 1.02.
(2) For distributions commencing on or after January 1,
1995, the reduced dollar limitation in subparagraph
(a)(1) shall be the lesser of (i) the actuarial
equivalent of the limitation in subparagraph (a)(1)
at age sixty-two (62) determined on the basis of the
interest rate and mortality table specified in
Section 1.02, or (ii) the actuarial equivalent of the
dollar limitation at age sixty-two (62) computed
using five (5%) percent interest and the GAM 83
unisex mortality table or any successor mortality
table prescribed by the Secretary of the Treasury.
(d) If benefit payments begin after a Participant's Social
Security Retirement Age, the Plan Administrator shall increase
the limitation in subparagraph (a)(1) at Social Security
Retirement Age on an actuarially equivalent basis, as follows:
(1) For distributions occurring prior to January 1, 1995,
the Plan Administrator shall use an interest rate
assumption equal to the lesser of five percent (5%)
per annum or the rate specified in Section 1.02 and
shall use the mortality table specified in Section
1.02.
(2) For distributions commencing on or after January 1,
1995, the increased dollar limitation in subparagraph
(a)(1) shall be the lesser of (i) the actuarial
equivalent of the limitation of subparagraph (a)(1)
at Social Security Retirement Age determined on the
basis of the interest rate and mortality table
specified in Section 1.02; or (ii) the actuarial
equivalent of the
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<PAGE> 35
limitation under subparagraph (a)(1) at Social
Security Retirement Age computed using five (5)
percent interest and the GAM 83 unisex mortality
table or any successor mortality table prescribed by
the Secretary of the Treasury.
(e) Notwithstanding the foregoing, determinations under Code
Section 415(b)(2)(E) that are made before January 1, 2000
shall be made on the basis of Code Section 415(b)(2)(E) as in
effect on December 7, 1994 and the provisions of the Plan as
in effect on December 7, 1994.
(f) For purposes of Section 4.07(e) of this Plan, "Social Security
Retirement Age" shall mean the age used as the retirement age
for the Participant under Section 216(l) of the Social
Security Act, except that such section shall be applied
without regard to the age increase factor and as if the early
retirement age under Section 216(l)(2) of such Act were
sixty-two (62).
4.08 COMBINED MAXIMUM LIMITATIONS
In the event any Participant is also participating in any other
qualified plan (within the meaning of Section 401 of the Internal
Revenue Code) maintained by an Employer or a Related Employer, then for
any Limitation Year the sum of the "Defined Benefit Plan Fraction" and
the "Defined Contribution Plan Fraction" for such Limitation Year shall
not exceed 1.0. For purposes of this Section 4.08, such sum shall be
determined in accordance with the following:
(a) The "Defined Benefit Plan Fraction" for any year is a
fraction:
(1) The numerator of which is a projected annual benefit
of the Participant under each defined benefit plan
(determined as of the close of the year); and
(2) The denominator of which is the lesser of the maximum
dollar limitation in effect under Section
415(b)(1)(A) of the Code
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<PAGE> 36
for such Limitation Year times 1.25, or the amount
which may be taken into account under Section
415(b)(1)(B) of the Code for such Limitation Year
times 1.4.
(b) The "Defined Contribution Plan Fraction" for any year is a
fraction:
(1) The numerator of which is the sum of the annual
additions to the Participant's account under each
defined contribution plan as of the close of the
year; and
(2) The denominator of which is the sum of the lesser of
the following amounts determined for such Limitation
Year and each prior year of service with the Employer
or a Related Employer:
(A) The product of 1.25 multiplied by the dollar
limitation in effect under Section
415(c)(1)(A) of the Code for such Limitation
Year; or
(B) The product of 1.4 multiplied by the amount
which may be taken into account under
Section 415(c)(1)(B) of the Code for such
Limitation Year.
The annual additions for any Limitation Year beginning before September
1, 1987 shall not be recomputed to treat all employee contributions as
annual additions.
For purposes of this Section 4.08, all defined benefit or defined
contribution plans shall be treated as one (1) plan by class. In the
event the above limitation would otherwise be exceeded in any
Limitation Year, the Participant's benefits under this Plan are to be
limited, and the Retirement Plan Board shall advise any affected
Participant of any additional limitation on his annual benefits
required by this Section 4.08.
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<PAGE> 37
If the Plan satisfied the applicable requirements of Section 415 of the
Code as in effect for all Limitation Years beginning before September
1, 1987, an amount shall be subtracted from the numerator of the
Defined Contribution Plan Fraction (not exceeding such numerator), as
prescribed by the Secretary of the Treasury, so that the sum of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction computed under Section 415(e)(1) of the Code does not exceed
one (1).
This Section 4.08 shall cease to be effective with respect to
Limitation Years beginning after December 31, 1999.
4.09 DEFINITION OF COMPENSATION FOR PURPOSES OF SECTIONS 4.07 AND 4.08
(a) Solely for the purpose of applying the limitations of Sections
4.07 and 4.08, effective January 1, 1998, the compensation of
a Participant includes:
(1) A Participant's wages, salaries, fees for
professional services, elective deferrals (as defined
in Code Section 402(g)(3)), amounts which are
contributed or deferred by the Employer or Related
Employer at the election of the Employee and which
are not includable in the gross income of the
Employee by reason of Section 125 of the Code, and
other amounts received (without regard to whether or
not an amount is paid in cash) for personal services
actually rendered in the course of employment with
the Employer or Related Employer to the extent that
the amounts are includable in gross income
(including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances);
32
<PAGE> 38
(2) In the case of a Participant who is an employee
within the meaning of Section 401(c)(1) of the Code
and the regulations thereunder, the Participant's
earned income (as described in Section 401(c)(2) of
the Code and the regulations thereunder);
(3) Amounts described in Sections 104(a)(3), 105(a), and
105(h) of the Code, but only to the extent these
amounts are includable in the gross income of the
Employee;
(4) Amounts paid or reimbursed by the Employer or Related
Employer for moving expenses incurred by an Employee,
but only to the extent that these amounts are not
deductible by the Employee under Section 217 of the
Code;
(5) The value of a nonqualified stock option granted to
an Employee by the Employer or Related Employer , but
only to the extent that the value of the option is
includable in the gross income of the Employee for
the taxable year in which granted; and
(6) The amount includable in the gross income of an
Employee upon making the election described in
Section 83(b) of the Code.
(b) Solely for the purpose of applying the limitations of Sections
4.07 and 4.08, effective January 1, 1998, the compensation of
a Participant excludes:
(1) Contributions to a plan of deferred compensation
which are not included in the Participant's gross
income for the taxable year in which contributed
(other than as described in Section 402(g)(3) of the
Code), employer contributions under a simplified
employee pension plan to the extent such
33
<PAGE> 39
contributions are excluded from the Participant's
gross income, or any distributions from a plan of
deferred compensation;
(2) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the Participant either becomes freely
transferable or is no longer subject to substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock
option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer or Related
Employer (whether or not under a salary reduction
agreement) toward the purchase of an annuity
described in Code Section 403(b) (whether or not the
amounts are actually excludable from the gross income
of the Employee), and other than those excluded from
the gross income of the Employee by reason of Section
125 of the Code.
4.10 REEMPLOYMENT AFTER RECEIPT OF BENEFITS
(a) A Participant who terminates employment and is rehired without
having received retirement benefits and who once again becomes
a Participant in the Plan may later retire and receive
benefits based upon his entire period of Credited Service both
before and after such termination and reemployment, to the
extent not disregarded under Section 1.41.
(b) A Participant who retires and is rehired prior to his Normal
Retirement Date after beginning to receive retirement benefits
shall have such payments suspended.
34
<PAGE> 40
In the event that a reemployed, retired Participant accrues
further periods of Credited Service, he may later retire again
to receive benefits based upon his total period of Credited
Service both before and after such termination and
reemployment. However, the subsequent retirement benefits
shall be reduced by the Actuarial Equivalent of the benefits
he received prior to his reemployment.
(c) A Participant who retires and is rehired after his Normal
Retirement Date and after beginning to receive retirement
benefits shall have such payments suspended. No payment shall
be suspended unless the Plan Administrator gives written
notice to the Employee by personal delivery or first-class
mail, during the month in which his reemployment occurs, that
he will not receive any benefit for any calendar month of
employment during which he works forty (40) or more Hours of
Service for the Employer or a Related Employer or receives
from the Employer or a Related Employer payment for any Hours
of Service performed on each of eight (8) or more days in such
month (or separate work shifts), provided that the Plan has
not determined or used the actual number of Hours of Service.
The benefit of such Participant shall be actuarially increased
to reflect the benefit payable to such Participant for any
calendar month during which he does not complete forty (40)
Hours of Service for the Employer or a Related Employer or
receive from the Employer or a Related Employer payment for
any Hours of Service performed on each of eight (8) or more
days in such month (or separate work shifts), provided that
the Plan has not determined or used the actual number of Hours
of Service. If such Participant dies before the commencement
of his benefit, as so increased, a single sum equal to the
aggregate benefit payable to the Participant for each month
after his Normal Retirement Date during which he did not
complete at least forty (40) Hours of Service for the Employer
or a Related Employer or receive from the Employer or a
Related Employer payment for any Hours of
35
<PAGE> 41
Service performed on each of eight (8) or more days in such
month (or separate work shifts), provided that the Plan has
not determined or used the actual number of Hours of Service
shall be paid to his surviving spouse, and if none, to his
estate. Hours of Service in this subsection are hours as
defined under Department of Labor Regulation Section
2530.200b-2(a).
In the event that a reemployed, retired Participant accrues
further periods of Credited Service, he may later retire
again, to receive benefits based upon his total period of
Credited Service both before and after such termination and
reemployment. However, the subsequent retirement benefits
shall be reduced by the Actuarial Equivalent of the benefits
he previously received prior to his Normal Retirement Date. In
the event that, by mistake, suspension occurs without notice
as provided in this subsection, the Participant shall be
entitled to receive a benefit calculated by actuarially
increasing the benefit payable at Normal Retirement Date to
the date of subsequent retirement if such benefit is greater
than the benefit described in the preceding sentence.
4.11 TRANSFERS
A participant in another retirement plan maintained by or contributed
to by an Employer or a Related Employer who becomes a Participant in
this Plan shall be considered a transferred employee.
Such transferred employee's benefit under the plan he was previously a
participant in shall be frozen as of his transfer date. If such
transferred employee is a Participant in this Plan at the time of his
death, termination of employment, disability, or retirement, whichever
first occurs, he, his spouse, or his Beneficiary will receive any
benefit due under this Plan. The benefit provided hereunder will be
based on Final Average Earnings and total Credited Service as an
Employee of the Employer or Related
36
<PAGE> 42
Employer reduced by any benefit such Participant was entitled to under
the plan in which he was previously a participant.
Final Average Earnings will be based on the Participant's employment
with an Employer in accordance with the Plan's definition of Final
Average Earnings.
Notwithstanding the foregoing, in the case of an individual hired on or
after June 1, 1987 who is a member of the collective beginning unit
represented by Local 3713 of the United Steelworkers of America who
becomes a Participant in this Plan, Credited Service shall be
calculated beginning with his date of participation in this Plan. His
period of employment as a member of the collective bargaining unit
represented by Local 3713 of the United Steelworkers of America shall
not be considered in determining his Credited Service hereunder.
37
<PAGE> 43
ARTICLE V
FORM AND PAYMENT OF BENEFITS
5.01 NORMAL PENSION
If a Participant is unmarried as of his Annuity Starting Date, the
benefit payments determined under Article IV shall be in the form of a
Normal Pension, unless the Participant elects the optional form of
payment provided in the Plan in accordance with the procedures of
Section 5.03. The benefit formula in Section 4.01 yields payments in
the form of a Normal Pension.
5.02 JOINT AND SURVIVOR ANNUITY
If a Participant is married on his Annuity Starting Date, benefit
payments determined under Article IV shall be in the form of a Joint
and Survivor Annuity, unless the Participant, with the consent of the
Participant's spouse, elects either the Normal Pension or the optional
form of payment provided in the Plan in accordance with the procedures
of Section 5.04.
5.03 ELECTION NOT TO RECEIVE NORMAL PENSION
An unmarried Participant may elect in writing, during the ninety (90)
day period ending on his Annuity Starting Date, to waive the automatic
Normal Pension form of benefit described in Section 5.01 and to make a
qualified election of the optional form of payment permitted under the
Plan. No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent with
such regulations as the Secretary of the Treasury may prescribe, the
Retirement Plan Board shall provide the Participant with a written
explanation of:
(a) The terms and conditions of the Normal Pension;
(b) The Participant's right to make and the effect of an election
to waive the Normal Pension;
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<PAGE> 44
(c) The right of the Participant to revoke such election and the
effect of such revocation; and
(d) The relative value of the optional forms of benefit available
under the Plan.
5.04 ELECTION NOT TO RECEIVE JOINT AND SURVIVOR ANNUITY
(a) A Participant may, with his spouse's written consent, elect in
writing, during the ninety (90) day period ending on his
Annuity Starting Date, to waive the automatic Joint and
Survivor Annuity form of payment described in Section 5.02 and
to make a qualified election of either the Normal Pension or
the optional form of payment permitted under the Plan. The
spouse's consent must acknowledge the effect of such election
and be witnessed by a Plan representative or notary public.
The spouse must also consent both to the specific optional
form of benefit chosen and to the specific Beneficiary
designated, if applicable. Notwithstanding the foregoing, this
paragraph (a) shall not apply if it is established to the
Retirement Plan Board's satisfaction that the spouse cannot be
located or that other circumstances set forth in regulations
promulgated under Section 417 of the Code which preclude the
necessity of the spouse's consent are present with respect to
the Participant.
(b) No less than thirty (30) days and no more than ninety (90)
days prior to the Participant's Annuity Starting Date and
consistent with such regulations as the Secretary of the
Treasury may prescribe, the Retirement Plan Board shall
provide the Participant with a written explanation of:
(1) The terms and conditions of the Joint and Survivor
Annuity;
(2) The Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity;
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<PAGE> 45
(3) The right of the Participant's spouse to consent to
any election to waive the Joint and Survivor Annuity;
(4) The right of the Participant to revoke such election
and the effect of such revocation; and
(5) The relative value of the optional forms of benefit
available under the Plan.
5.05 PAYMENT IN OPTIONAL FORM ON RETIREMENT
(a) As an optional form of payment, a Participant may elect to
have his retirement income paid in the form of a contingent
annuitant option. A contingent annuitant option is a monthly
income payable for the lifetime of the Participant and
continuing thereafter in an amount fifty percent (50%) or one
hundred percent (100%) as great, as elected by the
Participant, to a Beneficiary designated in writing by the
Participant for such Beneficiary's life. The Participant's
monthly income under the contingent annuitant option shall be
an amount equal to the amount payable under the Normal
Pension, multiplied by the applicable factor shown below,
based on the particular optional form elected and the age of
the Participant and that of his Beneficiary as of the date
benefits commence under the optional form:
40
<PAGE> 46
Factor for (Factor for One
Based on Fifty Hundred percent
Attained Ages, Percent (100%)
Beneficiary Is (50%) Option Option
-------------- ------------ ------
5 .925 .846
Years younger than 4 .928 .852
the Participant 3 .931 .858
2 .934 .864
1 .937 .870
0 .940 .876
1 .943 .882
Years older than 2 .946 .888
the Participant 3 .949 .894
4 .952 .900
5 .955 .906
In the case of election of the fifty percent (50%) option,
where the Beneficiary is more than five (5) years younger or
five (5) years older than the Participant, the following rules
apply:
(1) For each additional year beyond five (5) that the
Beneficiary is younger than the Participant, the
factor shall be reduced by .003 for each such year
from the factor of .925, but shall not be less than a
factor of .502.
(2) For each additional year beyond five (5) that the
Beneficiary is older than the Participant, the factor
shall be increased by .003 for each such year from
the factor of .955, but shall not be greater than a
factor of .997.
In the case of election of the one hundred percent (100%)
option, where the Beneficiary is more than five (5) years
younger or five (5) years older than the Participant, the
following rules apply:
(1) For each additional year beyond five (5) that the
Beneficiary is younger than the Participant, the
factor shall be reduced by
41
<PAGE> 47
.006 for each such year from the factor of .846, but
shall not be less than a factor of .502.
(2) For each additional year beyond five (5) that the
Beneficiary is older than the Participant, the factor
shall be increased by .006 for each such year from
the factor of .906, but shall not be greater than a
factor of .996.
Distribution may be made over only one (1) of the following
periods (or a combination thereof):
(1) The life of the Participant;
(2) The life of the Participant and a designated
Beneficiary;
(3) A period certain not extending beyond the life
expectancy of the Participant; or
(4) A period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
A Participant's life expectancy may be recalculated no more
frequently than annually; however, the life expectancy of a
nonspouse Beneficiary may not be recalculated.
All distributions shall be determined and made in accordance
with Section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the proposed regulations.
(b) As an optional form of payment, if the single sum Actuarial
Equivalent value of his retirement income is ten thousand
dollars ($10,000) or less, a participant may elect to have his
retirement income payable in the form of a single sum.
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<PAGE> 48
(c) If the single sum Actuarial Equivalent of a Participant's
benefit is greater than five thousand dollars ($5,000) (three
thousand five hundred dollars ($3,500) prior to January 1,
1998) and the Annuity Starting Date precedes his Normal
Retirement Date, then such Participant must consent in writing
to the early commencement of benefits. His spouse must also
consent in writing to the early commencement of benefits
unless payment is made in the form of either a Joint and
Survivor Annuity or the contingent annuitant option with the
spouse as Beneficiary.
(d) A participant who has elected an optional form of benefit
payment may revoke such election at any time before his
Annuity Starting Date without the consent of his spouse, if
any. Another election to receive his retirement income in
another form must be made in accordance with this Article V.
If a Participant who has elected an optional form of benefit
dies prior to his Annuity Starting Date, retirement income
payments shall be made in accordance with the provisions of
the Plan as if no optional form of retirement income had been
elected. If a Participant who has elected an optional form of
benefit dies either on or after his Annuity Starting Date,
retirement income payments shall be made in accordance with
the optional form elected.
(e) If the single sum Actuarial Equivalent value of any benefit
that is not yet in pay status is five thousand dollars
($5,000) (three thousand five hundred dollars ($3,500) prior
to January 1, 1998) or less, the Retirement Plan Board shall
direct the Trustee to pay such benefit with respect to the
terminated Participant or Beneficiary as soon as practicable
(whether or not the Participant has reached a retirement date)
in a single sum cash payment which shall be the Actuarial
Equivalent of the retirement income otherwise payable. For
purposes of this paragraph, if the present value of a
Participant's vested Accrued Benefit is zero (0), the
Participant shall be deemed to have received a distribution of
such vested Accrued Benefit under this paragraph (e).
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<PAGE> 49
5.06 PRE-RETIREMENT SURVIVOR ANNUITY
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and if he is survived by a spouse to whom he has been
married throughout the twelve (12) month period preceding his death,
such spouse shall be eligible to receive a Pre-retirement Survivor
Annuity under this Section 5.06, payable as set forth in subsection (a)
or (b) below, whichever is applicable:
(a) If a Participant dies during employment on or after the
attainment of his Early Retirement Age, the Pre-retirement
Survivor Annuity shall be a monthly income payable for the
life of the spouse, equal to the benefit that would have been
payable to the spouse had the deceased Participant retired on
the day before death and elected immediate commencement of
benefits in the one hundred percent (100%) contingent
annuitant form under Section 5.05. Payment to the spouse will
begin on the first day of the month coinciding with or next
following the Participant's date of death unless the spouse
elects to defer distribution. The last monthly payment shall
be made for the month in which death of such spouse occurs.
The spouse may elect to defer commencement of benefits, but
not beyond the date the Participant would have attained age
seventy and one-half (70 1/2).
(b) If a Participant dies during employment but prior to the
attainment of his Early Retirement Age, or, in the case of the
death of a former Participant, the following rules shall
apply:
(1) If a Participant or former Participant was eligible
to immediately commence receipt of his retirement
income as of the date of his death, the
Pre-retirement Survivor Annuity shall be a monthly
income payable for the life of the spouse, equal to
the benefit that would have been payable to the
spouse had the deceased Participant retired on the
day before
44
<PAGE> 50
death and elected immediate commencement of benefits
in the Joint and Survivor Annuity (fifty percent
[50%]) form. Payment to the spouse will begin on the
first day of the month coinciding with or next
following the Participant's date of death unless the
spouse elects to defer distribution. The last monthly
payment shall be made for the month in which death of
such spouse occurs. The spouse may elect to defer
commencement of benefits, but not beyond the date the
Participant would have attained age seventy and
one-half (70 1/2).
(2) If a Participant or former Participant was not
eligible to immediately commence receipt of benefits
hereunder as of the date of his death, the
Pre-retirement Survivor Annuity shall be a monthly
income payable for the life of the spouse, equal to
the benefit that would have been payable to such
spouse had the Participant terminated employment on
his date of death (except, where termination of
employment occurred prior to his death, the
Participant's date of termination of employment shall
be used) and then survived and retired on the first
date upon which he could have elected immediate
benefits and elected immediate commencement of
benefits in the Joint and Survivor Annuity (fifty
percent [50%]) form. Payment to the spouse will begin
on the first day of the month in which the
Participant could have elected immediate benefits had
he survived unless the spouse elects to defer
distribution. The last monthly payment shall be made
for the month in which death of such spouse occurs.
The spouse may elect to defer commencement of
benefits, but not beyond the date the Participant
would have attained age seventy and one-half (70
1/2).
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<PAGE> 51
(c) If a Participant dies prior to his Annuity Starting Date and
the single sum Actuarial Equivalent of the Pre-retirement
Survivor Annuity exceeds five thousand dollars ($5,000) (three
thousand five hundred dollars ($3,500) prior to January 1,
1998), the spouse must consent in writing in order for payment
to be made prior to the date the Participant would have
attained his Normal Retirement Age.
5.07 PRE-RETIREMENT DEATH BENEFIT FOR UNMARRIED PARTICIPANTS
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and where no Pre-retirement Survivor Annuity is payable
under Section 5.06, his Beneficiary shall be entitled to a
pre-retirement death benefit in accordance with the following
provisions:
(a) If a Participant dies during employment on or after the
attainment of his Early Retirement Age, or if a former
Participant was eligible to commence receipt of his retirement
income immediately as of the date of his death, such
pre-retirement death benefit shall be equal to the single sum
Actuarial Equivalent of the benefit that would have been
payable to the Beneficiary had such Participant retired on the
day before his death and begun receiving benefits in the form
of a Normal Pension. Payment shall be made as soon as
practicable following the Participant's death.
(b) If a Participant or former Participant was not eligible to
immediately commence receipt of benefits hereunder as of the
date of his death, such pre-retirement death benefit shall be
equal to the single sum Actuarial Equivalent of the benefit
that would have been payable to the Beneficiary had the
Participant terminated employment on the day before his death
(except, where termination of employment occurred prior to his
death, the Participant's date of termination of employment
shall be used) then survived to the earliest date at which he
would be entitled to begin receiving benefits under the Plan,
and began receiving benefits in the
46
<PAGE> 52
form of a Normal Pension. Payment shall be made as soon as
practicable following the Participant's death.
5.08 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
If a Participant or Beneficiary is under a legal disability or, by
reason of illness or mental or physical disability, is unable, in the
opinion of the Retirement Plan Board, to attend properly to his
personal financial matters, the Trustee may make such payments in such
of the following ways as the Retirement Plan Board shall direct:
(a) Directly to such Participant or Beneficiary; or
(b) To the legal representative of such Participant or
Beneficiary.
Any payment made pursuant to this Section 5.08 shall be in complete
discharge of the obligation for such payment under the Plan.
5.09 NO GUARANTY OF BENEFITS
The benefits provided under the Plan shall be paid solely from the
assets of the Trust Fund. Nothing contained in the Plan or the Trust
Agreement shall constitute a guaranty by the Employer or the Trustee
that the assets of the Trust Fund will be sufficient to pay any benefit
to any person.
5.10 TIME OF PAYMENT
Unless the Participant elects otherwise, payment shall be made or shall
commence not later than the sixtieth day after the close of the Plan
Year in which the latest of the following occurs:
(a) The Participant attains age sixty-five (65);
(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(c) The Participant terminates his employment with an Employer.
47
<PAGE> 53
Payment of retirement shall commence no later than the April 1 of the
calendar year following the calendar year in which the Participant
attains age seventy and one-half (70 1/2), whether or not such
Participant has retired. The preceding provisions shall not apply to a
Participant who:
(a) Has made a written election to receive his benefits under the
Plan at a later date in accordance with Section 242(b) of the
Tax Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before January
1, 1988 and was not a five percent (5%) owner of an Employer
or a Related Employer at any time during the Plan Year ending
with or within the calendar year in which such individual
attained age sixty-six and one-half (66 1/2) or any subsequent
Plan Year.
5.11 DEATH DISTRIBUTION REQUIREMENTS
(a) In addition to any other requirements specified in the Plan,
if the Participant dies after his Annuity Starting Date, the
remaining portion of his retirement income will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(b) If the Participant dies before distribution of his interest
commences, the Participant's entire interest will be
distributed no later than five (5) years after the
Participant's death except to the extent that an election is
made to receive distributions in accordance with (1) or (2)
below:
(1) If any portion of the Participant's interest is
payable to a designated Beneficiary, distributions
may be made in substantially equal installments over
the life or life expectancy of the designated
Beneficiary commencing no later than one (1) year
after the Participant's death;
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<PAGE> 54
(2) If the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required
to begin in accordance with (1) above shall not be
earlier than the date on which the Participant would
have attained age seventy and one-half (70 1/2), and
if the spouse dies before payments begin, subsequent
distributions shall be made as if the spouse had been
the Participant.
5.12 DIRECT ROLLOVERS
Effective January 1, 1993, a Distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to have any portion of
an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan in the form of a Direct Rollover. Notwithstanding the
above, an Eligible Rollover Distribution of less than two hundred
dollars ($200) is not eligible for a Direct Rollover. Further, a
Distributee may elect to have an Eligible Rollover Distribution paid to
only one Eligible Retirement Plan in a Direct Rollover.
For purposes of this Section 5.12, the following definitions apply:
(a) "Distributee" means a Participant or former Participant, his
surviving spouse, his spouse, or his former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order.
(b) "Eligible Rollover Distribution" means any distribution of all
or any portion of the Participant's vested Accrued Benefit,
except that an Eligible Rollover Distribution does not include
any distribution that is one (1) of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Participant, or
the joint lives (or joint life expectancies) of the
Participant and his designated Beneficiary, or for a specified
period of ten (10) years or more; any distribution to the
extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not
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includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(c) "Eligible Retirement Plan" means an individual retirement
account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to
the surviving spouse, an Eligible Retirement Plan is limited
to an individual retirement account or individual retirement
annuity.
(d) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(e) The Retirement Plan Board shall clearly inform the Distributee
that he has a right to a period of at least thirty (30) days
after receiving the notice required by Section 402(f) of the
Code to consider the decision of whether or not to elect a
distribution and, if so, to make a Direct Rollover. The
Distributee may thereafter waive the thirty-day period by
electing a distribution prior to the expiration of such
period.
5.13 ADDITIONAL RULES RELATING TO PAYMENTS
Notwithstanding the provisions of Section 5.03 and Section 5.04, the
following additional procedures shall apply to the distribution of
benefits hereunder. If the Participant, after having received the
written explanation of the Normal Pension or Joint and Survivor
Annuity, as applicable, affirmatively elects a form of distribution and
the spouse consents in writing to that form of distribution, if
necessary, the Annuity Starting Date may be less than thirty (30) days
after the written explanation was provided to the Participant, and the
written explanation may be provided after the Annuity Starting Date
provided that the following requirements are met:
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(a) The Retirement Plan Board provides information to the
Participant clearly indicating that the Participant has a
right to at least thirty (30) days to consider whether to
waive the Normal Pension or Joint and Survivor Annuity and
consent to an alternative form of distribution. The
Participant (and, if the Participant is married, and if
payment is to be made in a form other than the Joint and
Survivor Annuity or a contingent annuitant option with the
Participant's spouse as Beneficiary, the Participant's spouse)
affirmatively waives the requirement that the written
explanation be provided at least thirty (30) days before the
Annuity Starting Date. In such event, payment may commence
less than thirty (30) days after the written explanation is
provided to the Participant. If the written explanation is
provided after the Annuity Starting Date, the Participant
(and, if the Participant is married and if payment is to be
made in a form other than the Joint and Survivor Annuity or a
contingent annuitant option with the Participant's spouse as
Beneficiary, the Participant's spouse) affirmatively waives
the requirement that distribution must commence at least
thirty (30) days after the written explanation is provided. In
such event, payment may commence less than thirty (30) days
after the written explanation is provided to the Participant.
(b) The Participant is permitted to revoke an affirmative
distribution election at least until the Annuity Starting
Date, or, if later, at any time prior to the expiration of the
seven-day period that begins the day after the explanation of
the Normal Pension or Joint and Survivor Annuity is provided
to the Participant.
(c) Distribution in accordance with the affirmative election does
not commence before the expiration of the seven-day period
that begins the day after the explanation of the Normal
Pension or Joint and Survivor Annuity is provided to the
Participant. If the written explanation is provided after the
Annuity Starting Date, payments retroactive to such date shall
be made to the Participant when distribution commences.
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5.14 LOST PARTICIPANTS
Any benefit payable under this Plan shall be forfeited if the
Retirement Plan Board, after reasonable effort, is unable to locate the
Participant or Beneficiary to whom payment is due. Any such benefit
shall be restored, without actuarial adjustment or earnings, if a claim
for the forfeited benefit is made by the Participant or Beneficiary to
whom such benefit was payable. Such forfeited amounts shall be used to
reduce Employer Contributions, as provided in Section 3.03.
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ARTICLE VI
PLAN ADMINISTRATION
6.01 PLAN ADMINISTRATOR
The Board has appointed the Retirement Plan Board as Plan Administrator
to administer the Plan and keep records of proceedings and claims. The
Board may appoint an investment manager or managers, as defined in
Section 3(38) of ERISA, to manage or control all or a part of the Trust
Fund. The Employer shall notify the Trustee of the representatives of
the Plan Administrator and of any changes that may take place from time
to time. The Board may change the Plan Administrator or any
representative thereof at any time with or without cause and may
designate a successor Plan Administrator, in its discretion. No
compensation will be paid the Plan Administrator from the Trust Fund
for service as such, but any reasonable expenses incurred pursuant to
such service will be reimbursed from the Trust Fund, provided that the
Employer may advance payment of such expenses and receive reimbursement
from the Plan pursuant to Prohibited Transaction Class Exemption 80-26.
6.02 DUTIES
Subject to the limitations of the Plan and of the Trust Agreement, the
Plan Administrator will from time to time establish rules for the
administration of the Plan and the transaction of its business. The
Plan Administrator will rely on the records of the Employer with
respect to any and all factual matters dealing with the employment of
an Employee. The Plan Administrator will resolve any factual dispute,
giving due weight to all evidence available to it. The Plan
Administrator will interpret the Plan and determine all questions
arising in the administration, interpretation, and application of the
Plan. In making such determinations, the Plan Administrator shall have
and shall exercise complete discretionary authority to administer the
Plan, giving controlling weight to the intent of the sponsor of the
Plan, and all such determinations shall be final, conclusive, and
binding on the Plan, the sponsor, and all Participants and
Beneficiaries. If challenged in court, such determination shall not be
subject to de
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novo review and shall not be overturned unless proven to be arbitrary
and capricious based upon the evidence considered by the Plan
Administrator at the time of such determination. The Plan Administrator
shall keep a permanent record of its meetings and actions and shall
establish reasonable procedures providing for the proper operation of
Section 414(p) of the Code with respect to "qualified domestic
relations orders," as defined therein, including, but not limited to,
establishing appropriate procedures, authorizing the establishment of
new accounts, and directing distributions from such accounts.
6.03 DIRECTIONS TO TRUSTEE
The Plan Administrator shall direct the Trustee, in writing, to make
payments from the Trust Fund to individuals who qualify for such
payments hereunder. Such written order to the Trustee shall specify the
individual's name, address, Social Security number, and the amount and
frequency of such payments.
6.04 NONDISCRIMINATION
The Plan Administrator shall not take action or direct the Trustee to
take any action with respect to any of the benefits provided hereunder
or otherwise in pursuance of the powers conferred herein upon the Plan
Administrator which would be discriminatory in favor of Employees who
are officers, shareholders, or highly compensated employees or which
would result in benefiting one (1) Employee, or group of Employees, at
the expense of another, or in the application of different rules to
substantially similar sets of facts.
6.05 AGENTS
The Plan Administrator may employ such counsel, accountants, and other
agents as it shall deem advisable. The compensation of such counsel,
accountants, and other agents shall be considered an expense under
Section 6.01.
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6.06 LIMITATIONS
In accordance with the provisions hereof, the Plan Administrator has
been delegated certain administrative functions relating to the Plan
with all powers necessary to enable it properly to carry out such
duties. The Plan Administrator, in its capacity as Plan Administrator,
shall have no power in any way to modify, alter, add to, or subtract
from any provisions of the Plan.
6.07 UNSTATED RULES AND PROCEDURES
Any rules, regulations, or procedures that may be necessary for the
proper administration or functioning of this Plan that are not covered
in this Plan or the Trust Agreement shall be promulgated and adopted by
the Plan Administrator.
6.08 NAMED FIDUCIARY
Those persons or entities named in the Plan or pursuant to a procedure
specified in the Plan to perform functions that are subject to
fiduciary responsibility under applicable law shall constitute the
"named fiduciaries" but only to the extent that they actually perform
(or are responsible for performing) the particular functions that are
subject to fiduciary responsibility.
6.09 EXERCISE OF THE PLAN ADMINISTRATOR'S DUTIES
The Plan Administrator shall discharge its duties:
(a) For the exclusive purpose of providing benefits to Plan
Participants, former Participants and Beneficiaries; and
(b) With the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man 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.
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6.10 INDEMNIFICATION
The Employer shall indemnify the Plan Administrator against any and all
claims, loss, damage, expense, and liability arising from any act or
failure to act relating to the Plan Administrator's duties and powers
unless the same is judicially determined to be the result of the Plan
Administrator's gross negligence or willful misconduct.
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ARTICLE VII
CLAIMS PROCEDURES
7.01 CLAIMS REVIEW
Any Participant, former Participant or Beneficiary who wishes to
request a review of a claim for benefits or who wishes an explanation
of a benefit or its denial may direct to the Plan Administrator a
written request for such review. The Plan Administrator shall respond
to the request by issuing a notice to the claimant as soon as possible,
but in no event later than ninety (90) days from the date of receipt of
the request. This notice furnished by the Plan Administrator shall be
written in a manner calculated to be understood by the claimant and
shall include the following:
(a) The specific reason or reasons for any denial of benefits;
(b) The specific Plan provisions on which any denial is based;
(c) A description of any further material or information which is
necessary for the claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) An explanation of the Plan's claim appeals procedure.
If the claimant does not respond to the notice, posted by first-class
mail to the address of record of the claimant, within sixty (60) days
from the posting of the notice, the claim shall be considered satisfied
in all respects. If the Plan Administrator denies the claim or fails to
respond to the claimant's written request for a review within ninety
(90) days of its receipt, the claimant shall be entitled to proceed to
the claim appeals procedure described in Section 7.02.
7.02 APPEALS PROCEDURE
In the event that the claimant wishes to appeal the claim review
denial, the claimant or his duly authorized representative may submit
to the Plan Administrator, within sixty
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(60) days of the posting of the notice, a written notification of
appeal of the claim denial. The notification of appeal of the claim
denial shall permit the claimant or his duly authorized representative
to utilize the following claim appeals procedures:
(a) To review pertinent documents; and
(b) To submit issues and comments in writing to which the Plan
Administrator shall respond.
The Plan Administrator shall furnish a written decision on the appeal
not later than sixty (60) days after receipt of the notification of
appeal, unless special circumstances require an extension of the time
for processing the appeal and the claimant is notified of the extension
by the end of the original 60-day period to consider the appeal. In no
event, however, shall the Plan Administrator respond later than one
hundred twenty (120) days after a request for a formal review. The
decision on the appeal shall be in writing and shall include specific
reasons for the decision, and shall be written in a manner calculated
to be understood by the claimant and shall contain specific reference
to the pertinent Plan provisions on which the decision is based.
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ARTICLE VIII
RESTRICTIONS ON BENEFITS
8.01 RESTRICTIONS ON PLAN TERMINATION
In the event of Plan termination, the benefit of any Participant or
former Participant who is a highly compensated employee shall be
limited to a benefit that is nondiscriminatory under Section 401(a)(4)
of the Code.
For purposes of this Article VIII, "highly compensated employee" shall
mean highly compensated employee as defined under Section 414(q) of the
Code.
8.02 RESTRICTION ON DISTRIBUTIONS
(a) The annual payments to a restricted Participant shall be
limited to an amount equal to the payments that would be made
on behalf of such restricted Participant under a single life
annuity that is the Actuarial Equivalent of the sum of the
restricted Participant's Accrued Benefit and other benefits
under the Plan.
Notwithstanding the foregoing, the restriction set forth in
this Section 8.02 shall not apply in the event that either of
the following requirements is met:
(1) The value of Plan assets equals or exceeds one
hundred ten percent (110%) of the value of the Plan's
current liabilities, as defined under Section
412(l)(7) of the Code, after payment to a restricted
Participant of his "Benefits" as described in
paragraph (b) below; or
(2) The value of "Benefits," as described in paragraph
(b) below, of a restricted Participant is less than
one percent (1%) of the value of the Plan's current
liabilities, as defined in Section 412(l)(7) of the
Code.
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For purposes of this Section 8.02(a), "restricted
Participant" means a Participant or former
Participant who is among the twenty-five (25) highest
paid highly compensated employees.
"Benefits," for purposes of this Section 8.02(a),
include loans in excess of the amounts set forth in
Section 72(p)(2)(A) of the Code, any periodic income,
the value of any withdrawals made by the Participant,
in the event the Participant is still living, and any
death benefits not provided for by insurance on the
Participant's life.
(b) Notwithstanding any other provision of the Plan, no
prohibited payments shall be made during any period
the Plan has a liquidity shortfall. For this purpose,
a plan has a liquidity shortfall during the period
that there is an underpayment of an installment under
Code Section 412(m) by reason of paragraph (5)(A)
thereof. A prohibited payment for this purpose means
(1) any payment in excess of the monthly amount paid
under a single life annuity to a Participant or
Beneficiary whose Annuity Starting Date occurs during
the period of the liquidity shortfall or (2) any
payment for the purchase of an irrevocable commitment
from an insurer to pay benefits.
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ARTICLE IX
AMENDMENT AND TERMINATION
9.01 RIGHT TO AMEND OR TERMINATE
The Employer reserves to itself the right at any time, by action of its
Board, to alter, amend, modify, revoke, or terminate in whole or in
part this Plan, and each Employer, in adopting this Plan, consents to
any such alteration, amendment, modification, revocation or
termination. The Employer, by resolution of the Board, may terminate
the Plan with respect to any or all Employers. Each Employer, by a
resolution of its Board of Directors, may terminate its participation
in the Plan. If the Plan is terminated by fewer than all Employers, it
shall continue in effect for Participants employed by the remaining
Employers. Subject to the provisions of ERISA, and without limiting the
general applicability of the preceding provisions of this section, the
Employer specifically reserves the right to amend the Plan to change:
(a) The requirements of or the dates upon which early or normal
retirement may occur;
(b) The factors and methods used to calculate early retirement
benefits; or
(c) The factors and methods used to calculate benefit options, in
all three (3) cases, to reflect changes in common or customary
practice or in the requirements for receipt of Social Security
benefits;
provided, however, that no amendment:
(a) Shall have the effect of vesting in the Employer or any
Related Employer any interest in or control of any funds,
securities or other property subject to the terms of the
Trust;
(b) Shall authorize or permit at any time any part of the corpus
or income of the Trust Fund to be used for or diverted to
purposes other than for the
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exclusive benefit of Participants and their Beneficiaries,
except as provided in Section 3.04;
(c) Shall have any retroactive effect as to deprive any
Participant, former Participant or Beneficiary of any benefit
already accrued, save only that no amendment made in
conformance with the provisions of the Code or any other
statute relating to employees' trusts, or of any official
regulation or rulings issued pursuant thereto, shall be
considered prejudicial to the rights of any Participant or
Beneficiary; or
(d) Shall eliminate an optional form of benefit or decrease an
Accrued Benefit.
9.02 TERMINATION
(a) It is the expectation of each Employer that it will continue
this Plan and the payment of contributions hereunder
indefinitely, but the continuation of the Plan is not assumed
as a contractual obligation of an Employer, and the right is
reserved by each Employer at any time to discontinue
permanently its contributions hereunder. In the event that the
Plan is terminated in whole or in part or if contributions by
the Employers are discontinued completely, the benefits then
accrued for all affected Participants shall be fully vested
and nonforfeitable. Notwithstanding the previous sentence, a
person shall have recourse in seeking satisfaction of his
benefits against only the Trust Fund and the PBGC. No
Participant or Beneficiary shall have a claim against any
Employer, the Trust or any Plan fiduciary for any benefit in
excess of the amount funded on the date of the Plan
termination.
(b) This Plan may be terminated by the Board at any time, but the
Employer must notify the PBGC of its intention to terminate
the Plan. Such termination shall become effective as set forth
in ERISA.
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(c) The funds are to be allocated in such manner as:
(1) To continue benefits which began to be paid three (3)
years before the termination date under the
provisions of the Plan in effect during the five (5)
years prior to termination which would provide the
smallest benefit. Benefits which would be in this
category if the Participant eligible for benefits had
elected to begin receipt of such benefit payments at
least three (3) years prior to the termination shall
also be provided;
(2) Then to provide all other insured benefits guaranteed
by the PBGC, including benefits for a substantial
owner who owns directly or indirectly more than ten
percent (10%) of the Employer's voting stock;
(3) Then to provide all other nonforfeitable benefits;
(4) Then to provide all other benefits under the Plan;
and
(5) Then to provide a return to the Employer of any
balance due to actuarial error if any assets remain
after all liabilities with respect to Participants,
former Participants and Beneficiaries have been
satisfied.
This allocation is intended to fulfill the requirements of
ERISA, and assets shall be allocated on the basis of ERISA
should the above provisions and ERISA differ. Notwithstanding
the foregoing, upon the termination of the Plan, the benefits
of any missing participants, as defined in Section 4050 of
ERISA, shall be transferred to the PBGC in accordance with
Section 401(a)(34) of the Code and Section 4050 of ERISA.
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9.03 PARTIAL TERMINATION
In the event the Plan is partially terminated, the Participants
affected shall have a nonforfeitable right to the benefits accrued to
the date of the partial termination.
9.04 METHOD OF PAYMENT
Amounts allocated to affected individuals upon termination or partial
termination of the Plan shall be paid through the purchase of annuity
contracts; provided, however, that if the single sum value of an
individual's benefit is five thousand dollars ($5,000) (three thousand
five hundred dollars ($3,500) prior to January 1, 1998) or less,
payment shall be made in a single sum in cash.
9.05 NOTICE OF AMENDMENT, TERMINATION, OR PARTIAL TERMINATION
Affected Participants shall be notified of an amendment, termination or
partial termination of the Plan as required by the applicable
provisions of ERISA. In the event that any amendment to the Plan would
change the provisions of Section 4.04 with respect to eligibility for a
nonforfeitable benefit, each Participant who has completed at least
three (3) years of Vesting Service shall be entitled to elect, in
accordance with ERISA, to have his right to a nonforfeitable benefit
computed under the Plan without regard to such amendment.
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ARTICLE X
MISCELLANEOUS
10.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract of
employment between any Employer and any Employee. The employment
records of the Employers and the Trustee's records shall be final and
binding upon all Employees as to liability and participation.
10.02 MERGER OR CONSOLIDATION OF PLAN, TRANSFER OF ASSETS
Any merger or consolidation of the Plan with another plan or transfer
of Plan assets or liabilities to any other plan shall be effected, in
accordance with such regulations, if any, as may be issued pursuant to
Section 208 of ERISA, in such a manner that each Participant in the
Plan would receive, if the merged, consolidated or transferred plan
were terminated immediately following such event, a benefit which is
equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately before such event.
Notwithstanding the foregoing, compliance with applicable regulations
under Section 414(l) of the Code shall be deemed compliance with this
Section 10.02.
10.03 DATA
It shall be a condition precedent to the payment of all benefits under
the Plan that each Participant, former Participant and Beneficiary must
furnish to the Employer such documents, evidence or information as the
Employer considers necessary or desirable for the purpose of
administering the Plan, or to protect the Employer or the Trustee.
10.04 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS' CLAIMS
Except as otherwise provided in the Plan, no Participant, former
Participant or any Beneficiary, or the estate of any such person, shall
have the power to assign, pledge, encumber or transfer any interest in
the Trust Fund while the same shall be in
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possession of the Trustee. Any such attempt at alienation shall be
void. No such interest shall be subject to attachment, garnishment,
execution, levy or any other legal or equitable proceeding or process,
and any attempt to do so shall be void. The preceding shall apply also
to the creation, assignment or recognition of any right to any benefit
payable with respect to a Participant pursuant to a domestic relations
order, unless such order is determined to be a qualified domestic
relations order, as defined in Section 414(p) of the Code. A domestic
relations order entered before January 1, 1985 will be treated as a
qualified domestic relations order if payment of benefits pursuant to
the order has commenced as of such date and may be treated as a
qualified domestic relations order if payment of benefits has not
commenced as of such date, even though the order does not satisfy the
requirements of Section 414(p) of the Code.
Effective with respect to judgments, orders and decrees issued, and
settlement agreements entered into, on or after August 5, 1997, the
preceding provisions, as set forth in Section 401(a)(13)(A) of the
Code, shall not apply to any offset of a Participant's benefits under
the Plan against an amount that the Participant is ordered or required
to pay to the Plan if such offset meets the requirements of Section
401(a)(13)(C) of the Code.
10.05 RESTRICTION OF CLAIMS AGAINST TRUST FUND
The Trust Fund under this Plan and Trust Agreement from its inception
shall be a separate entity aside and apart from each Employer and its
assets. The Trust and the corpus and income thereof shall in no event
and in no manner whatsoever be subject to the rights or claims of any
creditor of an Employer. Neither the establishment of the Trust Fund,
the modification thereof, the creation of any fund or account nor the
payment of any benefits shall be construed as giving any Participant or
any other person whomsoever any legal or equitable rights against an
Employer or the Trustee unless the same shall be specifically provided
for in this Plan.
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10.06 BENEFITS PAYABLE ONLY FROM TRUST FUND
The benefits under the Plan shall be only such as can be provided by
the Trust Fund. Except as may be provided by law, no liability for the
payment of benefits hereunder to Participants or their surviving
spouses shall be imposed upon the Employer, its officers or
shareholders, and there shall be no liability or obligation on the part
of the Employer to make any further contributions in the event of
termination of the Plan.
10.07 SUCCESSOR TO EMPLOYER
In the event that any successor to an Employer, by merger,
consolidation, purchase or otherwise, shall elect to adopt the Plan,
such successor shall be substituted hereunder for that Employer upon
filing in writing with the Trustee its election to do so.
10.08 APPLICABLE LAW
The Plan shall be construed and administered in accordance with ERISA,
and any judicial review thereunder shall be governed by the "arbitrary
and capricious" standard, and with the laws of the Commonwealth of
Pennsylvania, to the extent that such laws are not preempted by ERISA.
10.09 INTERNAL REVENUE SERVICE APPROVAL
This amendment and restatement of the Plan shall be effective as of
January 1, 1999 provided that the Employer shall obtain a favorable
determination letter from the Internal Revenue Service that this Plan
and the related Trust Agreement qualify under Sections 401(a) and
501(a) of the Code, as amended. Any modification or amendment of this
Plan may be made retroactive as necessary or appropriate in order to
secure or maintain such qualification.
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ARTICLE XI
TOP-HEAVY PROVISIONS
11.01 GENERAL
Notwithstanding anything herein to the contrary, the following
provisions shall apply with respect to any Plan Year in which the Plan
is deemed to be Top-heavy.
11.02 DEFINITIONS
DETERMINATION DATE
With respect to any Plan Year, the last calendar day of the immediately
preceding Plan Year, or, in the case of the first Plan Year, the last
calendar day of the first Plan Year.
KEY EMPLOYEE
Any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the Plan Year or any of the four (4)
immediately preceding Plan Years (or, if fewer, the total number of
Plan Years during which the Plan has been in effect) is or was:
(a) An officer of an Employer or a Related Employer who has an
annual compensation in excess of fifty percent (50%) of the
dollar limitation under Section 415(b)(1)(A) of the Code for
such Plan Year.
(b) An owner (or considered an owner under Section 318 of the
Code) of one (1) of the ten (10) largest interests in an
Employer or a Related Employer if such individual's
compensation exceeds the dollar limitation under Section
415(c)(1)(A) of the Code;
(c) A five percent (5%) owner of an Employer; or
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(d) A one percent (1%) owner of an Employer who has an annual
compensation in excess of one hundred fifty thousand dollars
($150,000).
An officer is defined as an actual officer of an Employer or a Related
Employer, provided that not more than the greater of three (3)
Employees or ten percent (10%) of the Employees (but in no event more
than fifty (50) Employees) shall be considered as officers in
determining whether a plan is Top-heavy.
NON-KEY EMPLOYEE
Any Employee who is not included in the definition of Key Employee.
TOP-HEAVY PLAN
For any Plan Year, this Plan is Top-heavy if any of the following
conditions exist:
(a) If the Top-heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not a part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(b) If this Plan is a part of a Required Aggregation Group of
plans (but is not a part of a Permissive Aggregation Group of
plans) and the Top-heavy Ratio for the group of plans exceeds
sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group of
plans and a part of a Permissive Aggregation Group of plans
and the Top-heavy Ratio for the Permissive Aggregation Group
of plans exceeds sixty percent (60%).
TOP-HEAVY RATIO
(a) If an Employer maintains one (1) or more defined benefit plans
and an Employer has never maintained any defined contribution
plans (including any simplified employee pension plan) which,
during the five (5) year period ending on the Determination
Date, has or has had account balances, the Top-heavy Ratio for
this Plan alone or for the Required or
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Permissive Aggregation Group, as appropriate, is a fraction,
the numerator of which is the sum of the Present Value of
accrued benefits of all Key Employees under the aggregated
defined benefit plans as of the Determination Date (including
any part of any accrued benefit distributed in the five (5)
year period ending on the Determination Date), and the
denominator of which is the sum of the Present Value of all
accrued benefits (including any part of any accrued benefit
distributed in the five (5) year period ending on the
Determination Date) of all Participants as of the
Determination Date, both computed in accordance with Section
416 of the Code. The numerator and denominator of the
Top-heavy Ratio shall be adjusted to reflect any contribution
not actually made as of the Determination Date, but which is
required to be taken into account on that date under Section
416 of the Code.
(b) If an Employer maintains or has maintained one (1) or more
defined benefit plans and an Employer maintains or has
maintained one (1) or more defined contribution plans
(including any simplified employee pension plan) which, during
the five (5) year period ending on the Determination Date, has
or has had any account balances, the Top-heavy Ratio for any
Required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account
balances under the aggregated defined contribution plans for
all Key Employees as of the Determination Date and the Present
Value of accrued benefits under the aggregated defined benefit
plans for all Key Employees as of the Determination Date, and
the denominator of which is the sum of the account balances
under the aggregated defined contribution plans for all
Participants and the Present Value of accrued benefits under
the aggregated defined benefit plans for all Participants as
of the Determination Date, determined in accordance with
Section 416 of the Code. Both the numerator and denominator of
the Top-heavy Ratio shall be adjusted for any distribution of
an account balance or accrued benefit
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<PAGE> 76
made in the five (5) year period ending on the Determination
Date and any contributions due but unpaid as of the
Determination Date.
(c) For purposes of (a) and (b) above, the value of account
balances and the Present Value of accrued benefits shall be
determined as of the most recent Valuation Date occurring
within the twelve (12) month period ending on the
Determination Date, except as provided in Section 416 of the
Code for the first and second Plan Years of a defined benefit
plan. The accrued benefits of Non-key Employees shall be
determined under the method which is used for accrual purposes
for all plans of the Employer or, if there is no such method,
then as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional accrual
rate of Code Section 411(b)(1)(C). The account balances and
accrued benefits of a Participant who is not a Key Employee
but who was a Key Employee in a prior year or, effective for
Plan Years beginning on or after September 1, 1985, who has
not performed services for the Employer at any time during the
five (5) Plan Year period ending on the Determination Date
shall be disregarded. The calculation of the Top-heavy Ratio
and the extent to which distributions, rollovers and direct
transfers are taken into account will be made in accordance
with Section 416 of the Code. When aggregating plans, the
value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall
within the same calendar year.
PERMISSIVE AGGREGATION GROUP
The Required Aggregation Group of plans plus any other plan or plans of
the Employer or a Related Employer which, when considered as a group
with the Required Aggregation Group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
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<PAGE> 77
REQUIRED AGGREGATION GROUP
(a) Each qualified plan of the Employer or a Related Employer in
which at least one (1) Key Employee participates; and
(b) Any other qualified plan of the Employer or a Related Employer
which enables a plan described in (a) to meet the requirements
of Section 401(a)(4) or 410 of the Code.
PRESENT VALUE
Present Value will be determined on the basis of the actuarial
assumptions then being used for funding purposes.
VALUATION DATE
The same Valuation Date used for computing Plan costs for minimum
funding, regardless of whether an actuarial valuation is performed that
year.
11.03 MINIMUM ACCRUED BENEFIT
(a) Notwithstanding any other provision in this Plan except
subparagraphs (c) and (e) below, for any Plan Year in which
this Plan is Top-heavy, each Participant who is not a Key
Employee and who has completed one thousand (1,000) Hours of
Service will accrue a benefit (to be provided solely by
Employer contributions and expressed as a life annuity
commencing at Normal Retirement Date) of not less than two
percent (2%) of his highest average compensation for the five
(5) consecutive years for which the Participant had the
highest compensation. The minimum accrual is determined
without regard to any Social Security contribution. The
minimum accrual applies even though under other Plan
provisions the Participant would not otherwise be entitled to
receive an accrual, or would have received a lesser accrual
for the year because the Non-key Employee's compensation is
less than a stated amount, the Non-
72
<PAGE> 78
key Employee is not employed on the last day of the accrual
computation period or the Plan is integrated with Social
Security.
(b) For purposes of computing the minimum accrued benefit,
compensation will mean compensation as defined in Section 4.09
of the Plan.
(c) No additional benefit accruals shall be provided pursuant to
(a) above to the extent that the total accruals on behalf of
the Participant attributable to Employer contributions will
provide a benefit expressed as a life annuity commencing at
Normal Retirement Date that equals or exceeds twenty percent
(20%) of the Participant's highest average compensation for
the five (5) consecutive years for which the Participant had
the highest compensation.
(d) If the form of benefit is other than a life annuity, the
Employee must receive an amount that is the Actuarial
Equivalent of the minimum life annuity benefit. If the benefit
commences at a date other than at Normal Retirement Date, the
Employee must receive at least an amount that is the Actuarial
Equivalent of the minimum life annuity benefit commencing at
Normal Retirement Date.
(e) The provisions in (a) above shall not apply to any Participant
to the extent that the Participant is covered under any other
plan or plans of the Employer and the Employer has provided
that the minimum benefit requirement applicable to this
Top-heavy Plan will be met in the other plan or plans.
(f) The minimum accrued benefit required (to the extent required
to be nonforfeitable under Section 416(b) of the Code) may not
be forfeited or suspended under Section 411(a)(3)(B) or
Section 411(a)(3)(D) of the Code.
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11.04 VESTING REQUIREMENTS
With respect to any Plan Year that the Plan is a Top-heavy plan, the
Plan shall have the following vesting schedule:
Years of Service for Vesting Vested Percentage
---------------------------- -----------------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
The minimum vesting schedule applies to all benefits within the meaning
of Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the Plan became
Top-heavy. Further, no reduction in vested benefits may occur in the
event the Plan's status as Top-heavy changes for any Plan Year.
However, this Section does not apply to the Accrued Benefits of any
Employee who does not have an Hour of Service after the Plan has
initially become Top-heavy, and such Employee's Accrued Benefits
attributable to Employer contributions will be determined without
regard to this section.
This minimum vesting schedule applies only to the extent that it
provides more favorable vesting than the vesting schedule provided in
Section 4.04.
11.05 SPECIAL 415 LIMITATIONS
For purposes of Section 4.08, in any Plan Year in which the Plan is
deemed to be a Top-heavy plan, the number 1.25 shall be replaced by the
number 1.0 to the extent required under Code Section 416(h); provided,
however, that such adjustment will not occur if the Top-heavy Ratio
does not exceed ninety percent (90%) and additional
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<PAGE> 80
benefits are provided for Non-key Employees in accordance with the
provisions of Section 416(h)(2)(A) and Section 416(h)(2)(B) of the
Code. In such case, the minimum accrued benefit provided in Section
11.03(a) shall be increased to three percent (3%) of the Participant's
average compensation for the five (5) consecutive years for which the
Participant had the highest compensation and the maximum accrual
provided in Section 11.03(c) shall be increased to thirty percent
(30%).
75
<PAGE> 1
Exhibit 10.39
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Amendment") is made
and entered into as of January 1, 1999, by and between Werner Co., a
Pennsylvania corporation (the "Company"), successor by merger to Werner
Management Co. ("WMC") and ______________________ ("Executive").
WHEREAS, WMC and Executive entered into an Employment Agreement as of
November 24, 1997 (the "Agreement") which govern the terms and conditions of
Executive's employment with the Company; and
WHEREAS, on June 30, 1998, WMC was merged with and into the Company
with the Company being the surviving corporation; and
WHEREAS, the Company and Executive desire to enter into this Amendment
to amend certain terms of the Agreement.
NOW THEREFORE, the Company and Executive agree as follows:
1. AMENDMENT TO PERFORMANCE BASED COMPENSATION.
Section 3.2 of the Agreement shall be amended by deleting the second
sentence following the chart contained in Section 3.2, which sentence reads as
follows: "The EBITDA targets for the 1999, 2000, 2001 and 2002 fiscal years are
set out in Exhibit 2, attached." In addition, Exhibit 2 of the Agreement is
hereby deleted in its entirety.
2. REMAINING PROVISIONS.
All provisions of the Agreement not otherwise amended by this Amendment
shall remain in full force and effect.
1
<PAGE> 2
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first above written.
WERNER CO., a Pennsylvania
Corporation
By: ________________________
Title: ________________________
EXECUTIVE
_________________________________
<PAGE> 1
Exhibit 10.40
AMENDMENT NO. 1
TO
WERNER HOLDING CO. (PA), INC.
STOCK INCENTIVE PLAN
--------------------
The Werner Holding Co. (PA), Inc. Stock Incentive Plan (the "Plan") is hereby
amended as follows:
1. New, revised EBITDA targets as set forth in Exhibit A for individuals
receiving stock option grants after December 1998 shall be as follows:
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
(IN THOUSANDS OF DOLLARS)
(A) (B) (C)
Cumulative
Fiscal Year Minimum Target Target
----------- ------- ------ ------
[S] [C] [C] [C]
1999 59,400 66,000 --
2000 67,500 75,000 141,000
2001 82,800 92,000 233,000
2002 99,000 110,000 343,000
2003 108,000 120,000 463,000
2004 117,900 131,000 594,000
2. All other provisions of the Plan unchanged hereby shall continue in
full force and effect.
Pursuant to Werner Holding Co. (PA), Inc. Board of Directors action dated
December 8, 1999.
<PAGE> 1
Exhibit 10.41
WERNER CO.
DEFERRED STOCK
PLAN
TABLE OF CONTENTS
-----------------
ARTICLE I.....................................................................1
TITLE, PURPOSE AND AUTHORIZED SHARES..........................................1
ARTICLE II....................................................................1
DEFINITIONS...................................................................1
ARTICLE III...................................................................4
PARTICIPATION.................................................................4
ARTICLE IV....................................................................4
DEFERRAL ELECTIONS AND GRANTS.................................................4
4.1. ELECTIONS.............................................................4
4.2. GRANTS OF STOCK UNITS................................................4
ARTICLE V.....................................................................4
DEFERRAL ACCOUNTS.............................................................4
5.1. STOCK UNIT ACCOUNT....................................................4
5.2. DIVIDEND EQUIVALENT CREDITS TO STOCK UNIT ACCOUNT.....................5
5.3. IMMEDIATE VESTING.....................................................5
5.4. DISTRIBUTION OF BENEFITS.............................................5
5.5. ADJUSTMENTS IN CASE OF CHANGES IN CLASS C STOCK.......................6
5.6. COMPANY'S RIGHT TO WITHHOLD...........................................6
5.7 REPURCHASE OF SHARES...................................................6
<PAGE> 2
5.8 RESTRICTIONS ON TRANSFERS OF SHARES....................................8
ARTICLE VI....................................................................8
ADMINISTRATION................................................................8
6.1. THE ADMINISTRATOR.....................................................8
6.2. COMMITTEE ACTION......................................................8
6.3. RIGHTS AND DUTIES.....................................................9
6.4. INDEMNITY AND LIABILITY...............................................9
ARTICLE VII..................................................................10
PLAN CHANGES AND TERMINATION.................................................10
7.1. AMENDMENTS...........................................................10
7.2. TERM.................................................................10
ARTICLE VIII.................................................................10
MISCELLANEOUS................................................................10
8.1. LIMITATION ON PARTICIPANT'S RIGHTS...................................10
8.2. BENEFICIARIES........................................................10
8.3. BENEFITS NOT ASSIGNABLE; OBLIGATIONS BINDING UPON SUCCESSORS.........11
8.4. GOVERNING LAW; SEVERABILITY..........................................11
8.5. COMPLIANCE WITH LAWS.................................................11
8.6. HEADINGS NOT PART OF PLAN............................................11
ii
<PAGE> 3
WERNER CO.
DEFERRED STOCK
PLAN
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as the "WERNER CO. DEFERRED STOCK PLAN". The
purpose of this Plan is to motivate and retain Dennis Heiner as Chief Executive
Officer of the Company by permitting him to defer compensation and affording him
the opportunity to link that compensation to an equity interest in Parent. The
total number of shares of Class C Stock that may be delivered pursuant to
deferral elections and grants under this Plan is One Thousand Three Hundred
Eight (1,308), subject to adjustments contemplated by Section 5.5.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary:
ACCOUNT means the Participant's Stock Unit Account
ACT means the Securities Act of 1933, as amended.
APPROVED SALE means a transaction or a series of related transactions
which results in a BONA FIDE, unaffiliated change of economic beneficial
ownership of the Parent or its business of greater than 50% (disregarding for
this purpose any disparate voting rights attributable to the outstanding stock
of the Parent), whether pursuant to the sale of the stock of the Parent, the
sale of the assets of the Parent, or a merger or consolidation (other than a
sale of stock by an Initial Stockholder to (i) another Initial Stockholder or
affiliate thereof, or (ii) a non-U.S. entity with respect to which an Initial
Stockholder or affiliate thereof has an administrative relationship).
ARTICLES OF INCORPORATION means the Restated Articles of Incorporation
of the Parent, as amended from time to time.
AWARD DATE means (a) with reference to the crediting of Stock Units
pursuant to elections under Section 4.1, the Pay Date; and (b) with reference to
grants of Stock Units, the award date stated in the grant instrument.
BOARD means the Board of Directors of the Company.
CAUSE has the meaning set forth in the Employment Agreement.
<PAGE> 4
CHANGE IN CONTROL EVENT has the meaning set forth in the Employment
Agreement.
CLASS C STOCK means Class C Stock, $0.01 par value, of Parent subject
to adjustment pursuant to Section 5.5.
CLOSING DATE means the date on which occurred the closing of the
recapitalization of the Parent pursuant to the Recapitalization Agreement.
CODE means the Internal Revenue Code of 1986, as amended.
COMMITTEE means the Board or a Committee of the Board acting in
accordance with Article VI.
COMPANY means Werner Co., a Pennsylvania corporation and wholly-owned
subsidiary of Parent, and its successors and assigns.
DESIGNATED PRICE equals $2,421.29 per share.
DIVIDEND EQUIVALENT means the amount of cash dividends or other cash
distributions paid by the Parent on that number of shares of Class C Stock
equivalent to the number of Stock Units then credited to the Participant's Stock
Unit Account, which amount shall be allocated as additional Stock Units to the
Participant's Stock Unit Account, as provided in Section 5.2.
EFFECTIVE DATE means September 30, 1999.
EMPLOYMENT AGREEMENT means the employment agreement dated as of May 26,
1999 by and between the Company and the Participant.
FAIR MARKET VALUE means on any date the fair market value of a share of
Class C Stock, as determined by the Board pursuant to Section 5.7(c). The Fair
Market Value as of the Effective Date is $2,421.29 per share.
GOOD REASON has the meaning set forth in the Employment Agreement.
INITIAL PUBLIC OFFERING means the sale of any of the common stock of
the Parent pursuant to a registration statement that has been declared effective
under the Act, if as a result of such sale (i) the issuer becomes a reporting
company under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended, and (ii) such stock is traded on the New York Stock Exchange or the
American Stock Exchange, or is quoted on the Nasdaq National Market System or is
traded or quoted on any other national stock exchange or national securities
system.
INITIAL STOCKHOLDERS means the shareholders of the Parent who became
shareholders as of the Closing Date (other than any such shareholders who were
employees of the Parent or a Subsidiary or were shareholders of the Parent or a
Subsidiary prior to the Closing Date) and any transferees of such shareholders
prior to an Initial Public Offering or an Approved
2
<PAGE> 5
Sale.
INVESTORS means those entities set forth on Schedule 1 of the
Recapitalization Agreement.
IWH means Investcorp Werner Holdings L.P., a Cayman Islands
corporation.
PARENT means Werner Holding Co. (PA), Inc., a Pennsylvania corporation
and the owner of 100% of the outstanding stock of the Company.
PARTICIPANT means Dennis Heiner.
PERMANENT DISABILITY has the meaning set forth in the Employment
Agreement.
PERMITTED TRANSFEREE has the meaning set forth in Section 5.8.
PLAN means the Werner Co. Deferred Stock Plan.
RECAPITALIZATION AGREEMENT means that certain recapitalization
agreement, dated as of October 8, 1997 and amended as of October 27, 1997, by
and between the Parent and the Investors.
RECORD DATE means the date, as determined by the Board, on which a
shareholder must own shares in order to be entitled to a dividend.
REPURCHASE PERIOD and REPURCHASE RIGHT have the meaning set forth in
Section 5.7(a).
REPURCHASE PERIOD COMMENCEMENT DATE means the first date on which all
Shares distributed to the Participant pursuant to Section 5.4 shall have been
owned by the Participant for six (6) months.
SHARES means shares of Class C Stock of the Parent distributed to the
Participant hereunder pursuant to Section 5.4.
STOCK UNIT OR UNIT means a non-voting unit of measurement which is
deemed for bookkeeping purposes to be equivalent to one outstanding share of
Class C Stock of the Parent solely for purposes of this Plan.
STOCK UNIT ACCOUNT means the bookkeeping account maintained by the
Company on behalf of the Participant which is credited with Stock Units in
accordance with Section 5.1.
TERMINATION DATE means the date on which the Participant ceases to be
employed by the Company for any reason.
YEAR means the calendar year.
3
<PAGE> 6
ARTICLE III
PARTICIPATION
The Participant may elect to defer all or part of his or her salary
and/or bonus for the applicable year under and subject to Section 4.1 of this
Plan.
ARTICLE IV
DEFERRAL ELECTIONS AND GRANTS
4.1. ELECTIONS.
(a) TIME AND TYPE OF ELECTIONS. On or before December 31 of each Year
(or, in the case of the year in which the Plan is adopted, within 30 days after
the Effective Date of the Plan), the Participant may make an irrevocable
election to defer all or any part of the salary and/or bonus payable to him for
services to be rendered during the next Year (or remainder of the Year, as the
case may be); provided, however, that any election hereunder shall be effective
only if approved by the Committee in its absolute discretion.
(b) ELECTIONS. All elections shall be in writing on forms provided by
the Company.
4.2. GRANTS OF STOCK UNITS.
The Company may, from time to time, grant Stock Units to the
Participant. Any such Stock Units shall be treated in all respects in the same
manner as Stock Units arising from an irrevocable election of deferral.
ARTICLE V
DEFERRAL ACCOUNTS
5.1. STOCK UNIT ACCOUNT.
(a) CREDITING OF STOCK UNITS. If the Participant has made an election
under Section 4.1, the Committee shall, as of the Pay Date, credit the
Participant's Stock Unit Account with a number of Units determined by dividing
the applicable portion of the Participant's salary and/or bonus by the Fair
Market Value of a share of Class C Stock as of the Pay Date. If the Participant
has been granted Stock Units pursuant to Section 4.2, the Committee shall, as of
the Award Date, credit the Participant's Stock Unit Account with the number of
Units so granted.
(b) LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. The Participant's
Stock Unit Account shall be a memorandum account on the books of the Company.
The Units credited to the Participant's Stock Unit Account shall be used solely
as a device for the determination of the number of shares of Class C Stock to be
eventually distributed to the
4
<PAGE> 7
Participant in accordance with this Plan. The Units shall not be treated as
property or as a trust fund of any kind. The Participant shall not be entitled
to any voting or other stockholder rights with respect to Units credited under
this Plan. The number of Units credited (and the Class C Stock to which the
Participant is entitled under this Plan) shall be subject to adjustment in
accordance with Section 5.5.
5.2. DIVIDEND EQUIVALENT CREDITS TO STOCK UNIT ACCOUNT.
As of the Pay Date with respect to any dividends, the Participant's
Stock Unit Account shall be credited with that number of additional Units as
shall equal the quotient obtained by dividing (i) the Dividend Equivalents
representing dividends paid on that number of shares equal to the aggregate
Stock Units in the Participant's Stock Unit Account as of the Record Date, by
(ii) the Fair Market Value of a share of Class C Stock as of the Pay Date.
5.3. IMMEDIATE VESTING.
(a) UNITS AND OTHER AMOUNTS VEST IMMEDIATELY. All Units or other
amounts credited to the Participant's Stock Unit Account shall be at all times
fully vested.
5.4. DISTRIBUTION OF BENEFITS.
(a) COMMENCEMENT OF BENEFIT DISTRIBUTION. The Participant shall be
entitled to receive a distribution of his Account on the first business day of
the first month following his termination of service with the Company.
(b) MANNER OF DISTRIBUTION. The benefits payable under this Plan shall
be distributed to the Participant (or, in the event of his death, the
Participant's Beneficiary) in a single distribution, or, as permitted by this
Section 5.4(b). The Participant may elect in writing on forms provided by the
Company at the time of making his deferral election or at the time of the grant
of Stock Units under Article IV or at least 12 months in advance of the date
benefits become distributable under Section 5.4(a) to receive a distribution of
his benefits in up to ten annual installments. Such installment payments shall
commence as of the date benefits become distributable under Section 5.4(a).
Notwithstanding the foregoing, if the number of Units remaining in the
Participant's Stock Unit Account is less than 100, then such remaining balance
shall be distributed in a single distribution.
(c) EFFECT OF CHANGE OF CONTROL. Notwithstanding Sections 5.4(a) and
(b), if a Change of Control and a termination of service has occurred or shall
occur, the Participant's Account shall be distributed immediately in a single
distribution.
(d) DISTRIBUTION IN SHARES. Stock Units credited to a Participant's
Stock Unit Account shall be distributed in an equivalent whole number of shares
of Class C Stock. No part of such distribution shall be made in cash.
5
<PAGE> 8
5.5. ADJUSTMENTS IN CASE OF CHANGES IN CLASS C STOCK.
If any stock dividend, stock split, recapitalization, merger,
consolidation, combination or other reorganization, exchange of shares, sale of
all or substantially all of the assets of Parent, split-up, split-off, spin-off,
extraordinary redemption, liquidation or similar change in capitalization or any
distribution to holders of Class C Stock (other than cash dividends and cash
distributions) shall occur, proportionate and equitable adjustments consistent
with the effect of such event on stockholders generally (but without duplication
of benefits if Dividend Equivalents are credited) shall be made in the number
and type of shares of Class C Stock or other securities, property and/or rights
contemplated hereunder and of rights in respect of Units and Accounts credited
under this Plan so as to preserve the benefits intended.
5.6. COMPANY'S RIGHT TO WITHHOLD.
The Company shall satisfy any state or federal income tax withholding
obligation arising upon distribution of the Participant's Account by reducing
the number of shares of Class C Stock otherwise deliverable to the Participant.
The appropriate number of shares required to satisfy such tax withholding
obligation in the case of Stock Units will be based on the Fair Market Value of
a share of Class C Stock on the day prior to the date of distribution. If the
Company, for any reason, cannot satisfy the withholding obligation in accordance
with the preceding sentence, the Participant shall pay or provide for payment in
cash of the amount of any taxes which the Company may be required to withhold
with respect to the benefits hereunder.
5.7 REPURCHASE OF SHARES.
(a) In the event that the Participant ceases to be employed by the
Company for any reason prior to an Initial Public Offering or an Approved Sale,
the Parent shall, during the sixty (60) days following the Repurchase Period
Commencement Date (the "Repurchase Period"), have the right to repurchase all,
but not less than all, of the Shares distributed to the Participant pursuant to
Section 5.4 (the "Repurchase Right"). The repurchase price for each such Share
will equal the Fair Market Value[, or, if the Participant terminates his
employment with the Company without Good Reason prior to January 1, 2002 or is
terminated by the Company for Cause, the lower of the Designated Price and Fair
Market Value]. If the Parent elects to repurchase the Shares, it shall notify
the Participant at or before the end of the Repurchase Period of such election
and the repurchase price shall be paid in cash at a time set by the Parent
within thirty (30) days after the end of the Repurchase Period provided that the
Participant has presented to the Parent a stock certificate evidencing the
shares properly endorsed for transfer (the "Endorsed Certificate"). The Shares
shall be transferred to the Parent free and clear of all liens, encumbrances,
mortgages, pledges, security interests, restrictions, prior assignments and
claims of any kind or nature whatsoever except those created by the Articles of
Incorporation or this Plan. Notwithstanding the Participant's failure to deliver
the Endorsed Certificate, the Shares represented thereby shall be deemed to be
owned by the Parent upon the payment by the Parent of the repurchase price to
the Participant or his Permitted Transferee, and upon such payment the
Participant and such Permitted Transferee will have no further rights in such
Shares. If the Parent does not repurchase the Shares pursuant to this Section
5.7(a) or Section 5.7(b), the
6
<PAGE> 9
restrictions on transfer thereof contained in Section 5.8 of this Plan shall
terminate and be of no further force and effect. Notwithstanding the foregoing,
if the Participant's employment terminates prior to January 1, 2000, the
Repurchase Period shall commence on January 1, 2000.
(b). In the event that the Participant ceases to be employed
by Company for any reason prior to an Initial Public Offering or an Approved
Sale and the Parent does not exercise its repurchase rights pursuant to Section
5.7(a), the Participant or his representative, during the 120 days following the
Repurchase Period Commencement Date (the "Put Period"), shall have the right to
require IWH to repurchase all, but not less than all, of the Shares (the "Put
Right"), unless, by the thirtieth (30th) day after IWH and the Parent have
received notice of the Participant's election to exercise the Put Right, the
Parent has notified the Participant and IWH of its election, exercisable in the
discretion of the Parent, to purchase the Shares on the same terms as such
Shares were to be purchased by IWH, in which case such Shares will be acquired
by the Parent. [If the Termination Date is prior to January 1, 2002 (unless the
Participant's employment is terminated because of his death or Permanent
Disability) or if the Participant is terminated for Cause, the repurchase price
for each Share will equal the lower of the Designated Price and Fair Market
Value. In all other cases,] the repurchase price for each Share will equal the
Fair Market Value. If the Participant elects to have the Shares repurchased, the
repurchase price shall be paid in cash on the later of (i) the thirtieth (30)
day after the end of the Put Period or (ii) the day Participant presents to IWH
or the Parent, as applicable, the Endorsed Certificate. The Shares shall be
transferred to IWH or the Parent, as applicable, free and clear of all liens,
encumbrances, mortgages, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever except those created by
the Articles of Incorporation or this Plan. Notwithstanding the foregoing, if
the Participant's employment terminates prior to January 1, 2000, the 120 day
period described in the first sentence of this Section 5.7(b) shall commence on
January 1, 2000.
(c).The Fair Market Value of Shares to be purchased by the
Parent hereunder shall be determined in good faith by the Parent's Board of
Directors. The Board of Directors shall make its determination of Fair Market
Value annually (the "Annual Valuation") promptly after the completion of the
Parent's audited financial statements for the year then completed and such
determination shall remain in effect until the Board of Directors makes the next
Annual Valuation. Notwithstanding the foregoing, if the Board of Directors or an
investment banker or appraiser appointed by the Parent makes a determination of
Fair Market Value subsequent to an Annual Valuation, such subsequent
determination shall supersede the Annual Valuation then in effect and shall
establish the Fair Market Value until the next Annual Valuation. The Fair Market
Value shall be based on an assumed sale of 100% of the outstanding capital stock
of the Parent (without reduction for minority interest or lack of liquidity of
the Shares or similar discount). If such determination of the Fair Market Value
is challenged by the Participant, a mutually acceptable investment banker or
appraiser shall establish the Fair Market Value as of the date of valuation
referenced in the Annual Valuation or a subsequent determination. The investment
banker's or appraiser's determination shall be conclusive and binding on the
Parent and the Participant. The Parent shall bear all costs incurred in
connection with the services of such investment banker or appraiser unless the
Fair Market Value established by such investment banker or appraiser is less
than 115% of the determination challenged by the Participant, in
7
<PAGE> 10
which case the Participant shall promptly pay or reimburse the Parent for half
of such costs. If the Participant and the Parent cannot agree upon an investment
banker or appraiser, they shall each choose an investment banker or appraiser
and the two shall choose a third investment banker or appraiser who shall
establish the Fair Market Value. Notwithstanding the foregoing, the Parent shall
obtain valuation of all of its Common Stock at least once annually for purposes
of the Participant's estate and gift planning; provided, however, that such
valuation is not binding on the Board of Directors for purposes of determining
Fair Market Value.
(d).The Participant shall not be considered to have ceased to
be employed by the Company for purposes of this Plan if he continues to be
employed by an affiliate of the Company or the Parent.
5.8 RESTRICTIONS ON TRANSFERS OF SHARES.
Subject to Section 5.7 hereof, prior to an Initial Public Offering or
an Approved Sale, the Shares shall not be transferable or transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
except that a Participant may transfer the Shares to a Permitted Transferee or
pursuant to the Articles of Incorporation. For purposes of this Plan, a
"Permitted Transferee" includes (a) his spouse, child, estate, personal
representative, heir or successor (b) a trust for the benefit of the Participant
or his spouse, child or heir and (c) a partnership the partners of which consist
solely of the Participant and/or his spouse, child, heir, and/or successor. This
Plan shall be binding on and enforceable against any person who is a Permitted
Transferee of the Shares. The stock certificates issued to evidence Shares
hereunder shall bear a legend referring to this Plan and the restrictions
contained herein.
ARTICLE VI
ADMINISTRATION
6.1. THE ADMINISTRATOR.
The Committee hereunder shall consist of the Board or a committee of
Directors appointed from time to time by the Board to serve as administrator of
this Plan. Any member of the Committee may resign by delivering a written
resignation to the Board. Members of the Committee shall not receive any
additional compensation for administration of this Plan.
6.2. COMMITTEE ACTION.
Action of the Committee with respect to the administration of this Plan
shall be taken pursuant to a majority vote or by unanimous written consent of
its members.
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6.3. RIGHTS AND DUTIES.
Subject to the limitations of this Plan, the Committee shall be charged
with the general administration of this Plan and the responsibility for carrying
out its provisions, and shall have powers necessary to accomplish those
purposes, including, but not by way of limitation, the following:
(a) To construe and interpret this Plan;
(b) To resolve any questions concerning the amount of benefits payable
to a Participant;
(c) To make all other determinations required by this Plan;
(d) To maintain all the necessary records for the administration of
this Plan; and
(e) To make and publish forms, rules and procedures for the
administration of this Plan.
The determination of the Committee made in good faith as to any
disputed question or controversy and the Committee's determination of benefits
payable to Participants shall be conclusive. In performing its duties, the
Committee shall be entitled to rely on information, opinions, reports or
statements prepared or presented by: (i) officers or employees of the Company
whom the Committee believes to be reliable and competent as to such matters; and
(ii) counsel (who may be employees of the Company), independent accountants and
other persons as to matters which the Committee believes to be within such
persons' professional or expert competence. The Committee shall be fully
protected with respect to any action taken or omitted by it in good faith
pursuant to the advice of such persons. The Committee may delegate ministerial,
bookkeeping and other non-discretionary functions to individuals who are
officers or employees of the Company.
6.4. INDEMNITY AND LIABILITY.
All expenses of the Committee shall be paid by the Company and the
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties. No member of the Committee shall
be liable for any act or omission of any other member of the Committee nor for
any act or omission on his or her own part, excepting only his or her own
willful misconduct or gross negligence. To the extent permitted by law, the
Company shall indemnify and save harmless each member of the Committee against
any and all expenses and liabilities arising out of his or her membership on the
Committee, excepting only expenses and liabilities arising out of his or her own
willful misconduct or gross negligence, as determined by the Board.
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ARTICLE VII
PLAN CHANGES AND TERMINATION
7.1. AMENDMENTS.
The Board shall have the right to amend this Plan in whole or in part
from time to time or may at any time suspend or terminate this Plan; PROVIDED,
however, that no amendment or termination shall cancel or otherwise adversely
affect in any way, without his written consent, the Participant's rights with
respect to Stock Units and Dividend Equivalents credited to his Stock Unit
Account. Any amendments authorized hereby shall be stated in an instrument in
writing, and the Participant shall be bound thereby upon receipt of notice
thereof.
7.2. TERM.
It is the current expectation of the Company that this Plan shall be
continued for a period of 10 years after the Effective Date, but continuance of
this Plan is not assumed as a contractual obligation of the Company. In the
event that the Board decides to discontinue or terminate this Plan, it shall
notify the Committee and the Participant of its action in writing, and this Plan
shall be terminated at the time therein set forth. The Participant shall be
bound thereby. In such event, the then credited benefits of the Participant
shall be distributed at the time(s) and in the manner elected and provided under
Section 5.4.
ARTICLE VIII
MISCELLANEOUS
8.1. LIMITATION ON PARTICIPANT'S RIGHTS.
Participation in this Plan shall not give the Participant the right to
continued employment with the Company or any distribution or other rights or
interests other than as herein provided. The Participant shall not have any
right to any distribution or other benefit hereunder except to the extent
provided in this Plan. This Plan shall create only a contractual obligation on
the part of the Company as to such benefits and shall not be construed as
creating a trust. This Plan, in and of itself, has no assets. The Participant
shall have rights no greater than the right to receive the Class C Stock as a
general unsecured creditor of the Company.
8.2. BENEFICIARIES.
(a) BENEFICIARY DESIGNATION. Subject to conditions imposed by the
Company, the Participant may designate in writing the Beneficiary or
Beneficiaries (as defined in Section 8.2(b)) whom the Participant desires to
receive any shares of Class C stock payable under this Plan after his death. The
Company and the Committee may rely on the Participant's designation of a
Beneficiary or Beneficiaries last filed in accordance with the terms of this
Plan.
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(b) DEFINITION OF BENEFICIARY. The Participant's "Beneficiary" or
"Beneficiaries" shall be the person, persons, trust or trusts (or similar
entity) designated by the Participant or, in the absence of a designation,
entitled by will or the laws of descent and distribution to receive the
Participant's benefits under this Plan in the event of the Participant's death,
and shall mean the Participant's executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.
8.3. BENEFITS NOT ASSIGNABLE; OBLIGATIONS BINDING UPON SUCCESSORS.
Benefits of the Participant under this Plan shall not be assignable or
transferable and any purported transfer, assignment, pledge or other encumbrance
or attachment of any benefits under this Plan, or any interest therein, other
than by operation of law or pursuant to Section 8.2, shall not be permitted or
recognized. Obligations of the Company under this Plan shall be binding upon
successors of the Company.
8.4. GOVERNING LAW; SEVERABILITY.
The validity of this Plan or any of its provisions shall be construed,
administered and governed in all respects under and by the laws of the State of
Pennsylvania. If any provisions of this instrument shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
hereof shall continue to be fully effective.
8.5. COMPLIANCE WITH LAWS.
This Plan and the offer, issuance and delivery of shares of Class C
Stock through the deferral of compensation or grant of Stock Units under this
Plan are subject to compliance with all applicable federal and state laws, rules
and regulations (including but not limited to state and federal securities law)
and to such approvals by any listing, agency or any regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under this Plan
shall be subject to such restrictions, and the person acquiring such securities
shall, if requested by the Company, provide such assurances and representations
to the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements.
8.6. HEADINGS NOT PART OF PLAN.
Headings and subheadings in this Plan are inserted for reference only
and are not to be considered in the construction of the provisions hereof.
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Exhibit 10.42
MANAGEMENT STOCK PURCHASE AGREEMENT
THIS MANAGEMENT STOCK PURCHASE AGREEMENT (this "Agreement") is made as
of December 30, 1999 (the "Effective Date") between Investcorp Werner Holdings
L.P., a Cayman Islands corporation ("IWH"), Werner Holding Co. (PA), Inc., a
Pennsylvania corporation (the "Company"), and the individual signatory hereto
("Buyer").
R E C I T A L S
A. Buyer is an employee of the Company or a Subsidiary (as defined
herein) and desires to acquire an equity interest in the Company.
B. The Company is willing to sell to Buyer shares of Class C Stock,
$0.01 par value, of the Company ("Class C Stock") subject to the terms and
conditions of this Agreement.
AGREEMENTS
1. DEFINITIONS. Capitalized terms used herein shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Management Stock Purchase Agreement.
"Approved Sale" means a transaction or a series of related
transactions which results in a BONA FIDE, unaffiliated change of economic
beneficial ownership of the Company or its business of greater than 50%
(disregarding for this purpose any disparate voting rights attributable to the
outstanding stock of the Company), whether pursuant to the sale of the stock of
the Company or a Subsidiary, the sale of the assets of the Company, or a merger
or consolidation (other than a sale of stock by an Initial Stockholder to
another Initial Stockholder, an affiliate thereof, or a non-U.S. entity with
respect to which an Initial Stockholder or an affiliate thereof has an
administrative relationship).
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended from time to time.
"Buyer" is defined in the preamble.
"Cause" has the meaning set forth in the Employment Agreement.
"Class C Stock" is defined in recital C.
"Closing Date" means November 24, 1997.
"Company" is defined in the preamble.
"Cost" means $2,421.29 per share.
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"Permanent Disability" has the meaning set forth in the
Employment Agreement.
"Effective Date" is defined in the preamble.
"Employment Agreement" means the Employment Agreement between
Buyer and Werner Co., a subsidiary of the Company dated as of May 26, 1999, as
amended from time to time.
"Endorsed Certificate" is defined in Section 4(a).
"Fair Market Value" means the value of a Share, as of the
Termination Date, determined pursuant to Section 4(d).
"Fiscal Year" means the fiscal year of the Company.
"Good Reason" has the meaning set forth in the Employment
Agreement.
"Initial Public Offering" means the sale of any of the common
stock of the Company pursuant to a registration statement that has been declared
effective under the Act, if as a result of such sale (i) the issuer becomes a
reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and (ii) such stock is traded on the New York Stock Exchange
or the American Stock Exchange, or is quoted on the NASDAQ National Market
System, or is traded or quoted on any other national stock exchange or national
securities system.
"Initial Stockholders" means the shareholders of the Company who
became shareholders as of the Closing Date (other than any such shareholders who
are also employees of the Company or were shareholders of the Company prior to
the Closing Date) and any transferees of such shareholders prior to an Approved
Sale or an Initial Public Offering.
"IWH" is defined in the preamble.
"permitted transferee" is defined in Section 3.
"person" means an individual, partnership, corporation, limited
liability company, trust, joint venture or other entity.
"Put Period" and "Put Right" are defined in Section 4(b).
"Repurchase Period" and "Repurchase Right" are defined in Section
4(a).
"Retirement" means age 65.
"Shares" is defined in Section 2.
"Subsidiary" means any joint venture, corporation, partnership or
other entity as to which the Company, whether directly or indirectly, has more
than 50% of the (i) voting rights
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or (ii) rights to capital or profits.
"Termination Date" means the date on which Buyer ceases to be
employed by the Company for any reason.
2. PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions hereof, the Company hereby issues and sells to Buyer 725 shares of
Class C Stock of the Company (the "Shares") against payment therefor of
$2,421.29 cash per share.
3. RESTRICTIONS ON TRANSFERS OF SHARES; PERMITTED TRANSFEREES.
Prior to 180 days following an Initial Public Offering, the Shares shall not be
transferable or transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) except that Buyer may transfer the
Shares (i) to his or her spouse, child, estate, personal representative, heir or
successor or to a trust for the benefit of Buyer or his or her spouse, child or
heir or to a partnership the partners of which consist solely of the Buyer
and/or his or her spouse, child, heir and/or successor (a "permitted
transferee"), or (ii) pursuant to Section 4 hereof or Sections 4, 5 or 6 of
Article IV of the Articles of Incorporation. Buyer and the Company agree that
the provisions of Section 4 of Article IV of the Articles of Incorporation shall
apply to the Shares even though such provisions by their terms apply only to
Class A and Class B shares. This Agreement shall be binding on and enforceable
against any person who is a permitted transferee of the Shares, and for purposes
of Sections 4, 5, and 6, the rights and obligations relating to Shares owned by
Buyer shall extend as well to Shares owned by permitted transferees of Buyer
and, unless the context otherwise requires, each reference to Buyer in said
Sections shall encompass also permitted transferees of Buyer. The stock
certificates issued to evidence Shares hereunder shall bear a legend referring
to this Agreement and the restrictions contained herein.
4. REPURCHASE OF SHARES.
(a) In the event that Buyer ceases to be employed by the
Company for any reason prior to an Initial Public Offering or Approved Sale, the
Company, during the sixty (60) days following the Termination Date (subject to
Section 4(e))the "Repurchase Period"), shall have the right to purchase all, but
not less than all, of the Shares which have been beneficially owned by Buyer for
a period of at least six (6) months (the Repurchase Right"). The purchase price
for each Share shall equal Fair Market Value, or, if Buyer resigns without Good
Reason prior to January 1, 2002 or is terminated for Cause at any time, the
lower of Fair Market Value or Cost. If the Company elects to purchase the
Shares, it shall notify Buyer at or before the end of the Repurchase Period of
such election and the purchase price shall be paid in cash at a time set by the
Company within thirty (30) days after the end of the Repurchase Period, provided
that Buyer has presented to the Company a stock certificate evidencing the
Shares duly endorsed for transfer (the "Endorsed Certificate"). If Buyer fails
to deliver the Endorsed Certificate, the Shares represented thereby shall be
deemed to have been purchased upon (i) the payment by the Company of the
purchase price to Buyer or his or her permitted transferee or (ii) notice to
Buyer or such permitted transferee that the Company is holding the purchase
price for the account of Buyer or such permitted transferee, and upon such
payment or notice Buyer and such permitted transferee will have no further
rights in or to such Shares. the Company may assign its rights
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<PAGE> 4
under this Section 4(a) IWH or to an affiliate of the Company. If the Shares are
not purchased pursuant to Section 4(a) or 4(b), the restrictions on transfer
thereof contained in this Agreement shall terminate and be of no further force
and effect.
(b) If Buyer's employment by the Company is terminated prior
to an Initial Public Offering or an Approved Sale (i) by the Company without
Cause or by Buyer for any reason; (ii) due to Buyer's Retirement, death or
Permanent Disability; or (iii) by the Company with Cause after January 1, 2002,
Buyer or his or her representative, during the 120 days following the
Termination Date (subject to Section 4(e), the "Put Period"), shall have the
right (the "Put Right") to require IWH to purchase all, but not less than all,
of the Shares then owned by Buyer, unless, by the thirtieth (30th) day after IWH
and the Company have received notice of Buyer's election to exercise the Put
Right, the Company has notified Buyer and IWH of its election, exercisable in
the discretion of the Company, to purchase the Shares on the same terms as such
Shares were to be purchased by IWH, in which case the Shares will be acquired by
the Company. The purchase price shall be at Fair Market Value, unless the
employment of Buyer is terminated for any reason other than Cause, Good Reason,
Retirement, death, or Permanent Disability prior to January 1, 2002 and Buyer
exercises the Put Right prior to such date, in which case the purchase price
will be the lower of Fair Market Value or Cost. The purchase price shall be paid
in cash at a time set by the Company or IWH, as applicable, within thirty (30)
days after the end of the Put Period, provided that IWH or the Company, as the
case may be, need not pay the purchase price until such later time that Buyer
presents to the Company or IWH, as applicable, the Endorsed Certificate.
(c) The Fair Market Value of Shares to be purchased by the
Company or IWH, as the case may be, hereunder shall be determined in good faith
by the Company's Board of Directors. The Board of Directors shall make its
determination of Fair Market Value annually (the "Annual Valuation") promptly
after the completion of the Company's audited financial statements for the year
then completed and such determination shall remain in effect until the Board of
Directors makes the next Annual Valuation. Notwithstanding the foregoing, if the
Board of Directors or an investment banker or appraiser appointed by the Company
makes a determination of Fair Market Value subsequent to an Annual Valuation,
such subsequent determination shall supersede the Annual Valuation then in
effect and shall establish the Fair Market Value until the next Annual
Valuation. The Fair Market Value shall be based on an assumed sale of 100% of
the outstanding capital stock of the Company (without reduction for minority
interest or lack of liquidity of the Shares or similar discount). If such
determination of the Fair Market Value is challenged by Buyer, a mutually
acceptable investment banker or appraiser shall establish the Fair Market Value
as of the date of valuation referenced in the Annual Valuation or a subsequent
determination. The investment banker's or appraiser's determination shall be
conclusive and binding on the Company and Buyer. The Company shall bear all
costs incurred in connection with the services of such investment banker or
appraiser unless the Fair Market Value established by such investment banker or
appraiser is less than 115% of the determination challenged by the Buyer, in
which case Buyer shall promptly pay or reimburse the Company for half of such
costs. If Buyer and the Company cannot agree upon an investment banker or
appraiser, they shall each choose an investment banker or appraiser and the two
shall choose a third investment banker or appraiser who shall establish the Fair
Market
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Value. Notwithstanding the foregoing, the Company shall obtain valuation
of all of its common stock at least once annually for purposes of Buyer's estate
and gift planning; provided, however, that such valuation is not binding on the
Board of Directors for purposes of determining Fair Market Value.
(d) Buyer shall not be considered to have ceased to be
employed by the Company for purposes of this Agreement if he continues to be
employed by the Company or a Subsidiary, or by a company of which the Company is
a Subsidiary.
(e) In the event that, on the Termination Date, any Shares
held by Buyer have been owned by Buyer for less than six (6) months, the
Repurchase Period and the Put Period for such Shares the Shares will not
commence on the Termination Date but rather will commence on the first date on
which all Shares have been owned by Buyer for six (6) months.
5. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants to Buyer as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania.
(b) Upon issuance to Buyer in accordance with the terms
hereof, the Shares will be duly and validly authorized, issued and outstanding,
fully paid and non-assessable (without limiting any rights the Company or its
Subsidiary have pursuant to any loan documents).
(c) The Shares shall not be subject to dilution upon (i) the
conversion, pursuant to the terms of the Articles of Incorporation, of (A) any
of the Company's Class D Stock or Class E Stock, each with a par value of $0.01,
or (B) any of the Class C Stock, or (ii) the exercise of those certain warrants
issued by the Company on November 24, 1997 entitling the holder thereof to
purchase shares of the Company's common stock, $0.01 par value.
6. Representations and Acknowledgments of Buyer.
(a) Buyer hereby represents and warrants to the Company
as follows:
(i) Buyer is acquiring the Shares for investment for
his or her own account and without a view to further
distribution of the Shares.
(ii) Buyer is an employee of the Company and has been
given access to all information that Buyer considers necessary to make
an investment decision as to the Shares.
(b) Buyer hereby acknowledges to the Company as follows:
(i) The Shares are being acquired by Buyer without
registration under the Act pursuant to exemptions from registration
thereunder. Buyer cannot transfer the Shares except pursuant to an
effective registration statement or an exemption from
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registration under the Act.
(ii) The Shares are nonvoting under the Articles of
Incorporation and are otherwise subject to the Articles of
Incorporation.
7. GOVERNING LAW. All terms of and rights under this Agreement
shall be governed by and construed in accordance with the internal law of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of law.
8. NOTICES. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, telexed or telecopied to, or, if mailed,
when received by, the other party at the following addresses (or at such other
address as shall be given in writing by either party to the other):
If to IWH to:
Investcorp Werner Holdings L.P.
P.O. Box 1111, West Wind Building
Grand Cayman, Cayman Islands B.W.I.
With a copy to:
Investcorp Management Services Limited
c/o Investcorp Bank E.C.
P.O. Box 5430
Manama, Bahrain
Attention: H. Richard Lukens, III
If to the Company to:
Werner Holding Co. (PA), Inc.
93 Werner Road
Greenville, PA 16125
Attention: Eric J. Werner, Esq.
General Counsel
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 47th Floor
New York, NY 10166
Attention: E. Michael Greaney, Esq.
If to Buyer, to the address set forth on the signature page hereof.
9. AMENDMENTS AND WAIVERS. This Agreement may be amended, and any
provision
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hereof may be waived, only by a writing signed by the party to be charged.
10. CAPITALIZATIONS, EXCHANGES, ETC. AFFECTING SHARES; ADJUSTMENT
OF COST.
(a) The provisions of this Agreement shall apply to any and
all shares of capital stock of the Company or any successor or assign of the
Company that may be issued in respect of, in exchange for, or in substitution
of, the Shares by reason of any stock dividend, stock split, stock issuance,
reverse stock split, combination, recapitalization, reclassification, merger,
consolidation or otherwise, other than an Approved Sale. Nothing herein shall
prohibit or restrict the Company from taking any corporate action or engaging in
any corporate transaction of any kind, including, without limitation, any
merger, consolidation, liquidation or sale of assets.
(b) In the event of any stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or similar event as a result of which Buyer holds a lesser
or greater number of Shares and/or other securities, the Cost of a Share or
other security shall be appropriately adjusted as determined in good faith by
the Board of Directors of the Company.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and supersedes all prior oral and written and all contemporaneous oral
discussions, agreements and understandings of any kind or nature.
12. SEPARABILITY. In the event that any provision of this
Agreement is declared to be illegal, invalid or otherwise unenforceable by a
court of competent jurisdiction, such provision shall be reformed, if possible,
to the extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to
the extent necessary to reform or delete such illegal, invalid or unenforceable
provision.
13. HEADINGS. The headings preceding the text of the sections
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
15. FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement.
16. REMEDIES. Consistent with section 18 herein, in the event of a
breach by any party to this Agreement of its obligations under this Agreement,
any party injured by such breach, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, shall be entitled to
specific performance of its rights under this Agreement. The parties
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<PAGE> 8
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of any such provision will be inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is hereby waived.
17. NOT AN EMPLOYMENT CONTRACT. Nothing in this Agreement or any other
instrument executed pursuant hereto shall confer upon Buyer any right to
continue in the employ of the Company or any Subsidiary or shall affect the
right of the Company or any Subsidiary to terminate the employment of Buyer with
or without Cause.
18. ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement, or the breach, termination or validity hereof, shall
be finally settled by arbitration in accordance with the then-prevailing
Commercial Arbitration Rules of the American Arbitration Association, as
modified herein ("Rules"). There shall be one arbitrator who shall be jointly
selected by the parties. If the parties have not jointly agreed upon an
arbitrator within twenty days of respondent's receipt of claimant's notice of
intention to arbitrate, either party may request the American Arbitration
Association to furnish the parties with a list of names from which the parties
shall jointly select an arbitrator. If the parties have not agreed upon an
arbitrator within ten days of the transmittal date of the list, then each party
shall have an additional five days in which to strike any names objected to,
number the remaining names in order of preference, and return the list to the
American Arbitration Association, which shall then select an arbitrator in
accordance with Rule 13 of the Rules. The place of arbitration shall be
Pittsburgh, Pennsylvania. By agreeing to arbitration, the parties hereto do not
intend to deprive any court of its jurisdiction to issue a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of arbitration. The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. secs.
1-16. Judgment upon the award of the arbitrator may be entered in any court of
competent jurisdiction. Each party shall bear its or his own costs and expenses
in any such arbitration and one-half of the arbitrator's fees and expenses
provided that the arbitrator may but need not award the prevailing party
reasonable fees and expenses.
19. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective permitted successors
and assigns.
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IN WITNESS WHEREOF, this Agreement is entered into as of the date first
above written.
WERNER HOLDING CO. (PA), INC.
By:_________________________________
Name:
Title:
INVESTCORP WERNER HOLDINGS L.P.
By:_______________________________
Name:
Title:
"BUYER"
___________________________________
Name: Dennis Heiner
Address: 130 Thorntree Lane
Winnetka, IL 60093
No. of Shares of Class C
Stock acquired by Buyer: 1,000
Amount paid by Buyer: $2,421,290.00
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Exhibit 10.43
STOCK OPTION AGREEMENT
PURSUANT TO THE
WERNER HOLDING CO. (PA), INC.
STOCK INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of December
30, 1999 (the "Effective Date"), between Werner Holding Co. (PA), Inc., a
Pennsylvania corporation (the "Company"), and Dennis G. Heiner (the "Optionee").
R E C I T A L S
---------------
A. The Company has adopted the Werner Holding Co. (PA) Inc. Stock
Incentive Plan (the "Plan"), a copy of which is attached hereto as Exhibit 1.
B. The Company desires to grant the Optionee the opportunity to acquire
a proprietary interest in the Company to encourage the Optionee's contribution
to the success and progress of the Company.
C. In accordance with the Plan, the Committee (as defined in the Plan)
has granted to the Optionee a non-qualified option to purchase shares of Class C
Stock, $0.01 par value, of the Company (the "Class C Stock") subject to the
terms and conditions of the Plan and this Agreement.
AGREEMENTS
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1. DEFINITIONS. Capitalized terms used herein shall have the
following meanings:
"Act" is defined in Section 10(a).
"Agreement" means this Stock Option Agreement.
"Annual Valuation" is defined in Section 9(d).
"Approved Sale" means a transaction or a series of related transactions
which results in a BONA FIDE, unaffiliated change of economic beneficial
ownership of the Company or its business of greater than 50% (disregarding for
this purpose any disparate voting rights attributable to the outstanding stock
of the Company), whether pursuant to the sale of the stock of the Company, the
sale of the assets of the Company, or a merger or consolidation (other than a
sale of stock by an Initial Stockholder to (i) another Initial Stockholder or
affiliate thereof, or (ii) a non-U.S. entity with respect to which an Initial
Stockholder or affiliate thereof has an administrative relationship).
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended from time to time.
"Cause" has the meaning set forth in the Employment Agreement.
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"Class C Stock" is defined in recital C.
"Closing Date" means November 24, 1997.
"Company" is defined in the preamble.
"Permanent Disability" has the meaning set forth in the Employment
Agreement.
"EBITDA" is defined in Section 3(a).
"Effective Date" is defined in the preamble.
"Employment Agreement" means the Employment Agreement between Buyer and
Werner Co., a subsidiary of the Company dated as of May 26, 1999, as amended
from time to time.
"Endorsed Certificate" is defined in Section 9(a).
"Exercise Price" is defined in Section 2.
"Fair Market Value" means the value of a Share, as of the Termination
Date, calculated pursuant to Section 9(d).
"Fiscal Year" means the fiscal year of the Company.
"Good Reason" has the meaning set forth in the Employment Agreement.
"Initial Public Offering" means the sale of any of the common stock of
the Company pursuant to a registration statement that has been declared
effective under the Act, if as a result of such sale (i) the issuer becomes a
reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and (ii) such stock is traded on the New York Stock Exchange
or the American Stock Exchange, or is quoted on the NASDAQ National Market
System or is traded or quoted on any other national stock exchange or national
securities system.
"Initial Stockholders" means the shareholders of the Company who became
shareholders as of the Closing Date (other than any such shareholders who are
also employees of the Company or were shareholders of the Company prior to the
Closing Date) and any transferees of such shareholders prior to an Initial
Public Offering or an Approved Sale.
"IWH" means Investcorp Werner Holdings L.P., a Cayman Islands
corporation.
"Option" is defined in Section 2.
"Optionee" is defined in the preamble.
"Option Shares" is defined in Section 2.
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"Plan" is defined in recital A.
"Put Period" and "Put Right" are defined in Section 9(b).
"Repurchase Period" and "Repurchase Right" are defined in Section 9(a).
"Retirement" means age 65.
"Subsidiary" means any joint venture, corporation, partnership or other
entity as to which the Company, whether directly or indirectly, has more than
50% of the (i) voting rights or (ii) rights to capital or profits.
"Termination Date" means the date on which the Optionee ceases to be
employed by the Company for any reason.
2. GRANT OF OPTION. The Company grants to the Optionee the right and
option (the "Option") to purchase, on the terms and conditions hereinafter set
forth, all or any part of the number of shares of Class C Stock set forth below
the Optionee's signature below (the "Option Shares"), at the purchase price of
$2,421.29 per Share (as such amount may be adjusted, the "Exercise Price"), on
the terms and conditions set forth herein.
3. EXERCISABILITY.
(a) The Option shall become exercisable to the extent of the
one-fifth (1/5) of the number of Option Shares as of the end of each fiscal year
set forth on Exhibit 2 of this Agreement if the Company's Earnings before
Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined on Exhibit
2, equals or exceeds the Target annual EBITDA amount set forth in column (B) of
Exhibit 2 with respect to such fiscal year, provided further that, if the EBITDA
for a fiscal year equals at least ninety percent (90%) of the Target annual
EBITDA set forth in column B of Exhibit 2 for such year, the Option shall become
exercisable to the extent provided in column (B) of Exhibit 3 of this Agreement.
If for any fiscal year set forth on Exhibit 2 the Company's cumulative annual
EBITDA amount for that and the preceding fiscal years equals or exceeds the
Cumulative Target EBITDA amount set forth in column (C) of Exhibit 2 with
respect to such fiscal year, the Option shall become exercisable to the extent
that it would have become exercisable had the Company achieved its Target annual
EBITDA amounts for that and each of the preceding fiscal years; provided,
however, that notwithstanding the Company's cumulative EBITDA amount equaling or
exceeding the Cumulative Target EBITDA amount, the Option shall not become
exercisable (subject to Section 3(b)) as to any year in which the Company's
EBITDA does not equal or exceed the Minimum Level EBITDA amount set forth in
column (A) of Exhibit 2 with respect to such fiscal year.
(b) Notwithstanding Sections 3(a), (i) upon the occurrence of
an Initial Public Offering, in which case the schedule set forth in Section 3(a)
shall not apply to the extent that Options are not yet exercisable, the Optionee
shall have the right (A) to exercise one-third (1/3) of all unexercisable
Options on the first anniversary of the Initial Public Offering, provided that
the Optionee remains continuously employed by the Company through such
anniversary; (B) to
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exercise an additional one third (1/3) of all unexercisable Options (as of the
first anniversary) on the second anniversary of the Initial Public Offering,
provided that the Optionee remains continuously employed by the Company through
such anniversary; and (C) to exercise the remaining one-third (1/3) of all
unexercisable Options on the third anniversary of the Initial Public Offering,
provided that the Optionee remains continuously employed by the Company through
such anniversary; (ii) upon the occurrence of an Approved Sale, in which case
the schedule set forth in Section 3(a) shall not apply to the extent that
Options are not yet exercisable, the Optionee shall have the right to exercise
up to fifty percent (50%) of all unexercisable Options, provided, and to the
extent, that the Initial Stockholders receive a twenty percent (20%) annual
internal rate of return (calculated on a fully diluted basis) from the Closing
Date until the date of closing of the Approved Sale (taking into account the
Approved Sale), and shall have the right to exercise up to one-hundred percent
(100%) of all unexercisable Options if the Initial Stockholders receive a thirty
percent (30%) annual internal rate of return (calculated on a fully diluted
basis) from the Closing Date until the date of closing of the Approved Sale
(taking into account the Approved Sale), and (iii) upon the seventh (7th)
anniversary of the date hereof, provided the Optionee remains continuously
employed by the Company through such anniversary, any unexercisable Option shall
immediately become fully exercisable.
4. EXPIRATION.
(a) Subject to Section 6(a), the exercisable portion of the
Option shall expire upon the thirtieth (30th) day following the seventh (7th)
anniversary of the Effective Date unless (i) at any time prior to the earlier of
an Approved Sale or January 1, 2002, the Optionee resigns without Good Reason,
in which case the exercisable portion of the option shall expire thirty (30)
days following the Termination Date, or (ii) the Optionee is terminated for
Cause from employment by the Company, in which case the exercisable portion of
the Option shall expire on the Termination Date, or (iii) in the event the
Optionee is terminated other than for Cause from employment by the Company and
the Company exercises the repurchase right pursuant to Section 9 hereof, or in
the event the Optionee or his or her representative exercises the put right
pursuant to Section 9 hereof, the exercisable portion of the Option shall expire
on the business day immediately preceding the Repurchase Date, the Put Date, or
the date on which the Company acquires any Option Shares pursuant to Section
9(c) hereof, as the case may be.
(b) The unexercisable portion of the Option shall expire on
the earlier to occur of (i) the Termination Date except in the case where the
employment of the Optionee is terminated without Cause, for Good Reason, or due
to Retirement, death or Permanent Disability, in which case the unexercisable
portion of the Option shall terminate on the thirtieth (30th) day following the
date on which the Optionee received notice of the EBITDA for the Fiscal Year
during which the Termination Date occurred, and a pro rata portion of the
portion of the Option scheduled to become exercisable in the year including the
Termination Date shall become exercisable as if the Optionee's employment had
not been terminated, such proration to be determined upon the number of days
elapsed in the year in which the Termination Date occurred, or (ii) except to
the extent provided in Section 3(b)(ii), an Approved Sale.
5. NONTRANSFERABILITY. Subject to Section 9 hereof, the Option shall
not be
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transferable by the Optionee except that the Optionee may transfer the Option to
(a) his or her spouse, child, estate, personal representative, heir or successor
(b) a trust for the benefit of the Optionee or his or her spouse, child or heir,
or (c) a partnership the partners of which consist solely of the Optionee and/or
his or her spouse, child, heir, and/or successor (each, a "permitted
transferee") and the Option is exercisable, during the Optionee's lifetime, only
by him or her or his or her spouse or child, or, in the event of the Optionee's
Permanent Disability, his or her guardian or legal representative. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise), and shall not be subject
to execution, attachment or similar process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any attachment or similar process upon the Option that
would otherwise effect a change in the ownership of the Option, shall terminate
the Option; provided, however, that in the case of the involuntary levy of any
attachment or similar involuntary process upon the Option, the Optionee shall
have thirty (30) days after notice thereof to cure such levy or process before
the Option terminates. This Agreement shall be binding on and enforceable
against any person who is a permitted transferee of the Option pursuant to the
first sentence of this Section.
6. EFFECT OF APPROVED SALE; ADJUSTMENTS.
(a) Subject to Section 6(b), in the event of an Approved Sale,
the unexercised portion of the Option shall terminate upon such Approved Sale,
provided that, unless the agreement or plan of merger effecting such Approved
Sale provides that the Optionee shall receive upon such Approved Sale, with
respect to the entire exercisable but unexercised portion of the Option, the
same consideration that the holders of the Class C Stock shall be entitled to
receive upon such Approved Sale, less the Exercise Price attributable to such
exercisable but unexercised portion, then the Optionee shall be given at least
thirty (30) days' prior notice of the proposed Approved Sale and shall be
entitled to exercise such exercisable but unexercised portion of the Option at
any time during such thirty (30) day period up to and until the close of
business on the day immediately preceding the date of consummation of such
Approved Sale and upon exercise of the Option the Option Shares shall be treated
in the same manner as the shares of any other holder of Class C Stock.
(b) Notwithstanding Section 6(a), if the shares of the Class C
Stock, or to the extent it affects the economic rights of the holders of the
Class C Stock, shares of Class D stock or Class E stock of the Company, are
changed into or exchanged for a different number or kind of shares or
securities, as the result of any one or more reorganizations, recapitalizations,
mergers, acquisitions, stock splits, reverse stock splits, stock dividends or
similar events, an appropriate adjustment shall be made in the number and kind
of shares or other securities subject to the Option, and the price for each
share or other unit of any securities subject to this Agreement, in accordance
with Section 13 of the Plan. No fractional interests shall be issued on account
of any such adjustment unless the Committee specifically determines to the
contrary; provided, however, that in lieu of fractional interests, the Optionee,
upon the exercise of the Option in whole or part, shall receive cash in an
amount equal to the amount by which the fair
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market value of such fractional interests exceeds the Exercise Price
attributable to such fractional interests.
7. EXERCISE OF THE OPTION. Prior to the expiration thereof, the
Optionee may exercise the exercisable portion of the Option from time to time in
whole or in part. Upon electing to exercise the Option, the Optionee shall
deliver to the Secretary of the Company a written and signed notice of such
election setting forth the number of Option Shares the Optionee has elected to
purchase and shall at the time of delivery of such notice tender cash or a
cashier's or certified bank check to the order of the Company for the full
Exercise Price of such Option Shares and any amount required pursuant to Section
16 hereof. Alternatively, if the Company is not at the time prohibited from
purchasing or acquiring shares of its capital stock, the Exercise Price may be
paid in whole or in part by delivery of shares of the Class C Stock owned by the
Optionee or by the Optionee directing the Company to withhold shares otherwise
issuable upon exercise provided that Optionee has owned such shares for at least
six (6) months. The value of any such shares delivered or withheld as payment of
the Exercise Price shall be such shares' fair market value as determined by the
Committee. The Committee further may, in its discretion, permit payment of the
Exercise Price in such form or in such manner as may be permissible under the
Plan and under any applicable law.
8. RESTRICTIONS ON TRANSFERS OF SHARES ISSUABLE UPON EXERCISE. Subject
to Section 9 hereof, prior to the earlier of (A) 180 days following an Initial
Public Offering or (B) an Approved Sale, the Option Shares shall not be
transferable or transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) except that the Optionee may transfer
the Option Shares (i) to a permitted transferee, as defined in Section 5 of this
Agreement, or (ii) as permitted by the Articles of Incorporation. This Agreement
shall be binding on and enforceable against any person who is a permitted
transferee of the Option Shares except a person who acquires the Option Shares
pursuant to the Articles of Incorporation or as part of the Initial Public
Offering. The stock certificates issued to evidence Option Shares upon exercise
of the Option hereunder shall bear a legend referring to this Agreement and the
restrictions contained herein.
9. REPURCHASE OF OPTION SHARES.
(a) In the event that the Optionee ceases to be employed by
the Company for any reason prior to an Initial Public Offering or an Approved
Sale, the Company, during the sixty (60) days following the Termination Date
(subject to Section 9(c), the "REPURCHASE PERIOD") shall have the right to
purchase all, but not less than all, of the Option Shares (the "Repurchase
Right"). The purchase price for each Option Share shall equal Fair Market Value,
or, if the Optionee resigns without Good Reason prior to January 1, 2002 or is
terminated for Cause at any time, the lower of Fair Market Value or the Exercise
Price. If the Company elects to purchase the Option Shares, it shall notify the
Optionee at or before the end of the Repurchase Period of such election and the
purchase price shall be paid in cash at a time set by the Company (the
"Repurchase Date") within thirty (30) days after the end of the Repurchase
Period, provided that the Optionee has presented to the Company a stock
certificate evidencing the Option Shares duly endorsed for transfer (the
"Endorsed Certificate"). If the Optionee fails to deliver the Endorsed
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Certificate, the Option Shares represented thereby shall be deemed to have been
purchased upon (i) the payment by the Company of the purchase price to the
Optionee or his or her permitted transferee or (ii) notice to the Optionee or
such permitted transferee that the Company is holding the purchase price for the
account of the Optionee or such permitted transferee, and upon such payment or
notice the Optionee and such permitted transferee will have no further rights in
or to such Option Shares. The Company may assign its Repurchase Right hereunder
to IWH or to an affiliate of the Company. If the Option Shares are not purchased
pursuant to Section 9(a) or 9(b), the restrictions on transfer thereof contained
in Sections 5 and 8 of this Agreement shall terminate and be of no further force
and effect.
(b) If the Optionee's employment by the Company is terminated
prior to an Initial Public Offering or an Approved Sale (i) by the Company
without Cause or by the Optionee for any reason; (ii) due to the Optionee's
Retirement, death or Permanent Disability; or (iii) by the Company with Cause
after January 1, 2002, the Optionee or his or her representative, during the 120
days following the Termination Date (subject to Section 9(c), the "Put Period")
shall have the right to require IWH to purchase all, but not less than all, of
the Option Shares then held by Optionee (the "Put Right"), shall unless, by the
thirtieth (30) day after the Company and IWH have received notice of the
Optionee's election to exercise the Put Right , the Company has notified the
Optionee and IWH of its election, exercisable at the discretion of the Company,
to purchase the Option Shares on the same terms as such Option Shares were to be
purchased by IWH, in which case such Option Shares will be acquired by the
Company. The purchase price shall be at Fair Market Value, unless the employment
of the Optionee is terminated for any reason other than Retirement, death, or
Permanent Disability prior to January 1, 2002, in which case the purchase price
will be the lower of Fair Market Value or the Exercise Price. The purchase price
shall be paid in cash at a time specified by IWH or the Company, as applicable,
within thirty (30) days after the end of the Put Period, provided that IWH or
the Company, as the case may be, need not pay the purchase price until such
later time that the Optionee presents to IWH or the Company, as applicable, the
Endorsed Certificate.
(c) In the event that (i) on the Termination Date, Optionee
owns Option Shares that have not been owned by the Optionee for a period of at
least six (6) months, and/or (ii) following the Termination Date, the Optionee
exercises any then outstanding vested Option pursuant to this Agreement
(including without limitation any Option which becomes exercisable by virtue of
Section 4(b) hereof), with respect to all such Option Shares, the Repurchase
Period and the Put Period will not commence on the Termination Date but rather
will commence on the first date on which all such Option Shares have been owned
by Optionee for six (6) months.
(d) The Fair Market Value of Option Shares to be purchased by
the Company or IWH, as the case may be, hereunder shall be determined in good
faith by the Company's Board of Directors. The Board of Directors shall make its
determination of Fair Market Value annually (the "Annual Valuation") promptly
after the completion of the Company's audited financial statements for the year
then completed and such determination shall remain in effect until the Board of
Directors makes the next Annual Valuation. Notwithstanding the foregoing, if the
Board of Directors or an investment banker or appraiser appointed by the Company
makes a determination of Fair Market Value subsequent to an Annual Valuation,
such subsequent
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determination shall supersede the Annual Valuation then in effect and shall
establish the Fair Market Value until the next Annual Valuation. The Fair Market
Value shall be based on an assumed sale of 100% of the outstanding capital stock
of the Company (without reduction for minority interest or lack of liquidity of
the Option Shares or similar discount). If such determination of the Fair Market
Value is challenged by the Optionee, a mutually acceptable investment banker or
appraiser shall establish the Fair Market Value as of the date of valuation
referenced in the Annual Valuation or a subsequent determination. The investment
banker's or appraiser's determination shall be conclusive and binding on the
Company and the Optionee. The Company shall bear all costs incurred in
connection with the services of such investment banker or appraiser unless the
Fair Market Value established by such investment banker or appraiser is less
than 115% of the determination challenged by the Optionee, in which case the
Optionee shall promptly pay or reimburse the Company for half of such costs. If
the Optionee and the Company cannot agree upon an investment banker or
appraiser, they shall each choose an investment banker or appraiser and the two
shall choose a third investment banker or appraiser who shall establish the Fair
Market Value. Notwithstanding the foregoing, the Company shall obtain valuation
of all of its common stock at least once annually for purposes of the Optionee's
estate and gift planning; provided, however, that such valuation is not binding
on the Board of Directors for purposes of determining Fair Market Value.
(e) The Optionee shall not be considered to have ceased to be
employed by the Company for purposes of this Agreement if he continues to be
employed by the Company or a Subsidiary, or by a company of which the Company is
a Subsidiary.
10. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) No Option Shares shall be issued or transferred pursuant
to this Agreement unless and until all legal requirements applicable to such
issuance or transfer have, in the opinion of counsel to the Company, been
satisfied. Such requirements may include, but are not limited to, registering or
qualifying such Shares under any state or federal law, satisfying any applicable
law relating to the transfer of unregistered securities or demonstrating the
availability of an exemption from applicable laws, placing a legend on the
Shares to the effect that they were issued in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the "Act"), and may
not be transferred other than in reliance upon Rule 144 or Rule 701 promulgated
under the Act, if available, or upon another exemption from the Act, or
obtaining the consent or approval of any governmental regulatory body.
(b) The Optionee understands that the Company intends for the
offering and sale of Option Shares to be effected in reliance upon Rule 701 or
another available exemption from registration under the Act and intends to file
a Form 701 as appropriate, and that the Company is under no obligation to
register for resale the Option Shares issued upon exercise of the Option,
subject to other applicable agreements or the Articles of Incorporation. In
connection with any such issuance or transfer, the person acquiring the Option
Shares shall, if requested by the Company, provide information and assurances
satisfactory to counsel to the Company with respect to such matters as the
Company reasonably may deem desirable to assure compliance with all applicable
legal requirements.
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11. SUBJECT TO ARTICLES OF INCORPORATION. The Optionee acknowledges
that the Option Shares are subject to the terms of the Articles of
Incorporation.
12. NO INTEREST IN SHARES SUBJECT TO OPTION. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of stock allocated or reserved for the purpose of
the Plan or subject to this Agreement except as to such Option Shares, if any,
as shall have been issued to such person upon exercise of an Option or any part
thereof.
13. PLAN CONTROLS. The Option hereby granted is subject to, and the
Company and the Optionee agree to be bound by, all of the terms and conditions
of the Plan as the same may be amended from time to time in accordance with the
terms thereof, but no such amendment shall be effective as to the Option without
the Optionee's consent insofar as it may adversely affect the Optionee's rights
under this Agreement.
14. NOT AN EMPLOYMENT CONTRACT. Nothing in the Plan, in this Agreement
or any other instrument executed pursuant thereto shall confer upon the Optionee
any right to continue in the employ of the Company or any Subsidiary or shall
affect the right of the Company or any Subsidiary to terminate the employment of
the Optionee with or without Cause.
15. GOVERNING LAW. All terms of and rights under this Agreement shall
be governed by and construed in accordance with the internal laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of law.
16. TAXES. The Committee may, in its discretion, make such provisions
and take such steps as it may deem necessary or appropriate for the withholding
of all federal, state, local and other taxes required by law to be withheld with
respect to the issuance or exercise of the Option including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, requiring the Optionee to pay to the Company
the amount required to be withheld or to execute such documents as the Committee
deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan; provided further that the
Optionee may satisfy all aforesaid withholding tax obligations by directing the
Company to withhold that number of Option Shares with an aggregate Fair Market
Value equal to the amount of all federal, state, local and other taxes required
to be withheld, or delivering to the Company such number of previously held
Shares, which Shares have been owned by the Optionee for at least six (6) months
with an aggregate Fair Market Value equal to the minimum statutory amount of the
federal, state, local and other taxes required to be withheld.
17. NOTICES. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, telexed or telecopied to, or, if mailed,
when received by, the other party at the following addresses (or at such other
address as shall be given in writing by either party to the other):
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If to the Company to:
Werner Holding Co. (PA), Inc.
93 Werner Road
Greenville, PA 16125
Attention: Eric J. Werner, General Counsel
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 47th Floor
New York, New York 10166-0193
Attention: E. Michael Greaney, Esq.
If to Investcorp Werner Holdings L.P. to:
Investcorp Werner Holdings L.P.
P.O. Box 1111, West Wind Building
Grand Cayman, Cayman Islands B.W.I.
With a copy to:
Investcorp Management Services Limited
c/o Investcorp Bank E.C.
P.O. Box 5430
Manama, Bahrain
Attention: H. Richard Lukens, III
If to the Optionee to the address set forth below the Optionee's
signature below.
18. AMENDMENTS AND WAIVERS. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by the party to be
charged.
19. ENTIRE AGREEMENT. This Agreement, together with the Plan, sets
forth the entire agreement and understanding between the parties as to the
subject matter hereof and supersedes all prior oral and written and all
contemporaneous oral discussions, agreements and understandings of any kind or
nature.
20. SEPARABILITY. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.
21. HEADINGS. The headings preceding the text of the sections hereof
are inserted solely for convenience of reference, and shall not constitute a
part of this Agreement, nor shall they affect its meaning, construction or
effect.
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22. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
23. FURTHER ASSURANCES. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.
24. REMEDIES. In the event of a breach by any party to this Agreement
of its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is hereby waived.
25. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.
26. CERTAIN ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Company
hereby represents and warrants to the Optionee that the Option Shares shall not
be subject to dilution upon (i) the conversion, pursuant to the terms of the
Articles of Incorporation, of (A) any of the Company's Class D Stock or Class E
Stock, each with a par value of $0.01, or (B) any of the Class C Stock, or (ii)
the exercise of those certain warrants issued by the Company on November 24,
1997 entitling the holder thereof to purchase shares of the Company's Class E
Stock, $0.01 par value.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
WERNER HOLDING CO. (PA), INC.
By: ___________________________________________
Name:
Title:
-------------------------------
Name: Dennis G. Heiner
Address: 130 Thorntree Lane
Winnetka, IL 60093
Number of Option Shares: 1,250
Accepted and agreed to for purposes
of Section 9(b) only:
INVESTCORP WERNER HOLDINGS L.P.
By: ________________________________________________
Name:
Title:
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EXHIBIT 1
WERNER HOLDING CO. (PA), INC.
STOCK INCENTIVE PLAN
l. ESTABLISHMENT AND PURPOSE OF THE PLAN. This Management Stock
Incentive Plan (the "Plan") is established by Werner Holding Co. (PA), Inc., a
Pennsylvania corporation (the "Company"), as of November 24, 1997. The Plan is
designed to enable the Company to attract, retain and motivate directors,
members of the management and certain other officers and key employees the
Company, and its subsidiaries, by providing for or increasing their proprietary
interest in the Company. The Plan provides for the grant of options ("Options")
that qualify as incentive stock options ("Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as Options that do not so qualify ("Non-Qualified Options"), for the grant
of stock appreciation rights ("Stock Appreciation Rights") and for the sale or
grant of restricted stock ("Restricted Stock").
2. STOCK SUBJECT TO PLAN. The number of shares of stock that may be
subject to Options or Stock Appreciation Rights granted hereunder plus the
number of shares of stock that may be granted or sold as Restricted Stock
hereunder shall not in the aggregate exceed 8,353 shares of the Company's Class
C Common Stock (the "Shares"), subject to adjustment under Section 13 hereof;
provided further that the number of Shares that a Participant (as hereinafter
defined) may receive pursuant to the Plan shall in no event exceed 2,500 in any
year. The Shares that may be subject to Options granted and Restricted Stock
sold or granted under the Plan may be authorized and unissued Shares or Shares
reacquired by the Company and held as treasury stock.
Shares that are subject to the unexercised portions of any Options that
expire, terminate or are canceled, and Shares that are subject to any Stock
Appreciation Rights that expire, terminate or are canceled, and Shares of
Restricted Stock that are reacquired by the Company pursuant to the restrictions
thereon, shall again be available for the grant of Options or Stock Appreciation
Rights and the sale or grant of Restricted Stock under the Plan. If a Stock
Appreciation Right is exercised, any Option or portion thereof that is
surrendered in connection with such exercise shall terminate and the Shares
theretofore subject to the Option or portion thereof shall not be available for
further use under the Plan.
3. SHARES SUBJECT TO ARTICLES OF INCORPORATION. All Shares issuable
under Options or Stock Appreciation Rights and all Shares of Restricted Stock
sold or granted pursuant to this Plan shall be subject to the terms and
restrictions contained in the Articles of Incorporation of the Company. A copy
of the Articles of Incorporation shall be delivered to the recipient of an
Option, Stock Appreciation Right or Restricted Stock at the time of grant or
issuance.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee (the "Committee") appointed by the Board of Directors (the "Board") of
the Company. If no persons are designated by the Board to serve on the
Committee, the Plan shall be administered by the Board and all references herein
to the Committee shall refer to the Board. The Board shall have
<PAGE> 14
the discretion to add, remove or replace members of the Committee, and shall
have the sole authority to fill vacancies on the Committee; provided that one
member of the Committee shall be a member of the Board appointed pursuant to
Section 4(iii) of the Shareholder Agreement (the "Shareholder Agreement") by and
among the Company, the holders of Class D Common Stock of the Company, and the
Designated Shareholders, as such term is defined in the Shareholder Agreement.
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting. The Committee shall have the sole authority,
in its absolute discretion, to adopt, amend, and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan, to construe and interpret the Plan, the rules and regulations, and the
agreements and other instruments evidencing Options and Stock Appreciation
Rights granted and Restricted Stock sold or granted under the Plan, and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations, and interpretations of the Committee
shall be final and conclusive upon the Participants, as hereinafter defined.
Notwithstanding the foregoing, any dispute arising under any Agreement (as
defined below) shall be resolved pursuant to the dispute resolution mechanism
set forth in such Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and non-lapse restrictions upon the Shares obtained
or obtainable under the Plan and the termination and/or forfeiture of Options
and Stock Appreciation Rights and Restricted Stock under the Plan. The terms
upon which Options and Stock Appreciation Rights are granted and Restricted
Stock is sold or granted shall be evidenced by a written agreement, executed by
the Company and the Participant (each, an "Agreement"), containing such terms
and conditions as may be approved by the Committee; provided that such terms and
conditions are not inconsistent with the express conditions of the Plan.
5. ELIGIBILITY. Persons who shall be eligible for grants of Options or
Stock Appreciation Rights or sales or grants of Restricted Stock hereunder shall
be those directors, officers and employees of the Company or a subsidiary of the
Company who are members of a select group of directors, management and other key
employees that the Committee may from time to time designate to participate
under the Plan ("Participants") through grants of Non-Qualified Options,
Incentive Stock Options and, if applicable, Stock Appreciation Rights, and/or
through sales or grants of Restricted Stock.
6. TERMS AND CONDITIONS OF OPTIONS. No Incentive Stock Option shall be
granted for a term of more than ten years and no Non-Qualified Option shall be
granted for a term of more than ten (10) years and thirty (30) days. Options
may, in the discretion of the Committee, be granted with associated Stock
Appreciation Rights or be amended so as to provide for associated Stock
Appreciation Rights. The Agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee as long as such terms,
conditions and provisions are not inconsistent with the Plan. The Committee
shall designate as such those
2
<PAGE> 15
Options intended to be eligible to qualify and be treated as Incentive Stock
Options and, correspondingly, those Options not intended to be eligible to
qualify and be treated as Incentive Stock Options.
7. EXERCISE PRICE OF OPTIONS. The exercise price for each Non-Qualified
Option granted hereunder shall be set forth in the Agreement. For so long as
required under Section 422 of the Code and the regulations promulgated
thereunder (or any successor statute or rules), the exercise price of any Option
intended to be eligible to qualify and be treated as an Incentive Stock Option
shall not be less than the fair market value of the Shares on the date such
Incentive Stock Option is granted, except that if such Incentive Stock Option is
granted to a Participant who on the date of grant is treated under Section
424(d) of the Code as owning stock (not including stock purchasable under
outstanding options) possessing more than ten percent of the total combined
voting power of all classes of the Company's stock, the exercise price shall not
be less than one hundred ten percent (110%) of the fair market value of the
Shares on the date such Incentive Stock Option is granted.
The fair market value of Shares for the purposes of this Plan shall be
determined by the Board, whose valuation shall be binding upon each Optionee.
Payment for Shares purchased upon exercise of any Option granted
hereunder shall be in cash at the time of exercise, except that, if either the
Agreement so provides or the Committee so permits, and if the Company is not
then prohibited from doing so, such payment may be made in whole or in part with
surrendered or withheld shares of stock of the same class as the stock then
subject to the Option. The Committee also may on an individual basis permit
payment or agree to permit payment by such other alternative means as may be
lawful, including by delivery of an executed exercise notice together with
irrevocable instructions to a broker promptly to deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
8. NON-TRANSFERABILITY. Unless provided otherwise in the Agreement, any
Option granted under this Plan shall by its terms be nontransferable by the
Participant other than by will or the laws of descent and distribution (in which
case such descendant or beneficiary shall be subject to all terms of the Plan
applicable to Participants) and is exercisable during the Participant's lifetime
only by the Participant or by the Participant's guardian or legal
representative.
9. INCENTIVE STOCK OPTIONS. The provisions of the Plan are intended to
satisfy the requirements set forth in Section 422 of the Code and the
regulations promulgated thereunder (including the aggregate fair market value
limits set forth in Section 422(d) of the Code) with respect to Incentive Stock
Options granted under the Plan. For so long as required under Section 422 of the
Code and the regulations promulgated thereunder (or any successor statute or
rules), during the term of the Plan, the aggregate fair market value of the
Shares with respect to which Incentive Stock Options are first exercisable by a
Participant during any calendar year shall not exceed $100,000. For the purpose
of this Section 9, the fair market value of the Shares shall be determined at
the time the Incentive Stock Option is granted.
10. STOCK APPRECIATION RIGHTS. The Committee may, under such terms and
3
<PAGE> 16
conditions as it deems appropriate, grant to any Participant selected by the
Committee Stock Appreciation Rights, which may or may not be associated with
Options. Upon exercise of a Stock Appreciation Right, the Participant shall be
entitled to receive payment of an amount equal to the excess of the fair market
value, as defined by the Committee, of the underlying Shares on the date of
exercise over the Stock Appreciation Right's exercise price. Such payment may be
made in additional Shares valued at their fair market value on the date of
exercise or in cash, or partly in Shares and partly in cash, as the Committee
may designate. The Committee may require that any Stock Appreciation Right shall
be subject to the condition that the Committee may at any time in its absolute
discretion not allow the exercise of such Stock Appreciation Right.
11. RESTRICTED STOCK. The Committee may sell or grant Restricted Stock
under the Plan (either independently or in connection with the exercise of
Options or Stock Appreciation Rights under the Plan) to Participants selected by
the Committee. The Committee shall in each case determine the number of Shares
of Restricted Stock to be sold or granted, the price at which such Shares are
sold, if applicable, and the terms and duration of the restrictions to be
imposed upon those Shares.
12. INVESTMENT REPRESENTATION. Each Agreement may contain an agreement
that, upon demand by the Committee for such a representation, the optionee shall
deliver to the Committee at the time of any exercise of an Option a written
representation that the Shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the delivery
of any Shares issued upon exercise of an Option and prior to the expiration of
the option period shall be a condition precedent to the right of the optionee or
such other person to purchase any Shares.
13. ADJUSTMENTS. In the event of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends,
extraordinary dividends, or distributions, or similar events, an appropriate
adjustment shall be made in the number, exercise or sale price and/or type of
shares or securities for which Options or Stock Appreciation Rights may
thereafter be granted and Restricted Stock may thereafter be sold or granted
under the Plan. The Committee also shall designate the appropriate changes that
shall be made in Options or Stock Appreciation Rights, or rights to purchase
Restricted Stock under the Plan, so as to preserve the value of any such
Options, Stock Appreciation Rights or Restricted Stock. Any such adjustment in
outstanding Options shall be made without changing the aggregate exercise price
applicable to the unexercised portions of such Options. Any such adjustments in
outstanding rights to purchase Restricted Stock shall be made without changing
the aggregate purchase price of such Restricted Stock.
14. DURATION OF PLAN. Options may not be granted and Restricted Stock
may not be sold or granted under the Plan after November 24, 2007.
15. AMENDMENT AND TERMINATION OF THE PLAN. Subject to the Section 5.4
of the Recapitalization Agreement, dated as of October 8, 1997 and amended and
restated as of October
4
<PAGE> 17
27, 1997 (the "Recapitalization Agreement") between the Company and the
Investors set forth on Schedule 1 to the Recapitalization Agreement, the Board
may at any time amend, suspend or terminate the Plan. The Committee may amend
the Plan or any Agreement issued hereunder to the extent necessary for any
Option or Stock Appreciation Right granted or Restricted Stock sold or granted
under the Plan to comply with applicable tax or securities laws. If the Board
determines that the approval of such action by the stockholders of the Company
is advisable or necessary for compliance with applicable securities law, tax
law, stock exchange requirement or other applicable federal or state law, no
such action of the Board or the Committee shall be permitted unless taken with
or ratified by such approval.
No Option or Stock Appreciation Right may be granted or Restricted
Stock sold or granted during any suspension of the Plan or after the termination
of the Plan. No amendment, suspension or termination of the Plan or of any
Agreement issued hereunder shall, without the consent of the affected holder of
such Option or Stock Appreciation Right or Restricted Stock, adversely alter or
otherwise impair any rights or obligations in any Option or Stock Appreciation
Right or Restricted Stock theretofore granted or sold to such holder under the
Plan.
16. NATURE OF PLAN. This Plan is intended to qualify as a compensatory
benefit plan within the meaning of Rule 701 under the Act. This Plan is intended
to constitute an unfunded arrangement for a select group of directors,
management and other key employees.
17. CANCELLATION OF OPTIONS. Any Option granted under the Plan may be
canceled at any time with the consent of the holder and a new Option may be
granted to such holder in lieu thereof.
18. WITHHOLDING TAXES. Whenever Shares are to be issued with respect to
the exercise of Options or amounts are to be paid or income earned with respect
to Stock Appreciation Rights or Restricted Stock under the Plan, the Committee
in its discretion may require the Participant to remit to the Company, prior to
the delivery of any certificate or certificates for such Shares or the payment
of any such amounts, all or any part of the amount determined in the Committee's
discretion to be sufficient to satisfy federal, state and local withholding tax
obligations (the "Withholding Obligation") that the Company or its counsel
determines may arise with respect to such exercise, issuance or payment.
Pursuant to a procedure established by the Committee or as set forth in the
Agreement, the Participant may (i) request the Company to withhold delivery of a
sufficient number of Shares or a sufficient amount of the Participant's
compensation or (ii) deliver a sufficient number of previously-issued Shares, to
satisfy the Withholding Obligation, which Shares have been owned by the Optionee
for at least six (6) months with an aggregate Fair Market Value equal to the
minimum statutory amount of the federal, state, local and other taxes required
to be withheld.
5
<PAGE> 18
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
(IN THOUSANDS OF DOLLARS)
(A) (B) (C)
Cumulative
Fiscal Year Minimum Target Target
----------- ------- ------ ------
l998 60,320 75,400 75,400
l999 75,120 93,900 169,300
2000 94,720 118,400 287,700
2001 107,840 134,800 422,500
2002 117,520 146,900 569,400
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as Consolidated Net Income (loss) of the Company and its
subsidiaries as it would appear on a statement of income (loss), which shall (i)
exclude or be adjusted otherwise for all acquisitions and additional equity
contributions to the extent such acquisitions and/or equity contributions
materially change target EBITDA for any particular Fiscal Year,(ii) reflect a
reduction for all management and employment bonuses payable with respect to the
Fiscal Year of the Company prepared in accordance with U.S. GAAP, consistently
applied and (iii) be adjusted for any material Board approved amendment to the
capital expenditure plan; plus (minus), to the extent such amounts are otherwise
taken into account in determining EBITDA (prior to adjustment), the following:
1. Any provision (benefit) for taxes (including franchise taxes)
deducted (added) in calculating such consolidated net income
(loss); plus
2. Any interest expense (net of interest income), deducted in
calculating such consolidated net income (loss); plus
3. Amortization expenses deducted in calculating
consolidated net income (loss); plus
4. Depreciation expense deducted in calculating
consolidated net income (loss); plus
5. Management fees paid to Investcorp; plus (minus)
6. Any unusual losses (gains) deducted (added) in calculating
consolidated net income (loss). (Unusual items are intended to
include transactions considered outside the ordinary course of
business. EBITDA will be adjusted to eliminate the effects, if
any, of such transactions, the intent being to calculate
EBITDA as if such transactions had not occurred.); plus
(minus)
6
<PAGE> 19
7. Any compensation expense (income) deducted
(added) in calculating consolidated net income (loss)
attributable to transactions involving equity securities of
the Company or its subsidiaries.
The Participant and his or her representative shall be provided
reasonable opportunity to review the computation of EBITDA and reasonable access
to the data and information supporting such computation, but the Board's
determination shall be conclusive and binding.
7
<PAGE> 20
AMENDMENT NO. 1
TO
WERNER HOLDING CO. (PA), INC.
STOCK INCENTIVE PLAN
The Werner Holding Co. (PA), Inc. Stock Incentive Plan (the "Plan") is hereby
amended as follows:
1. New, revised EBITDA targets as set forth in Exhibit A for individuals
hired after December 1998 shall be as follows:
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
(IN THOUSANDS OF DOLLARS)
(A) (B) (C)
Cumulative
Fiscal Year Minimum Target Target
2000 68,000 75,000 141,000
2001 83,000 92,000 233,000
2002 99,000 110,000 343,000
2003 108,000 120,000 463,000
2004 118,000 131,000 594,000
2. All other provisions of the Plan unchanged hereby shall continue in
full force and effect.
Pursuant to Werner Holding Co. (PA), Inc. Board of Directors action
dated December 8, 1999.
<PAGE> 21
EXHIBIT 2
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
(IN THOUSANDS OF DOLLARS)
(A) (B) (C)
Fiscal Year Minimum Target Cumulative Target
----------- ------- ------ -----------------
2000 68,000 75,000 141,000
2001 83,000 92,000 233,000
2002 99,000 110,000 343,000
2003 108,000 120,000 463,000
2004 118,000 131,000 594,000
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as Consolidated Net Income (loss) of the Company and its
subsidiaries as it would appear on a statement of income (loss), which shall (i)
exclude or be adjusted otherwise for all acquisitions and additional equity
contributions to the extent such acquisitions and/or equity contributions
materially change target EBITDA for any particular Fiscal Year,(ii) reflect a
reduction for all management and employment bonuses payable with respect to the
Fiscal Year of the Company prepared in accordance with U.S. GAAP, consistently
applied and (iii) be adjusted for any material Board approved amendment to the
capital expenditure plan; plus (minus), to the extent such amounts are otherwise
taken into account in determining EBITDA (prior to adjustment), the following:
1. Any provision (benefit) for taxes (including franchise taxes)
deducted (added) in calculating such consolidated net income
(loss); plus
2. Any interest expense (net of interest income), deducted in
calculating such consolidated net income (loss); plus
3. Amortization expenses deducted in calculating consolidated net
income (loss); plus
4. Depreciation expense deducted in calculating consolidated net
income (loss); plus
5. Management fees paid to Investcorp; plus (minus)
6. Any unusual losses (gains) deducted (added) in calculating
consolidated net income (loss). (Unusual items are intended to
include transactions considered outside the ordinary course of
business. EBITDA will be adjusted to eliminate the effects, if
any, of such transactions, the intent being to calculate
EBITDA as if such transactions had not occurred.); plus
(minus)
<PAGE> 22
7. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to
transactions involving equity securities of the Company or its
subsidiaries.
The Participant and his or her representative shall be provided
reasonable opportunity to review the computation of EBITDA and reasonable access
to the data and information supporting such computation, but the Board's
determination shall be conclusive and binding.
2
<PAGE> 23
EXHIBIT 3
SLIDING SCALE FOR EXERCISABILITY OF OPTIONS
<TABLE>
<CAPTION>
(B)
(A) Portion of Applicable
Option Shares Becoming
Percentage Exercisable 2000 2001 2002 2003 2004
---------- ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
100% 100% 75.0 92.0 110.0 120.0 131.0
95% 75% 71.3 87.4 104.5 114.0 124.5
90% 50% 67.5 82.8 99.0 108.0 117.9
</TABLE>
1
<PAGE> 1
Exhibit 10.44
AMENDMENT NO. 2
TO
WERNER HOLDING CO. (PA), INC.
STOCK INCENTIVE PLAN
--------------------
The Werner Holding Co. (PA), Inc. Stock Incentive Plan (the "Plan") is hereby
amended as follows:
1. Notwithstanding anything to the contrary in the Option Agreement,
whenever pursuant to applicable provisions of the Options Agreement the
Optionee shall have the right to put Option Shares to the Company or
another entity following termination of Optionee's employment and such
Option Shares have not been held by Optionee for at least six (6)
months as of the date of such termination, in each such case the
periods during which the put rights and call rights attributable to
such Option Shares may be exercised shall not commence until such
Options Shares have been held by Optionee for six (6) months.
2. All other provisions of the Plan unchanged hereby shall continue in
full force and effect.
Pursuant to Werner Holding Co. (PA), Inc. Board of Directors action dated
December 15, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<NAME> Werner Holding Co. (DE), Inc.
<CIK> 0001056112
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 866
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 1,900
<INVENTORY> 58,348
<CURRENT-ASSETS> 130,731
<PP&E> 175,011
<DEPRECIATION> 91,504
<TOTAL-ASSETS> 255,440
<CURRENT-LIABILITIES> 69,194
<BONDS> 277,434
0
0
<COMMON> 1
<OTHER-SE> (143,877)
<TOTAL-LIABILITY-AND-EQUITY> 255,440
<SALES> 484,646
<TOTAL-REVENUES> 484,646
<CGS> 348,643
<TOTAL-COSTS> 436,511
<OTHER-EXPENSES> 2,067
<LOSS-PROVISION> 709
<INTEREST-EXPENSE> 27,102
<INCOME-PRETAX> 18,966
<INCOME-TAX> 7,649
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,317
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
