SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Fiscal Year Ended December 31, 1993.
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period
from to
Commission File Number 1-8973
KYSOR INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction 38-1909000
of incorporation or organization) (IRS employer identification number)
One Madison Avenue, 49601-9785
Cadillac, Michigan (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (616) 779-2200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock $1 par value New York Stock Exchange
Indicate by check mark whether the Company (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates* of the
registrant as of March 1, 1994:
Common Stock $80,153,603
*For purposes of this response, the Kysor Industrial Corporation Employee
Stock Ownership Plan, which owns 340,095 shares of Common Stock and 810,163
shares of Series A Preferred Stock, is considered to be an affiliate of Kysor
Industrial Corporation.
Indicate the number of shares outstanding of each of the registrant's class
of Common Stock, as of the latest practicable date: 5,495,809 shares of
Common Stock, $1 par value, as of March 1, 1994.
Documents Incorporated by Reference
Part III, Items 10 through 13 Parts of the registrant's Proxy Statement of
its April 29, 1994 Annual Meeting of
Shareholders
PART I
Item 1. DESCRIPTION OF BUSINESS
(a) General Development of Business.
Kysor Industrial Corporation ("Kysor", the "Company" or
the "Registrant") is a Michigan corporation. It is the successor to a
Delaware corporation of the same name organized in 1970 and also
previously a Michigan corporation of the same name originally
organized in 1925.
In April 1988, Kysor purchased an 80 percent interest in
Kysor/Warren Refrigeration GmbH of Limburg, West Germany. In January
1989 the remaining 20 percent interest was acquired. Kysor/Warren
Refrigeration GmbH designs, manufactures and markets refrigerated
display cases for the European market.
In July 1990, Kysor acquired a portion of the truck and
off-highway heater and air-conditioning business from Valeo Climate
Control Ltd., located in South Wales, United Kingdom.
In February 1994, Kysor acquired Kalt Manufacturing Co.,
Inc., located in Portland, Oregon and Goodyear, Arizona. Kalt
manufactures walk-in coolers and panels for the supermarket
convenience store and food service industry.
The Aluminum Fabricated Products operations, located in
Perry, Florida and Greeneville, Tennessee, were divested during 1990
in three separate transactions.
(b) Segment Information.
Kysor Industrial Corporation's operations include two
segments: commercial products and transportation products.
Operations in the commercial products segment design, manufacture and
market refrigerated display cases, energy control systems,
refrigerated building systems, and heating and air-conditioning
systems. Operations in the transportation products segment design,
manufacture and market engine performance systems, engine protection
systems, and components and accessories for heavy-duty trucks, other
commercial vehicles and marine equipment. The information in the
following schedule excludes intercompany transactions which are deemed
to be immaterial.
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Financial Information by Segment
Years Ended December 31,
(amounts in thousands)
________________________________
NET SALES 1993 1992 1991
________ ________ ________
Commercial products
United States $166,347 $171,437 $135,433
Europe 19,398 16,234 18,287
_________ _________ _________
Total commercial products 185,745 187,671 153,720
_________ _________ _________
Transportation products
United States 80,518 65,075 57,578
Europe 6,344 9,428 12,345
_________ _________ _________
Total transportation products 86,862 74,503 69,923
_________ _________ _________
NET SALES $272,607 $262,174 $223,643
_________ _________ _________
_________ _________ _________
OPERATING PROFIT (LOSS)*
Commercial products
United States $ 21,784 $ 22,651 $ 12,866
Europe (1,871) (1,599) (1,478)
_________ _________ _________
Total commercial products 19,913 21,052 11,388
_________ _________ _________
Transportation products
United States 11,859 8,210 5,017
Europe (412) (346) (1,991)
_________ _________ _________
Total transportation products 11,447 7,864 3,026
_________ _________ _________
TOTAL OPERATING PROFIT 31,360 28,916 14,414
Corporate administrative expense (net) (11,190) (8,794) (6,732)
Provision for litigation - (1,500) (4,000)
Interest expense (2,162) (2,595) (3,748)
_________ _________ _________
INCOME (LOSS) BEFORE INCOME TAXES AND BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 18,008 $ 16,027 $ (66)
_________ _________ _________
_________ _________ _________
* Operating profit includes net sales less operating expenses. Excluded
from the computation of operating profit are interest and other non-
operating revenues, general corporate expenses and interest expense.
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Financial Information by Segment
Years Ended December 31,
(amounts in thousands)
________________________________
1993 1992 1991
________ ________ ________
ASSETS
Commercial products
United States $ 63,667 $ 65,718 $ 63,789
Europe 9,847 9,937 10,950
_________ _________ _________
Total commercial products 73,514 75,655 74,739
_________ _________ _________
Transportation products
United States 29,542 26,921 29,383
Europe 2,938 4,356 5,880
_________ _________ _________
Total transportation products 32,480 31,277 35,263
________ ________ ________
Subtotal 105,994 106,932 110,002
Cash and other corporate assets 50,461 28,918 23,008
________ ________ ________
TOTAL ASSETS $156,455 $135,850 $133,010
________ ________ ________
________ ________ ________
DEPRECIATION AND AMORTIZATION
Commercial products $ 3,734 $ 3,784 $ 3,718
Transportation products 3,677 3,617 3,699
Corporate 243 249 296
________ ________ ________
TOTAL DEPRECIATION AND AMORTIZATION $ 7,654 $ 7,650 $ 7,713
________ ________ ________
________ ________ ________
CAPITAL EXPENDITURES
Commercial products $ 3,829 $ 2,398 $ 2,864
Transportation products 4,758 1,379 2,005
Corporate 66 142 87
________ ________ ________
TOTAL CAPITAL EXPENDITURES $ 8,653 $ 3,919 $ 4,956
________ ________ ________
________ ________ ________
(c) Narrative Description of Business.
At December 31, 1993, Kysor had approximately 1,904
employees. Information as of December 31, 1993 concerning Kysor's two
industry segments is presented below. Certain financial information
related to the individual industry segments is incorporated in
response to Item 1.(b) above.
There were no material expenditures for compliance with
federal, state or local provisions regulating the discharge of
materials into the environment except with respect to ongoing
proceedings relating to soil and groundwater contamination at the
Cadillac Industrial Park in Cadillac, Michigan which is explained
further under Note 11, Contingent Liabilities, to the Consolidated
Financial Statements included under Part II, Item 8.
Commercial Products
The principal products of the commercial products group
include supermarket refrigerated display cases, condensing units,
insulated panels for refrigerated building systems and walk-in
coolers, commercial vehicle heating, ventilating and air-conditioning
(HVAC) units and truck trailer supports. The principal markets for
Kysor's commercial products group include supermarkets, convenience
stores and original equipment manufacturers for such vehicles as
heavy-duty trucks, buses, vans, agriculture and military off-highway
equipment and truck trailers. Refrigerated display equipment,
refrigerated building systems, and sundry food store equipment are
sold directly to supermarkets and convenience stores, as well as
through independent commercial refrigeration distributors. Vehicle
HVAC units and truck trailer support product sales are made directly
to original equipment manufacturers and through a nationwide network
of distributors.
The basic raw materials used by Kysor in this group are
galvanized sheet and other types of steel, aluminum, glass, copper
tubing, foam insulation, refrigerants, brass, copper, plastics and a
variety of purchased electronic components. All raw materials used in
this segment are readily available in adequate quantities from a
number of sources.
Kysor holds or is licensed under a number of patents and
trademarks relating to its commercial products. While none of these
patents or trademarks are considered individually to be material,
collectively these patents and trademarks are important to the
business of the commercial products group.
There are no significant seasonal factors. Backlogs at
year-end 1993 and 1992 were approximately $48.0 million and no
material portion of this business is subject to renegotiation or
termination by the government. There are no working capital
requirements peculiar to this industry segment.
The commercial products industry is highly competitive.
Kysor competes with numerous companies in this group, some of which
are larger and have greater financial resources than Kysor. Kysor
believes that it competes primarily on the basis of quality, service,
product performance, and price for most of its products, and warrants
the majority of its products in accordance with general industry
practices.
The commercial products group generated $29.0 million,
$48.4 million and $34.7 million of sales and revenues from Food Lion
Stores in the years ended December 31, 1993, 1992 and 1991
respectively.
Transportation Products
The principal products of this group include engine
performance systems consisting of radiator shutters, fan clutches and
plastic fans; engine protection systems consisting of various engine
monitoring devices, truck fuel tanks, and marine instruments. The
principal markets for Kysor's transportation products group are
original equipment manufacturers of such vehicles as medium- and
heavy-duty trucks, buses, off-highway equipment and the marine
industry. The majority of the group's sales are made directly to
manufacturers. Additionally, Kysor utilizes a network of independent
distributors to provide aftermarket and replacement parts service to
end users.
The basic raw materials used by Kysor in this group are
steel, brass, copper, aluminum, plastics and a variety of purchased
electronic components which are widely available in adequate
quantities from a number of sources.
Kysor holds or is licensed under a number of patents and
trademarks relating to its transportation products. While none of
these patents or trademarks are considered individually to be of
material value, collectively these patents and trademarks are
important to the business of the transportation products group.
There are no significant seasonal factors. Backlogs at
year-end 1993 were approximately $16.0 million compared to $13.0
million in 1992 and no material portion of this business is subject to
renegotiation or termination by the government. There are no working
capital requirements peculiar to this industry segment. The
Transportation Products Group generated $26.5 million of sales and
revenue from Ford Motor Company in the year ended December 31, 1993.
The transportation products industry is highly
competitive. Kysor competes with numerous companies in this group,
some of which are larger and have greater financial resources than
Kysor. Kysor believes that it competes primarily on the basis of
quality, service, product performance, and price for most of its
products, and warrants the majority of its products in accordance with
general industry practices.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales
This information is included in Item 1(b) above under the
heading "Financial Information by Segment". The "Financial
Information by Segment" does not include separately reported export
sales as they are not significant.
Item 2. PROPERTIES
Kysor and its subsidiaries owned or leased the following offices and
manufacturing facilities as of December 31, 1993:
COMMERCIAL PRODUCTS GROUP
LOCATION DESCRIPTION INTEREST
GEORGIA:
Conyers Plant & office; 480,000 Owned in fee simple
sq. ft. on 50-acre site
Columbus Plant & office; 295,826 Owned in fee simple
sq. ft. on 22.7-acre site
TEXAS:
Fort Worth Plant & office; 100,162 Owned in fee simple
sq. ft. on 11-acre site
ILLINOIS:
Byron Plant, warehouse & office;
176,716 sq. ft. on Owned in fee simple
31-acre site
W.GERMANY:
Limburg Plant & office; 52,096 Owned in fee simple
sq. ft. on 6.9-acre site
TRANSPORTATION PRODUCTS GROUP
INDIANA:
Scottsburg Plant & office; 42,048 Owned in fee simple
sq. ft. on 10.7-acre site
MICHIGAN:
Cadillac Plant, warehouse & office; Owned in fee simple
131,426 sq. ft. on
12.4-acre site
Spring Lake Plant & office; 80,000 Owned in fee simple
sq. ft. on 8.l-acre site
Rothbury Plant, warehouse & office; Owned in fee simple
18,543 sq. ft. on
3.4-acre site
Walker Plant & office; 49,188 Owned in fee simple
sq. ft. on 3-acre site
White Pigeon Plant & office; 42,000 Owned in fee simple
sq. ft. on 5-acre site
N.CAROLINA:
Charlotte Plant & office; 91,150 Owned in fee simple
sq. ft. on 3.5-acre site
SOUTH WALES:
Hengoed Plant & office; Leased
50,000 sq. ft.
CORPORATE
MICHIGAN:
Cadillac Executive office; Owned in fee simple
23,000 sq. ft. on
102-acre site
OKLAHOMA:
Duncan Vacant plant, wrhse. Owned in fee simple
& office; 93,000 sq. ft.
on 22.1-acre site
It is believed that Kysor's facilities are generally adequate for
its operations and such properties are maintained in a good state of repair.
Item 3. LEGAL PROCEEDINGS.
As previously reported, the Company is involved in the
following legal proceedings:
The Company is involved in an environmental proceeding
with respect to a site in Cadillac, Michigan. The description of such
proceeding is set forth in Part II, Item 8 of this report, Note 11 to
the Consolidated Financial Statements.
On July 3, 1991, the Michigan Attorney General and the
Department of Natural Resources filed a lawsuit against the Company
and various other parties in the United States Federal District Court
for the Western District of Michigan. The description of such
proceeding is set forth under Part II, Item 8 of this report, Note 11
to the Consolidated Financial Statements.
On December 31, 1991, General Electric ("GE") filed a
third-party claim against the Company in the United States District
Court for the Western District of Michigan. The dispute arose out of
claims made by Midwest Aluminum Manufacturing Company ("Midwest")
against GE. The description of such proceeding is set forth in Part
I, Item 3 of the Company's 1991 Annual Report on Form 10-K filed with
the Commission on March 25, 1992. In February 1993, an agreement-in-
principle was reached settling the underlying dispute between Midwest
and GE, which settlement was finanlized in early 1994. As part of the
settlement, the Company has been released by Midwest from all past and
future environmental claims with respect to the Midwest site, and by
GE with respect to all claims for indemnity or contribution arising
out of Midwest's underlying claims against GE. The settlement is
without prejudice to GE's remaining claims against the Company, pursuant
to which GE seeks to recover response costs associated with certain
environmental cleanup at GE's property, formerly owned by Kysor, and its
defense costs incurred in connection with the Midwest suit.
On December 4, 1992, Kysor was named as a defendant,
together with over 30 other parties, in an action commenced by the
Township of Oshtemo, City of Kalamazoo, Kalamazoo County and The
Upjohn Company with respect to alleged contamination at the West KL
Avenue Landfill site located in Kalamazoo, Michigan. On November 16,
1993 Kysor Industrial Corporation entered into a settlement agreement
requiring the payment of $20,000 which dismisses Kysor from all
claims.
On March 30, 1993, the Company received a notification
from the Michigan Department of Natural Resources that it has been
named as a potentially responsible party ("PRP") with respect to a
site commonly referred to as the SCA Independent Landfill Superfund
Site, located in Muskegon County, Michigan. The notice alleges that
the Company, together with numerous other parties, was an owner,
generator or transporter of waste materials deposited at the site.
The PRP notice request the Company and the other named PRPs to conduct
a Remedial Investigation/Feasibility Study to determine the extent of
contamination at the site, and seeks recovery of investigative costs
expended by the MDNR to date. No significant discovery has taken
place with respect to this matter.
Other contingent liabilities include various legal
actions, proceedings and claims which are pending or which may be
instituted or asserted in the future against the Company. Litigation
is subject to many uncertainties, the outcome of individual matters is
not predictable with assurance and it is reasonably possible that some
of these other legal actions, proceedings and claims could be decided
unfavorable to the Company. Although the liability with regard to
these matters at December 31, 1993 cannot be ascertained, it is the
opinion of management, after conferring with counsel, that any
liability resulting from these other matters should not materially
affect the consolidated financial position of the Company and its
subsidiaries at December 31, 1993.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
As of December 31, 1993, Kysor Industrial Corporation had
a total of 5,467,840 shares of Common Stock issued and outstanding and
1,396 shareholders of record. A large number of shares are held by
brokerage firms and banks for the benefit of other shareholders in all
50 states of the United States and several foreign countries. In
addition, the Corporation had 810,163 shares of Series A. Convertible
Voting Preferred Stock outstanding, all of which are owned by the
Kysor Industrial Corporation Employee Stock Ownership Plan.
The annual dividends declared amounted to $.44 and $.40 during 1993
and 1992, respectively. The quarterly rate was $.10 per share for all
of 1992 and the first quarter 1993, $.11 for the second and third
quarter, 1993, and $.12 for the fourth quarter.
A quarterly summary of Kysor Industrial Corporation's Common Stock
trading range is as follows:
1993 1992
High Low High Low
First Quarter 21.75 16.125 8.875 6.875
Second Quarter 20.875 15.875 11.25 8.625
Third Quarter 18.00 14.50 13.00 10.125
Fourth Quarter 17.875 15.625 19.125 12.00
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Financial Summary
(Dollars in Thousands except per share data)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Commercial Products Sales 185,745 187,671 153,720 149,771 139,206
Transportation Products Sales 86,862 74,503 69,923 81,880 89,040
Net Sales 272,607 262,174 223,643 231,651 228,246
Other Revenues 1,251 1,623 1,255 2,478 1,524
Total sales and revenues 273,858 263,797 224,898 234,129 229,770
Commercial Products Operating Profit 19,913 21,052 11,388 10,401 7,674
Transportation Products Operating Profit 11,447 7,864 3,026 8,936 4,977
Total Operating Profit 31,360 28,916 14,414 19,337 12,651
Interest Expense 2,162 2,595 3,748 3,586 3,533
Income Before Tax & Actg Change from Cont' Oper 18,008 16,027 (66) 8,664 (2,424)
Income (Loss) from Cont' Oper before Actg Change 10,098 9,127 (726) 5,064 (4,804)
Accounting Change / Discontinued Operations (7,628) - - - -
Net Income (Loss) 2,470 9,127 (726) 5,064 (4,804)
Earnings (Loss) Applicable to Common Stock 1,487 8,077 (1,779) 4,009 (5,693)
____________________________________________________________
EARNINGS (LOSS) PER COMMON SHARE AND DIVIDENDS
Before Actg Change from Cont' Oper $1.62 $1.52 ($0.35) $0.72 ($0.94)
Net Earnings (Loss) 0.27 1.52 (0.35) 0.72 (0.94)
Dividends Declared 0.44 0.40 0.55 0.60 0.60
____________________________________________________________
FINANCIAL INFORMATION
Current Assets 93,210 80,515 74,668 87,564 87,917
Working Capital 45,062 41,609 40,115 50,504 47,973
Property, Plant and Equipment 42,823 41,898 45,760 49,322 52,989
Capital Expenditures 8,653 3,919 4,956 4,773 7,296
Depreciation & Amortization 7,654 7,650 7,713 7,080 11,927
Intangible Assets 2,806 3,046 3,365 3,668 3,838
Total Assets 156,455 135,850 133,010 148,070 151,393
Long-Term Debt 33,673 36,521 45,540 53,393 51,077
Retained Earnings 43,997 44,908 38,914 44,948 61,499
Shareholders' Equity 54,693 52,905 44,572 49,260 52,091
____________________________________________________________
FINANCIAL RATIOS
Current Ratio 1.9 2.1 2.2 2.4 2.2
Debt to Invested Capital 38.1% 40.8% 50.5% 52.0% 49.5%
Net Income Return on Beginning Equity 4.7% 20.5% -1.5% 9.7% -6.8%
Pretax Income Coverage of Interest
and Preferred Dividends 5.8 4.8 1.0 2.7 0.5
____________________________________________________________
OTHER
Price Range of Common Stock - High $21.75 $19.125 $12.75 $12.875 $21.50
Low $14.50 $6.875 $5.75 $6.750 $12.375
Number of Shareholders 1,396 1,429 1,432 1,441 1,454
Net Outstanding Common Shares 5,467,840 5,332,201 5,151,186 5,264,094 5,869,547
This summary should be read in conjunction with the consolidated financial
statements and notes thereto.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Financial Summary
(Dollars in Thousands except per share data)
<CAPTION>
1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Commercial Products Sales 141,301 128,418 96,403 86,208 74,634
Transportation Products Sales 96,722 96,636 68,418 55,640 51,006
Net Sales 238,023 225,054 164,821 141,848 125,640
Other Revenues 987 1,853 8,410 2,189 1,052
Total sales and revenues 239,010 226,907 173,231 144,037 126,692
Commercial Products Operating Profit 16,152 19,329 11,654 14,356 11,438
Transportation Products Operating Profit 11,048 9,583 4,948 9,429 9,259
Total Operating Profit 27,200 28,912 16,602 23,785 20,697
Interest Expense 3,294 2,006 1,763 2,264 3,214
Income Before Tax & Actg Change from Cont' Oper 16,564 21,387 15,724 18,174 14,948
Income (Loss) from Cont' Oper before Actg Change 10,398 12,577 8,824 10,734 9,108
Accounting Change / Discontinued Operations - - - (1,020) 249
Net Income (Loss) 10,398 12,577 8,824 9,714 9,356
Earnings (Loss) Applicable to Common Stock 10,398 12,577 8,824 9,714 9,356
____________________________________________________________
EARNINGS (LOSS) PER COMMON SHARE AND DIVIDENDS
Before Actg Change from Cont' Oper $1.56 $1.82 $1.33 $1.69 $1.49
Net Earnings (Loss) 1.56 1.82 1.33 1.53 1.53
Dividends Declared 0.56 0.51 0.44 0.42 0.25
____________________________________________________________
FINANCIAL INFORMATION
Current Assets 79,614 73,538 66,562 57,022 59,739
Working Capital 47,616 41,212 36,182 31,806 34,709
Property, Plant and Equipment 52,763 38,511 34,273 29,755 34,115
Capital Expenditures 16,779 9,640 5,958 5,178 6,665
Depreciation & Amortization 6,338 5,418 4,632 3,217 2,497
Intangible Assets 7,649 7,377 7,808 5,548 379
Total Assets 145,853 124,618 113,617 97,495 96,713
Long-Term Debt 36,335 23,420 16,022 15,693 20,086
Retained Earnings 71,781 65,686 58,588 52,592 45,469
Shareholders' Equity 71,080 63,158 62,384 53,497 48,340
____________________________________________________________
FINANCIAL RATIOS
Current Ratio 2.5 2.3 2.2 2.3 2.4
Debt to Invested Capital 33.8% 27.1% 20.4% 22.7% 29.4%
Net Income Return on Beginning Equity 16.5% 20.2% 16.5% 20.1% 23.8%
Pretax Income Coverage of Interest
and Preferred Dividends 6.0 11.7 9.9 9.0 5.7
____________________________________________________________
OTHER
Price Range of Common Stock - High $23.50 $22.3125 $13.50 $11.625 $9.9375
Low $15.625 $10.50 $9.75 $8.00 $6.50
Number of Shareholders 1,522 1,612 1,795 2,051 2,176
Net Outstanding Common Shares 6,359,634 6,245,698 6,522,078 6,225,156 5,966,854
This summary should be read in conjunction with the consolidated financial
statements and notes thereto.
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Comparison of 1993 and 1992 Kysor Industrial Corporation's
1993 total sales and revenues were $273.9 million, up 3.8 percent from
1992. Net income, before the accounting change for postretirement
benefits, was $10.1 million compared to $9.1 million reported in 1992.
Primary earnings per share before the accounting change was $1.62 in
1993, compared to $1.52 per share in 1992. Primary earnings per share
after the accounting change was $.27 per share in 1993. Included in
1993 results is a provision for environmental matters amounting to
$.14 per share, which are described in greater detail under Note 11,
while 1992 results include a provision for litigation equaling $.18
per share. The increase in 1993 profitability resulted primarily from
the increases in the Transportation Products Group where they
benefited from the best Class-8 heavy-duty truck market since 1979 and
the increased market penetration of Kysor's injection molded polymer
engine fans.
On December 21, 1990, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard #106 ("SFAS
#106"), effective for 1993. SFAS #106 requires employers to accrue
the cost of postretirement benefits other than pensions during the
working careers of active employees instead of expensing the benefits
when paid as allowed under prior rules. Actuarial valuation of the
Company's transition obligation is $7.5 million (net of tax). In
addition to the transition obligation, the Company is now required to
accrue recurring annual postretirement benefits higher than the "pay
as you go" expense. This additional accrual was $564,000 for 1993.
The Company elected to record the transition obligation as a charge
against income during the first quarter, 1993.
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard #112 ("SFAS #112")
which requires employers, effective for fiscal years beginning after
December 15, 1993, to recognize the liability for postemployment
benefits provided to former or inactive employees. The Company has
reviewed the requirements of SFAS #112 and determined that the impact
on the Company was not material. The Financial Accounting Standards
Board also has adopted SFAS #109, Accounting for Income Taxes
effective for years beginning after December 15, 1992 which replaces
SFAS #96. There was no material impact on the Company when this
standard was adopted in 1993.
Sales backlogs at the end of 1993 were up 4.6 percent from
record levels at year-end 1992.
The continued improvement in 1993 results allowed Kysor to
reduce its long-term debt and improve its debt ratio from 40.8 percent
to 38.1 percent at the end of the year, after giving consideration to
the decrease in equity resulting from the accrual for postretirement
benefits.
The Company is presently involved in certain environmental
proceedings with respect to soil and groundwater contamination in
Cadillac, Michigan, as described below under the heading "Liquidity
and Capital Resources" and in Note 11, Contingent Liabilities. In
addition, the Company is involved in various other legal proceedings
including certain proceedings involving allegedly contaminated sites
with respect to which the Company has been named a potentially
responsible party under the Federal Superfund law or comparable state
laws. Although discovery in certain of these proceedings has not been
completed, subject to the contingencies discussed in Note 11, the
information presently available to management does not cause
management to believe that the ultimate aggregate cost to the Company
of such proceedings will result in a material adverse effect on its
future financial condition or results of operation.
Comparative summaries and review of operations for the two
business groups follows:
TRANSPORTATION PRODUCTS
AMOUNTS IN THOUSANDS 1993 1992 1991
Net Sales $ 86,862 $ 74,503 $69,923
Operating Profit 11,447 7,864 3,026
Sales in the Transportation Products Group increased 16.6
percent and operating profit increased 45.6 percent compared to 1992.
The increase in sales and the significant increase in operating profit
are the result of improved market conditions in the heavy-duty truck
market and the positive impact of cost containment measures initiated
over the past years. Backlogs at year-end 1993 were 22.9 percent
above year-end 1992 levels and set the stage for another outstanding
year in 1994.
During 1993, the Company's Kysair injection molded fan
continued to gain market share, both domestically and internationally.
As a result of that success, Kysor approved capital expenditures for
1994 which will establish manufacturing capabilities in the United
Kingdom and management is currently studying a similar expansion into
Korea.
COMMERCIAL PRODUCTS
AMOUNTS IN THOUSANDS 1993 1992 1991
Net Sales $185,745 $187,671 $153,710
Operating Profit 19,913 21,052 11,388
Commercial Products Group sales and operating profits
decreased slightly as a result of the trimming of expansion plans by a
major customer in the Kysor/Warren division during 1993.
Kysor/Needham, the group's walk-in cooler manufacturer, increased
sales 13.8 percent and made significant inroads in Mexico where sales
increased substantially year-over-year. Additionally, in February 1994, Kysor
purchased another cooler and panel manufacturer, Kalt Manufacturing
Co., Inc., with manufacturing facilities in Portland, Oregon and
Phoenix, Arizona.
Backlogs at year-end 1993 and 1992 for the
Commercial Products Group were approximately $48.0 million.
Comparison of 1992 and 1991 Kysor Industrial Corporation's
1992 total sales and revenues were $264 million, up 17.3 percent from
1991. Net income was $9 million compared to a loss of $726,000 in
1991. Primary earnings per share were $1.52 in 1992 compared to a
loss of $.35 per share in 1991. 1991's loss was the result of
establishing a $4.0 million provision for a judgment in a commercial
lawsuit equaling $.49 per share. Although the Company was in the
process of appealing the verdict in the lawsuit, the parties, on
December 15, 1992, reached an acceptable settlement agreement. The
settlement was adequately reserved in 1991 and had no adverse effect
on income in 1992. The increase in 1992 sales and revenue and its
positive impact on profits resulted from improvement in all six
domestic divisions, particularly the commercial refrigeration division
where Kysor's major customers continued to expand aggressively
throughout the year. Included in 1992 results is a $1.5 million
provision for litigation which relates primarily to certain
environmental proceedings against the Company which is described in
greater detail under Note 11, Contingent Liabilities of the 1993
Annual Report to Shareholders.
International Operations Kysor Industrial Corporation has
two foreign manufacturing subsidiaries - Kysor/Warren Refrigeration
GmbH, which is part of the Commercial Products Group, and
Kysor/Europe, part of the Transportation Products Group.
Kysor/Warren Refrigeration GmbH, with manufacturing
operations in Limburg, Germany, experienced a 19.5 percent increase in
sales compared to 1992. The increase in sales was primarily the
result of low margin sales to Eastern Europe which contributed to
additional losses during 1993. A new German general manager has been
hired during 1994 and stringent cost-containment programs have been
implemented to stem losses in the future.
Kysor/Europe, serving the European commercial vehicle
truck market, with manufacturing operations located in Hengoed, South
Wales, experienced a 29 percent decrease in sales in 1993 compared to
1992. The decrease is primarily attributable to the significant
recession in the European markets. Notwithstanding the significant
decrease in sales, improved internal controls and cost-containment
programs allowed Kysor/Europe to minimize its operating losses at
$412,000 in 1993 compared to $346,000 in 1992.
Liquidity and Capital Resources The Company's debt to
invested capital ratio decreased from 40.8 percent at December 31,
1992, to 38.1 percent at December 31, 1993. Working capital at
December 31, 1993 was $45.1 million, an increase of $3.5 million from
the same period last year. Cash flow generated from operating
activities in 1993 was $27.6 million, an increase of $8.7 million over
the cash flow generated during 1992. At December 31, 1993, the
Company has current maturities of long-term debt amounting to $5.7
million. All temporary borrowings are executed under a $20 million,
long-term, revolving credit facility of which none was utilized at
December 31, 1993.
Corporate philosophy is that long-term debt, properly
utilized, can contribute to the sustained long-term growth of the
Company. In furtherance of this philosophy, the Company will use
long-term debt to the point financial flexibility is preserved and
undue financial risk is not incurred. The Company's long-term
objective is to maintain debt at less than 40 percent of total
capitalization.
Capital expenditures during 1993 were financed through
internally generated funds. The Company's capital expenditures for
the year were $8.7 million relating primarily to the replacement and
improvement of manufacturing equipment. Depreciation and amortization
were $7.7 million for 1993. Capital expenditures are expected to
increase during 1994, while depreciation and amortization should
remain at approximately the same levels.
The ultimate amount of the environmental cleanup costs
associated with the Cadillac, Michigan site described in Note 11 to
the financial statements, the amount of costs allocated to the Company
and the other contingencies discussed in such note, could impact
earnings and liquidity in a material way, could result in the
violation of one or more loan covenants and could result in the
limitation or discontinuance of the payment of future dividends.
However, the Company believes, subject to the referenced
contingencies, that anticipated cash flow from operations, available
borrowings on the resolving line of credit, and other potential
sources of borrowing will be adequate to meet its short- and long-term
liquidity and capital resource needs.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
Kysor Industrial Corporation
Cadillac, Michigan
We have audited the accompanying consolidated balance sheet of Kysor
Industrial Corporation and Subsidiaries as of December 31, 1993 and
1992 and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kysor
Industrial Corporation and Subsidiaries as of December 31, 1993 and
1992, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993,
in conformity with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, effective
January 1, 1993, the Corporation changed its method of accounting for
postretirement benefits other than pensions.
Detroit, Michigan
February 14, 1994
<TABLE>
KYSOR INDUSTRIAL CORPORATION
Consolidated Statement of Income
Year Ended December 31,
(Dollars in thousands except per share data)
<CAPTION>
1993 1992 1991
____________ ____________ ____________
<S> <C> <C> <C>
Net sales $ 272,607 $ 262,174 $ 223,643
Interest and other revenues 1,251 1,623 1,255
____________ ____________ ____________
TOTAL SALES AND REVENUES 273,858 263,797 224,898
____________ ____________ ____________
COSTS AND EXPENSES
Cost of sales 207,203 199,851 177,562
Selling and administrative expenses 44,460 43,104 39,283
Interest expense 2,162 2,595 3,748
Provision for litigation - 1,500 4,000
Other expenses 2,025 720 371
____________ ____________ ____________
TOTAL COSTS AND EXPENSES 255,850 247,770 224,964
____________ ____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES AND BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 18,008 16,027 (66)
INCOME TAXES 7,910 6,900 660
____________ ____________ ____________
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 10,098 9,127 (726)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS (Net of income
tax benefit of $4,435) (7,628) - -
____________ ____________ ____________
NET INCOME (LOSS) 2,470 9,127 (726)
DIVIDENDS ON PREFERRED STOCK (Net of income tax
benefit of $601, $541 and $542) 983 1,050 1,053
____________ ____________ ____________
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 1,487 $ 8,077 $ (1,779)
____________ ____________ ____________
____________ ____________ ____________
EARNINGS (LOSS) PER COMMON SHARE
PRIMARY - INCOME BEFORE ACCOUNTING CHANGE $ 1.62 $ 1.52 $ (0.35)
- ACCOUNTING CHANGE -1.35 - -
____________ ____________ ____________
- NET EARNINGS (LOSS) $ 0.27 $ 1.52 $ (0.35)
____________ ____________ ____________
____________ ____________ ____________
FULLY DILUTED - INCOME BEFORE ACCOUNTING CHANGE $ 1.38 $ 1.30 $ (0.35)
- ACCOUNTING CHANGE -1.35 - -
____________ ____________ ____________
- NET EARNINGS (LOSS) $ 0.03 $ 1.30 $ (0.35)
____________ ____________ ____________
____________ ____________ ____________
Weighted ave common shares and equivalents 5,636 5,307 5,101
____________ ____________ ____________
____________ ____________ ____________
Dividends declared per common share $ 0.44 $ 0.40 $ 0.55
____________ ____________ ____________
____________ ____________ ____________
The accompanying notes are an integral part of the financial statements.
</TABLE>
KYSOR INDUSTRIAL CORPORATION
Consolidated Balance Sheet
(Dollars in thousands, except per share data)
December 31, December 31,
ASSETS 1993 1992
____________ ____________
CURRENT ASSETS
Cash and equivalents $ 21,339 $ 6,913
Accounts receivable less $1,546 and
$1,496 allowance for doubtful accounts 35,968 32,070
Inventories 28,409 34,435
Prepaid expenses 1,228 1,402
Deferred income taxes 6,266 5,695
__________ __________
TOTAL CURRENT ASSETS 93,210 80,515
__________ __________
PROPERTY, PLANT AND EQUIPMENT
Land 2,616 2,628
Buildings 30,155 29,336
Machinery and equipment 61,970 55,180
__________ __________
94,741 87,144
Less accumulated depreciation 51,918 45,246
__________ __________
TOTAL PROPERTY, PLANT AND EQUIPMENT 42,823 41,898
__________ __________
OTHER ASSETS
Goodwill, patents and other intangibles 2,806 3,046
Cash value of officers' life insurance 9,547 8,589
Deferred income taxes 4,031 -
Miscellaneous receivables and other assets 4,038 1,802
__________ __________
TOTAL OTHER ASSETS 20,422 13,437
__________ __________
TOTAL ASSETS $ 156,455 $ 135,850
__________ __________
__________ __________
The accompanying notes are an integral part of the financial statements.
KYSOR INDUSTRIAL CORPORATION
Consolidated Balance Sheet
(Dollars in thousands, except per share data)
(continued)
December 31, December 31,
LIABILITIES 1993 1992
____________ ____________
CURRENT LIABILITIES
Current maturities of long-term debt $ 5,670 $ 1,595
Accounts payable 14,353 14,388
Accrued income taxes payable 2,426 1,719
Accrued expenses and contingent liabilities 25,699 21,204
__________ __________
TOTAL CURRENT LIABILITIES 48,148 38,906
Long-term debt, less current maturities,
plus guarantee of ESOP indebtedness 33,673 36,521
Deferred income taxes - 1,108
Accumulated postretirement benefit obligation 12,628 -
Other long-term liabilities 7,313 6,410
__________ __________
TOTAL LIABILITIES AND DEFERRED CREDITS 101,762 82,945
__________ __________
PREFERRED SHAREHOLDERS' EQUITY
Employee Stock Ownership Plan Preferred Stock,
shares authorized 5,000,000; outstanding
810,163 and 814,612 stated value of $24.375 19,748 19,856
Unearned deferred compensation under
employee stock ownership plan (16,175) (17,039)
__________ __________
TOTAL PREFERRED SHAREHOLDERS' EQUITY 3,573 2,817
__________ __________
COMMON SHAREHOLDERS' EQUITY
Common stock, $1 par value, shares authorized
30,000,000, outstanding 5,467,840
and 5,332,201 5,468 5,332
Additional paid-in capital 3,386 1,631
Retained earnings 43,997 44,908
Translation adjustment 286 627
Notes receivable-common stock
99,116 and 104,188 shares (1,319) (1,364)
Unearned deferred compensation under
employee stock ownership plan (698) (1,046)
__________ __________
TOTAL COMMON SHAREHOLDERS' EQUITY 51,120 50,088
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 156,455 $ 135,850
__________ __________
__________ __________
<TABLE>
KYSOR INDUSTRIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Amounts in thousands)
<CAPTION>
1993 1992 1991
_____ _____ _____
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss) $2,470 $9,127 ($726)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Cumulative effect of change in accounting for
Postretirement Benefits (net of tax benefits) 7,628 - -
Depreciation and amortization 7,654 7,650 7,713
Provision for losses on accounts receivable 544 1,031 462
(Gain) Loss on sales of fixed assets 7 (13) (2)
Deferred compensation (ESOP) 1,212 1,212 1,226
Deferred income taxes (1,275) (1,328) (1,678)
Changes in assets and liabilities providing
(consuming) cash:
Accounts receivable (4,442) (5,811) 6,831
Inventories 6,026 3,191 4,296
Prepaid expenses 174 (763) 153
Accounts payable (153) 2,177 (2,468)
Accrued expenses and contingent liabilities 4,495 1,267 671
Accrued income taxes payable 1,781 1,604 1,177
Other long-term liabilities 1,467 (420) 1,069
_______ _______ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 27,588 18,924 18,724
_______ _______ _______
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to property and equipment (8,653) (3,919) (4,956)
Proceeds from sales of property and equipment 307 458 326
Decrease (Increase) in other long-term assets (3,194) (1,168) (917)
Unrealized translation gain (loss) (341) (658) (347)
_______ _______ _______
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (11,881) (5,287) (5,894)
_______ _______ _______
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Current borrowings 1,593 - 935
Principal payments against long-term debt (366) (9,189) (9,814)
Proceeds from issuance of common stock 1,355 1,784 81
Purchase of common stock - - (1,000)
Common stock and preferred stock dividends paid (3,863) (3,658) (4,783)
_______ _______ _______
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,281) (11,063) (14,581)
_______ _______ _______
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 14,426 2,574 (1,751)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 6,913 4,339 6,090
_______ _______ _______
CASH AND EQUIVALENTS AT END OF YEAR $21,339 $6,913 $4,339
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the financial statements.
</TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(Dollars in thousands, except per share data)
Unearned Total
Deferred Preferred
Preferred Compensation Shareholders'
Stock ESOP Equity
BALANCE, DECEMBER 31, 1990 $19,982 ($18,780) $1,202
Employee Stock Ownership Plan,
deferred compensation earned 0 877 877
Purchase of common stock, returned
to an unissued status (85,180
shares) 0 0 0
Preferred stock distributions (1,933
shares for 5,345 shares of common) (47) 0 (47)
Exercise of employee stock options,
8,005 shares issued 0 0 0
Collections of notes receivable 0 0 0
Forfeitures of notes receivable 0 0 0
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income (loss) 0 0 0
Preferred stock dividends (net of
income tax benefit of $542) 0 0 0
share 0 0 0
BALANCE, DECEMBER 31, 1991 19,935 (17,903) 2,032
Employee Stock Ownership Plan,
deferred compensation earned 0 864 864
Preferred stock distributions (3,223
shares for 8,040 shares of common) (79) 0 (79)
Exercise of employee stock options,
172,975 shares issued 0 0 0
Collections of notes receivable 0 0 0
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income 0 0 0
Preferred stock dividends (net of
income tax benefit of $541) 0 0 0
Common dividends declared, $ .40 per
share 0 0 0
BALANCE, DECEMBER 31, 1992 19,856 (17,039) 2,817
Employee Stock Ownership Plan,
deferred compensation earned 0 864 864
Preferred stock distributions (4,449
shares for 6,528 shares of common) (108) 0 (108)
Exercise of employee stock options,
129,111 shares issued 0 0 0
Collections of notes receivable 0 0 0
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income 0 0 0
Preferred stock dividends (net of
income tax benefit of $601) 0 0 0
share 0 0 0
BALANCE, DECEMBER 31, 1993 $19,748 ($16,175) $3,573
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(Dollars in thousands, except per share data)
Paid-In Retained
Common Stock Capital Earnings
BALANCE, DECEMBER 31, 1990 $5,264 $0 $44,948
0 0 0
Employee Stock Ownership Plan,
deferred compensation earned 0 0 0
Purchase of common stock, returned
to an unissued status (85,180
shares) (85) 0 (915)
Preferred stock distributions (1,933
shares for 5,345 shares of common) 5 0 41
Exercise of employee stock options,
8,005 shares issued 8 0 36
Collections of notes receivable 0 0 0
Forfeitures of notes receivable (41) 0 (548)
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income (loss) 0 0 (726)
Preferred stock dividends (net of
income tax benefit of $542) 0 0 (1,053)
share 0 0 (2,869)
BALANCE, DECEMBER 31, 1991 5,151 0 38,914
Employee Stock Ownership Plan,
deferred compensation earned 0 0 0
Preferred stock distributions (3,223
shares for 8,040 shares of common) 8 70 0
Exercise of employee stock options,
172,975 shares issued 173 1,561 0
Collections of notes receivable 0 0 0
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income 0 0 9,127
Preferred stock dividends (net of
income tax benefit of $541) 0 0 (1,050)
Common dividends declared, $ .40 per
share 0 0 (2,083)
BALANCE, DECEMBER 31, 1992 5,332 1,631 44,908
Employee Stock Ownership Plan,
deferred compensation earned 0 0 0
Preferred stock distributions (4,449
shares for 6,528 shares of common) 7 101 0
Exercise of employee stock options,
129,111 shares issued 129 1,654 0
Collections of notes receivable 0 0 0
Translation adjustment on
investments in foreign subsidiaries 0 0 0
Net income 0 0 2,470
Preferred stock dividends (net of
income tax benefit of $601) 0 0 (983)
share 0 0 (2,398)
BALANCE, DECEMBER 31, 1993 $5,468 $3,386 $43,997
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(Dollars in thousands, except per share data)
Unearned
Notes Deferred
Translation Receivable- Compensation
Adjustment Common Stock ESOP
BALANCE, DECEMBER 31, 1990 $1,632 ($2,042) ($1,744)
Employee Stock Ownership Plan,
deferred compensation earned 0 0 349
Purchase of common stock, returned
to an unissued status (85,180
shares) 0 0 0
Preferred stock distributions (1,933
shares for 5,345 shares of common) 0 0 0
Exercise of employee stock options,
8,005 shares issued 0 0 0
Collections of notes receivable 0 38 0
Forfeitures of notes receivable 0 589 0
Translation adjustment on
investments in foreign subsidiaries (347) 0 0
Net income (loss) 0 0 0
Preferred stock dividends (net of
income tax benefit of $542) 0 0 0
share 0 0 0
BALANCE, DECEMBER 31, 1991 1,285 (1,415) (1,395)
Employee Stock Ownership Plan,
deferred compensation earned 0 0 349
Preferred stock distributions (3,223
shares for 8,040 shares of common) 0 0 0
Exercise of employee stock options,
172,975 shares issued 0 0 0
Collections of notes receivable 0 51 0
Translation adjustment on
investments in foreign subsidiaries (658) 0 0
Net income 0 0 0
Preferred stock dividends (net of
income tax benefit of $541) 0 0 0
Common dividends declared, $ .40 per
share 0 0 0
BALANCE, DECEMBER 31, 1992 627 (1,364) (1,046)
Employee Stock Ownership Plan,
deferred compensation earned 0 0 348
Preferred stock distributions (4,449
shares for 6,528 shares of common) 0 0 0
Exercise of employee stock options,
129,111 shares issued 0 0 0
Collections of notes receivable 0 45 0
Translation adjustment on
investments in foreign subsidiaries (341) 0 0
Net income 0 0 0
Preferred stock dividends (net of
income tax benefit of $601) 0 0 0
share 0 0 0
BALANCE, DECEMBER 31, 1993 $286 ($1,319) ($698)
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
Dollars in thousands, except per share data)
Total Common Total
Stockholders' Shareholders'
Equity Equity
BALANCE, DECEMBER 31, 1990 $48,058 $49,260
Employee Stock Ownership Plan,
deferred compensation earned 349 1,226
Purchase of common stock, returned
to an unissued status (85,180
shares) (1,000) (1,000)
Preferred stock distributions (1,933
shares for 5,345 shares of common) 46 (1)
Exercise of employee stock options,
8,005 shares issued 44 44
Collections of notes receivable 38 38
Forfeitures of notes receivable 0 0
Translation adjustment on
investments in foreign subsidiaries (347) (347)
Net income (loss) (726) (726)
Preferred stock dividends (net of
income tax benefit of $542) (1,053) (1,053)
share (2,869) (2,869)
BALANCE, DECEMBER 31, 1991 42,540 44,572
Employee Stock Ownership Plan,
deferred compensation earned 349 1,213
Preferred stock distributions (3,223
shares for 8,040 shares of common) 78 (1)
Exercise of employee stock options,
172,975 shares issued 1,734 1,734
Collections of notes receivable 51 51
Translation adjustment on
investments in foreign subsidiaries (658) (658)
Net income 9,127 9,127
Preferred stock dividends (net of
income tax benefit of $541) (1,050) (1,050)
Common dividends declared, $ .40 per
share (2,083) (2,083)
BALANCE, DECEMBER 31, 1992 50,088 52,905
Employee Stock Ownership Plan,
deferred compensation earned 348 1,212
Preferred stock distributions (4,449
shares for 6,528 shares of common) 108 0
Exercise of employee stock options,
129,111 shares issued 1,783 1,783
Collections of notes receivable 45 45
Translation adjustment on
investments in foreign subsidiaries (341) (341)
Net income 2,470 2,470
Preferred stock dividends (net of
income tax benefit of $601) (983) (983)
share (2,398) (2,398)
BALANCE, DECEMBER 31, 1993 $51,120 $54,693
The accompanying notes are an integral part of the financial statements.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Kysor Industrial Corporation and all of its subsidiaries
("Kysor" or "Company").
Foreign Currency Translation
Translation adjustments have been accumulated as a separate
component of Shareholders' Equity.
Cash and Equivalents
Kysor considers all highly-liquid debt instruments purchased with
a maturity of less than one year to be cash equivalents.
Inventories
Inventories are generally stated at the lower of FIFO (first in,
first out) cost or market. Kysor has one subsidiary on LIFO
(last in, first out), the inventory value of which was $828,000
and $735,000 lower than it would have been under FIFO at December
31, 1993 and 1992, respectively.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation
is computed by the straight-line method based on the estimated
useful lives of the assets.
Buildings are depreciated over lives ranging from 10 to 40 years.
Machinery, equipment, and office furniture are depreciated over
lives ranging from 3 to 25 years.
When properties are retired, the cost of such properties, net of
accumulated depreciation and any salvage proceeds, is reflected
in income.
Goodwill
Goodwill, resulting from the excess of cost over the net assets
of purchased companies, is amortized on a straight-line basis
over periods not exceeding 20 years.
Income Taxes
In 1993, the Company adopted Statement of Financial Accounting
Standards # 109, "Accounting for Income Taxes," which requires
recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based
on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse (see
Note 10).
Prior to 1993, the provision for income taxes was based on income
and expenses included in the accompanying consolidated statements
of operations. Differences between taxes so computed and taxes
payable under applicable statutes and regulations were classified
as deferred taxes arising from timing differences.
Financial Instruments
The Company has cash, cash equivalents, and long-term debt which
are considered financial instruments. The market values of these
financial instruments, as determined through information obtained
from banking sources and management estimates, approximate their
carrying values.
Pension and Retirement Plans
Annual provisions for pension and retirement plan costs recognize
amortization of prior service costs over the expected service
period of active employees. Accrued pension costs are funded
annually to the extent deductible for federal income tax
purposes.
In 1993, the Company adopted Financial Accounting Standards #
106, "Employers' Accounting for Postretirement Benefits Other
than Pensions" which requires the accrual of postretirement
benefits such as health care and life insurance during the
working careers of active employees instead of expensing the
benefits when paid as allowed under prior rules (see Note 8).
Product Warranty Costs
Anticipated costs related to product warranty are expensed in the
period of sale.
Environmental Costs
Environmental expenditures that relate to current or future
revenues are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations,
and do not contribute to current or future revenues, are
expensed. Liabilities are recorded when environmental
assessments and/or cleanups are probable and the costs can be
reasonably estimated. Generally, the timing of these accruals
coincides with Kysor's commitment to a formal plan of action.
NOTE 2. BALANCE SHEET INFORMATION
(amounts in thousands)
The following information is provided as of December 31:
Inventories 1993 1992
Finished products $ 5,338 $ 7,442
Work-in-process 8,973 9,689
Raw materials 14,098 17,304
$28,409 $34,435
Nonoperating Properties
Nonoperating properties included in property, plant and equipment
are as follows:
1993 1992
Land $ 118 $ 134
Buildings 654 654
772 788
Less accumulated depreciation 100 100
$ 672 $ 688
Nonoperating properties held for resale are stated at cost less
accumulated depreciation, which amounts are not in excess of net
realizable value.
Goodwill, Patents and Other Intangible Assets 1993 1992
Goodwill 4,868 4,968
Less accumulated amortization 2,062 1,922
$ 2,806 $ 3,046
Accrued Expenses and Contingent Liabilities 1993 1992
Compensation $ 5,744 $ 3,689
Workers' compensation insurance 5,078 4,483
Warranty 4,120 4,010
Litigation 2,900 2,900
Other 7,857 6,122
$25,699 $21,204
NOTE 3. FINANCING
(amounts in thousands)
Long-term debt consists of the following:
Years Ended December 31,
1993 1992
Long-Term Debt
Term note, $750 quarterly principal payments,
beginning 1994, plus interest at 9.9% $ 15,000 $15,000
Loan agreement for Kysor Industrial Corporation
Employee Stock Ownership Plan, $1,250 semiannual
principal payments beginning 1996, plus interest
at 8.36% 20,000 20,000
Other, $2,321 principal payments due in,
1994, plus interest at rates ranging from 5.0%
to 8.0% 3,646 2,070
Loan Guarantee
Loan guarantee for Kysor Industrial Corporation
Employee Stock Ownership Plan, $174 semiannual
principal payments, plus interest at 7.0% 697 1,046
39,343 38,116
Less current maturities 5,670 1,595
$33,673 $36,521
At December 31, 1993, the Company maintained revolving credit
agreements with two banks which provide for borrowings up to $20
million. At December 31, 1993, there were no outstanding
borrowings under this facility. Interest rates are fixed at the
date of borrowing based on current LIBOR or CD rates plus a
spread of .75 - 1.0 percent. An annual commitment fee of .375
percent is paid on the unused balance. In January 1994, the
Company entered into a modification of the revolving credit terms
which reduced the spread on LIBOR borrowing to .50 percent and
reduced the annual commitment fee to .25 percent. The Company
has an interest rate swap under which the variable rate of
interest on the $15 million term note is converted to a fixed
rate.
During the years ended December 31, 1993 and 1992, there was no
short-term debt.
Aggregate maturities of obligations under long-term debt, during
the next five years ended December 31, are as follows:
(amounts in thousands)
1994 1995 1996 1997 1998
Maturities of Long-Term Debt $5,670 $3,349 $4,250 $5,500
$5,500
Under various loan arrangements, Kysor is subject to certain
restrictions relating, among other things, to the creation of
indebtedness, the maintenance of minimum consolidated working
capital, the payment of dividends, and the purchase of common
stock.
Interest paid was $2,073,000, $3,039,000, and $3,348,000 for the
years ended December 31, 1993, 1992, and 1991, respectively.
NOTE 4. STOCK OPTION PLANS
As of December 31, 1993, Kysor administered its 1980 Nonqualified
Stock Option Plan; 1983 Incentive Stock Option Plan; 1984 Stock
Option Plan; 1987 Stock Option and Restricted Stock Plan, and
1993 Long-Term Incentive Plan which was approved by Shareholders
on April 30, 1993. Options may be granted to officers, directors,
and key employees to purchase common shares of the Company's
stock at a price equal to the mean market value of such stock at
the date of the grant. All options granted prior to January 1,
1990 are exercisable at the date of grant, except for a
nonqualified stock option for 100,000 shares granted to the
Chairman of the Board on January 30, 1987 which vested at the
rate of 20 percent per year through January 30, 1991. All
options granted after January 1, 1990 vest at the rate of 20
percent at time of grant and 20 percent each year thereafter,
except for the final 20 percent which vests only upon exercise
and retention for one year of the entire vested 80 percent.
Changes in options outstanding for the years ended December 31,
1992 and 1993 are as follows:
Number of Number of
Shares Optioned
Reserved Shares Option Price Range Total
Balance December 31, 1991 574,391 1,587,256 $ 3.875 - $19.125 19,913,818
Granted [377,000] 377,000 7.8125- 16.1875 3,164,500
Terminated 114,950 [114,950] 7.25 - 18.6875 [1,337,576]
Exercised - [207,156] 3.875 - 14.375 [1,753,905]
Balance December 31, 1992 312,341 1,642,150 7.25 - 19.125 19,986,837
Granted [288,500] 288,500 16.3125- 18.9375 5,384,719
Terminated 59,700 [59,700] 7.25 - 19.125 [668,300]
Exercised - [138,650] 7.25 - 18.6875 [1,488,494]
1993 Long-Term Incentive Plan
1,000,000 - - - -
Balance December 31, 19931,083,541 1,732,300 $ 7.25 -$19.125 $23,214,762
At December 31, 1993, 1,179,470 of the shares granted were
exercisable. The fair market value of options exercised in 1993
ranged from $15.50 to $20.4375 per share for a total market value
of $2,591,225. The fair market value of options exercised in 1992
ranged from $9.0625 to $18.8125 for a total market value of
$3,411,376.
In 1989, optionees executed 4.5 percent nonrecourse installment
purchase agreements of $2,090,793 with respect to 157,128 shares
previously granted under the nonqualified plans. During 1991,
three optionee participants relinquished their stock option loans
in the amount of $589,383 and forfeited the attendant 41,150
common shares. Under the terms of the installment purchase
agreements, the shares are pledged as collateral and the
extension of credit is subject to Federal Reserve Bank Regulation
G. Required annual payments are calculated using a 15-year
amortization with a balloon payment due within the original life
of the option being exercised. The participants have
limited rights of principal deferral in cases of hardship. The
Board of Directors, in January 1992, passed a resolution
to permit participants to defer the 1992 principal payments to
the end of the loan. Dividends paid, in respect to the
shares, are received by the Company and first applied to accrued
interest and then to principal.
NOTE 5. COMMON STOCK REPURCHASED
In October 1991, Kysor purchased 85,108 shares of its Common
Stock for $11.75 per share in accordance with an agreement,
granted in conjunction with restricted stock issued for the 1986
acquisition of Medallion Instruments, Inc.
NOTE 6. PREFERRED STOCK
On February 24, 1989, Kysor sold 820,513 shares of newly issued 8
percent cumulative Series A Convertible Voting Preferred Stock,
$24.375 stated value per share (the "Convertible Stock"), to the
Kysor Industrial Corporation Employee Stock Ownership Plan (the
"ESOP"). The Convertible Stock may be voluntarily converted at
the option of the holder, unless previously redeemed, into shares
of Kysor Industrial Corporation Common Stock (the "Common Stock")
on a one-for-one basis, subject to certain antidilution
adjustments, and will convert automatically into Common Stock (in
certain instances subject to a conversion floor equal to
liquidation value of $24.375 per share plus accrued and unpaid
dividends) if transferred to a holder other than the ESOP or
another Kysor Industrial Corporation employee benefit plan. The
Convertible Stock is subject to redemption by the Company. Each
share of Convertible
Stock entitles its holder to one vote on all matters submitted
for a vote of shareholders, again subject to possible
antidilution adjustments. The Convertible Stock ranks senior to
the Common Stock and is at least on a parity with any other
series of Preferred Stock that may be subsequently issued.
Preferred Stock issued and outstanding was 810,163 and 814,612
shares at December 31, 1993 and 1992, respectively. Preferred
shares allocated to ESOP participants were 35,463 for each of the
years ended December 31, 1993 and 1992.
NOTE 7. EARNINGS PER COMMON SHARE
Primary earnings per common share have been computed using the
weighted average shares of Common Stock and dilutive Common Stock
equivalents outstanding during the year. The Convertible Stock
has been determined not to be a Common Stock equivalent.
Fully diluted earnings per common share are calculated assuming
the conversion of the Convertible Stock to Common Stock as well
as other dilutive assumptions.
NOTE 8. PENSION AND RETIREMENT PLANS
Kysor has several noncontributory defined benefit pension plans
and defined contribution plans covering substantially all of its
domestic employees. The defined benefit plans provide benefits
based on the participants' years of service and compensation or
stated amounts for each year's service. The Company's funding
policy is to make annual contributions as required by contract or
applicable regulations.
The pension cost components were:
(amounts in thousands) Years Ended December 31,
1993 1992 1991
Defined Benefit Plans:
Service cost benefits earned during period $1,905 $1,497 $1,595
Interest cost on projected benefit obligation 3,388 3,024 2,858
Actual investment return on plan assets [6,001] [3,434] [6,937]
Net amortization and deferral 2,967 670 4,347
Net periodic pension cost $2,259 $1,757 $1,863
Assumptions used in the accounting were:
Years Ended December 31,
1993 1992 1991
Discount rates 8.0% 8.0% 8.0%
Rates of increase in compensation levels 5.4% 5.3% 6.0%
Expected long-term rate of return on assets 8.0% 8.0% 8.0%
The following table sets forth the funded status and amounts
recognized in the Company's statement of financial position for
defined benefit plans:
(amounts in thousands) Years Ended December 31,
1993 1992
Plans in Which Plans in Which
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
Accum. Exceed Accum. Exceed
Benefits Assets Benefits Assets
Actuarial present value of benefit obligations:
Vested benefit obligation $[30,503] $[3,239] $[28,375] $[3,336]
Accumulated benefit obligation $[32,955] $[5,804] $[30,475] $[4,919]
Projected benefit obligation $[38,434] $[7,432] $[35,490] $[5,551]
Plan assets at fair market value 49,267 - 42,376 -
Projected benefit obligation (in excess of)
or less than plan assets 10,833 [7,432] 6,886 [5,551]
Unrecognized net (gain) or loss [6,782] 1,678 [4,703] 677
Prior service cost not yet recognized in
net periodic pension cost 778 82 966 98
Unrecognized net (asset) obligation
at January 1, [1,980] 779 [2,229] 890
Pension asset (liability) recognized in the
statement of financial position $ 2,849 $[4,893] $ 920 $[3,886]
At both December 31, 1993 and 1992, 100 percent of plan assets
was invested in publicly traded stocks, bonds, and money market
investments.
In 1985, Kysor adopted a nonqualified, unfunded supplemental
executive retirement plan for senior management. Kysor has
purchased life insurance policies on the lives of participants
and is the sole owner and beneficiary of such policies. The
amount of coverage is designed to provide sufficient revenues to
cover all costs of the plan if the assumptions made as to
mortality experience, policy earnings, and other factors are
realized. The Company is charging earnings with the present
value of the future cost of the plan over the remaining working
life of the participants. In addition, life insurance premiums,
in excess of the increase in cash value of the policies, are
expensed as a period cost.
In September 1985, Kysor established an Employee Stock Ownership
Plan ("ESOP") and trust for its domestic salaried employees. The
ESOP authorized the trust to borrow $3,487,000 from a bank in
September 1985. The proceeds were used to purchase 357,668
shares of common stock at $9.75 per share, that being the mean
market price on the New York Stock Exchange on August 22, 1985,
the day preceding the date the transaction was agreed upon. The
Company has guaranteed the loan and is obligated to contribute
sufficient cash to the ESOP to enable it to repay the loan
principal ($349,000 annually) plus interest.
In February 1989, Kysor expanded the ESOP with the sale to the
ESOP of $20 million of newly issued Series A Convertible Voting
Preferred Stock from the Company (see Note 6). The ESOP
purchase of Preferred Stock was financed by a loan from the
Company which issued a $20 million, 15-year ESOP note to raise
the necessary funds. In 1993, 1992, and 1991, dividends on
Preferred Stock of $1,584,000, $1,591,000, and $1,595,000 plus
interest expense of $88,000, $81,000, and $77,000, respectively,
were used to service the debt obligation related to the ESOP.
The Company amortized $864,000 in 1993 and 1992, and $877,000 in
1991, of unearned deferred compensation relating to the shares
allocated for the year as a percentage of the total shares to be
allocated.
Postretirement Health and Life Insurance Benefits
Kysor provides certain defined health care and life insurance
benefits for retired employees. All salaried and certain hourly
employees may become eligible for these benefits if they reach
retirement age while working for the Company. Effective January
1, 1993, the Company adopted Statement of Accounting Standards
#106, "Employers accounting for Postretirement Benefits other
than Pensions" ("'SFAS #106"). SFAS #106 requires the accrual
method of accounting for postretirement health care and life
insurance benefits based on actuarially determined cost to be
recognized over the period from the date of hire to the full
eligibility date of employees who are expected to qualify for
such benefits. At January 1, 1993, the Company recognized the
full amount of its estimated accumulated postretirement benefit
obligation which represents the present value of the estimated
future benefits payable to current retirees and a pro rata
portion of estimated benefits payable to active employees after
retirement. The pretax charge to 1993 earnings for this
transition obligation was $12,063,000 ($7,628,000 net of income
tax benefit) or $1.35 per share. This amount has been reflected
in the consolidated statement of income as the cumulative effect
of an accounting change.
The incremental cost in 1993 of accounting for postretirement
health care and life insurance benefits under the new accounting
method amounted to $564,000, less a deferred tax benefit of
$212,000, or $.06 per share. In prior years, the Company
expensed claims for postretirement benefits on a pay as you go
method. The total pretax amount recognized for retiree health
and life insurance benefits in 1993 was $1,352,000. The amounts
included in expense for 1992 was $862,000. For the year ended
December 31, 1993, the components of periodic expense for these
postretirement benefits were as follows:
(amounts in thousands)
Service cost - benefits earned during the year $ 413
Interest cost on accumulated
postretirement benefit obligation 939
Net periodic benefit costs $1,352
At December 31, 1993, the actuarial and recorded liabilities for
these postretirement benefits, none of which have been funded,
were as follows:
(amounts in thousands)
Accumulated postretirement benefit obligation (APBO):
Retirees $10,191
Fully eligible active plan participants 1,146
Other active participants 1,429
Total APBO 12,766
Fair market value of plan assets -
Accumulated postretirement benefit
obligation in excess of plan assets 12,766
Unrecognized net (loss) [138]
Accrued postretirement benefit liability at
December 31, 1993 $12,628
The accumulated postretirement benefit obligation was determined
using the unit credit method and an assumed discount rate of 8
percent. The assumed gross claim health care trend rate used for
under age 65 claims was 10 percent in 1993, graded uniformly down
to 5.5 percent in 2005 and level thereafter. For ages 65 and
over claims, the assumed trend rate was 8 percent in 1993, graded
uniformly down to 5.5 percent in 2005 and level thereafter. A 1
percent increase each year in the health care cost trend rate
used would have resulted in a $129,000 increase in the aggregate
service and interest components of expense for the year ended
December 31, 1993, and a $1,279,000 increase in the accumulated
postretirement benefit obligation at December 31, 1993.
The Company has a continuing deferred compensation arrangement
with Raymond A. Weigel former chairman which provides for annual
payments of $350,000.
NOTE 9. LEASE COMMITMENTS
Kysor leases some real estate and equipment. In most cases,
management expects that in the normal course of business these
leases will be renewed and replaced by other leases. Kysor has
future minimum rental payments required through 1998 under
operating leases that have initial or remaining noncancelable
lease terms in excess of one year in the following amounts:
(amounts in thousands) Years Ended December 31,
1994 1995 1996 1997 1998
Future minimum rental payments $966 $513 $368 $342 $475
In addition to fixed rentals, certain of these leases requires
Kysor to pay maintenance, property taxes, and insurance.
Rental expense charged to operations is as follows:
(amounts in thousands) Years Ended December 31,
1993 1992 1991
Minimum rentals $1,829 $1,909 $1,811
Contingent rentals 53 30 31
$1,882 $1,939 $1,842
NOTE 10. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
#109, "Accounting for Income Taxes" ("SFAS #109"), as of January
1, 1993. The cumulative effect of this change in accounting
principle was immaterial. Prior years' financial statements have
not been restated to apply the provisions of SFAS #109. The
adoption of SFAS #109 changes the Company's method of accounting
for income taxes from the deferred method using Accounting
Principles Board Opinion #11 ("APB #11") to an asset and
liability approach.
The provision (credit) for income tax consists of the following:
(amounts in thousands) Year Ended December 31,
1993 1992 1991
Currently payable
Federal $7,733 $7,318 $2,025
State and local 1,022 800 283
Foreign 55 28 -
Total currently payable 8,810 8,146 2,308
Deferred
Federal [790] [1,076] [1,268]
State and local [110] [170] [154]
Foreign - - [226]
Total deferred [900] [1,246] [1,648]
Total Provision $7,910 $6,900 $ 660
Deferred income taxes, on a SFAS #109 basis, reflect the
estimated future tax effect of temporary differences between the
amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations.
The components of deferred income tax assets and liabilities as
of December 31, 1993 are as follows:
(amounts in thousands)
Deferred tax Deferred tax
assets liabilities
Post-retirement health care $4,644 $ -
Employee benefit plans 3,147 1,053
Workers' compensation/product liability 2,377 -
Warranty 1,100 -
Litigation expense 1,072 -
Service contract 896 -
Slow-moving inventory 704 -
Bad debts 482 -
Environmental costs 481 -
Vacation pay 453 -
Depreciation - 3,693
LIFO reserve at acquisition - 535
Other 297 75
$15,653 $ 5,356
Deferred income taxes for 1992 and 1991 were derived using
guidelines in APB #11. Under APB #11 deferred income taxes
result from timing differences in the recognition of revenues and
expenses between financial statements and tax returns. The
sources of these differences and the related effect of each on
the Company's provision for income taxes were as follows:
(amounts in thousands) Year Ended December 31,
1992 1991
Slow-moving inventory $ [496] $148
Workers' compensation/product liability [433] 336
Depreciation [395] [58]
Warranty [360] [61]
Bad debts [156] 22
Service contract [99] [129]
Reserves for self-insurance [72] 521
Foreign earnings - [226]
Environmental costs 90 183
Employee benefit plans 127 [622]
Interest 145 [145]
Alternative minimum tax 150 [150]
Litigation 407 [1,477]
Other [154] 10
$[1,246] $[1,648]
Major differences between the income taxes computed using the
United States statutory tax rate and the actual income tax
expense were as follows:
(amounts in thousands) Years Ended December 31,
1993 1992 1991
Federal income taxes at statutory rate $ 6,303 $ 5,449 $[22]
Nondeductible losses related to foreign
subsidiaries and other foreign expenses 1,071 981 728
Goodwill 84 82 82
State and local income taxes
(net of Federal benefit) 593 472 85
Life insurance [165] [169] [161]
Other 24 85 [52]
Provision for income taxes $ 7,910 $ 6,900 $660
Income taxes paid were $7,427,000, $6,245,000, and $1,788,000 for
the years ended December 31, 1993, 1992, and 1991, respectively.
Income tax refunds were $71,000 in 1993, $283,000 in 1992, and
$657,000 in 1991. Domestic operations contributed a profit of
$15,305,000, $18,261,000, and $3,513,000 to income before income
taxes and before cumulative effect of accounting change for 1993,
1992, and 1991, respectively. Foreign operations sustained a
loss of $2,704,000, $2,234,000, and $3,579,000 for the same
periods. Income tax benefits of $473,000 and $560,000 have been
credited to shareholders' equity for the years ended December 31,
1993 and 1992, respectively, for deemed compensation deductions
attributable to stock options. Income tax benefits of $601,000,
$541,000, and $542,000 for preferred stock dividends related to
the Company's ESOP have been credited to shareholders' equity in
1993, 1992, and 1991, respectively.
NOTE 11. CONTINGENT LIABILITIES
As previously reported, the Company has been involved in ongoing
proceedings relating to soil and groundwater contamination at the
Cadillac Industrial Park in Cadillac, Michigan.
Since the Company's initial involvement in the referenced
proceedings, extensive testing has been performed to determine
the extent of contamination at the site. Based upon certain of
those tests, in 1989 the United States Environmental Protection
Agency ("U.S. EPA") issued a Record of Decision which selected
certain cleanup methods for the site and estimated the present
value of the costs for selected cleanups. In particular, the EPA
estimated the cost for the Company's soil cleanup at $925,000,
and estimated the costs for the areawide groundwater cleanup at
$15,124,000.
Pursuant to a unilateral administrative order that was issued by
the U.S. EPA in 1990 to the Company and other potentially
responsible parties ("PRPs"), the Company is continuing to
perform design work for remedial action for the area groundwater
contamination and for the soil contamination at the Company site.
The Company is the only PRP that is complying with the order.
The order was issued pursuant to Section 106 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, which authorizes the U.S. EPA to seek treble damages
and civil penalties of up to $25,000 per day for violation of an
administrative order. The scope of the present order is limited
to design work, and does not at this time require the Company or
the other PRPs to undertake the construction or implementation of
any remedial action.
The Company's design work plan has been approved by the U.S. EPA
and, as required by the design work plan, the Company has
submitted an Additional Studies Report to the U.S. EPA, which was
also approved. As further required by the design work plan, the
Company submitted to the U.S. EPA preliminary design documents,
which EPA has reviewed up through 95% of the design. The current
schedule calls for completion of design work in 1994. The costs
presently estimated for completion of the remaining design work,
including the incremental work described in the following
paragraph, is $90,000. The costs to date for design work have
been approximately $1,300,000. Approximately $255,000 of the
total estimated design costs relate to the soil cleanup at the
Company site, and the Company has previously accrued these
estimated cleanup costs.
U.S. EPA recently requested that the Company include two
additional areas of groundwater contamination within the area to
be addressed by the remediation system which is the subject of
the ongoing design work. These additional areas are immediately
adjacent to the original area of groundwater contamination
covered by the remedial design. Without admitting liability for
the contamination, the Company has agreed to include these
additional areas in the remedial design. The incremental design
and remediation costs are estimated at $40,000 and $310,000,
respectively.
As a potential solution to the referenced groundwater
contamination, the Company has become a limited partner in Beaver
Michigan Associates, a Michigan limited partnership formed to
construct a $58 million wood-fired cogeneration plant in
Cadillac, Michigan. It is intended that the project would
facilitate treatment of the groundwater contamination at the
Cadillac Industrial Park. In that regard, the City of Cadillac,
also a limited partner in the venture, has established a Local
Development Finance Authority ("LDFA") which intends to use tax-
generated revenues from the project to service bonds to be issued
to pay the capital cost to build the groundwater cleanup
facility. It is anticipated that assessments for operating and
maintenance costs of the cleanup facility would be shared
primarily by the PRPs, including Kysor, as well as other
beneficiaries within the Cadillac Industrial Park. In January
1992, Beaver Michigan Associates obtained financing to construct
the facility from General Electric Capital Corporation. In 1993,
the cogeneration facility construction was completed and the
plant began commercial operation. The LDFA is currently pursuing
the permanent placement of bonds totally $7.4 million to fund the
capital costs to build the cleanup facility.
With respect to the groundwater cleanup discussed above, there
are a number of evolving factors that will affect the extent of
the Company's liability for these costs. First, the U.S. EPA's
cost estimate may be overstated. While detailed estimates cannot
be made until completion of the ongoing design work, the initial
modeling work performed by the Company's consultants indicates
that the U.S. EPA's cost estimate is too high. In addition, the
Company is continuing to pursue mixed funding (i.e., partial
government funding) from the U.S. EPA and participation of others
PRPs, and the extent of funding from these sources is not yet
known. The regional office of the U.S. EPA has agreed that mixed
funding should be provided for a portion of the remedial design
and remedial action, although the actual amount of such funding,
if any, is subject to further negotiation with the regional
office of the U.S. EPA and final approval by the U.S. EPA
headquarters. As described above, the LDFA is presently pursuing
the permanent placement of bonds, the proceeds of which would pay
the initial capital costs for the cleanup facility and certain
future capital costs for continued operation of the facility.
The bond debt would be serviced by tax increment revenues
collected by the LDFA from the cogeneration facility. Possible
insurance coverage for this matter remains unresolved.
On July 3, 1991, the Michigan Attorney General and Department of
Natural Resources commenced a lawsuit in Federal District Court,
Western District Michigan against the Company and various other
parties seeking to recover expenses allegedly incurred by the
State in investigating the nature and extent of contamination at
the Cadillac site, incidental expenses associated therewith,
fines, penalties, interest, attorneys' fees and damages for
injury to the natural resources of the State. Discovery has
commenced in this action although it is not yet complete. The
suit also seeks a declaratay judgement holding Kysor and others
jointly and severally liable for clean-up at the site. The
Attorney General asserts that the Department of Natural Resources
has expended approximately $3.0 million to date on tests and
related studies at the site and provide city water to
contaminated areas, for which the Attorney General claims Kysor
and others are jointly responsible. The Attorney General also
asserts that the State is entitled to statutory interest, which
it claims is approximately $1.6 million as of Fall 1992, and
noted that under the Michigan Water Resource Commission Act the
court in its discretion may impose penalties of up to $10,000 a
day ($25,000 a day from May 1990) dating back to the early
1980's. The Attorney General finally asserts that the Company
may be responsible for injury to the State's natural resources as
well as attorneys fees.
The Company continues to dispute the State's allegations and
intends to vigorously defend against the damages sought. Though
discovery is not yet complete, the Company believes that many of
the costs claimed by the State were duplicative or related to
areas of contamination for which the Company is not responsible.
The Company also disputes the claimed interest calculation and
believes that it is unlikely that material penalties would be
imposed due to the continuing efforts of the Company to
investigate and remediate the contamination at the site which
date back to as early as 1980. If ongoing settlement
negotiations are unsuccessful, the Company intends to vigorously
defend against the claims to the extent they relate to the
testing of contamination not caused by the Company or costs which
were duplicative and unnecessary. The Company is investigating
the possibility of insurance coverage of the matter and has made
cross-claims and third-party claims for contribution against
other parties located at this site, including parties involved in
the referenced proceeding as a co-defendant.
While it is clear that the Company is responsible for the soil
contamination at its site and the Company shares a portion of the
responsibility for the groundwater contamination described above,
it is presently impossible to provide a precise estimate of the
Company's actual liability. Kysor has accrued its best estimate
of the liability for soil cleanup costs. As noted above, the
U.S. EPA cost figures on the groundwater cleanup are estimates
that may be overstated, and the Company continues to aggressively
promote the referenced cogeneration project as a means of
facilitating a cleanup at the site. The Company is also pursuing
insurance coverage as well as mixed funding from the EPA for this
matter, but there has been no determination as to the
availability or extent of such coverage or funding.
Specifically, with respect to the referenced costs for design and
the capital costs of the cleanup work, the Company is not only
pursuing insurance coverage and mixed funding, but also intends
to seek reimbursement and funding from a bond offering planned by
the Cadillac LDFA in connection with the cogeneration project, as
described above. The availability of this latter source of
reimbursement would depend, among other things, upon the sale of
the referenced bonds.
Other contingent liabilities include various legal actions,
proceedings and claims which are pending or which may be
instituted or asserted in the future against the Company.
Litigation is subject to many uncertainties, the outcome of
individual matters is not predictable with assurance and it is
reasonably possible that some of these other legal actions,
proceedings and claims could be decided unfavorable to the
Company. Although the liability with regard to these matters at
December 31, 1993 cannot be ascertained, it is the opinion of
management, after conferring with counsel, that any liability
resulting from these other matters should not materially affect
the consolidated financial position of the Company and its
subsidiaries at December 31, 1993.
NOTE 12. SEGMENT INFORMATION
Kysor Industrial Corporation's operations include two segments:
commercial products and transportation products. Operations in
the commercial products segment design, manufacture and market
refrigerated display cases, energy control systems, refrigerated
building systems, and heating and air-conditioning systems.
Operations in the transportation products segment design,
manufacture and market engine performance systems, engine
protection systems, and components and accessories for heavy-duty
trucks, other commercial vehicles and marine equipment.
The commercial products segment generated $29.0 million, $48.4
million and $34.7 million of sales and revenues from one customer
in the years ended December 31, 1993, 1992 and 1991,
respectively. The transportation products segment generated $27.3
million of sales and revenues from one customer in the year ended
December 31, 1993.
<TABLE>
QUARTERLY FINANCIAL DATA (unaudited)
(amounts in thousands except per share data)
<CAPTION>
First Second Third Forth Year
1993 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Total sales and revenues $63,909 $69,933 $74,435 $65,581 $273,858
Gross profit 15,411 16,770 17,272 15,951 65,404
Income before cumulative effect of
accounting change 2,105 2,777 3,270 1,946 10,098
Cumulative effect of change in accounting
for postretirement benefits (net of tax) (7,628) - - - (7,628)
Net income (loss) (5,523) 2,777 3,270 1,946 2,470
Earnings applicable to common stock (5,773) 2,528 3,032 1,700 1,487
Primary earnings (loss) per common share
Income before accounting change 0.33 0.45 0.54 0.30 1.62
Accounting change (1.35) - - - (1.35)
Net earnings (loss) (1.02) 0.45 0.54 0.30 0.27
Dividends declared per common share 0.10 0.11 0.11 0.12 0.44
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
First Second Third Forth Year
1992 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Total sales and revenues $55,841 $64,829 $72,379 $70,748 $263,797
Gross profit 12,511 15,156 17,708 16,948 62,323
Net income 1,072 2,343 3,751 1,961 9,127
Earnings applicable to common stock 809 2,081 3,489 1,698 8,077
Primary earnings per common share 0.16 0.40 0.66 0.30 1.52
Dividends declared per common share 0.10 0.10 0.10 0.10 0.40
Included in the fourth quarter of 1993 is a provision for environmental matters of $1,300,000 while
included in the fourth quarter of 1992 is a provision for litigation costs of $1,500,000.
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption "Directors and Executive
Officers" in the Company's definitive Proxy Statement for its April
29, 1994 Annual Meeting of Shareholders is here incorporated by
reference.
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and persons who own
more than 10 percent of the Company's Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. Officers, directors and
greater than 10 percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company
believes that all filing requirements applicable to its officers,
directors, and greater than 10 percent beneficial owners, with respect
to fiscal year 1992, were satisfied.
Item 11. EXECUTIVE COMPENSATION.
The information under the caption "Executive Compensation"
in the Company's definitive Proxy Statement for its April 29, 1994
Annual Meeting of Shareholders is here incorporated by reference.
In lieu of filing Annual Reports on Form 11-K on behalf of
the Kysor Industrial Corporation Employee Stock Ownership Plan,
pursuant to Rule 15d-21 promulgated under the Securities Exchange Act
of 1934, as amended, the report of Coopers & Lybrand, Certified Public
Accountants, and Examination of Financial Statements and Supplemental
Schedule of Reportable Transactions with respect to the Plan is
included in the exhibits to this Form 10-K Annual Report.<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information under the caption "Voting Securities" in
the Company's definitive Proxy Statement for its April 29, 1994 Annual
Meeting of Shareholders is here incorporated by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Management
Transactions", "Indebtedness of Management", and "Compensation
Committee Interlocks and Insider Participation", in the Company's
definitive Proxy Statement for its April 29, 1994 Annual Meeting of
Shareholders is here incorporated by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. The following financial statement schedules are
filed as a part of this report:
II. Amounts Receivable From Related Parties, Underwriters,
Promoters and Employees Other Than Related Parties - pages
45, 46 & 47.
V. Property, Plant and Equipment - pages 48, 49 & 50.
VI. Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment - pages 51, 52 & 53.
VIII. Valuation and Qualifying Accounts and Reserves -
page 54.
X. Supplementary Income Statement Information from Continuing
Operations - page 55.
Schedules other than those listed above are omitted
because they are not required, not applicable, or the information is
disclosed elsewhere in the financial statements.
Individual financial statements of the Company are omitted
because the Company is primarily an operating Company and the
subsidiaries included in the consolidated financial statements are
wholly owned subsidiaries and are not indebted to any person other
than the Parent or the consolidated subsidiaries in amounts exceeding
five percent (5%) of the total assets as shown by the Consolidated
Balance Sheet at December 31, 1993.
2. The following exhibits are filed as part of this
report:
NUMBER EXHIBIT LOCATION
3(a) Restated Articles of Incorporation (8)
(b) Restated Bylaws (1)
(c) Certificate of Designations,
Rights and Preferences -
Series A Convertible Voting
Preferred Stock (11)
4(a) Rights Agreement dated as of
April 28, 1986 between Kysor
Industrial Corporation and NBD, N.A. (5)
(b) Amendment dated as of May, 1988
to Rights Agreement dated as
of April 28, 1986 between Kysor
Industrial Corporation and NBD
Bank, N.A. (8)
(c) Revolving Credit Agreements between
Kysor Industrial Corporation and NBD
Bank, N.A., and Old Kent Bank
and Trust Company (12)
(d) Amendment dated January 1994 to the
Revolving Credit Agreements between
NBD Bank, N.A., and Old Kent Bank
and Trust Company (1)
(e) Term Note Agreement with NBD Bank,
N.A. dated as of October4, 1988 (8)
(f) Note Agreement between Kysor
Industrial Corporation and
Massachusetts Mutual Life Insurance
Company dated February 24, 1989 (8)
(g) Loan Agreement between Kysor
Industrial Corporation Employee
Stock Ownership Plan and NBD Bank,
N.A. and Related Guaranty and
Note Purchase Agreement (3)
(h) The Company has outstanding several
classes of long-term debt instruments.
None of these classes of debt is
registered under the Securities Act
of 1933. None of these classes of
debt outstanding at the date of
this report exceeds 10% of the Company's
total consolidated assets except for
the previously disclosed item included as
exhibit 4(d) and 4(f). The Company
agrees to furnish copies of the agreements
defining the rights of holders of such
long-term indebtedness to the Securities
and Exchange Commission upon request
The following management contracts of compensatory plans or
arrangements are included in the exhibits filed as part of this
report:
10(a) Stock Option and Stock Appreciation
Rights Plan of 1980 (2)
(b) Kysor Industrial Corporation amended
1983 Incentive Stock Option Plan (6)
(c) Kysor Industrial Corporation amended
1984 Stock Option Plan (6)
(d) Kysor Industrial Corporation 1987
Stock Option Plan (4)
(e) Kysor Industrial Corporation 1993
Long-Term Incentive Plan (14)
(f) Form of Termination Agreements with
corporate officers David W. Crooks,
Thomas P. Forrestal, Jr., Timothy J.
Campbell, Timothy D. Peterson,
Peter W. Gravelle, Richard G. De Boer,
Ellen E. Hovey, Mary C. Janik,
Robert L. Joseph, Terry M. Murphy (3)
(g) Employment Contract with corporate
officer George R. Kempton (4)
(h) Service Contract with Raymond A. Weigel (3)
(i) Form of Supplemental Executive Retirement
Plan with George R. Kempton,
Peter W. Gravelle, Timothy J. Campbell,
Thomas P. Forrestal, Jr., David W. Crooks,
Timothy D. Peterson, Logan F. Wernz,
Wilbert J. Venema, John B. Stevenson,
William G. Cobb (3)
(j) Amendment dated as of August 15, 1989
to Supplemental Executive Retirement
Plan dated July 10, 1985 (9)
(k) Amendment dated as of January 31, 1990
to Supplemental Executive Retirement Plan
dated July 10, 1985 (9)
(l) Kysor Industrial Corporation S.E.R.P.
Irrevocable Trust (9)
(m) Form of Indemnity Agreement with
directors and corporate officers;
William E. Callahan, Timothy J. Campbell,
Thomas P. Forrestal, Jr., Paul K. Gaston,
Grant C. Gentry, Peter W. Gravelle,
George R. Kempton, Philip LeBoutillier,
Jr., Robert W. Navarre, Frederick W.
Schwier, John D. Selby, Raymond A. Weigel,
David W. Crooks, Terry M. Murphy,
Timothy D. Peterson, Richard G. De Boer,
Ellen E. Hovey, Mary C. Janik,
Robert L. Joseph (6)
(n) Kysor Industrial Corporation Pension
Plan for Directors dated
January 1, 1985, amended
January, 1989 (9)
(o) Amendment dated as of July 28, 1989
to Kysor Industrial Corporation Pension
Plan for Directors dated January 1, 1985 (8)
(p) Directors Pension Plan Trust (9)
(q) Kysor Industrial Corporation Corporate
Management Variable Compensation Program (12)
(r) Form of Nonrecourse Promissory Note
and Pledge Agreement - Stock Option
Loan Program; George R. Kempton,
Philip LeBoutillier,Jr.,
Paul K. Gaston (12)
The Following are Other Material Contracts Included in the Exhibits
Filed as Part of this Report:
(s) AFP Divestiture Agreements (10)
(t) Beaver Michigan Associates Limited
Partnership Agreement (12)
(u) Development Agreement between
Beaver Michigan Associates
Limited Partnership, The City of
Cadillac and the Local Development
Finance Authority of the
City of Cadillac (12)
(v) Kysor Industrial Corporation Employee
Stock Ownership Plan Amended and
Restated effective January 1, 1989 (1)
(w) Employee Stock Ownership Trust
between Kysor Industrial Corporation
and Old Kent Bank and Trust Co.
dated January 1, 1989 (1)
(x) Note Agreement between Employee
Stock Ownership Plan and
Kysor Industrial Corporation (7)
11 Computation of Consolidated
Earnings Per Share (1)
22 Significant Subsidiaries (1)
24 Consent of Independent Accountants (1)
25 Power of Attorney (1)
28 Report of Coopers & Lybrand,
Certified Public Accountants, on
Examination of Financial Statements
and Supplemental Schedule of
Reportable Transactions for the
Kysor Industrial Corporation
Employee Stock Ownership Plan (1)
Notes
(1) Filed as a new exhibit to this report.
(2) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1981, and is here incorporated by
reference.
(3) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1985, and is here incorporated by
reference.
(4) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1986, and is here incorporated by
reference.
(5) This exhibit was previously filed as an exhibit to the
Registrant's Form 8-K Current Report dated May 1, 1986, and
is here incorporated by reference.
(6) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1987, and is here incorporated by
reference.
(7) This exhibit was filed as an exhibit to the Registrant's Form
8-K Current Report dated March 1, 1989, and is here
incorporated by reference.
(8) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1988, and is here incorporated by
reference.
(9) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1989, and is here incorporated by
reference.
(10) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1990, and is here incorporated by
reference.
(11) This exhibit was filed as an exhibit to the Registrant's Form
8-K Current Report dated February 28, 1989, and is here
incorporated by reference.
(12) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1991, and is here incorporated by
reference.
(13) This exhibit was previously filed as an exhibit to the
Registrant's Form 10-K Annual Report for its fiscal year
ended December 31, 1992, and is here incorporated by
reference.
(14) This exhibit was previously filed as an exhibit to the
Registrant's Proxy Statement for its fiscal year ended
December 31, 1992 and is here incorporated by reference.
The Company will furnish a copy of any exhibit listed
above to any shareholder of the Company without charge upon written
request to Investor Relations, Kysor Industrial Corporation, One
Madison Avenue, Cadillac, Michigan 49601-9785.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KYSOR INDUSTRIAL CORPORATION
By /s/ Terry M. Murphy
Terry M. Murphy
Vice President, Chief
Financial Officer
Date: March 9, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
/s/ Raymond A. Weigel * /s/ George R. Kempton *
Raymond A. Weigel, Chairman George R. Kempton,Chairman of
Emeritus, Director the Board, Chief Executive
Officer, Director
(Principal Executive Officer)
Date: March 9, 1994 Date: March 9, 1994
/s/ Peter W. Gravelle * /s/ Robert L. Joseph *
Peter W. Gravelle, Executive Robert L. Joseph, Comptroller
Vice President and Chief (Principal Accounting Officer)
Operating Officer
Date: March 9, 1994 Date: March 9, 1994
/s/ William E. Callahan * /s/ Thomas P. Forrestal, Jr. *
William E. Callahan, Director Thomas P. Forrestal, Jr.,
Group Vice President, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Paul K. Gaston * /s/ Grant C. Gentry *
Paul K. Gaston, Director Grant C. Gentry, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Philip LeBoutillier, Jr. * /s/ Timothy J. Campbell *
Philip LeBoutillier, Jr., Timothy J.Campbell, Group
Director Vice President, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Frederick W. Schwier * /s/ John D. Selby *
Frederick W. Schwier, Director John D. Selby, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Robert W. Navarre*
Robert W. Navarre, Director
Date: March 9, 1994
*By /s/ Terry M. Murphy
Terry M. Murphy
Attorney-in-fact
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Kysor Industrial Corporation
Cadillac, Michigan
Our report on the consolidated financial statements of Kysor Industrial
Corporation and Subsidiaries is included in Item 8 of this Form 10-K. In
connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in Item 14(a)1 of
this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Detroit, Michigan
February 14, 1994
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Year Ended December 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E
________ _________ _________ ______________________ ______________________
Deductions Balance at
Balance at (1) (2) End of Period
Beginning Amounts Amounts (1) (2)
Name of Debtor of Period Additions Collected Written Off Current Not Current
______________ __________ _________ _________ ___________ _______ ___________
<S> <C> <C> <C> <C> <C> <C>
G. Kempton $1,052,565 $36,156 $57,531 $958,878
P. LeBoutillier 209,183 9,133 10,828 189,222
P. Gaston 102,836 35 5,424 97,377
__________ __________ ________ __________ _______ __________
Total $1,364,584 $0 $45,324 - $73,783 $1,245,477
__________ __________ ________ __________ _______ __________
__________ __________ ________ __________ _______ __________
<F1>
In 1989, certain employees and directors executed 4.5 percent nonrecourse installment
purchase agreements of $2,090,793 with respect to 157,128 shares previously granted
under nonqualified stock option plans. Under the terms of the installment purchase
agreements, the shares are pledged as collateral and the extension of credit is subject
to Federal Reserve Bank Regulation G. Required annual payments are calculated using a
15-year amortization with a balloon payment due within the original life of the option
being exercised. The participants have limited rights of principal deferral in cases
of hardship. Dividends paid in respect to the shares are received by the Company and
first applied to accrued interest and then to principal. In January of 1992, the Board
of Directors authorized and directed management to permit those persons who have
outstanding option exercise loans to elect to make a special deferral of the 1992
required principal payment under the loan without otherwise impacting the terms of the
loan. Interest continues to be payable on the outstanding balance, but the 1992
principal payment was deferred until the end of the term of the loan. On January 1,
1993, the company and loan recipients agreed to rewrite the loans with essentially the
same terms as the old loans except any loans whose maturity date was more than 3 years
out, were revised to mature January 1, 1996.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Year Ended December 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E
________ _________ _________ ______________________ ______________________
Deductions Balance at
Balance at (1) (2) End of Period
Beginning Amounts Amounts (1) (2)
Name of Debtor of Period Additions Collected Written Off Current Not Current
______________ __________ _________ _________ ___________ _______ ___________
<S> <C> <C> <C> <C> <C> <C>
G. Kempton $1,052,565 $0 $56,034 $996,531
P. LeBoutillier 210,122 939 10,830 198,353
P. Gaston 102,659 (177) 5,424 97,412
Others under $100,000 49,942 49,942 0
__________ __________ ________ __________ _______ __________
Total $1,415,288 - $50,704 - $72,288 $1,292,296
__________ __________ ________ __________ _______ __________
__________ __________ ________ __________ _______ __________
<F1>
In 1989, certain employees and directors executed 4.5 percent nonrecourse installment
purchase agreements of $2,090,793 with respect to 157,128 shares previously granted
under nonqualified stock option plans. Under the terms of the installment purchase
agreements, the shares are pledged as collateral and the extension of credit is subject
to Federal Reserve Bank Regulation G. Required annual payments are calculated using a
15-year amortization with a balloon payment due within the original life of the option
being exercised. The participants have limited rights of principal deferral in cases
of hardship. Dividends paid in respect to the shares are received by the Company and
first applied to accrued interest and then to principal. In January of 1992, the Board
of Directors authorized and directed management to permit those persons who have
outstanding option exercise loans to elect to make a special deferral of the 1992
required principal payment under the loan without otherwise impacting the terms of the
loan. Interest continues to be payable on the outstanding balance, but the 1992
principal payment was deferred until the end of the term of the loan.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Year Ended December 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E
________ _________ _________ ______________________ ______________________
Deductions Balance at
Balance at (1) (2) End of Period
Beginning Amounts Amounts (1) (2)
Name of Debtor of Period Additions Collected Written Off Current Not Current
______________ __________ _________ _________ ___________ _______ ___________
<S> <C> <C> <C> <C> <C> <C>
G. Kempton $1,069,517 $16,952 $1,052,565
T. Forrestal 267,383 267,383 0
P. LeBoutillier 222,269 12,147 210,122
L. Wernz 215,625 215,625 0
P. Gaston 107,777 5,118 102,659
M. Janik 106,458 83 106,375 0
Others under $100,000 52,792 2,850 49,942
__________ __________ ________ __________ _______ __________
Total $2,041,821 - $37,150 $589,383 - $1,415,288
__________ __________ ________ __________ _______ __________
__________ __________ ________ __________ _______ __________
<F1>
In 1989, certain employees and directors executed 4.5 percent nonrecourse installment
purchase agreements of $2,090,793 with respect to 157,128 shares previously granted
under nonqualified stock option plans. During 1991, three optionee participants
relinquished their stock option loans in the amount of $589,383 and forfeited the
attendant 41,150 common shares. Under the terms of the installment purchase
agreements, the shares are pledged as collateral and the extension of credit is subject
to Federal Reserve Bank Regulation G. Required annual payments are calculated using a
15-year amortization with a balloon payment due within the original life of the option
being exercised. The participants have limited rights of principal deferral in cases
of hardship. Dividends paid in respect to the shares are received by the Company and
first applied to accrued interest and then to principal. In January of 1992, the Board
of Directors authorized and directed management to permit those persons who have
outstanding option exercise loans to elect to make a special deferral of the 1992
required principal payment under the loan without otherwise impacting the terms of the
loan. Interest continues to be payable on the outstanding balance, but the 1992
principal payment is deferred until the end of the term of the loan.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Balance at Other Balance
Beginning Additions Changes at End
Classification of Period at Cost Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $2,628,000 $21,000 $16,000 ($17,000)(a) $2,616,000
Buildings and equipment 29,336,000 1,013,000 (194,000)(a) 30,155,000
Machinery and equipment 43,709,000 5,954,000 341,000 (117,000)(a) 49,205,000
Office equipment 9,839,000 1,557,000 202,000 (47,000)(a) 11,147,000
Vehicles and airplanes 1,632,000 108,000 113,000 (9,000)(a) 1,618,000
___________ ___________ ___________ ___________ ___________
Total $87,144,000 $8,653,000 $672,000 ($384,000) $94,741,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
<F2>
Current year additions include replacements, improvements, government mandated changes,
increased facilities, and other capital investments.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Balance at Other Balance
Beginning Additions Changes at End
Classification of Period at Cost Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $2,565,000 $83,000 $4,000 ($16,000)(a) $2,628,000
Buildings and equipment 29,113,000 687,000 207,000 (257,000)(a) 29,336,000
Machinery and equipment 43,017,000 2,577,000 1,570,000 (315,000)(a) 43,709,000
Office equipment 9,973,000 511,000 567,000 (78,000)(a) 9,839,000
Vehicles and airplanes 1,710,000 61,000 86,000 (53,000)(a) 1,632,000
___________ ___________ ___________ ___________ ___________
Total $86,378,000 $3,919,000 $2,434,000 ($719,000) $87,144,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
<F2>
Current year additions include replacements, improvements, government mandated changes,
increased facilities, and other capital investments.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Balance at Other Balance
Beginning Additions Changes at End
Classification of Period at Cost Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $2,768,000 $34,000 $235,000 ($2,000)(a) $2,565,000
Buildings and equipment 28,861,000 1,116,000 834,000 (30,000)(a) 29,113,000
Machinery and equipment 42,536,000 2,413,000 1,851,000 (81,000)(a) 43,017,000
Office equipment 9,628,000 1,139,000 782,000 (12,000)(a) 9,973,000
Vehicles and airplanes 1,689,000 253,000 223,000 (9,000)(a) 1,710,000
___________ ___________ ___________ ___________ ___________
Total $85,482,000 $4,955,000 $3,925,000 ($134,000) $86,378,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
<F2>
Current year additions include replacements, improvements, government mandated changes,
increased facilities, and other capital investments.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes at End
Classification of Period Expenses Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $442,000 $51,000 $0 $0 (a) $493,000
Buildings and equipment 10,216,000 1,284,000 0 (44,000)(a) 11,456,000
Machinery and equipment 26,922,000 4,800,000 313,000 (56,000)(a) 31,353,000
Office equipment 6,721,000 1,048,000 196,000 (47,000)(a) 7,526,000
Vehicles and airplanes 945,000 231,000 82,000 (4,000)(a) 1,090,000
___________ ___________ ___________ ___________ ___________
Total $45,246,000 $7,414,000 $591,000 ($151,000) $51,918,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes at End
Classification of Period Expenses Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $390,000 $52,000 $0 $0 (a) $442,000
Buildings and equipment 9,167,000 1,331,000 207,000 (75,000)(a) 10,216,000
Machinery and equipment 23,999,000 4,611,000 1,559,000 (129,000)(a) 26,922,000
Office equipment 6,254,000 1,094,000 563,000 (64,000)(a) 6,721,000
Vehicles and airplanes 808,000 248,000 47,000 (64,000)(a) 945,000
___________ ___________ ___________ ___________ ___________
Total $40,618,000 $7,336,000 $2,376,000 ($332,000) $45,246,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
______________ ___________ ___________ ___________ ____________ ___________
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes at End
Classification of Period Expenses Retirements Add (Deduct) of Period
______________ ___________ ___________ ___________ ____________ ___________
<S> <C> <C> <C> <C> <C>
Land and improvements $349,000 $48,000 $8,000 $1,000 (a) $390,000
Buildings and equipment 8,183,000 1,312,000 309,000 (19,000)(a) 9,167,000
Machinery and equipment 21,300,000 4,632,000 1,717,000 (216,000)(a) 23,999,000
Office equipment 5,640,000 1,158,000 776,000 232,000 (a) 6,254,000
Vehicles and airplanes 688,000 268,000 144,000 (4,000)(a) 808,000
___________ ___________ ___________ ___________ ___________
Total $36,160,000 $7,418,000 $2,954,000 ($6,000) $40,618,000
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
<F1>
(a) Foreign translation adjustments
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
________ __________ ______________________ __________ __________
Additions
______________________
(1) (2)
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
DESCRIPTION of Period Expenses Accounts Deductions of Period
___________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Allowance for possible losses on $13,000 (c)
accounts and notes receivable $1,496,000 $544,000 ($33,000)(b) $474,000 (a) $1,546,000
__________ __________ _________ _________ __________
__________ __________ _________ _________ __________
Year Ended December 31, 1992:
Allowance for possible losses on ($22,000)(c)
accounts and notes receivable $985,000 $1,031,000 ($9,000)(b) $489,000 (a) $1,496,000
__________ __________ _________ _________ __________
__________ __________ _________ _________ __________
Year Ended December 31, 1991:
Allowance for possible losses on
accounts and notes receivable $960,000 $462,000 $72,000 (b) $509,000 (a) $985,000
__________ __________ _________ _________ __________
__________ __________ _________ _________ __________
<F1>
(a) Accounts written off as uncollectible net of recoveries
(b) Effect of translation adjustment on foreign operations
(c) Reclassification
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FROM CONTINUING OPERATIONS
<CAPTION>
Column A Column B
________ _________________________________________
Years Ended December 31,
Item 1993 1992 1991
________ ___________ ___________ ___________
<S> <C> <C> <C>
1. Maintenance and repairs $3,790,000 $3,490,000 $3,212,000
__________ __________ __________
__________ __________ __________
</TABLE>
EXHIBIT 3(b)
BYLAWS
OF
KYSOR INDUSTRIAL CORPORATION
ARTICLE I
OFFICES
The Corporation may have offices at such places, both within and
without the State of Michigan, as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Times and Places of Meetings. All meetings of the
shareholders shall be held, except as otherwise provided by statute or these
Bylaws, at such time and place as may be fixed from time to time by the Board
of Directors. Meetings of shareholders may be held within or without the State
of Michigan as shall be stated in the notice of each meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of the shareholders shall
be held on the last Friday of April if not a legal holiday, and if a legal
holiday, then on the next secular day following, at such hour as shall be
stated in the notice of each meeting, at which they shall elect by a plurality
vote the successors of the class of directors whose term expires at the
meeting, together with directors to fill vacancies or newly created direc-
torships, and transact such other business as may properly be brought before
the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called by an executive officer whenever directed by the Board of Directors,
or by the Chief Executive Officer.
Section 4. Notice of Meeting. Written notice of the time, place, and
purpose of each meeting of shareholders shall be given not less than 10 nor
more than 60 days before the date of the meeting, either personally or by
mail, to each shareholder of record entitled to vote at the meeting. Notice
of a meeting need not be given to any shareholder who signs a waiver of notice
before or after the meeting.
A shareholder's attendance at a meeting will result in both of the
following:
(a) Waiver of objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of
the meeting objects to holding the meeting or transacting business
at the meeting because the meeting has not been lawfully called or
convened; and
(b) Waiver of objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
Section 5. Postponement. Any annual or special meeting of the
shareholders may be postponed by the Board of Directors or the Chief Executive
Officer for any reason at any time prior to the time such meeting is called to
order. Written notice of such postponement, stating the date, time and place
of the postponed meeting, if it has been postponed to a specific date and
time, shall be given personally or by mail to each shareholder of record
entitled to vote at such meeting. For this purpose, a written notice
conspicuously posted at the time and place originally specified for the
meeting postponed shall be deemed to have been given personally to each
shareholder who appears at that place.
Section 6. Quorum. Shares entitled to cast a majority of votes at a
meeting constitute a quorum at the meeting, except as otherwise provided by
statute or by the Restated Articles of Incorporation. The shareholders
present in person or by proxy at such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum. Whether or not a quorum is present, the meeting may
be adjourned by a vote of the shares present.
Except when the holders of a class or series of shares are
entitled to vote separately on an item of business, shares of all classes and
series entitled to vote shall be combined as a single class and series for the
purpose of determining a quorum. When the holders of a class or series of
shares are entitled to vote separately on an item of business, shares of that
class or series entitled to cast a majority of the votes of that class or
series at a meeting constitute a quorum of that class or series at that
meeting, unless a greater or lesser quorum is provided by statute or the
Restated Articles of Incorporation.
Section 7. Adjournment. The Chairman of the Board, or such other
officer who shall preside at any meeting of shareholders, may adjourn the
meeting for any reason at any time after that meeting has been called to
order, without motion or vote of the shareholders, by announcing such
adjournment to the meeting.
If a meeting is adjourned to another time or place, it is not
necessary, unless the Bylaws otherwise require, to give notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken and the only
business transacted at the adjourned meeting is business which might have been
transacted at the original meeting. If after the adjournment the board fixes
a new record date for the adjourned meeting, a notice of the adjourned meeting
shall be given to each shareholder of record on the new record date. If a
meeting is adjourned solely for the purpose of receiving the results of voting
by shareholders, such meeting need not be reconvened. If not reconvened, such
meeting shall stand adjourned pending submission of the results of voting to
the Secretary of the Corporation, whereupon such meeting shall stand adjourned
until the next regular or special meeting of shareholders.
Section 8. Shareholder List. The officer or agent who has charge of
the stock ledger of the Corporation shall prepare and make available at every
meeting of shareholders a complete list of the shareholders entitled to vote
at the meeting, arranged by class or series of shares in alphabetical order,
showing the address of and the number of shares registered in the name of each
shareholder. Such list shall be produced and kept at the time and place of
the meeting and shall be subject to inspection by any shareholder who is
present at the meeting during the whole time of the meeting.
Section 9. Vote Required. When a quorum is present at a meeting, any
action to be taken by a vote of the shareholders, other than the election of
directors, shall be authorized by a majority of the votes cast by the holders
of shares entitled to vote on the action, unless a greater vote is required by
the Restated Articles of Incorporation or express provision of statute.
Except as otherwise provided by the Restated Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an election.
Section 10. Voting Rights. Except as otherwise provided by the
Restated Articles of Incorporation or the resolution or resolutions of the
Board of Directors creating any class of stock, each shareholder shall at
every meeting of shareholders be entitled to one vote in person or by proxy
for each share of the capital stock having voting power held by such
shareholder. Each proxy shall be in writing and signed by the shareholder or
his or her duly authorized representatives, and shall be valid only with
respect to the particular meeting, or any adjournments thereof, to which it
specifically pertains.
Section 11. Inspectors of Election. The Board of Directors or, if they
shall not have so acted, the chairman may appoint, at or prior to any meeting
of shareholders, one or more persons (who may be directors, employees,
attorneys or accountants of the Corporation) to serve as inspectors of
election. The inspectors so appointed shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes or ballots, hear and determine challenges and questions
arising in connection with the right to vote, count and tabulate votes,
determine the result, and do such acts as are proper to conduct the election
or vote with fairness to all shareholders.
Section 12. Voting. When any vote is taken by written ballot at any
meeting of shareholders, an unrevoked proxy submitted in accordance with its
terms shall be accepted in lieu of, and shall be deemed to constitute, a
written ballot marked specified in such proxy.
Section 13. Conduct of Meetings. Meetings of shareholders generally
shall be subject to the following rules of procedure:
(a) The chairman of the meeting shall have absolute
authority over matters of procedure, and there shall be no appeal
from the ruling of the chairman. If, in his or her absolute
discretion, the chairman deems it advisable to dispense with
customary rules of parliamentary procedure as to any meeting of
shareholders or part thereof, he or she shall clearly state the
rules under which the meeting or appropriate part thereof shall be
conducted.
(b) If disorder should arise which, in the absolute
discretion of the chairman, prevents the continuation of the
legitimate business of the meeting, the chairman may quit the
chair and announce the adjournment of the meeting; and upon his or
her so doing, the meeting shall be immediately adjourned without
the necessity of any vote or further action of the shareholders.
(c) The chairman may require any person who is not a bona
fide shareholder of record on the record date, or a validly
appointed proxy of such a shareholder, to leave the meeting.
(d) The chairman may introduce nominations, resolutions or
motions submitted by the Board of Directors for consideration by
the shareholders without a motion or second. Except as the
chairman shall direct, a resolution or motion not submitted by the
Board of Directors shall be considered for vote only if proposed
by a shareholder of record on the record date or a validly
appointed proxy of such a shareholder, and seconded by such a
shareholder or proxy other than the individual who proposed the
resolution or motion.
(e) Except as the chairman shall direct, no matter may be
presented to the meeting which has not been submitted in writing
to the Secretary for inclusion in the agenda at least 10 days
before the date of the meeting.
(f) When all shareholders present at a meeting in person
or by proxy have been offered an opportunity to vote on any matter
properly before a meeting, the chairman may at his or her
discretion declare the polls to be closed, and no further votes
may be cast or changed after such declaration. If no such
declaration is made by the chairman, the polls shall remain open
and shareholders may cast additional votes or change votes until
the inspectors of election have delivered their final report to
the chairman.
(g) When the chairman has declared the polls to be closed
on all matters then before a meeting, the chairman may declare the
meeting to be adjourned pending determination of the results by
the inspectors of election. In such event, the meeting shall be
considered adjourned for all purposes, and the business of the
meeting shall be finally concluded upon delivery of the final
report of the inspectors of election to the chairman at or after
the meeting.
(h) When the chairman determines that no further matters
may properly come before a meeting, he or she may declare the
meeting to be adjourned, without motion, second, or vote of the
shareholders.
(i) When the chairman has declared a meeting to be
adjourned, unless the chairman has declared the meeting to be
adjourned until a later date, no further business may properly be
considered at the meeting even though shareholders or holders of
proxies representing a quorum may remain at the site of the
meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Term of Directors. The number of directors which
shall constitute the whole Board shall be not less than three and shall be
determined from time to time by resolution of the Board of Directors as set
forth in the Restated Articles of Incorporation. The directors, other than
those who may be elected by the holders of any class or series of stock having
a preference over Common Stock as to dividends or upon liquidation, shall be
divided into three classes, as nearly equal in number as possible, with the
term of office of one class expiring each year. At each annual meeting of the
shareholders, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election. Directors need not be shareholders.
Section 2. Powers. The business and affairs of the Corporation shall
be managed by the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Restated Articles of Incorporation or by these Bylaws directed or required
to be exercised or done by the shareholders.
Section 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled as provided in the Restated Articles of Incorporation.
Section 4. Resignation and Removal. Any director may resign at any
time and such resignation shall take effect upon receipt of written notice
thereof by the Corporation, or at such subsequent time as set forth in the
notice of resignation. Any or all of the directors may be removed, but only
for cause, as provided in the Restated Articles of Incorporation.
Section 5. Compensation of Directors. Each director who is not a
salaried officer of the Corporation may receive as compensation for his or her
services in that capacity such sums and such benefits as shall from time to
time be determined by the Board of Directors, plus all expenses necessary for
attendance at regular or special meetings of the Board of Directors and
committees of the Board. Members of special or standing committees may be
allowed like compensation for attending committee meetings. Nothing herein
shall be construed to preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor.
Section 6. Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Michigan.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected Board of Directors shall be held following the annual
meeting of shareholders, and no notice of such meeting shall be necessary to
the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 9. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, Chief Executive Officer, or Secretary
or by any two (2) directors on two (2) days' notice to each director, either
personally, by mail, by telegram or by facsimile transmission.
Section 10. Purpose Need Not be Stated. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting.
Section 11. Quorum. At all meetings of the Board of Directors a
majority of the directors shall constitute a quorum for the transaction of
business, and the acts of a majority of the directors present at any meeting
at which there is a quorum shall be acts of the Board of Directors except as
may be otherwise specifically provided by statute or by the Restated Articles
of Incorporation. If a quorum is not present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Restated Articles of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if, before or after the
action, all members of the Board or of such committee, as the case may be,
consent thereto in writing and such written consent is filed with the minutes
or proceedings of the Board or committee.
Section 13. Meeting by Telephone or Similar Equipment. Members of the
Board of Directors or any committee designated by the Board of Directors may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
Section 14. Written Notice. Notices to directors shall be in writing
and delivered personally or mailed to the directors at their addresses
appearing on the books of the Corporation. Notice by mail shall be deemed to
be given at the time when the same shall be mailed. Notice to directors may
also be given by telegram or facsimile transmission.
Section 15. Waiver of Notice. A waiver of notice of a meeting in
writing, signed by the person or persons entitled to such notice, whether
before or after the meeting shall be deemed equivalent notice of the meeting.
The attendance of a director at or participation in a meeting shall constitute
a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting, at the beginning of the meeting or upon
his or her arrival, to the meeting or the transaction of any business because
the meeting has not been lawfully called or convened, and the person does not
thereafter vote for or assent to any action taken at the meeting.
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 1. Committees. The Board of Directors may from time to time
appoint committees whose membership shall consist of such members of the Board
of Directors as it may deem advisable to serve at the pleasure of the Board.
The Board of Directors may also appoint directors to serve as alternates for
members of committees in the absence or disability of regular members. The
Board of Directors may fill any vacancies as they occur.
Section 2. Executive Committee. The Executive Committee, if there is
one, shall have and may exercise the powers and authority of the Board of
Directors in the management of the business affairs and property of the
Corporation during the intervals between meetings of the Board of Directors,
subject to law and to such limitations and control as the Board of Directors
may impose from time to time. The Executive Committee shall also have the
power and authority to declare distributions and dividends and to authorize
the issuance of stock.
Section 3. Audit Committee. The Audit Committee, if there is one,
shall cause a suitable examination of the financial records and operations of
the Corporation and its subsidiaries to be made by the internal auditor of the
Corporation. The Audit Committee shall also recommend to the Board of
Directors the employment of independent certified public accountants to
examine the financial statements of the Corporation and its subsidiaries, and
report to the Board of Directors at least once each calendar year concerning
the results of examinations made and such conclusions and recommendations as
the Audit Committee deems advisable.
Section 4. Compensation and Organization Committee.
(a) Function. The Compensation and Organization Committee shall
perform the function of a compensation committee as that function may be
defined for the purpose of compliance with laws and regulations applicable to
the Corporation. The Compensation and Organization Committee shall have the
following duties and responsibilities:
(i) determining the compensation policy of the
Corporation, reviewing the personnel policies, plans and programs
of the Corporation, and submitting recommendations to the board of
directors;
(ii) determining the compensation of the Chief Executive
Officer, reviewing individual salaries of other executive
officers, and submitting recommendations to the board of
directors;
(iii) preparing an annual report that may be submitted to
the Corporation's shareholders concerning the compensation policy
of the Corporation and the committee's compensation decisions
during the previous fiscal year;
(iv) recommending to the Board of Directors the amounts of
the retainer and attendance for non-employee directors; and
(v) reviewing the administration and results of operations
of the Corporation's pension plans; conferring with and receiving
reports from the actuaries and investment managers of the pension
plans, reviewing all material pension plan changes; and submitting
recommendations concerning such plans to the Board of Directors.
(b) Eligibility of Members. Directors who serve on the Compensation
and Organization Committee must be "disinterested persons" as such term may be
defined for purposes of Section 16 of the Securities and Exchange Act of 1934,
as amended.
(c) Authorized Actions. The Compensation and Organization Committee
shall have the power to take and effect the following actions:
(i) authorize the issuance of stock pursuant to the
benefit plans of the Corporation which are approved by the board
of directors;
(ii) interpret the benefit plans of the Corporation which
it administers to the extent that such power does not conflict
with the terms of the applicable plan document; and
(iii) engage counsel and other consultants as the committee
may deem necessary or advisable to assist the committee in
performing its duties, which counsel and other consultants may but
need not be otherwise engaged by the Corporation.
Section 5. Nominating Committee. The Nominating Committee, if there is
one, shall develop and recommend to the Board of Directors criteria for the
selection of candidates for director, seek and receive suggestions concerning
possible candidates, review and evaluate the qualifications of possible
candidates and recommend to the Board candidates for vacancies occurring from
time to time and for the slate of directors to be proposed on behalf of the
Board of Directors at the annual meeting of shareholders. The Nominating
Committee will consider nominees recommended by the shareholders, as properly
submitted to the Secretary of the Corporation.
Section 6. Other Committees. The Board of Directors may from time to
time designate such other committees as it may deem appropriate. Such
committees shall exercise the authority delegated to them by the Board.
Section 7. Committee Meetings. Each committee provided for above shall
meet as often as its business may require and may fix a day and time for
regular meetings, notice of which shall not be required. Whenever the day
fixed for a meeting shall fall on a holiday, the meeting shall be held on the
business day following or on such other day as the committee may determine.
Special meetings of committees may be called by the chairman of the committee
or any two (2) members other than the chairman, and notice thereof may be
given to the members by telephone, telegram, letter or facsimile transmission.
A majority of its members shall constitute a quorum for the transaction of the
business of any of the committees. A record of the proceedings of each
committee shall be kept and presented to the Board of Directors.
Section 8. Substitutes. In the absence or disqualification of a member
of a committee, the members thereof present at a meeting and not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of such absent or
disqualified member.
ARTICLE V
OFFICERS
Section 1.
(a) Central Staff. The executive officers of the
Corporation shall be a Chairman of the Board, a President, one or
more Vice Presidents, a Secretary, a Treasurer and a Chief
Financial Officer who shall be appointed by the Board of Directors
at its first meeting after each regular annual meeting of
shareholders. The Board of Directors may also appoint such other
officers as they may deem necessary. The dismissal of an officer,
the appointment of an officer to fill the place of one who has
been dismissed or has ceased for any reason to be an officer, the
appointment of any additional officers, and the change of an
officer to a different office may be made by the Board of
Directors at any later meeting. Each officer shall hold office at
the pleasure of the Board. The Board of Directors may remove any
officer from that office or position for cause or without cause.
Any officer may resign his or her office at any time, such
resignation to take effect upon receipt of written notice thereof
by the Corporation unless otherwise specified in the resignation.
The Chairman of the Board and President shall be chosen from among
the directors, but no other officer need be a director. Either
the Chairman of the Board or the President shall also be
designated as the Chief Executive Officer. Any two (2) or more of
the above offices, except those of the President and Vice
President, may be held by the same person.
(b) Divisional Officers. The Board of Directors or the
Chief Executive Officer may, as they shall deem necessary,
designate certain individuals as divisional officers. Any titles
so given to divisional officers may be withdrawn at any time with
or without cause by the Board of Directors or the Chief Executive
Officer.
Section 2. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders, and at all meetings of the Board
of Directors, shall be an ex officio voting member of all standing committees
designated by the Board of Directors except the Audit Committee and the
Compensation and Organization Committee and shall have such other duties and
powers as may be imposed or given by the Board of Directors. In the case of
absence or inability to act of the President or Chief Executive Officer, the
Chairman of the Board shall exercise all of the duties and responsibilities of
such officer until the Board of Directors shall otherwise direct.
Section 3. President. The President shall, subject to the direction of
the Board of Directors, see that all orders and resolutions of the Board of
Directors are carried into effect, and shall perform all other duties
necessary as appropriate to his office, subject, however, to his right and the
right of the directors to delegate any specific powers to any other officer or
officers of the Corporation. In the case of absence or inability to act of
the Chairman of the Board or the Chief Executive Officer, the President shall
exercise all of the duties and responsibilities of such officer until the
Board of Directors shall otherwise direct. The President shall be an ex
officio voting member of all standing committees designated by the Board of
Directors, except the Audit Committee and the Compensation and Organization
Committee.
Section 4. Chief Executive Officer. The Chief Executive Officer, in
addition to his duties as Chairman of the Board or President, as the case may
be, shall have final authority, subject to the control of the Board of
Directors, over the general policy and business of the Corporation and shall
have the general control and management of the business and affairs of the
Corporation. The Chief Executive Officer shall have the power, subject to the
control of the Board of Directors, to appoint, suspend or discharge and to
prescribe the duties and to fix the compensation of such agents and employees
of the Corporation, other than the officers appointed by the Board, as he may
deem necessary.
Section 5. Chief Operating Officer. There may be elected a Chief
Operating Officer who shall, if elected, have general charge, control and
supervision over the administration and operations of the Corporation and
shall have such other duties and powers as may be imposed or given by the
Board of Directors. If no Chief Operating Officer is elected, the duties and
powers of the Chief Operating Officer shall be performed by the Chief
Executive Officer.
Section 6. Vice Presidents. The Vice President or Vice Presidents
shall perform such duties and have such powers as the Chief Executive Officer
or the Board of Directors may from time to time prescribe. The Board of
Directors may at its discretion designate one or more of the Vice Presidents
to be Executive Vice Presidents or Senior Vice Presidents. Any Vice President
so designated shall have such duties and responsibilities as the Board shall
prescribe.
Section 7. Secretary. The Secretary shall attend all meetings of the
shareholders, the Board of Directors and the Executive Committee, and shall
preserve in the books of the Corporation true minutes of the proceedings of
all such meetings. The Secretary shall safely keep in his or her custody the
seal of the Corporation and shall have authority to affix the same to all
instruments where its use is required or appropriate. The Secretary shall
give all notices required or appropriate pursuant to statute, the Bylaws, or
resolution. The Secretary shall perform such other duties as may be delegated
to him or her by the Board of Directors or by the Executive Committee.
Section 8. Treasurer. The Treasurer shall have custody of all
corporate funds and securities and shall keep in books belonging to the
Corporation full and accurate accounts of all receipts and disbursements. The
Treasurer shall deposit all moneys, securities and other valuable effects in
the name of the Corporation in depositories as may be designated for that
purpose by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive
Officer and directors at the regular meetings of the Board, and whenever
requested by them, an account of all his or her transactions as Treasurer and
of the financial condition of the Corporation. If required by the Board of
Directors the Treasurer shall deliver to the Chief Executive Officer of the
Corporation, and shall keep in force, a bond in form, amount and with a surety
or sureties satisfactory to the Board of Directors, conditioned for faithful
performance of the duties of his or her office, and for restoration to the
Corporation in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and property of whatever kind in
his or her possession or under his or her control belonging to the
Corporation.
Section 9. Chief Financial Officer. There may be elected a Chief
Financial Officer who shall, if elected, perform such duties and exercise such
authority as may be prescribed by the Board of Directors. Unless otherwise
designated by the Board of Directors, the Chief Financial Officer shall also
be the principal accounting officer.
Section 10. Assistant Secretary and Assistant Treasurer. There may be
elected an Assistant Secretary and Assistant Treasurer who shall, in the
absence, disability or nonfeasance of the Secretary or Treasurer, perform the
duties and exercise the powers of such persons, respectively.
Section 11. Other Officers. All other officers, as may from time to
time be appointed by the Board of Directors pursuant to Paragraph (a) of
Section 1 of this Article V, shall perform such duties and exercise such
authority as the Board of Directors shall prescribe. All divisional officers,
as may from time to time be appointed by the Board of Directors or the Chief
Executive Officer pursuant to Paragraph (b) of Section 1 of this Article V,
shall perform such duties and exercise such authority as the Board of
Directors or the Chief Executive Officer shall prescribe.
ARTICLE VI
INDEMNIFICATION
Section 1. Indemnification Other Than in Actions by or in The Right of
the Corporation. Any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he or she is
or was a director or executive officer of the Corporation or a subsidiary, or,
while serving as such a director or executive officer, is or was serving at
the request of the Corporation or a subsidiary as a director, officer,
partner, trustee, employee or agent of another foreign or domestic
Corporation, partnership, joint venture, trust or other enterprise, whether
for profit or not, shall be indemnified by the Corporation against expenses
(including attorneys' fees), judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the Corporation, or its
shareholders, or, with respect to any criminal action or proceeding, that he
or she had reasonable cause to believe that his or her conduct was unlawful.
Persons who are not directors or executive officers of the Corporation or a
subsidiary may be similarly indemnified in respect of such service to the
extent authorized at any time by the Board of Directors, except as otherwise
provided by statute or the Restated Articles of Incorporation.
Section 2. Indemnification in Actions by or in the Right of the
Corporation. Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director or executive officer of the
Corporation or a subsidiary, or, while serving as such a director or executive
officer, is or was serving at the request of the Corporation or a subsidiary
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by the Corporation
against expenses (including attorneys' fees) and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the action
or suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation or
its shareholders. Indemnification shall not be made for any claim, issue or
matter in which such person has been found liable to the Corporation except to
the extent authorized in Section 6 of this Article. Persons who are not
directors or executive officers of the Corporation or a subsidiary may be
similarly indemnified in respect of such service to the extent authorized at
any time by the Board of Directors, except as otherwise provided by statute or
the Restated Articles of Incorporation.
Section 3. Expenses. To the extent that a director or executive
officer, or other person whose indemnification is authorized by the Board of
Directors, has been successful on the merits or otherwise, including the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 1 or 2 of this Article, or in defense of
any claim, issue or matter therein, he or she shall be indemnified against all
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection therewith and any action, suit or proceeding brought to
enforce the mandatory indemnification provided in this Section.
Section 4. Determination of Right of Indemnification. Any
indemnification under Section 1 or 2 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
this Article and upon an evaluation of the reasonableness of expenses and
amounts paid in settlement. Such determination shall be made (a) by the Board
of Directors by a majority vote of a quorum consisting of directors who are
not parties or threatened to be made parties to such action, suit or
proceeding, or if such a quorum cannot be obtained, by a majority vote of a
committee duly designated by the Board consisting solely of two or more
directors not at the time parties or threatened to be made parties to such
action, suit or proceeding; (b) by independent legal counsel (who may be the
regular counsel of the Corporation) in a written opinion, which counsel shall
be selected as provided in (a) above, provided that if a committee cannot be
designated as provided in (a) above, then the Board shall select such
independent counsel; (c) by all Independent Directors (as that term is defined
in the Michigan Business Corporation Act) who are not parties or threatened to
be made parties to such action, suit or proceeding; or (d) by the
shareholders, but shares held by directors, officers, employees or agents who
are parties or threatened to be made parties to such action, suit or
proceeding may not be voted. In designating a committee under (a) above, or
in the selection of independent legal counsel in the event a committee cannot
be designated pursuant to (b) above, all directors may participate. The
Corporation may indemnify a person for a portion of expenses (including
reasonable attorneys' fees), judgments, penalties, fines, and amounts paid in
settlement for which the person is entitled to indemnification under
Sections 1 or 2 of this Article, even though the person is not entitled to
indemnification for the total amount of such expenses, judgments, penalties,
fines and amounts paid in settlement.
Section 5. Advancing of Expenses. Expenses incurred by any person who
is or was serving as a director or executive officer of the Corporation or a
subsidiary in defending a civil or criminal action, suit or proceeding
described in Section 1 or 2 of this Article shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding if
(a) the person furnishes the Corporation a written affirmation of his or her
good faith belief that he or she has met the applicable standard of conduct
set forth in Section 1 or 2 of this Article; (b) the person furnishes the
Corporation a written undertaking, executed personally or on his or her
behalf, to repay the advance if it is ultimately determined that he or she did
not meet the applicable standard of conduct; and (c) a determination is made
that the facts then known to those making the determination would not preclude
indemnification under the Michigan Business Corporation Act. Persons who are
or were not serving as a director or executive officer of the Corporation or a
subsidiary may receive similar advances of expenses to the extent authorized
at any time by the Board of Directors, except as otherwise provided by statute
or the Articles of Incorporation. Determinations under this Section shall be
made in the manner specified in Section 4 of this Article. Notwithstanding
the foregoing, in no event shall any advance be made in instances where the
Board or independent legal counsel reasonably determines that such person
deliberately breached his or her duty to the Corporation or its shareholders.
Section 6. Right to Indemnification on Upon Application; Procedure Upon
Application. A director, executive officer or other person who is a party or
threatened to be made a party to an action, suit or proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court may order
indemnification if it determines that the person is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not he or she met the applicable standard of conduct set forth in
Sections 1 or 2 of this Article or was adjudged liable as described in
Section 2 of this Article, provided, however, that if he or she was adjudged
liable, his or her indemnification shall be limited to reasonable expenses
incurred.
Section 7. Indemnification Hereunder Not Exclusive. The
indemnification or advancement of expenses provided by this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under the Restated Articles of
Incorporation, any Bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent,
and shall inure to the benefit of the heirs, executors and administrators of
such a person. The total amount of expenses advanced or indemnified from all
sources shall not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. All rights to
indemnification under this Article shall be deemed to be provided by a
contract between the Corporation and the director, officer, employee or agent
who serves in such capacity at any time while these Bylaws and other relevant
provisions of the general corporation law and other applicable law, if any,
are in effect. Any repeal or modification thereof shall not affect any right
or obligation then existing.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her
in any such capacity, or arising out of his or her status as such, whether or
not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article.
Section 9. Mergers. For the purposes of this Article, references to
the "Corporation" include all constituent corporations absorbed in a
consolidation or merger, as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee, or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall stand in the same position under
the provisions of this Article with respect to the resulting or surviving
corporation if he or she had served the resulting or surviving corporation in
the same capacity.
Section 10. Savings Clause. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction,
then the Corporation shall nevertheless indemnify each director, executive
officer, or other person whose indemnification is authorized by the Board of
Directors as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including a grand
jury proceeding and an action by the Corporation, to the full extent permitted
by any applicable portion of this Article that shall not have been invalidated
or by any other applicable law.
ARTICLE VII
SUBSIDIARIES
Section 1. Subsidiaries. The Board of Directors, the Chief Executive
Officer, or any executive officer designated by the Board of Directors may
vote the shares of stock owned by the Corporation in any subsidiary, whether
wholly or partly owned by the Corporation, in such manner as they may deem in
the best interests of the Corporation, including, without limitation, for the
election of directors of any subsidiary corporation, or for any amendments to
the charter or bylaws of any such subsidiary corporation, and for the
liquidation, merger, or sale of assets of any such subsidiary corporation.
The Board of Directors, the Chief Executive Officer or any executive officer
designated by the Board of Directors may cause to be elected to the Board of
Directors of any such subsidiary corporation such persons as they shall
designate, any of whom may, but need not be, directors, executive officers, or
other employees or agents of the Corporation. The Board of Directors, the
Chief Executive Officer or any executive officer designated by the Board of
Directors may instruct the directors of any such subsidiary corporation as to
the manner in which they are to vote upon any issue properly coming before
them as the directors of such subsidiary corporation, and such directors shall
have no liability to the Corporation as the result of any action taken in
accordance with such instructions.
Section 2. Subsidiary Officers Not Executive Officers. The officers of
any subsidiary corporation shall not, by virtue of holding such title and
position, be deemed to be executive officers of the corporation, nor shall any
such officer of a subsidiary corporation, unless he or she is also a director
or executive officer of the Corporation, be entitled to have access to any
files, records or other information relating or pertaining to the Corporation,
its business and finances, or to attend or receive the minutes of any meetings
of the Board of Directors or any committee of the Corporation, except as and
to the extent expressly authorized and permitted by the Board of Directors or
the Chief Executive Officer.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate in the name of the Corporation, signed by the
Chairman of the Board or the President or a Vice President and the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him or her in the
Corporation.
Section 2. Facsimile Signatures. Where a certificate is signed (1) by
a transfer agent or an assistant transfer agent, or (2) by a transfer clerk
acting on behalf of the Corporation and a registrar, the signatures of the
Chairman of the Board, President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be facsimiles. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if the person were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate of certificates, the Board of
Director may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of successor, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. Fixing of Record Date by Board. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting
of shareholders, or any adjournment thereof, or to express consent to or
dissent from any corporate action in writing without a meeting, or for the
purpose of determining shareholders entitled to receive payments of any
dividend or the distribution or allotment of any rights or evidences or
interests arising out of any change, conversion or exchange of capital stock,
or for the purpose of any other action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of shareholders.
Such date shall not be more than sixty (60) days nor less than ten (10) days
before the date of any such meeting, nor more than sixty (60) days prior to
the effectuation of any other action proposed to be taken. Only shareholder
of record on a record date so fixed shall be entitled to notice of, and to
vote at, such meeting or to receive payment of any dividend or the
distribution or allotment of any rights or evidences of interests arising out
of any change, conversion or exchange of capital stock.
Section 6. Provision for Record Date in the Absence of Board Action.
If a record date is not fixed by the Board of Directors: (a) the record date
for determination of shareholders entitled to notice of or to vote at a
meeting of shareholders shall be the close of business on the day next
preceding the day on which notice is given, or, if no notice if given, the day
next preceding the day on which the meeting is held; and (b) the record date
for determining shareholders entitled to express consent to or dissent from
corporate action in writing, without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is delivered to the Corporation; and (c) the record date for
determining shareholders for any other purpose shall be the close of business
on the day on which the resolution of the Board relating thereto is adopted.
Section 7. Adjournments. When a determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders has been
made as provided in this Article, the determination applies to any adjournment
of the meeting, unless the Board fixes a new record date for the adjourned
meeting.
Section 8. Registered Shareholders. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner; the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise
provided by the laws of Michigan.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Articles of
Incorporation, if any, maybe declared by the Board of Directors at any regular
or special meeting pursuant to law. Dividends may be paid in cash, in
property, or in shares of capital stock, subject to the provisions of the
Restated Articles of Incorporation.
Section 2. Reserves. Before payment of any dividends, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
thinks proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive
to the interests of the Corporation, and the directors may modify or abolish
any such reserve in the manner in which it was created.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate. Any
signature on any check, demand or note may be signed by the facsimile
signature of any person authorized by the Board of Directors to sign under
this Section. If any officer who has signed or whose facsimile signature has
been used shall cease to be such officer, such document may nevertheless be
signed by means of such facsimile signature and delivered as though the person
who signed such document or whose facsimile signature has been used thereon
had not ceased to be such officer.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, and the words "Corporate Seal, Michigan." The seal
may be used by causing it or a facsimile thereof to be impressed, affixed,
reproduced or otherwise.
Section 6. Voting Securities. The Chief Executive Officer or any
executive officer designated by the Board of Directors shall have full power
and authority on behalf of the Corporation to attend and to act and to vote,
or to execute in the name or on behalf of the Corporation a proxy authorizing
an agent or attorney-in-fact for the Corporation to attend and to act and to
vote, at any meetings of security holders of corporations in which the
Corporation may hold securities, and at such meetings he or she and his or her
duly authorized agent or attorney-in-fact shall possess and may exercise any
and all rights and powers incident to the ownership of such securities and
which, as the owner hereof, the Corporation may have possessed and exercised
if present.
ARTICLE X
AMENDMENTS
These Bylaws may be amended or repealed by the Board of Directors
at any regular or special meeting of the Board of Directors. These Bylaws may
be amended or repealed by the shareholders at any annual or special meeting of
the shareholders provided that notice that amendment of the Bylaws is a
purpose of the meeting and notice of the proposed amendment has been provided
in the notice of such meeting.
EXHIBIT 4(d)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of
January ___, 1994 (this "Amendment") is between KYSOR INDUSTRIAL
CORPORATION, a Michigan corporation (the "Company") and NBD BANK,
N.A., a national banking association (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Credit
Agreement dated as of December 31, 1991 (the "Credit Agreement")
pursuant to which the Bank agreed, subject to the terms and
conditions thereof, to extend credit to the Company.
B. The Company has requested that the Bank extend
the termination date and make certain other amendments and the Bank
is willing to amend the terms and conditions of the Credit Agreement
on the terms and conditions hereof.
TERMS
In consideration of the premises and of the mutual
agreements herein contained, the parties hereby agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth
in Article III hereof, the Credit Agreement shall be amended as
follows:
Section 1.1 shall be amended as follows:
(a) The definition of "Eurodollar Rate" shall
be amended by deleting clause (a) therein in its entirety and
inserting the following in place thereof: "(a) one-half of one
percent (1/2 of 1%) per annum".
(b) The definition of "Termination Date" shall
be amended by deleting the reference therein to "December 31, 1995"
and inserting "December 31, 1997" in place thereof.
Section 2.4 shall be amended by deleting the
reference therein to "three-eighths of one percent (3/8 of 1%)" and
inserting the following in place thereof: "one-quarter of one
percent (1/4 of 1%)".
The Allonge to Revolving Credit Note (the
"Allonge") annexed hereto as Exhibit A shall be delivered by the
Company, accepted by the Bank and attached to the Revolving Credit
Note.
ARTICLE II. REPRESENTATION. The Company represents and warrants
that:
The execution, delivery and performance of this
Amendment and the Allonge are within its powers, have been duly
authorized and are not in contravention with any law, of the terms of
its Articles of Incorporation or By-laws, or any undertaking to which
it is a party or by which it is bound.
The Amendment is, and the Allonge when issued
will be, valid and binding in accordance with their terms.
After giving effect to the amendments herein
contained, the representations and warranties contained in Article V
of the Credit Agreement are true on and as of the date hereof with
the same force and effect as if made on and as of the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until the following shall have been delivered to the
Bank:
A copy of the Resolutions adopted by the Board
of Directors of the Company, certified by an officer of the Company
as being true and correct and in full force and effect without
amendment as of the date hereof, authorizing the Company to enter
into this Amendment and to execute the Allonge.
An Allonge to the Revolving Credit Note duly
executed on behalf of the Company.
ARTICLE IV. MISCELLANEOUS.
References in the Credit Agreement or in any note,
certificate, instrument or other document to the "Credit Agreement"
shall be deemed to be references to the Credit Agreement as amended
hereby and as further amended from time to time.
The Company agrees to pay and to save the Bank
and any participant lender harmless for the payment of all costs and
expenses arising in connection with this Amendment, including the
reasonable fees of counsel to the Bank in connection with preparing
this Amendment and the related documents.
Except as expressly amended hereby, the Credit
Agreement and all certificates and other documents executed pursuant
thereto, shall remain in full force and effect. Terms used but not
defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement.
The Company agrees that the Credit Agreement and
other documents and agreements executed by the Company in connection
with the Credit Agreement in favor of the Bank are ratified and
confirmed and shall remain in full force and effect and that it has
no set off, counterclaim or defense with respect to any of the
foregoing.
This document may be signed upon any number of
counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this amendment
to be executed and delivered as of January ___, 1994, which shall be
the Effective Date of this Amendment.
KYSOR INDUSTRIAL CORPORATION
By: __________________________________________Its:
_____________________________________
NBD BANK, N.A.
By: __________________________________________
Its: _____________________________________
EXHIBIT A
ALLONGE TO REVOLVING CREDIT NOTE
For value received, the undersigned, Kysor Industrial
Corporation, hereby agrees that the Revolving Credit Note (the
"Note") dated December 31, 1991 in the amount of $10,000,000 issued
by Kysor Industrial Corporation in favor of NBD Bank, N.A. is
modified by deleting the reference to "December 31, 1995" in line 4
of the first paragraph and inserting "December 31, 1997" in place
thereof.
This modification shall be effective as of January __, 1994.
In all other respects, the Note shall remain in full force and
effect. This Allonge may be permanently attached to the Note.
KYSOR INDUSTRIAL
CORPORATION
By:_____________________________________
Its:________________________________
This modification is hereby
accepted:
NBD BANK, N.A.
By: ____________________________
Its: _______________________
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of January ______,
1994 (this "Amendment") is between KYSOR INDUSTRIAL CORPORATION, a
Michigan corporation (the "Company") and OLD KENT BANK and TRUST
COMPANY, a Michigan banking Corporation (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Loan Agreement dated as
of December 31, 1991 (the "Loan Agreement") pursuant to which the Bank
agreed, subject to the terms and conditions thereof, to extend credit
to the Company
B. The Company has requested that the Bank extend the termination
date and make certain other amendments and the Bank is willing to amend
the terms and conditions of the Loan Agreement on the terms and
conditions hereof.
TE RMS
In consideration of the premises and of the mutual agreements herein
contained, the parties hereby agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth
in Article III hereof, the Loan Agreement shall be amended as follows:
1.1 Section 1.1 shall be amended as follows:
(a) The definition of "Eurodollar Rate" shall be amended
by deleting clause (a) therein in its entirety and inserting the
following in place thereof: "(a) one-half of one percent (1/2 of 1%)
per annum".
(b) The definition of "Termination Date" shall be amended
by deleting the reference therein to "December 31, 1995" and inserting
"December 31, 1997" in place thereof.
1.2 Section 2.4 shall be amended by deleting the reference
therein to "three-eights of one percent (3/8 of 1%)" and inserting the
following in place thereof: "one-quarter of one percent (1/4 of 1%)".
1.3 The Allonge to Revolving Note (the "Allonge") annexed
hereto as Exhibit A shall be delivered by the Company, accepted by the
Bank and attached to the Revolving Note.
ARTICLE II. REPRESENTATION. The Company represents and warrants that:
2.1 The execution, delivery and performance of this Amendment
and the Allonge are within its powers, have been duly authorized and
are not in contravention with any law, of the terms of its Articles of
Incorporation or By-laws, or any undertaking to which it is a party or
by which it is bound.
2.2 The Amendment is, and the Allonge, when issued, will be
valid and binding in accordance with their terms.
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Article V of the Loan
Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until the following shall have been delivered to the
Bank:
3.1 A copy of the Resolutions adopted by the Board of Directors
of the Company, certified by an officer of the Company as being true
and correct and in full force and effect without amendment as of the
date hereof, authorizing the Company to enter into this Amendment and
to execute the Allonge.
3.2 An Allonge to the Revolving Note duly executed on behalf of
the Company.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Loan Agreement or in any note,
certificate, instrument or other document to the "Loan Agreement" shall
be deemed to be references to the Loan Agreement as amended hereby and
as further amended from time to time.
4.2 The Company agrees to pay and to save the Bank and any
participant lender harmless for the payment of all costs and expenses
arising in connection with this Amendment, including the reasonable
fees of counsel to the Bank in connection with preparing this Amendment
and the related documents.
4.3 Except as expressly amended hereby, the Loan Agreement and
all certificates and other documents executed pursuant thereto, shall
remain in full force and effect. Terms used but not defined herein
shall have the respective meanings ascribed thereto in the Loan
Agreement.
4.4 The Company agrees that the Loan Agreement and other
documents and agreements executed by the Company in connection with the
Loan Agreement in favor of the Bank are ratified and confirmed and
shall remain in full force and effect and that it has no set off,
counterclaim or defense with respect to any of the foregoing.
4.5 This document may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of January _____, 1994, which shall be the
Effective Date of this Amendment.
KYSOR INDUSTRIAL CORPORATION
By:
__________________________________
Its________________________________
OLD KENT BANK AND TRUST COMPANY
By:
__________________________________
Its:________________________________
EXHIBIT A
ALLONGE TO REVOLVING CREDIT NOTE
For Value received, the undersigned, Kysor Industrial Corporation,
hereby agrees that the Revolving Note (the "Note") dated December 31,
1991 in the amount of $10,000,000 issued by Kysor Industrial
Corporation in favor of Old Kent Bank and Trust Company is modified by
deleting the reference to "December 31, 1995" in line 6 of the first
paragraph and inserting "December 31, 1997" in place thereof.
This modification shall be effective as of January _____, 1994. In all
other respects, the Note shall remain in full force and effect. This
Allonge may be permanently attached to the Note.
KYSOR INDUSTRIAL CORPORATION
By:
__________________________________
Its:
__________________________________
This modification is hereby accepted:
OLD KENT BANK AND TRUST COMPANY
By: ___________________________
Its: ___________________________
EXHIBIT 10(v)
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(Amended and Restated Effective January 1, 1989)
Warner, Norcross & Judd
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503-2489
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Kysor Industrial Corporation, a Michigan corporation, amends
and restates the Kysor Industrial Corporation Employee Stock
Ownership Plan ("Plan").
ARTICLE 1
Establishment of Plan and Trust
1.1 Establishment of Plan.
This defined contribution plan is established by the Em-
ployer for the exclusive benefit of eligible Employees and their
beneficiaries. The Plan is designed to operate as an employee
stock ownership plan and to be invested primarily in Employer
Stock.
(a) Employer. "Employer" means Kysor Industrial Corpora-
tion and any other employer that has adopted or later adopts the
Plan.
(b) Plan History. A schedule that states the effective
date of the Plan and certain amendments may be attached.
(c) Adoption by Another Employer. Adoption of the Plan by
another employer shall be effective as of the date approved and
specified in writing by Kysor Industrial Corporation and by the
adopting employer. Any adopting employer may exclude from par-
ticipation any division or facility by the same corporate action
required for adoption of the Plan. Adoption of the Plan by an
employer other than Kysor Industrial Corporation shall not create
a separate plan.
For purposes of administration of the Plan, "Employer"
means only Kysor Industrial Corporation.
1.2 Declaration of Trust.
Assets held under the Plan will be held in trust and
administered under the terms of the Plan and the Kysor Industrial
Corporation Employee Stock Ownership Trust ("Trust"). The Trust
is established and shall be operated for the exclusive benefit of
Participants and their beneficiaries. The Trust shall not be
diverted to other purposes, except that trust assets may be used
to pay reasonable expenses of administration.
1.3 Compliance With Law.
This benefit program is intended to continue a qualified re-
tirement plan and trust under the Internal Revenue Code of 1986
("Code") and the Employee Retirement Income Security Act of 1974
("ERISA"), as amended, and all Regulations issued under the Code
and ERISA ("Regulations").
1.4 Effective Dates of Plan Provisions.
"Effective Date" of this amendment and restatement means
January 1, 1989, unless a provision specifies a different
effective date. Each Plan provision applies from its effective
date until the effective date of an amendment.
1.5 Application to Inactive and Former Participants.
An amendment to the Plan shall apply to former Participants
and to Participants not employed in Covered Employment on the ef-
fective date of the amendment only if it amends a provision of
the Plan that continues to apply to those Participants or only
to the extent it expressly states that it is applicable. Except
as specified in the preceding sentence, if a Participant is not
employed in Covered Employment on the effective date of an amend-
ment, the amendment shall not become applicable to the Partici-
pant unless the Participant has an Hour of Service in Covered
Employment after the effective date of the amendment.
ARTICLE 2
Definitions
Except for the following general definitions, defined terms
are located at or near the first major use of the term in the
Plan. A table showing the location of all definitions appears
immediately after the table of contents. When used as defined,
the first letter of each defined term is capitalized.
2.1 Break in Service.
"Break in Service" means a period of at least 12 months, be-
ginning on a Severance Date and ending on or after the first an-
niversary of the Severance Date, during which the Employee does
not have an Hour of Service.
2.2 Employer Contributions.
"Employer Contributions" means ESOP Contributions.
2.3 5% Owner.
"5% Owner" means:
(a) Corporation. An individual who owns (or is considered
to own under Code Section 318) either more than 5% of the out-
standing stock of a corporate Employer or Related Employer, or
stock possessing more than 5% of the total combined voting power
of all stock of a corporate Employer or Related Employer;
(b) Partnership. A partner who owns more than 5% of the
capital or profits interest in an Employer or Related Employer
that is a partnership; or
(c) Proprietorship. An Employer or Related Employer that
is a sole proprietor.
Notwithstanding aggregation of the Employer and all Related
Employers as required by Code Sections 414(b), (c) and (m), the
percentage of ownership for purposes of this definition shall be
determined separately for each entity that is an Employer or Re-
lated Employer.
2.4 Highly Compensated Employee.
(a) Definition. "Highly Compensated Employee" for a Plan
Year means any Employee who:
(i) 5% Owner. Was a 5% Owner at any time during the
current Plan Year or the 12-month period immediately preceding
the current Plan Year ("Look-Back Year"); or
(ii) Other. Is described in (A), (B), or (C), and is
one of the 100 Employees paid the most compensation during the
current Plan Year, or was described in (A), (B), or (C) during
the Look-Back Year.
(A) Compensation. Received HCE Compensation in
excess of $75,000 (as adjusted under Code Section 415(d));
(B) Top-Paid 20%. Received HCE Compensation in
excess of $50,000 (as adjusted under Code Section 415(d)) and was
among the top-paid 20% of Employees for the Plan Year when ranked
by HCE Compensation; or
(C) Officers. Was an officer and received HCE
Compensation in excess of 50% of the defined benefit dollar limit
under Code Section 415(b)(1)(A) (as adjusted under Code Sec-
tion 415(d)) or, if the Employer or a Related Employer has no
officer described in the preceding phrase, is the highest paid
officer of the Employer or the Related Employer for the Plan
Year.
(b) HCE Compensation. "HCE Compensation" means Section 415
Compensation plus elective contributions that are excluded from
gross income by Code Sections 125, 402(a)(8), 402(h), or 403(b).
(c) Determination Rules. The determination of who is
a Highly Compensated Employee shall be made under Code Sec-
tion 414(q) and Regulations, including the following rules:
(i) Officers. The number of Employees considered to
be officers shall be limited to 50 or, if less, the greater of
three Employees or 10% of all Employees.
(ii) Top-Paid 20%. The following Employees are ex-
cluded before determining the top-paid 20% of Employees:
(A) Age and Service. Employees who have not at-
tained age 21 or completed six months of service by the last day
of the current Plan Year or Look-Back Year;
(B) Part-Time/Seasonal. Employees who normally
work less than 17 1/2 hours per week or normally work six months
or less in any Plan Year;
(C) Nonresident Aliens. Employees who are non-
resident aliens receiving no earned income from sources within
the United States; and
(D) Collective Bargaining Employees. Employees
covered by a collective bargaining agreement if more than 90% of
all Employees are covered by a collective bargaining agreement
and this Plan excludes them.
(iii) Family Aggregation. If, during the current Plan
Year or the Look-Back Year, a Participant is a spouse, lineal
ancestor or descendant, or spouse of a lineal ancestor or descen-
dant, of a Participant who is either a 5% Owner or a Highly Com-
pensated Employee among the 10 Highly Compensated Employees paid
the most compensation for the current Plan Year or Look-Back
Year, the Participants shall be treated as one Highly Compensated
Employee.
(iv) Former Employees. A former Employee who was a
Highly Compensated Employee at termination of employment or at
any time after attaining age 55 shall be a Highly Compensated Em-
ployee at all times thereafter.
(v) Look-Back Year Election. In accordance with the
Regulations, the Employer may elect to designate the calendar
year ending with or within a Plan Year as the Look-Back Year for
that Plan Year.
2.5 Hour of Service.
"Hour of Service" means each hour that an Employee is di-
rectly or indirectly paid or entitled to be paid by the Employer
for the performance of duties during the applicable period.
These hours will be credited for the period in which the duties
are performed.
(a) Back Pay. Hours of Service include each hour for which
back pay, irrespective of mitigation of damages, is awarded or
agreed to by the Employer. Back pay hours shall be credited to
the Employee for the period or periods to which the award or
agreement pertains.
(b) Periods Credited. Generally, Hours of Service shall
be credited as provided in Section 2530.200b of the ERISA Regu-
lations. Hours of Service shall be credited under the rules
of this section and as provided in Section 2530.200b-2(b) of
those Regulations. Hours of Service shall be credited to ap-
propriate periods determined under the rules set forth in Sec-
tion 2530.200b-2(c) of those Regulations.
2.6 Person.
"Person" means an individual, committee, proprietorship,
partnership, corporation, trust, estate, association, organiza-
tion, or similar entity.
2.7 Plan Year.
"Plan Year" means the 12-month period beginning each
January 1.
2.8 Related Employer.
"Related Employer" means (i) each corporation, other than
the Employer, that is a member of a controlled group of corpo-
rations, as defined in Code Section 414(b), of which the Employer
is a member; (ii) each trade or business, other than the
Employer, whether or not incorporated, under common control of or
with the Employer under Code Section 414(c); (iii) each member,
other than the Employer, of an affiliated service group, as de-
fined in Code Section 414(m), of which the Employer is a member;
and (iv) any other entity required to be aggregated with the Em-
ployer by Regulations under Code Section 414(o). An entity shall
not be considered a Related Employer for any purpose under this
plan during any period it does not satisfy (i), (ii), (iii), or
(iv) in the preceding sentence.
2.9 Valuation Date.
"Valuation Date" means the last day of each calendar quarter
and any other date specified as a Valuation Date by the Adminis-
trator.
2.10 Year of Service.
"Year of Service" means an annual unit of service determined
and credited as follows:
(a) Aggregate Elapsed Time. The number of the Employee's
Years of Service is based on the Employee's aggregate elapsed
time of employment.
(b) Continuous. Generally, credit toward Years of Service
runs continuously between the first day an Employee has an Hour
of Service (upon initial employment or reemployment) and the next
Severance Date.
(c) Less Than One Year Absence. In addition, but without
duplication, if an Employee is absent for a period of less than
one year, and if the Employee has a Severance Date on or after
the date the Employee initially is absent from work but before
the absence from work ends, the entire period from the Severance
Date to the date the Employee returns to work shall be included
in the determination of Years of Service. For this purpose, an
Employee is absent from work for less than one year if the Em-
ployee returns to work before the first anniversary of the date
the Employee initially is absent from work. An Employee has re-
turned to work on the first day the Employee has an Hour of Ser-
vice after the date the Employee initially is absent from work.
(d) Severance Date. "Severance Date" means the earlier of:
(i) Termination of Employment. The date the Employee
quits, retires, is discharged, or dies, whichever comes first; or
(ii) First Anniversary of Absence. The first anniver-
sary of the first day of a period during which the Employee is
absent from work with or without pay for any other reason such
as vacation, holiday, sickness, disability, leave of absence, or
layoff.
(iii) Maternity/Paternity. If an Employee is absent
from work due to a Qualified Maternity or Paternity Absence, the
Severance Date shall be the second anniversary of the first day
of the Employee's absence.
(e) Qualified Maternity or Paternity Absence. "Qualified
Maternity or Paternity Absence" means an absence from work due
to pregnancy of the Employee, birth of a child of the Employee,
placement of a child with the Employee in connection with adop-
tion of the child, or caring for a child immediately after birth
or placement of the child with the Employee.
(f) Time of Credit. One Year of Service is credited as of
each anniversary of the date the measurement begins.
(g) Aggregation. All periods of less than one year shall
be aggregated at the rate of 1/12 year for each full period of 30
days.
(h) Military Service. If employment terminates due to ac-
tive service in the armed forces of the United States, the Em-
ployee shall receive credit toward Years of Service to the extent
the Employee would have been scheduled to work during each month
of the period of active service. The Employee must apply for,
and be able to resume, employment with the Employer within the
time limits established by federal law for protection of veter-
ans' reemployment rights.
(i) No Duplication. There shall be no duplication in the
calculation of Years of Service.
(j) Non-Covered Employment. Employment with the Employer
or a Related Employer that is not Covered Employment counts
toward Years of Service.
(k) Subject to Break-in-Service Rules. An Employee's Years
of Service are subject to the Break-in-Service rules stated in
the Plan.
(l) Regulations. Years of Service shall be credited as
provided in Regulations Section 1.410(a)-7.
(m) Predecessor Plan. If the Plan is required to be
treated as a continuation of the plan of a predecessor employer
under Code Section 414(a), an Employee shall be credited with all
Years of Service credited to the Employee under the predecessor's
plan.
ARTICLE 3
Eligibility to Participate
3.1 Eligibility Requirements.
The eligibility requirements for participation in the Plan
are attainment of age 20 1/2 and completion of six (6) months of
service. An Employee in Covered Employment shall become a
Participant ("Participant") on the first Entry Date following the
date the Employee satisfies the eligibility requirements.
(a) Employee. "Employee" means an individual who is em-
ployed by the Employer or a Related Employer and who receives
compensation for personal services to the Employer or Related
Employer that is subject to withholding for federal income tax
purposes.
(b) Entry Date. "Entry Date" means the first day of each
Plan Year.
3.2 Requirement of Covered Employment.
If an eligible Employee is not employed in Covered
Employment on the applicable Entry Date, the Employee shall
become a Participant on the first subsequent day on which the
Employee has an Hour of Service in Covered Employment.
"Covered Employment" means all employment with the Employer
except (i) employment with a Related Employer that has not
adopted the Plan, (ii) employment as a Leased Employee, (iii)
employment as a temporary Employee, (iv) employment with a
subsidiary or division of the Employer acquired or created after
December 31, 1988, unless Covered Employment is extended to
employees of the subsidiary or division by resolution of the
board of directors of Kysor Industrial Corporation, (v)
employment in a unit of Employees covered by a collective
bargaining agreement unless such bargaining agreement provides
for participation under the Plan, or (vi) employment as a
nonresident alien receiving no income from sources within the
United States.
3.3 Participation Rules.
(a) Termination of Participation. Participation shall ter-
minate upon the earlier of the date the Participant is not an Em-
ployee and has been paid the full amount due under the Plan or
the date of the Participant's death.
(b) Reemployment. A former Participant shall become a Par-
ticipant immediately upon completion of one Hour of Service in
Covered Employment.
3.4 Leased Employee.
"Leased Employee" means an individual described in and re-
quired to be treated as an Employee under Code Sections 414(n)
and 414(o) and Regulations. For purposes of this definition, the
Employer or any Related Employer for whom a Leased Employee per-
forms services is referred to as the recipient.
A Leased Employee under Code Section 414(n) is an individual
who is not an Employee (except by reason of this definition) but
who performs services for the recipient of a type historically
performed by employees in the recipient's business field, pursu-
ant to an agreement between the recipient and a leasing organiza-
tion, on a full-time basis for at least a one-year period.
(a) One-Year Period. For purposes of this definition, a
one-year period is the individual's initial 12-month period of
performing services for the recipient or any Plan Year beginning
during or after that initial 12-month period.
(b) Full-Time Basis. An individual is considered to be
employed on a full-time basis if the individual completes the
lesser of 1,500 Hours of Service or 75% of the median number of
Hours of Service credited to Employees who perform similar ser-
vices for the recipient. If no Employees perform similar ser-
vices during the current period, the median shall be based on the
performance of similar services by Employees during a prior Plan
Year. An individual is not considered employed on a full-time
basis unless the individual completes at least 1,000 Hours of
Service.
(c) Conditions. A Leased Employee shall be treated as an
Employee unless:
(i) 20% of Non-Highly Compensated Work Force. Leased
Employees do not constitute more than 20% of the recipient's non-
highly compensated work force, and
(ii) Covered by Plan Described in Code Section 414(n).
The Leased Employee is covered by a money purchase pension plan
described in Code Section 414(n) with a nonintegrated employer
contribution rate of at least 10% of HCE Compensation, immediate
participation, and full and immediate vesting. Immediate partic-
ipation shall not be required for a Leased Employee who received
less than $1,000 in compensation from the leasing organization in
each Plan Year during the four-year period ending with the cur-
rent Plan Year.
A Leased Employee includes a leased owner or a leased man-
ager determined to be a Leased Employee under Code Section 414(o)
and the Regulations.
ARTICLE 4
Contributions
4.1 Contributions.
The following contributions are permitted or required for a
Plan Year.
(a) ESOP Contributions. The Employer may make an ESOP
Contribution for each Plan Year.
(b) Restoration of Forfeiture. When restoration of a for-
feiture is required under Article 6 and current forfeitures and
trust earnings applied for that purpose are insufficient, the Em-
ployer shall contribute the necessary additional amount.
4.2 ESOP Contribution.
The Employer may make an "ESOP Contribution" for a Plan Year
on behalf of all eligible Employees. Subject to the restrictions
of the Plan, the ESOP Contribution shall be sufficient to meet
the Current Obligations of the Plan to the extent the Current
Obligations are not paid with cash dividends. To the extent the
ESOP Contribution is made in cash, the ESOP Contribution may be
used to repay an Exempt Loan used to purchase Employer Stock for
the Plan.
"Current Obligations" means Trust financial obligations
arising from an Exempt Loan to the Trust, and payable in cash
within one year from the date an Employer Contribution is due.
4.3 Limits on Employer Contributions.
Employer Contributions are subject to the following limits:
(a) Deduction. Employer Contributions for a Plan Year
shall not exceed the amount allowable as a deduction under Code
Section 404. A nondeductible contribution may be subject to a
10% excise tax.
(b) Annual Additions. Employer Contributions are subject
to the limit on Annual Additions stated in Article 5.
4.4 Return of Employer Contributions.
(a) Mistake of Fact. Part or all of any Employer Contri-
bution made by mistake of fact shall be returned to the Employer,
upon demand, within one year after payment of the contribution.
(b) Nondeductible. Each Employer Contribution is condi-
tioned on its deductibility under Code Section 404. Unless ne-
cessary for the Trust to meet its Current Obligations, a
nondeductible Employer Contribution shall be returned to the
Employer, upon demand, before the due date for the Employer's
federal income tax return for the taxable year for which the
contribution was made. The portion of the contribution to be
returned shall not exceed the amount determined to be nondeductible.
(c) Amount. The amount that may be returned shall be
determined as of the Valuation Date coinciding with or most
recently preceding the date of repayment. The amount shall be
the excess of the amount contributed over the amount that is
deductible or the amount that would have been contributed if the
mistake of fact had not occurred. Earnings attributable to the
excess amount shall not be returned. Losses attributable to the
excess amount shall reduce the amount returned. The amount
returned shall not reduce a Participant's account to less than
the account balance would have been on the applicable Valuation
Date had the excess amount not been contributed.
4.5 Reduction Of Employer Contribution for Leased Employees.
If a Leased Employee becomes a Participant in the Plan, any
Employer Contribution which would be made for and allocated to
the Leased Employee shall be reduced by any contribution made by
the leasing organization for the Participant to a qualified re-
tirement plan for services performed by the Leased Employee for
the Employer.
4.6 Timing of Contributions.
Any Employer Contribution shall be paid to the Trustee on
or before the date prescribed by law (including extensions) for
filing the Employer's federal income tax return for the taxable
year. The Employer also shall identify the type and amount of
each contribution for a Plan Year by written communication to the
Trustee on or before the date final allocations are performed
under Article 5. If property other than cash is contributed,
the property shall be valued at fair market value at the time of
contribution.
4.7 Limitations on ESOP Contributions.
ESOP Contributions that are allocated under Sections
5.2(a)(ii)(B)(2)(b)(i) and (ii) based on elective contributions
are subject to the ACP Limit.
(a) ACP Limit. "ACP Limit" means the maximum ACP for
Highly Compensated Employees determined as follows:
(i) Amount of Limit. The ACP for Participants who are
Highly Compensated Employees shall not exceed the greater of:
(A) 125% Limit. 125% of the ACP for all Partici-
pants who are not Highly Compensated Employees, or
(B) 200%/2% Limit. 200% of the ACP for all Par-
ticipants who are not Highly Compensated Employees or, if less,
the ACP for all Participants who are not Highly Compensated Em-
ployees plus two percentage points.
(ii) ACP. "ACP" means the average of the Contribution
Percentages determined by dividing the sum of all Contribution
Percentages of all eligible Participants in the applicable group
by the number of eligible Participants in the group. An eligible
Participant is a Participant who is directly or indirectly eligi-
ble to make or receive an allocation of an ACP Contribution.
(iii) Contribution Percentage. "Contribution Percent-
age" means the percentage determined by dividing the Partici-
pant's ACP Contributions for the Plan Year by the Participant's
ACP Compensation. If ACP Contributions are not made for the Par-
ticipant, the Participant's Contribution Percentage is zero.
(iv) ACP Compensation. "ACP Compensation" means the
Employee's compensation for the Plan Year as defined in Code
Section 414(s) and Regulations. ACP Compensation is determined
only for the portion of the Plan Year that the Employee is a Par-
ticipant employed in Covered Employment. ACP Compensation shall
not exceed the $200,000 limit, adjusted and applied as specified
in Section 5.2(a)(iii)(A).
(v) ACP Contributions. "ACP Contributions" means the
ESOP Contributions allocated as matching contributions under
Section 5.2(a)(ii)(B)(2)(b)(i) and (ii) for the Plan Year.
(vi) Aggregation With Other Plans. The Plan and any
plan aggregated with the Plan under the plan aggregation rules of
(d) below shall be treated as a single plan for testing com-
pliance with the ACP Limit.
(vii) Additional Rules. In determining compliance with
the ACP Limit, the plan aggregation, family aggregation, correc-
tion, and other rules in (d) below apply.
(b) Prevention of Excess Aggregate Contributions. If the
Administrator determines that the ACP Limit may be exceeded, the
Administrator may reduce or suspend contributions for individual
Highly Compensated Employees as necessary.
(c) Correction of Excess Aggregate Contribution. An Excess
Aggregate Contribution, plus any attributable income or loss,
shall be deducted from the Participant's ESOP Account to the ex-
tent that ESOP Contributions are treated as matching
contributions.
(i) Definition. "Excess Aggregate Contribution" means
the ACP Contributions of Highly Compensated Employees that cause
the ACP to exceed the ACP Limit.
(ii) Method. Correction of the Excess Aggregate
Contribution shall be made by deducting the Participant's ESOP
Contributions treated as matching contributions for the Plan
Year.
ESOP Contributions treated as matching contribu-
tions deducted to correct an Excess Aggregate Contribution shall
be multiplied by the Participant's vested percentage to determine
the vested amount. The vested amount shall be distributed, and
the nonvested portion shall be treated as a forfeiture as of the
date of deduction.
(d) Additional 401(m) Rules. The following additional
rules apply to the contributions subject to the ACP Limit:
(i) Deadline for Inclusion in Tests. To be included
for testing compliance with the ACP Limit for a Plan Year, con-
tributions must be paid to the Trust by the end of the twelfth
month after the end of that Plan Year and must be allocated to
the Participant's accounts as of a date during the Plan Year.
(ii) Plan Aggregation Rules.
(A) HCE Required Aggregation. Unless prohibited
by the Regulations, if the same Highly Compensated Employee is
eligible to participate in two or more plans of the Employer or a
Related Employer, the plans shall be treated as a single plan for
determining compliance with the ACP Limit. If the plans have
different plan years, they shall be treated as a single plan with
respect to the plan years ending within the same calendar year.
(B) Required Aggregation. If the Plan and any
other qualified retirement plan of the Employer or a Related
Employer are required to be treated as a single plan for
compliance with Code Section 410(b) (other than Code Sec-
tion 410(b)(2)(A)(ii)), compliance with the ACP Limit shall be
determined as if the plans were a single plan.
(C) Permissive Aggregation. If the Plan and any
other qualified retirement plan of the Employer or a Related Em-
ployer are treated as a single plan when permitted but not re-
quired by Code Section 410(b) and Regulations, the aggregated
plans must comply with the ACP Limit and must also meet the
requirements of Code Sections 401(a)(4) and 410(b) as if the
plans were a single plan. For plan years beginning after Decem-
ber 31, 1989, plans may be aggregated permissively only if they
have the same plan year.
(D) Prohibited Aggregation. Plans that may be
aggregated under Code Section 410(b) but are not actually aggre-
gated for a Plan Year for purposes of Code Section 410(b) (other
than Code Section 410(b)(2)(A)(ii)) may not be aggregated for
purposes of compliance with the ACP Limit.
(iii) Family Aggregation. Family members aggregated
under Section 2.4(c)(iii) shall be treated as a single fictitious
Highly Compensated Employee for testing compliance with the ACP
Limit. The Contribution Percentage for the fictitious Highly
Compensated Employee shall be the amount determined by combining
the ACP Contributions and combining the ACP Compensation of all
family group members. The fictitious Highly Compensated Employee
shall represent the entire family group in the ACP test and none
of the individual family members or their respective Contribution
Percentages shall be separately included in the tests.
(iv) Order of Correction.
(A) Order. Excess Aggregate Contributions shall
be corrected by reducing the Contribution Percentages of Highly
Compensated Employees, beginning with those at the highest Con-
tribution Percentage, to the next lower Contribution Percentage
level for Highly Compensated Employees or, if greater, a percent-
age that results in compliance with the ACP Limit. If further
reduction is required to satisfy the ACP Limit, the amount shall
be determined by continuing the process until the ACP Limit is
not exceeded. The amount by which the Contribution Percentage is
reduced shall be distributed to each affected Highly Compensated
Employee as specified in (c) above.
(B) Family Aggregation Group. The amount of
Excess Aggregate Contributions attributable to the fictitious
Highly Compensated Employee shall be allocated among the members
of the family aggregation group in proportion to the ACP Contri-
butions combined to determine the Contribution Percentage of the
fictitious Highly Compensated Employee.
(v) Attributable Income or Loss. Any distribution
from a Participant's account to correct or in conjunction with
correction of an Excess Aggregate Contribution shall include
the attributable income or loss for the Plan Year and for the
period between the last day of the Plan Year and the date of
distribution.
(A) Method of Determination. The Employer may
determine the attributable income or loss for the Plan Year and
for the period between the last day of the Plan Year and the date
of distribution using any reasonable method that does not result
in discrimination under Code Section 401(a)(4). The method must
be used consistently for all Participants and for all corrective
distributions for the Plan Year and must be the method used for
allocating earnings or losses to the Participants' accounts for
that year.
(B) Alternative Method of Determination. If the
attributable income or loss is not determined under (v)(A) above,
the income or loss shall be determined by multiplying the income
or loss attributable to the account from which the correcting
deduction is made for the Plan Year for which the excess is
determined by a fraction. The numerator of the fraction is the
excess amount. The denominator is the balance in the account as
of the first day of the Plan Year, plus contributions allocated
as of the last day of the Plan Year.
In addition, income credited for the period
between the last day of the Plan Year and the date of distribu-
tion shall be equal to 10% of the income determined under the
preceding paragraph multiplied by the number of full months
between the last day of the Plan Year and the date of distribu-
tion. A month shall be considered a full month if the payment is
made after the 15th day of that month.
(vi) Allocation of Correction Among Multiple Plans. If
the Employer maintains another plan that must be aggregated with
this Plan for testing compliance with the ACP Limit, the Employer
shall specify the plan from which corrections are to be made.
(vii) Deadline for Correction. To correct an Excess Ag-
gregate Contribution, a distribution shall be made not later than
the last day of the Plan Year after the Plan Year for which the
excess was contributed.
(viii) Taxation of Distribution. Attributable income on
an Excess Aggregate Contribution shall be included in the Partic-
ipant's income for the calendar year in which it is distributed.
(ix) Penalties. Distribution of an Excess Aggregate
Contribution does not subject the Participant to the 10% penalty
on an early withdrawal under Code Section 72(t).
(x) Calendar Year/Taxable Year. The term calendar
year with reference to an individual means the taxable year for
any individual whose taxable year is not the calendar year.
ARTICLE 5
Allocations
5.1 Accounts.
The Administrator shall maintain the necessary number of ac-
counts for each Participant. The Administrator shall maintain
the accounts described in (a) below.
(a) Specific Accounts.
(i) ESOP Account. "ESOP Account" means a separate
account for a Participant that is credited with shares of
Employer Stock. The ESOP Account shall consist of subaccounts
known as Employer Stock Accounts and, if applicable, an Other
Investments Account.
(A) Employer Stock Account. "Employer Stock Ac-
count" means the portion of a Participant's ESOP Account that is
credited with shares of Employer Stock. There shall be a sepa-
rate Employer Stock Account for Employer Stock purchased with
each Exempt Loan, and a separate Employer Stock Account for Em-
ployer Stock acquired by the Trust without an Exempt Loan. An
Employer Stock Account shall include stock dividends paid on Em-
ployer Stock allocated to such account and Employer Stock pur-
chased with cash dividends to the extent those dividends were not
used to repay an Exempt Loan or distributed to Participants.
(B) Other Investments Account. "Other Invest-
ments Account" means the portion of a Participant's ESOP Account
credited with cash or the Participant's share of the net income
(or loss) on investments of a permanent nature (as opposed to
short-term investments under Section 4.2(j) of the Trust pending
acquisition of Employer Stock). An Other Investments Account
shall not be required to be maintained unless, and until,
investments of a permanent nature, other than Employer Stock, are
held in a Participant's ESOP Account.
(C) Employer Stock. "Employer Stock" means Em-
ployer securities within the meaning of Code Section 409(l).
(ii) TRASOP Account. "TRASOP Account" means a separate
account for each Participant who had such an account under the
Plan on December 31, 1988.
(iii) After-Tax Employee Contributions Account. "After-
Tax Employee Contributions Account" means a separate account for
the Participant's after-tax employee contributions as of
December 31, 1988. Effective January 1, 1989, no additional
after-tax employee contributions may be credited to these
accounts or may be made under the Plan.
(b) General Rules.
(i) Accounting Only. Separate accounts shall be
maintained for accounting purposes only and shall not require
segregated investment of amounts allocated to separate accounts.
(ii) Consolidation. Separate accounts shall not be
required if (A) the separation is not necessary for compliance
with any requirement of the Code, ERISA, and Regulations, (B) the
consolidation would not deprive a Participant of any tax or
transfer opportunity, and (C) the accounts are subject to the
same vesting schedule or are fully vested.
5.2 Allocations.
As of each applicable Valuation Date, the contributions to
the Plan and/or Employer Stock released under Section 4.2(i) of
the Trust shall be allocated to each Participant's accounts as
follows:
(a) ESOP Contribution.
(i) Eligibility. A Participant shall be eligible for
a share of the ESOP Contribution or Employer Stock allocated as
a result of the ESOP Contribution for each Plan Year in which
(A) the Participant is employed in Covered Employment on the last
day of the Plan Year, or (B) the Participant's employment
terminates on or after the Participant's Normal Retirement Date
or due to death or Total Disability. Each Participant with an
Employer Stock Account at the payment date for cash dividends
(payable with respect to Employer Stock held in the Participant's
accounts) shall be eligible for the allocation of cash dividends
on that Employer Stock.
(ii) Allocation.
(A) Cash Dividend and Cash Contributions. Sub-
ject to (D) below, all cash dividends paid to the Trust, plus
earnings, with respect to Employer Stock purchased with an Exempt
Loan, may be used to pay Current Obligations with respect to the
Exempt Loan, or to prepay that Exempt Loan to the extent prepay-
ment would not violate the terms of the Exempt Loan. If cash
dividends are not used to pay or prepay an Exempt Loan, the cash
dividends shall be distributed pursuant to Section 7.12. Subject
to (D) below, cash contributions by the Employer, plus earnings,
shall be used to pay Current Obligations or to prepay an Exempt
Loan to the extent prepayment would not violate the terms of the
Exempt Loan. If cash contributions are not used to pay or prepay
an Exempt Loan, they shall be allocated under (D)(2) below. Em-
ployer Stock released for allocation under Section 4.2(i) of the
Trust as a result of the payments made on an Exempt Loan shall be
allocated in accordance with (B) below.
(B) Employer Stock. Employer Stock released
under Section 4.2(i) of the Trust shall be allocated as of the
end of the Plan Year to the applicable account of each
Participant as follows:
(1) Cash Dividends Value. First, released
Employer Stock with respect to an Exempt Loan which has a Fair
Market Value equal to the cash dividends paid to the Trust (and
used to pay or prepay an Exempt Loan) during the Plan Year with
respect to Employer Stock allocated to each Participant's appli-
cable Employer Stock Account shall be allocated to that Partici-
pant's applicable account.
(2) Remaining Allocation. Second, if
additional Employer Stock remains to be allocated, released
Employer Stock with respect to an Exempt Loan shall be allocated
to each Participant's applicable Employer Stock Account as
follows:
(a) Allocation For Plan Years Beginning
Prior to January 1, 1993. For each Plan Year beginning prior to
January 1, 1993, the allocation shall be in the proportion that
the Participating Compensation of each eligible Participant bears
to the Participating Compensation of all eligible Participants.
(b) Allocation For Plan Years Beginning
On or After January 1, 1993. For each Plan Year beginning on or
after January 1, 1993, the allocation shall be made in the
following steps.
(i) 50%. First, an amount shall
be allocated that is 50% of the Elective Contributions made by
each eligible Participant up to a maximum of 1% of the
Participating Compensation for each eligible Participant for the
Plan Year.
(ii) 100%. Then, if an eligible
Participant has attained age 45 and has completed 5 Years of
Service as of the end of the Plan Year, an additional amount
shall be allocated that is 100% of the Elective Contributions
made by each eligible Participant up to a maximum of $300 for the
Plan Year.
If an eligible Participant has
attained age 55 and has completed 5 Years of Service as of
December 31, 1993, the Participant shall not receive an
allocation under the preceding paragraph, and instead, an amount
shall be allocated that is 100% of the Elective Contributions
made by each eligible Participant up to a maximum of $750 for the
Plan Year. Effective for Plan Years beginning on or after
January 1, 1998, the maximum amount shall be reduced to $300.
(iii) Proportionate. Finally, if
any amount remains to be allocated, that amount shall be
allocated in the proportion that the Participating Compensation
of each eligible Participant bears to the Participating
Compensation of all eligible Participants.
(C) Special Employer Contribution or Employer
Stock Release. Notwithstanding any provision of the Plan or
Trust to the contrary, to the extent necessary to meet the
required allocation of Employer Stock under (ii)(B)(1) above, the
Employer, in its sole discretion, may contribute additional
Employer Stock or cash to the Trust for purposes of completing
such allocation. If sufficient Employer Contributions are not
made for such purpose, then additional shares of Employer Stock
shall be released under Section 4.2(i) of the Trust for purposes
of completing such allocation.
(D) No Exempt Loan. If the Trust has no Exempt
Loan with respect to a Participant's Employer Stock Account,
TRASOP Account, or After-Tax Employee Contributions Account:
(1) Cash Dividends. Cash dividends paid
with respect to the Participant's Employer Stock Account shall be
distributed pursuant to Section 7.12;
(2) Cash Contributions. Cash contributions
shall be allocated to eligible Participants' Other Investments
Accounts in the manner described in (B)(2) above; and
(3) Employer Stock Contributions. Contribu-
tions in Employer Stock shall be allocated to eligible Partici-
pants' Employer Stock Accounts in the manner described in (B)(2)
above.
(E) Employer Stock Allocation in Numbers of
Shares. Allocation of Employer Stock and accountings with re-
spect to the Employer Stock Account shall be in numbers of whole
and fractional shares.
(iii) Definitions.
(A) Participating Compensation. "Participating
Compensation" means the Participant's Compensation for services
in Covered Employment during the Plan Year.
Participating Compensation may not exceed
$200,000 (as adjusted under Code Section 415(d)). One $200,000
limit shall apply in the aggregate to each group consisting of a
Participant who is either a 5% Owner or a Highly Compensated Em-
ployee among the 10 Highly Compensated Employees paid the most
HCE Compensation and that Participant's Spouse and descendants
who have not attained age 19 before the end of the Plan Year.
The maximum amount of Participating Compensation shall be allo-
cated among the 5% Owner or other Highly Compensated Employee and
family members who are Participants in proportion to each indi-
vidual's Participating Compensation for the Plan Year before ap-
plication of the limit.
(B) Compensation. "Compensation" means an Em-
ployee's W-2 wages as provided in Regulations under Code Sec-
tion 415 plus Elective Deferrals and any amount that is excluded
from gross income pursuant to Code Section 125 minus any amounts
paid or reimbursed by the Employer for moving expenses incurred
by the Employee. "Elective Deferrals" means the elective con-
tributions made for the Participant and any other portion of the
Participant's income deferred and excluded from current taxation
under Code Sections 402(a)(8) (a cash or deferred 401(k) profit-
sharing plan); 402(h) (a simplified employee pension plan); or
403(b) (a tax-sheltered annuity).
(C) Elective Contributions. "Elective Contribu-
tions" means the elective contributions made to the Kysor
Industrial Corporation Savings Plan under Section 4.2 of that
plan for the Plan Year. For purposes of this Plan, Elective
Contributions do not include Elective Contributions withdrawn by
the Participant prior to the end of the Plan Year. In addition,
Elective Contributions that are excess deferrals or excess
contributions shall not be considered in determining the amount
of the ESOP Contribution to be allocated under this Plan to the
Participant for the Plan Year. If a portion of the ESOP
Contribution is credited to the Participant before an excess
deferral or excess contribution is determined for the Plan Year,
the portion based on an excess deferral or excess contributions
shall be deducted, with any attributable income or loss, and
treated as a forfeiture as of the date of the deduction.
(b) Restoration of Forfeiture. If a forfeited amount is
required to be restored under Article 6, that amount shall be al-
located to the account from which the amount was forfeited.
5.3 Stock Dividends on Employer Stock, Stock Splits, Etc.
Each Participant's Employer Stock Account, TRASOP Account,
and After-Tax Employee Contributions Account will be credited
with the Participant's share of Employer Stock (including frac-
tional shares) representing (i) stock dividends paid on Employer
Stock, (ii) a stock split, or (iii) stock received by the Trustee
as a result of a reorganization or other recapitalization of the
Employer. However, stock dividends or other Employer Stock
received with respect to Employer Stock that is encumbered, or
held in a suspense account, pursuant to Section 4.2 of the Trust
shall be added to the encumbrance or suspense account, and shall
be released and allocated as provided in Section 4.2 of the Trust
and Section 5.2 of the Plan.
5.4 Forfeitures.
Forfeitures shall be allocated first to restore any for-
feited amounts that are required to be restored under Article 6.
Any remaining forfeitures shall be allocated as an additional
ESOP Contribution. Employer Stock forfeited from an Employer
Stock Account shall be allocated to the other Employer Stock
Accounts maintained as a result of the same purchase of Employer
Stock.
(a) Timing. Forfeitures shall occur as of the dates spec-
ified in Article 6. Forfeitures that occur during a Plan Year
shall be allocated as of the end of that Plan Year.
(b) Annual Addition Limitation. Any forfeitures that can-
not be allocated under (a) due to the limitation on Annual Addi-
tions shall be held and applied pursuant to Section 5.8.
(c) Investment Experience. Each forfeiture shall remain in
the account of the forfeiting Participant and shall share in the
investment experience of the Trust through the date as of which
the forfeiture is allocated.
(d) Limitation on Allocation. Forfeitures shall not be al-
located to the account of any forfeiting Participant.
5.5 Allocation of Earnings, Losses, and Expenses; Revaluation of
Assets.
(a) Earnings, Losses, and Expenses. Generally all Plan
earnings shall be used to pay administrative expenses of the Plan
and to repay an Exempt Loan. If earnings are not used in this
manner, as soon as administratively feasible after each Valuation
Date, the Trustee shall credit each Participant's accounts other
than the accounts holding Employer Stock with the proportion of
the net earnings of such accounts and of the net gain from the
disposition of assets of such accounts since the last Valuation
Date, as the balance of each such account bears to the aggregate
balances of all such accounts before allocations of contributions
and forfeitures; and shall charge each such account with any net
loss suffered by the Trust since the last Valuation Date, and any
expenses paid from the Trust since the last Valuation Date, in
the same proportion and manner as earnings and gains are credited
to those accounts. Interest paid under an installment contract
for the purchase of Employer Stock or on an Exempt Loan used to
purchase Employer Stock shall not be deemed an expense under this
provision.
(b) Revaluation of Trust.
(i) Employer Stock. As soon as administratively
feasible after each Valuation Date, the Administrator shall
determine Fair Market Value of the Employer Stock and shall
certify to the Trustee the Fair Market Value. The Trustee shall
thereupon adjust its records to reflect Fair Market Value.
Determination of Fair Market Value shall be made in good faith
and in accordance with the Plan and with Regulations under ERISA
Section 3(18). For purposes of this provision, Fair Market Value
of Employer Stock that is readily tradable on an established
securities market shall be the daily closing price for Employer
Stock, as reported on a national securities exchange, as of the
last business day coinciding with or immediately preceding the
Valuation Date. Fair Market Value of Employer Stock that is not
readily tradable on an established securities market shall be
determined annually by an independent appraiser selected by the
Employer, meeting requirements similar to those described in Code
Section 170(a)(1), in accordance with Code Section 401(a)(28) and
Regulations. The Employer shall cooperate with, and allow access
to and furnish relevant information to, the independent appraiser
for purposes of performing the valuation of Employer Stock.
(ii) Other Accounts. After the allocations described
in (a) above, the Trustee shall revalue, at fair market value,
the assets of the Trust other than the Employer Stock held in any
account. The amount in each account other than the accounts
holding Employer Stock shall be adjusted as of the Valuation Date
so that the ratio of the adjusted amount in each such account to
the total assets of all such accounts equals the ratio of the
amount in the account before adjustment to the total assets of
all such accounts before adjustment.
(c) No Earnings on Distributions. A Participant's accounts
shall not be credited with any interest or earnings for the
period between the last Valuation Date preceding the date of
distribution and the date of distribution.
5.6 Sale or Purchase of Employer Stock.
Each Participant's Employer Stock Account, Other Investments
Account, TRASOP Account, and After-Tax Employee Contributions
Account will be adjusted as of the applicable Valuation Date as
follows:
(a) Sale of Employer Stock. Each Participant's account
that holds Employer Stock will be debited with the Participant's
share of Employer Stock (including fractional shares) sold by the
Trust from that account for any reason. The proceeds received
from the sale shall be credited directly to the Participant's
applicable account. If unallocated Employer Stock is sold, the
proceeds, as necessary, shall be used to repay, or prepay, the
Exempt Loan by which such stock was purchased. After payment of
the Exempt Loan, if additional proceeds from the sale of such Em-
ployer Stock remain, the proceeds shall be considered earnings
and gains of the Trust on ESOP Accounts, and shall be allocated
in the proportion that the Employer Stock in the Participant's
Employer Stock Account with respect to that Exempt Loan bears to
the aggregate Employer Stock in all Participant's Employer Stock
Accounts with respect to that Exempt Loan.
(b) Purchase of Employer Stock. If the Trustee purchases
Employer Stock with cash rather than with the proceeds of an Ex-
empt Loan, each Participant's Other Investments Account will be
debited with the Participant's share of the purchase price for
Employer Stock purchased by the Trust, and the shares purchased
(including fractional shares) shall be credited directly to the
Participant's Employer Stock Account.
5.7 Limitation on Annual Additions.
The total Annual Additions for a Participant for any Limita-
tion Year shall not exceed the lesser of the Percentage Limit or
the Defined Contribution Dollar Limit.
(a) Annual Additions. For Limitation Years beginning after
December 31, 1986, "Annual Additions" for a Participant for a
Limitation Year means the sum of:
(i) Employer Contributions and Forfeitures. The Par-
ticipant's share of the Employer's contributions and forfeitures;
(ii) After-Tax Employee Contributions. The Partici-
pant's after-tax employee contributions;
(iii) Post-Retirement Medical Benefits Account. For
purposes of the Defined Contribution Dollar Limit and for Limita-
tion Years beginning after December 31, 1985, amounts allocated
to the separate post-retirement medical benefits account of a Key
Employee, as defined in Code Section 419A(d)(3), under a welfare
benefit fund, as defined in Code Section 419(e);
(iv) Individual Medical Benefit Account. For purposes
of the Defined Contribution Dollar Limit, contributions allocated
for Limitation Years beginning after March 31, 1984, to an indi-
vidual medical benefit account in a pension or annuity plan, as
defined in Code Section 415(l)(2);
(v) Excess Deferrals. For the Limitation Years during
which these amounts were contributed, excess deferrals that are
not distributed to a Participant by the first April 15th follow-
ing the end of the Participant's taxable year;
(vi) Excess Contributions and Excess Aggregate Contri-
butions. For the Limitation Years during which these amounts
were contributed, excess contributions and Excess Aggregate Con-
tributions whether or not distributed to a Participant; and
(vii) Excess Annual Addition Applied. An excess Annual
Addition from the preceding Limitation Year applied to reduce the
Employer Contributions for the current Plan Year.
(b) Defined Contribution Dollar Limit. For Limitation
Years beginning after December 31, 1986, "Defined Contribution
Dollar Limit" means $30,000 (or 25% of the defined benefit dollar
limit under Code Section 415(b)(1)(A), if greater).
(c) Percentage Limit. "Percentage Limit" means 25% of the
Participant's Section 415 Compensation from the Employer for the
Limitation Year.
(d) ESOP Exceptions. If no more than one-third of the An-
nual Addition under the Plan for a Plan Year is allocated to the
accounts of Highly Compensated Employees, the following special
rules shall apply:
(i) Dollar Limitation Increase. For Plan Years begin-
ning before July 13, 1989, the Defined Contribution Dollar Limit
(but not the Percentage Limit) for each Participant eligible for
an allocation pursuant to Section 5.2(a)(i) shall be increased by
the lesser of (A) the Defined Contribution Dollar Limit, or
(B) the portion of the Employer Contribution used to pay prin-
cipal of an Exempt Loan, multiplied by a fraction. The numerator
of the fraction is the Participating Compensation of the Partici-
pant, and the denominator is the Participating Compensation
of all Participants eligible for an allocation under Sec-
tion 5.2(a)(i).
(ii) Certain Forfeitures Not Annual Additions. For-
feitures of Employer Stock acquired by the Plan with a loan
described in Code Section 404(a)(9)(A) and allocated to a Partic-
ipant's account shall not be deemed an Annual Addition.
(iii) Employer Contribution To Pay Interest Not Annual
Addition. The Employer contribution for a Plan Year deductible
under Code Section 404(a)(9)(B) and not allocated to a Partici-
pant's account shall not be deemed an Annual Addition.
(e) Section 415 Compensation. "Section 415 Compensation"
means a Participant's earned income, wages, salaries, and fees
for professional services and other amounts received for personal
services actually rendered in the course of employment with the
Employer (including, but not limited to, commissions paid to
salesmen, compensation for services based on a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, reimbursements, and expense allowances) actually paid
(or accrued for Limitation Years beginning before January 1,
1992) and includable in gross income for the Limitation Year.
(i) Exclusions. Section 415 Compensation excludes:
(A) Contributions. Contributions (including
Elective Deferrals) to a plan of deferred compensation that are
not includable in the Employee's gross income for the taxable
year in which contributed, or contributions under a simplified
employee pension plan to the extent the contributions are de-
ductible by the Employee, or any distributions from a plan of de-
ferred compensation;
(B) Nonqualified Stock Option. Amounts realized
from the exercise of a nonqualified stock option, or when re-
stricted stock (or property) held by the Employee either becomes
freely transferable or is no longer subject to substantial risk
of forfeiture;
(C) Qualified Stock Option. Amounts realized
from the sale, exchange, or other disposition of stock acquired
under a qualified stock option;
(D) Other Amounts. Other amounts that received
special tax benefits (including any amount that is excluded from
gross income under Code Section 125), or contributions made by
the Employer (whether or not under a salary reduction agree-
ment) toward the purchase of an annuity described in Code Sec-
tion 403(b) (whether or not the amounts are actually excludable
from the gross income of the Employee); and
(E) $200,000 Limit. Amounts in excess of
$200,000 (as adjusted under Code Section 415(d)).
(ii) Estimation. Until Section 415 Compensation is ac-
tually determinable, the Employer may use a reasonable estimate
of Section 415 Compensation. As soon as administratively feasi-
ble, actual Section 415 Compensation shall be determined.
(f) Limitation Year. "Limitation Year" means the Plan
Year.
(i) Change. If the Limitation Year is amended to a
different 12-month period, the new Limitation Year must begin on
a date within the Limitation Year in which the amendment is made.
(ii) Short Limitation Year. If a short Limitation Year
is created by an amendment, the maximum Annual Addition shall
not exceed the Defined Contribution Dollar Limit multiplied by a
fraction. The numerator of the fraction is the number of months
in the short Limitation Year and the denominator is 12.
(g) Related Employer Aggregation. All plans maintained by
the Employer and any Related Employer, all contributions under
those plans, and Section 415 Compensation from the Employer and
any Related Employer shall be aggregated for purposes of applying
this section and the remainder of this article.
5.8 Excess Additions.
(a) Before Contribution. If the Annual Additions limita-
tion will be exceeded for a Participant, the Employer Contri-
bution for the Plan Year may be reduced before payment to the
Trustee to the maximum amount permitted under Section 5.7.
(b) After Contribution. If the Annual Additions limitation
would be exceeded for a Participant as a result of an allocation
of forfeitures, a reasonable error in estimating a Participant's
annual Section 415 Compensation, a reasonable error in determ-
ining the amount of Elective Deferrals permissible under the
limits of Code Section 415, or other facts and circumstances
permitted by the Commissioner of Internal Revenue, the excess
amount shall be reallocated to the accounts of all other Partici-
pants for whom the additional allocation would not exceed the An-
nual Additions limitation.
(i) Suspense Account. If reallocation of the excess
would cause all Participants to exceed the Annual Additions limi-
tation, the remaining excess shall be held in a suspense account.
(ii) Reduce Employer Contribution. The amount in the
suspense account shall be used to reduce an Employer Contribution
for the next Plan Year and shall be allocated before other Annual
Additions are allocated.
(iii) Plan Termination. If the Plan is terminated or
contributions to the Plan are discontinued while there is a sus-
pense account, the allocation shall be made as of the end of the
next Plan Year or, if earlier, as of the date of termination or
discontinuance.
Upon termination of the Plan, the amount remaining
in the Trust that cannot be allocated to Participants for the
Plan Year in which the termination occurs due to maximum
limitations on contributions and benefits under Code Section 415
shall revert to the Employer. The amount of any reversion shall
be paid by the Trustee, as agent of the Employer, to Participants
who are actively employed by the Employer or a Related Employer
at any time during the Plan Year in which the termination of the
Plan occurs. The amount for each Participant shall equal the
portion of the reversion that each Participant would have
received under the provisions of the Plan for the Plan Year as an
allocation had the maximum limitation on contributions and
benefits under Code Section 415 not applied. The payments shall
be treated as benefits payable under an excess benefit plan
within the meaning of ERISA Section 3(36). Any amount that was
held in the Trust in the form of Employer Stock shall be paid by
the Trustee to Participants in the form of Employer Stock.
(iv) No Investment Experience. No investment experi-
ence shall be allocated to a suspense account.
(c) No Distribution. Excess Annual Additions held in a
suspense account may not be distributed to Participants or former
Participants.
(d) Plan Order. If the excess cannot be eliminated com-
pletely under the terms of this section, any remaining excess
shall be eliminated under the terms of the Kysor Industrial
Corporation Savings Plan.
5.9 Limitation on Total Retirement Benefits.
If a Participant is, or was, a Participant in both a defined
contribution plan and a defined benefit plan maintained by the
Employer or a Related Employer, the sum of the Participant's De-
fined Contribution Plan Fraction and Defined Benefit Plan Frac-
tion may not exceed 1.0 in a Limitation Year.
(a) Defined Contribution Plan Fraction. "Defined Contri-
bution Plan Fraction" means a fraction. The numerator of the
fraction is the sum of the Annual Additions to the Participant's
account under all defined contribution plans (whether or not ter-
minated) maintained by the Employer or a Related Employer for the
current and all prior Limitation Years, and the denominator is
the sum of the lesser of the following amounts determined for the
Limitation Year and each prior Limitation Year of service with
the Employer or a Related Employer: (i) 125% of the Defined Con-
tribution Dollar Limit in effect for each Limitation Year, or
(ii) 35% of the Participant's Section 415 Compensation.
If the Participant was a participant as of the first
day of the first Limitation Year beginning after December 31,
1986, in one or more defined contribution plans maintained by the
Employer or a Related Employer that were in existence on May 6,
1986, the numerator of the fraction will be adjusted if the sum
of the fraction and the Defined Benefit Plan Fraction would oth-
erwise exceed 1.0 under the terms of the Plan. Under the ad-
justment, an amount equal to the product of (i) the excess of the
sum of the fractions over 1.0 times (ii) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the fractions
as they would be computed as of the end of the last Limitation
Year beginning before January 1, 1987, and disregarding any
change in the terms and conditions of the plan made after May 5,
1986, but using the Code Section 415 limitations applicable to
the first Limitation Year beginning on or after January 1, 1987.
(b) Defined Benefit Plan Fraction. "Defined Benefit Plan
Fraction" means a fraction. The numerator of the fraction is the
sum of the Participant's Projected Annual Benefits under all de-
fined benefit plans (whether or not terminated) maintained by the
Employer or a Related Employer, and the denominator is the lesser
of 125% of the Defined Benefit Dollar Limit in effect for the
Limitation Year or 140% of the average of the Participant's Sec-
tion 415 Compensation for the three consecutive calendar years of
plan participation that produce the highest average.
If the Participant was a participant as of the first
day of the first Limitation Year beginning after December 31,
1986, in one or more defined benefit plans maintained by the Em-
ployer or a Related Employer that were in existence on May 6,
1986, the denominator of the fraction will not be less than 125%
of the sum of the annual benefits under those defined benefit
plans that the Participant had accrued as of the close of the
last Limitation Year beginning before January 1, 1987, disregard-
ing any change in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the re-
quirements of Section 415 for all Limitation Years beginning be-
fore January 1, 1987.
(i) Projected Annual Benefit. "Projected Annual Bene-
fit" means the Participant's annualized accrued benefit at Normal
Retirement Date (or current date, if later) determined as if the
Participant continued employment and the Participant's Compensa-
tion for the Limitation Year and all other relevant factors used
to determine such benefit remained constant until Normal Retire-
ment Date (or current date, if later).
(ii) Defined Benefit Dollar Limit. "Defined Benefit
Dollar Limit" means the applicable limitation on annual benefits
payable at the social security retirement age, including all ad-
justments, set forth in Code Section 415(b)(1)(A) (as adjusted
under Code Section 415(d)). As of January 1, 1989, the Defined
Benefit Dollar Limit is $98,064.
(c) Benefit Accrual Reduction. If, in a Limitation Year,
the sum of the Defined Contribution Plan Fraction and the Defined
Benefit Plan Fraction will exceed 1.0, the rate of benefit ac-
crual under any applicable defined benefit plan will be reduced
so that the sum of the fractions equals 1.0.
(d) Application of Limitations. These limitations shall be
determined with respect to the aggregate benefits and/or contri-
butions under all plans to which they are applicable with respect
to a Participant as provided in the Regulations under Code Sec-
tion 415 as in effect at the time the limitation is applied.
(e) Maximum Limitations. These limitations are intended
to be not less than the maximum limitations that apply to a Par-
ticipant at the time of application under Code Section 415, ERISA
Section 2004, Section 235(g) of the Tax Equity and Fiscal Respon-
sibility Act of 1982, Section 1106 of the Tax Reform Act of 1986,
any subsequent legislation, and Regulations under the acts, in-
cluding all effective dates, transitional rules, and alternate
limitations contained in those acts and Regulations.
(f) Reduction of Limits. If the Plan is determined to be a
Super Top-Heavy Plan for a Plan Year, or at the election of the
Employer, the words "125% of" shall be deleted from each place
they appear in (a) and (b) above.
ARTICLE 6
Determination of Vested Percentage
6.1 Year of Service.
Service for determining the vested percentage shall be the
Participant's Years of Service.
6.2 Vested Percentage.
(a) 100% Vesting. A Participant's vested percentage with
respect to the Participant's TRASOP Account and After-Tax
Employee Contributions Account shall be 100%.
(b) Vesting Schedule. A Participant's vested percentage
with respect to the Participant's ESOP Account shall be deter-
mined as follows:
Years of Service Vested Percentage
Less than 3 years -0-
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years or more 100%
(c) Normal Retirement Date, Death, or Disability. A
Participant's vested percentage with respect to all of the Par-
ticipant's accounts shall be 100% upon the earlier of the Par-
ticipant's Normal Retirement Date or the date the Participant's
employment terminates due to death or Total Disability.
(d) Change in Control. In the event of a Change in
Control, a Participant's vested percentage with respect to all of
the Participant's accounts as of the date of the Change in
Control shall be 100%. Any amount allocated to the Participant's
ESOP Account as of any date after the Change in Control shall be
subject to the vesting schedule under (b) above.
A "Change in Control" means a change in control of a
nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14a promulgated under the
Securities Exchange Act of 1934, as amended, provided that,
without limitation, such a Change in Control shall be deemed to
have occurred if (i) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
board of directors of the Employer and any new director appointed
or elected to the board of directors during such period whose
appointment or election was approved by a vote of at least two-
thirds of the directors then still in office who either were
directors at the beginning of the period or whose appointment or
election was previously so approved, cease for any reason to
constitute a majority of the directors; (ii) the Employer merges
or consolidates with any other corporation, other than a merger
or consolidation that would result in the voting securities of
the Employer outstanding immediately before the merger of
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the total voting power
represented by the voting securities of the Employer or the
surviving entity outstanding immediately after the merger or
consolidation; or (iii) the Employer liquidates (pursuant to a
plan of complete liquidation) or sells or otherwise disposes of
all or substantially all of the Employer's assets.
Notwithstanding the foregoing or any other provision in
the Plan, a "Change in Control" shall not be deemed to have
resulted for purposes of the Plan upon the occurrence of an event
specified in the preceding paragraph if, prior to the occurrence
of such event (i) the Employer's board of directors adopts a
resolution stating that the occurrence of such event shall not
constitute a Change in Control for purposes of the Plan;
(ii) such resolution is affirmatively approved by at least 75% of
Employer's entire board of directors, including at least two-
thirds of the Continuing Directors; and (iii) at the time that
such resolution is adopted, at least a majority of Employer's
board of directors is made up of Continuing Directors.
"Continuing Director" means an individual serving as a director
of Employer on January 1, 1989, and any other individual
subsequently appointed or elected to the board of directors if
their appointment or election was affirmatively approved by a
majority of the then Continuing Directors. This subsection (d)
may not be amended or repealed without the affirmative vote of
the board of directors including the Continuing Directors (who
must comprise at least a majority of the entire board at such
time).
6.3 Cashout.
(a) Partial Vesting. If a Participant's employment ter-
minates and the Participant's entire Vested Account Balance is
distributed before the last day of the second Plan Year after
the Plan Year during which the Participant's employment termi-
nated, any nonvested amount shall be forfeited as of the date of
distribution.
If the Participant is reemployed by the Employer or a
Related Employer before the Participant has a Break in Service of
60 consecutive months and repays the entire amount distributed
before the earlier of five years after the date the Participant
is reemployed or the date the Participant has a Break in Service
of 60 consecutive months, the forfeited amount shall be restored
to the Participant's account as of the date of repayment.
(b) Zero Vesting. If a Participant's employment terminates
and the Participant's vested percentage under Section 6.2(b) is
zero, any nonvested amount shall be forfeited as of the date that
the Participant's employment terminates. If the former Partici-
pant is reemployed by the Employer or a Related Employer before
the Participant has a Break in Service of 60 consecutive months,
the forfeited amount shall be restored as of the date the
Participant is reemployed.
6.4 Break in Service.
(a) Cancellation of Vesting Service. If an Employee whose
vested percentage under Section 6.2(b) is zero has a Break in
Service of 60 consecutive months, the Participant's Years of Ser-
vice for determining the vested percentage credited before the
Break in Service shall be permanently canceled.
(b) Forfeiture of Nonvested Amount. Unless previously for-
feited, a Participant's nonvested amount shall be permanently
forfeited on the date the Participant has a Break in Service of
60 consecutive months.
6.5 Death After Termination/Lost Recipient.
(a) Death After Termination. If a Participant whose vested
percentage under Section 6.2(b) is not 100% dies after termina-
tion of employment but before the Participant has a Break in
Service of 60 consecutive months, the remaining Vested Account
Balance shall be distributed pursuant to Article 7. Any non-
vested amount that was not forfeited previously shall be for-
feited as of the date of the Participant's death.
(b) Lost Recipient. If a Person entitled to a payment can-
not be located, the Participant's account shall be forfeited as
of the date the Administrator certifies to the Trustee that the
Person cannot be located. The Participant's Vested Account Bal-
ance shall be restored to the Participant's account if the Person
entitled to the payment submits a written election of method of
payment.
6.6 Vested Account Balance and Nonvested Amount.
(a) Vested Amount. "Vested Account Balance" as of the date
of determination means the sum of (i) the balances in the Partic-
ipant's accounts listed under Section 6.2(b) multiplied by the
Participant's vested percentage and (ii) the balances in the Par-
ticipant's accounts listed under Section 6.2(a).
(b) Nonvested Amount. The remainder shall be the Partici-
pant's nonvested amount.
(c) Partial Distribution of Vested Account Balance. If
part of the Participant's Vested Account Balance is distributed
or reduced for any reason before the Participant's vested per-
centage is 100%, the remaining amount in the affected account
shall be maintained in a separate account. The Participant's
vested amount with respect to the separate account is equal to
P(AB + (R x D)) - (R x D), where P is the Participant's vested
percentage; AB is the separate account balance, after allocations
and revaluation, as of the end of the most recent Plan Year; D is
the amount of the distribution; and R is a fraction. The numer-
ator of the fraction is AB, and the denominator is the separate
account balance remaining immediately after the distribution.
If a separate account is maintained, it shall be merged into the
Participant's regular account at the end of the Plan Year in
which the Participant's vested percentage under Section 6.2(b)
becomes 100%.
6.7 Source of Forfeitures.
Any amount to be forfeited from a Participant's ESOP Account
under this article shall be forfeited first from the Partici-
pant's Other Investments Account. If additional amounts are to
be forfeited from the ESOP Account after the Participant's Other
Investments Account is exhausted, and the ESOP Account contains
more than one class of Employer Stock, the additional amounts to
be forfeited shall be forfeited proportionally from each class of
Employer Stock.
ARTICLE 7
Distributions
7.1 Distributive Events.
The following events shall permit distribution.
(a) Normal Retirement Date. A Participant's employment
terminates at or after the Participant's Normal Retirement Date.
"Normal Retirement Date" means the earlier of (i) the date the
Participant attains age 65, or (ii) the later of the date the
Participant attains age 55 or the date the Participant has
10 Years of Service.
(b) Death. A Participant dies.
(c) Total Disability. A Participant suffers a Total
Disability while an Employee. "Total Disability" means total and
permanent inability by reason of the physical or mental condition
of the Participant to perform the duties of the Participant's
employment. The question of whether or not Total Disability
exists shall be established by certification of a physician or
physicians, approved by the Administrator, whose determination
shall be conclusive in all cases. No Participant shall be deemed
to be totally and permanently disabled for purposes of the Plan
if the incapacity consists of chronic alcoholism or addiction to
narcotics, or if the incapacity was contracted, suffered, or
incurred while the Participant was engaged in a felonious enter-
prise or resulted from such enterprise, or resulted from an
intentionally self-inflicted injury, or resulted from the armed
forces of any country. In addition to the requirements described
above, a Participant must be eligible for and ultimately receive
a noncontingent award for total and permanent disability under
the Social Security Act.
(d) Other Termination of Employment. A Participant's em-
ployment terminates for any reason. A transfer between Covered
Employment and any other employment with the Employer, or a
transfer between the Employer and a Related Employer, is not a
termination of employment.
(e) Attainment of Age 70 1/2. A Participant attains age
70 1/2.
(f) QDRO. The Plan receives a QDRO and the Administrator
directs the Trustee to pay benefits to an alternate payee as set
forth in the QDRO. Benefits may be at the time specified in the
QDRO, provided that benefits under the TRASOP Account may not be
distributed unless they have been held at least 84 months after
the month in which they were allocated to the TRASOP Account.
"QDRO" means a qualified domestic relations order, as
defined in Code Section 414(p), that is issued by a competent
state court and that meets the following conditions:
(i) Alternate Payee. The alternate payee must be the
Spouse or former Spouse or a child or other dependent of the
Participant.
(ii) Reason for Distribution. The distribution must
relate to alimony, support of a child or other dependent, or a
division of marital property.
(iii) Contents. The QDRO must contain the name and ad-
dress of the Participant and the alternate payee, the amount of
the distribution or percentage of the Participant's account to
be distributed, the Valuation Date as of which the amount or per-
centage is to be determined, and instructions concerning the tim-
ing and method of distribution.
(iv) Restrictions. A QDRO may not require (A) this
Plan to pay more to the Participant and all alternate payees than
the Participant's Vested Account Balance; (B) a method, commence-
ment date, or duration of payment not otherwise permitted under
this article; and (C) cancellation of the prior rights of another
alternate payee.
(g) Plan Termination; Partial Termination. Termination of
the Plan with respect to all Participants or partial termination
with respect to Participants affected by the partial termination.
7.2 Valuation for Distribution.
The Participant's Vested Account Balance shall be determined
as of the Valuation Date coinciding with or most recently preced-
ing the date of the distribution. The amount distributed shall
not include investment experience for the period from the Valua-
tion Date to the date of distribution. Separate valuations shall
be performed for segregated accounts that are commingled for in-
vestment and any accounts that are separately invested without
commingling. The amount to be distributed shall be reduced by
the amount of any distribution or withdrawal during the period
from the Valuation Date to the date of distribution.
7.3 Method and Form of Distribution.
(a) Method of Distribution. Distribution shall be made in
a single payment or, if necessary, in one or more payments within
one taxable year of the recipient. If any amounts are allocated
to the Participant's accounts after a distribution has been made,
the additional amount shall be distributed as soon as
administratively feasible after the subsequent allocation.
(b) Form of Distribution.
(i) Distribution in Employer Stock. A Participant or
Beneficiary entitled to a distribution of benefits shall be paid
in Employer Stock, except that the value of a fractional share
may be paid in cash. A Participant or Beneficiary with an Other
Investments Account may request that the account be paid in the
form of Employer Stock. If no request is made, the Other
Investments Account shall be distributed in cash.
(ii) Preferred Stock. If the Employer Stock to be dis-
tributed is a class of Preferred Stock which, by its terms, may
be held only by an employee benefit plan and will upon distribu-
tion be automatically converted to Common Stock of the Employer,
then the Participant or Beneficiary shall receive a distribution
of such Common Stock in an amount determined pursuant to the
automatic conversion terms of the Preferred Stock. In addition,
if there are accrued but unpaid dividends with respect to the
Preferred Stock, or dividends that have been paid with respect to
the Preferred Stock but have not been allocated or otherwise
credited to the Participant or Beneficiary, the Participant or
Beneficiary shall be entitled to an additional distribution in an
amount determined by, and subsequent to, the allocation of the
dividend, or the allocation of Employer Stock to the account of
the Participant or Beneficiary, if the dividend is used to repay
an Exempt Loan used to purchase the Preferred Stock. The addi-
tional distribution shall be made as soon as administratively
feasible following the allocation.
7.4 Minimum Distribution.
The minimum amount that must be distributed for each calen-
dar year beginning with the calendar year in which the Partici-
pant attains age 70 1/2 ("Minimum Distribution") shall be equal
to the greater of the minimum required distribution under Regula-
tions Section 1.401(a)(9)-1 or the minimum distribution inciden-
tal benefit under Regulations Section 1.401(a)(9)-2.
7.5 Time of Distribution.
(a) Immediate Distribution. Distribution shall begin on
the Earliest Distribution Date.
(i) Earliest Distribution Date. "Earliest Distribu-
tion Date" means the first date on which distribution is admin-
istratively feasible after the Valuation Date following the
distributive event or, if later, after the Valuation Date
following election of distribution.
(ii) Exceptions.
(A) Certain Financed Securities. The portion of
a Participant's Employer Stock Account consisting of Employer
Stock purchased with an Exempt Loan may be distributed as soon as
administratively feasible after the last day of the Plan Year in
which the Exempt Loan is repaid in full, if later than the date
described in (a)(i) above.
(B) $3,500 or Less. The Vested Account Balance
of a Participant whose employment terminates for any reason other
than death and whose Vested Account Balance, including any
earlier distribution, is $3,500 or less, shall be distributed as
soon as administratively feasible following the end of the Plan
Year in which the Participant's employment terminates. The Par-
ticipant may elect earlier payment to occur as soon as adminis-
tratively feasible after the Valuation Date following the
election.
(C) Death. Subject to (d) below, the time of
distribution following death of a Participant is determined under
Section 7.6.
(D) QDRO. Distribution to an alternate payee
under a QDRO shall be paid to the alternate payee at the time
specified in the order, whether or not the Participant has
attained the age of 50 and even though the Participant continues
to be an Employee.
(b) Normal Distribution Date. Distribution due to termina-
tion of employment for any reason other than death shall begin
not later than 60 days after the end of the Plan Year that
includes the Participant's Normal Retirement Date or, if later,
the end of the Plan Year in which employment terminates. If the
amount cannot be ascertained at that date, distribution retroac-
tive to that date shall be made within 60 days of the date that
the amount can be determined.
A Participant may elect to defer distribution to any
date not later than the applicable date in (c) below.
(c) Required Distribution. If not made under (a) or (b),
distribution to a Participant shall begin not later than the Par-
ticipant's Required Beginning Date.
(i) Required Beginning Date. "Required Beginning
Date" means:
(A) General. The April 1 following the calendar
year in which the Participant attains age 70 1/2.
(B) Age 70 1/2 in 1988. For a Participant who
is not a 5% Owner and attained age 70 1/2 during 1988, April 1,
1990.
(C) Age 70 1/2 Before 1988. For a Participant
who attained age 70 1/2 before January 1, 1988, and who is not a
5% Owner, the April 1 after the calendar year in which the Par-
ticipant's employment terminates, or if the Participant becomes
a 5% Owner, the April 1 following the calendar year in which the
Participant becomes a 5% Owner.
(D) 5% Owner. For purposes of this definition, a
Participant is treated as a 5% Owner if the Participant is a 5%
Owner during the Plan Year in which the Participant attains age
66 1/2 or any later Plan Year. Once distribution begins to a 5%
Owner, it shall continue even if the Participant ceases to be a
5% Owner.
(ii) Payment. Unless paid during the calendar year in
which the Participant attains age 70 1/2 (or the calendar year
before the Participant's Required Beginning Date, if later), the
Minimum Distribution for that calendar year shall be paid not
later than the Required Beginning Date. The Minimum Distribution
for each subsequent calendar year shall be paid by the last day
of the calendar year for which it is required.
7.6 Death of Participant.
(a) Death Before Required Beginning Date. If the Partici-
pant dies before the Required Beginning Date, distribution shall
be made to the Participant's Beneficiary, as soon as administra-
tively feasible after the Valuation Date following the date the
Participant dies or, if later, after the Valuation Date following
election of distribution.
(i) Spouse as Beneficiary. If the Spouse is the Ben-
eficiary, the Spouse may elect distribution at any time after
the Participant's death. Distribution must be made on or before
the last day of the calendar year in which the Participant would
have attained age 70 1/2 or, if later, the last day of the cal-
endar year following the calendar year in which the Participant
died. If the Spouse dies before distribution is made, distri-
bution shall be made under (ii) as though the Spouse were the
Participant.
(ii) Default Rule. Distribution of the Participant's
Vested Account Balance shall be paid in a lump sum no later than
the last day of the calendar year that includes the fifth anni-
versary of the Participant's death. If the Beneficiary dies be-
fore complete distribution of the Participant's Vested Account
Balance, the remainder to be distributed shall be paid in a lump
sum to the successor Beneficiary no later than the last day of
the calendar year that includes the fifth anniversary of the Par-
ticipant's death.
(b) Death After Required Beginning Date. If the Partici-
pant dies after the Required Beginning Date, any unpaid amount
must be paid to the Beneficiary in a lump sum no later than the
last day of the calendar year after the calendar year in which
the Participant died.
7.7 Election of Method and Time of Distribution.
(a) Permitted Elections. To the extent permitted under
this article, the Participant or other recipient may elect the
method and time of distribution.
(b) Required Consent. If the distributive event is termi-
nation of employment prior to the date the Participant attains
age 62 for any reason other than death, distribution shall not
be made without the Participant's consent. The consent shall be
given by an election of distribution. An election of distribu-
tion shall be made within the 90-day period ending on the Benefit
Starting Date.
(i) Notice. When consent is required, the Participant
shall be notified of the right to elect or defer distribution.
The written notice shall provide an explanation of the material
features and relative values of the available methods of distri-
bution. The notice shall be provided at least 30 days and not
more than 90 days before the Benefit Starting Date.
(ii) Benefit Starting Date. "Benefit Starting Date"
means the first day of the first period for which an amount is
distributable in any form. Generally, the Benefit Starting Date
is the date on which distribution is due when all conditions and
requirements for distribution have been met.
(iii) Exception to Consent Requirement. The Partici-
pant's consent is not required with respect to a distribution
when the Participant's Vested Account Balance, including any
earlier distribution, is $3,500 or less.
(c) Election Requirements.
(i) Time. The election shall be made not later than
the date distribution begins or, if earlier, the date when dis-
tribution must begin. An election may be revoked or changed be-
fore distribution begins.
(ii) Form. An election shall be made in a form accept-
able to the Administrator.
(d) Failure to Elect. If a Person fails to elect (or mul-
tiple recipients cannot agree):
(i) Method. The method of distribution shall be a
lump sum.
(ii) Time. Distribution shall begin under Section
7.5(b) if the Participant is alive or under Section 7.6(a)(ii) if
the Participant died.
(e) Additional Information. The Administrator may require
additional election, application or information forms required by
law or deemed necessary or appropriate by the Administrator in
connection with any distribution.
(f) No Reduction or Delay of Distribution. An election
shall not cause a reduction in the minimum amount or delay the
required time of payment of any Minimum Distribution or any dis-
tribution required after the death of a Participant.
7.8 Designation of Beneficiary.
A Participant may designate or change a Beneficiary by
filing a signed designation with the Administrator in the form
approved by the Administrator. The Participant's Will is not ef-
fective for this purpose.
(a) Beneficiary. "Beneficiary" means the Person designated
by the Participant to receive the Participant's benefits under
the Plan after the Participant's death.
(b) Spousal Consent. If a married Participant designates
or changes a Beneficiary other than the Spouse without the
Spouse's consent to and acknowledgment of the effect of the des-
ignation, the designation shall be void. A consent that permits
further designations without consent is void unless the Spouse
expressly and voluntarily permits such designations without any
further spousal consent. The consent may be limited to a spe-
cific Beneficiary and a specific method of distribution.
(i) Consent. Consent by the Spouse is irrevocable.
The consent and acknowledgment must be witnessed by an individ-
ual named by the Administrator or by a notary public. If the
Spouse cannot be located or if other circumstances set forth in
Regulations issued under Code Section 417 exist, the consent need
not be obtained.
(ii) Spouse. "Spouse" means the Participant's husband
or wife at any specified time. A former Spouse shall not be a
Spouse except to the extent specified in a QDRO under Code Sec-
tion 414(p).
(iii) Successor Beneficiaries. A Participant may desig-
nate one or more successor Beneficiaries to the Spouse without
the Spouse's consent.
(iv) Change of Marital Status. A Beneficiary desig-
nation by a Participant will not be effective upon the Partic-
ipant's subsequent marriage unless the Spouse consents to the
designation and acknowledges the effect of the designation.
(c) Failure to Designate. If a Participant fails to desig-
nate a Beneficiary, the Beneficiary shall be the Spouse at the
time of the Participant's death and the Spouse's estate with re-
spect to any amount remaining undistributed at the subsequent
death of the Spouse. If the Participant is not survived by a
Spouse, the Beneficiary for each date of distribution shall be
the first of the following classes with a living member on the
date of distribution:
(i) Children. The Participant's children, including
those by adoption, dividing the distribution equally among the
Participant's children with the living issue of any deceased
child taking their parent's share by right of representation;
(ii) Parents. The Participant's parents, dividing the
distribution equally if both parents are living;
(iii) Brothers and Sisters. The Participant's brothers
and sisters, dividing the distribution equally among the Partici-
pant's living brothers and sisters.
(d) Death of Beneficiary. If distribution is being made to
a Beneficiary who dies before complete distribution, the remain-
ing amount in the account shall be paid to the successor Benefi-
ciary. If distribution is made to more than one Beneficiary,
distribution shall continue to the survivor or survivors of them,
and any remaining amount in the account upon the death of the
last survivor shall be paid to the successor Beneficiary. Survi-
vors shall include the issue of any deceased child who shall take
the deceased child's share by right of representation.
(e) No Beneficiary. If a deceased Participant has no sur-
viving Beneficiary under (c) above on the date a distribution is
payable, the remaining balance shall be paid to the Participant's
estate, if then under the active administration of a probate or
similar court, or if not, to those Persons who would then take
the Participant's personal property under the Michigan intestate
laws then in force and in the proportions provided therein, as
though the Participant had died at such time.
(f) Determination. The Administrator shall apply the rules
of this section to determine the proper Persons to whom payment
should be made. The decision of the Administrator shall be final
and binding on all Persons.
7.9 Facility of Payment.
A payment under this section shall fully discharge the Em-
ployer and Trustee from all future liability with respect to that
payment.
(a) Incapacity. If a recipient entitled to a payment is
legally, physically, or mentally incapable of receiving or ac-
knowledging payment, the Administrator may direct the payment to
the recipient; to the recipient's legal representative; to the
spouse, child, or other relative by blood or marriage of the re-
cipient; to the individual with whom the recipient resides; or by
expending the payment directly for the benefit of the recipient.
A payment made to any Person other than the recipient shall be
used for the recipient's exclusive benefit.
(b) Legal Representative. The Employer shall not be re-
quired to commence probate proceedings or to secure the appoint-
ment of a legal representative.
(c) Determination. The Employer may act upon affidavits
in making any determinations. In relying upon the affidavits or
having made a reasonable effort to locate any Person entitled to
payment, the Employer shall be authorized to direct payment to a
successor Beneficiary or another Person. A Person omitted from
payment shall have no rights on account of payments so made.
7.10 Notice of Penalties.
The following penalties apply to distribution of, or failure
to distribute, certain amounts under the Plan.
(a) Distribution Before Age 59 1/2. A Participant who re-
ceives a distribution before attaining age 59 1/2 may be liable
for an additional 10% federal income tax on any portion of the
distribution included in gross income.
(b) Excess Distributions. If a Participant or Benefi-
ciary receives excess distributions, as defined in Code Sec-
tion 4980A(c), the Participant or Beneficiary shall be subject to
a 15% penalty tax on the excess distributions.
(c) Failure to Receive a Minimum Distribution. For a cal-
endar year in which a Participant or Beneficiary fails to receive
the Minimum Distribution under Code Section 401(a)(9), the reci-
pient shall be subject to an additional tax equal to 50% of the
difference between the Minimum Distribution and the amount the
recipient actually received.
7.11 Special Rules--Distribution of Employer Stock.
Upon distribution of Employer Stock that is not readily
tradable on an established securities market, the following
provisions shall apply.
(a) Distributee's Option to Sell Benefit Shares. Upon dis-
tribution of Employer Stock to a Participant or Beneficiary (or a
donee, trustee, or other Person, including an estate to whom the
Employer Stock passes as a result of a death), the recipient may
elect to sell all or part of the Employer Stock (the "Benefit
Shares").
(i) Option Period: Lapse. The option to sell the
Benefit Shares shall begin on the date of distribution and extend
for a period of the next 60 days. At the end of the period, the
option will temporarily lapse. After the end of the Plan Year in
which the temporary lapse occurs, and after the Employer Stock is
valued as of the last day of that Plan Year, each recipient who
has not exercised the option to sell shall be notified of the new
Fair Market Value of the Benefit Shares. Each recipient will
then have period of 60 days from the date of notification to ex-
ercise the option to sell. If the option to sell is not exer-
cised, it shall lapse at the termination of the new 60-day period
and shall not be renewed.
(ii) Written Notice. Upon a written notice to the
Employer of an election to sell, the seller shall sell and the
Employer shall purchase in accordance with the provisions of (c)
below.
(iii) Limitation. The 60-day option periods shall not
run during a period of time during which the Employer is unable
to purchase the Benefit Shares due to a state or federal law.
(iv) Nonterminable. This option to sell, and the terms
of sale as set forth in (c) below, shall be nonterminable for the
period of the option, and shall continue in existence under the
Plan whether or not the Plan continues as an employee stock own-
ership plan and whether or not the Plan is discontinued.
(v) Assignment. The Employer may assign the obli-
gation to purchase to the Trustee, with the agreement of the
Trustee.
(b) Right of First Refusal.
(i) Notice of Sale or Transfer. If a Participant or
Beneficiary should at any time intend to sell or exchange or
otherwise transfer any Benefit Shares, and if the Participant ob-
tains a bona fide offer for the purchase or exchange of the Bene-
fit Shares, or if any of the Benefit Shares should be the subject
of a proposed assignment or transfer by way of gift, bankruptcy,
execution, hypothecation, or seizure and sale by legal process,
or upon the death of the Participant or Beneficiary, the Par-
ticipant or Beneficiary (or a creditor causing the proposed
transfer) or the personal representative of the estate of the
Participant or Beneficiary shall deliver to the Employer a writ-
ten notice stating: (A) the name or names of the proposed trans-
ferees; (B) the certificate number and number of the Benefit
Shares proposed to be transferred; (C) the proposed price (if a
sale transaction is contemplated); and (D) all other terms of the
proposed transfer. The Trustee shall have the right and option
for a period of 14 days after receipt of the notice to purchase
all of the Benefit Shares the transfer of which is proposed.
(ii) Failure to Exercise Option. If the Trustee does
not exercise the option to purchase and if the proposed transfer
is made within 20 days after the termination of the option to the
Person or Persons in the manner and upon the terms and conditions
set forth in the written notice, then the Benefit Shares may be
so transferred and shall in the hands of the transferee be free
of all options, obligations, and restrictions provided in the
Trust.
(iii) Additional Notices of Sale. If the Trustee does
not elect to exercise the option and if the proposed transfer
is not made within 20 days after the termination of the option,
then the Benefit Shares so proposed to be transferred may not be
transferred without again giving the notice to the Trustee and
the Trustee again shall have the option to purchase the Benefit
Shares.
(iv) Assignment. The Trustee may assign the option to
purchase to the Employer, with the consent of the Employer.
(c) Terms of Purchase. If the Trustee or the Employer be-
comes obligated to purchase Benefit Shares pursuant to the provi-
sions of either (a) or (b) above, the terms of the purchase shall
be as follows:
(i) Distributee's Option to Sell. If Benefit Shares
are purchased pursuant to the option granted under (a) above,
the purchase price shall be the Fair Market Value of the Benefit
Shares, and shall be paid in either a single lump-sum payment or
in not less frequent than annual installments. If a lump-sum
payment is to be made, the payment shall be paid within 30 days
after the date the option is exercised. If installment payments
are to be made, each installment shall be as equal as possible,
and the first installment shall be paid within 30 days after the
date that the option is exercised. If installment payments are
to be made, interest at a reasonable rate shall be payable and
the purchaser shall grant the seller a security interest in the
Benefit Shares being purchased or in other adequate security.
The installment period may not extend for more than five years.
(ii) Right of First Refusal. If Benefit Shares are
purchased pursuant to (b) above, the purchase price shall be the
price stated in the written notice of the proposed transfer, or
if greater, the Fair Market Value of the Benefit Shares. The
terms of purchase shall be no less favorable to the Participant
or Beneficiary than the terms of the offer the Participant or
Beneficiary has received. If the proposed transfer by the Par-
ticipant or Beneficiary is not a sale transaction, the purchase
price shall be the Fair Market Value of the Benefit Shares, and
the terms of purchase shall be governed by the rules of (a)(i)
above.
(iii) Procedure on Closing. At the time provided for
the payment or initial installment, the seller of Benefit Shares
shall deposit with the purchaser the certificates for the Benefit
Shares, properly endorsed or accompanied by an appropriate stock
power. At that time, the purchaser shall deposit with the seller
any required cash payment and, if applicable, its executed prom-
issory note representing any balance remaining to be paid. Also
at that time the Benefit Shares shall be subject to a security
interest in favor of the seller, as collateral for the payment of
the promissory note, or other adequate security shall be given
to the seller. All or a portion of the unpaid balance of a pur-
chase price may be prepaid by the purchaser at any time without
penalty.
(iv) Fair Market Value. "Fair Market Value" generally
means the value determined as of the most recent Valuation Date,
pursuant to Section 5.5(b)(i). However, in the case of a trans-
action under this section between this plan and a disqualified
person, as that term is defined in Code Section 4975, "Fair Mar-
ket Value" means the value as of the date of the transaction.
7.12 Distribution of Cash Dividends.
If an Exempt Loan used to purchase Employer Stock is not
fully repaid, cash dividends on Employer Stock purchased with the
proceeds of that Exempt Loan will be used to repay such Exempt
Loan. If the Exempt Loan used to purchase the Employer Stock has
been repaid, the Trustee shall distribute cash dividends paid on
the Employer Stock allocated to a Participant's account directly
to the Participant. Cash dividends paid on Employer Stock which
was not purchased with an Exempt Loan shall be distributed
directly to the Participant. Cash dividends to be distributed to
Participants shall be so paid not later than 90 days after the
end of the Plan Year during which they were paid to the Trust.
7.13 Distributions After December 31, 1992.
(a) Election of Direct Rollover. This section applies to
distributions made on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this section, a distributee
may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible Rollover Distribution. An eligible roll-
over distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribu-
tion that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution is
required under Code Section 401(a)(9); 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).
(ii) Eligible Retirement Plan. An eligible retirement
plan is an individual retirement account described in Code
Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Sec-
tion 403(a), or a qualified trust described in Code
Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution the surviving Spouse, an eligible retirement plan is
an individual retirement account or individual retirement
annuity.
(iii) Distributee. A distributee includes an Employee
or former Employee. In addition, the Employee's or former
Employees's surviving Spouse and the Employee's or former
Employee's Spouse or former Spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest of
the Spouse or former Spouse.
(iv) Direct Rollover. A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
ARTICLE 8
Administration of the Plan
8.1 Duties, Powers, and Responsibilities of the Employer.
(a) Required. The Employer shall be responsible for:
(i) Employer Contributions.
(A) Amount. Determining the amount of Employer
Contributions;
(B) Payment. Paying, ceasing, or suspending
Employer Contributions (including additional contributions if
necessary to correct an error in allocation, vesting, or distri-
bution of a Participant's interest); and
(C) Compliance. Determining that the amount and
time of Employer Contributions comply with the Plan;
(ii) Agent for Service of Process. Serving as the
agent for service of process;
(iii) Trustee. Appointing the Trustee;
(iv) Amendment. Amending the Plan and Trust;
(v) Plan Termination. Revoking this instrument and
terminating the Plan and Trust; and
(vi) Mergers; Spin-Offs. Merging the Plan with another
qualified retirement plan maintained by the Employer or dividing
the Plan into multiple plans.
(b) Discretionary. The Employer may exercise the following
responsibilities:
(i) Alternate Administrator. Designating a Person
other than the Employer as the Administrator; and
(ii) Payment of Administrative Expenses. Paying admin-
istrative expenses incurred in the operation, administration,
management, and control of the Plan or the Trust. These expenses
shall be the obligation of the Trust unless paid by the Employer.
8.2 Employer Action.
An action required to be taken by the Employer shall be
taken by its board of directors or by an officer authorized to
act on behalf of the Employer.
8.3 Plan Administrator.
"Administrator" means the Employer or a Person designated by
the Employer. The Administrator is a named fiduciary for opera-
tion and management of the Plan and shall have the responsibil-
ities conferred by ERISA upon the "Administrator" as defined in
ERISA Section 3(16).
8.4 Administrative Committee.
(a) Appointment. The Employer shall appoint an administra-
tive committee to perform the duties involved in the daily opera-
tion of the Plan and Trust.
(b) Agent; Powers and Duties. The administrative committee
is an agent of the Employer. The administrative committee shall
have the powers and duties delegated to it by the Administrator.
(c) Not Fiduciary. Except to the extent the administrative
committee is expressly delegated a fiduciary responsibility with
respect to the Plan, the administrative committee will be re-
sponsible to the Employer for its actions and will not be a named
fiduciary for operation and management of the Plan.
(d) Membership. The number of members of the administra-
tive committee shall be determined by the Employer. The Employer
shall appoint the members of the administrative committee and may
remove or replace them at any time.
(e) Records. The administrative committee shall keep rec-
ords of its proceedings.
(f) Actions. The administrative committee shall act by a
majority of its members then in office. Action may be taken ei-
ther by a vote at a meeting or in writing without a meeting. Ac-
tions of the administrative committee may be evidenced by written
instrument executed by the chairman or the secretary of the ad-
ministrative committee.
(g) Report to Administrator. The administrative committee
shall report to the Administrator when requested with respect to
the administration, operation, and management of the Plan and
Trust.
(h) Compensation. Any member of the administrative commit-
tee who is an Employee shall serve without compensation.
(i) Conflict of Interest. Any member of the administrative
committee who is a Participant shall not vote or act on a matter
that relates solely to that Participant. If that Participant is
the only member of the administrative committee, the necessary
action shall be exercised by the Administrator.
8.5 Duties, Powers, and Responsibilities of the Administrator.
Except to the extent properly delegated, the Administrator
shall have the following duties, powers, and responsibilities and
shall:
(a) Plan Interpretation. Interpret all provisions of this
instrument (including resolving an inconsistency or ambiguity or
correcting an error or an omission);
(b) Participant Rights. Subject to Section 8.10, determine
the rights of Participants and Beneficiaries under the terms of
the Plan and Trust and communicate that information to the
Trustee;
(c) Limits; Nondiscrimination Tests; Top-Heavy Tests. Be
responsible for determining (i) that the Plan complies with all
limitations and nondiscrimination tests under the Code and Regu-
lations including maintaining records necessary to demonstrate
compliance with the ACP Limit; and (ii) whether or not the Plan
is a Top-Heavy Plan or a Super Top-Heavy Plan for any Plan Year;
(d) Allocations and Vesting. Determine which Participants
are entitled to a share of the Employer Contribution and other
available amounts for a Plan Year, the amount of each eligible
Participant's Participating Compensation for the Plan Year, the
amount of the Employer Contribution to be allocated to each eli-
gible Participant, the amount and disposition of an excess Annual
Addition, and a Participant's vested percentage;
(e) Errors in Participants' Accounts. Correct (to the ex-
tent possible, by making adjustments to the accounts) an error,
including (but not limited to) errors in allocations of the Em-
ployer Contribution or investment experience, or in determination
of vesting or distribution of a Participant's interest;
(f) Claims and Elections. Establish or approve the manner
of making an election, designation, application, claim for bene-
fits, and review of claims;
(g) Benefit Payments. Direct the Trustee as to the recip-
ient, time payments are to be made or to begin, and the elected
form of distribution;
(h) QDRO Determination. Establish procedures to determine
whether or not a domestic relations order is a QDRO, to notify
the Participant and any alternate payee of this determination,
and to administer distributions pursuant to a QDRO;
(i) Administration Information. Obtain to the extent rea-
sonably possible all information necessary for the proper admin-
istration of the Plan and Trust;
(j) Recordkeeping. Establish procedures for and supervise
the establishment and maintenance of all records necessary and
appropriate for the proper administration of the Plan;
(k) Reporting and Disclosure. Prepare and (i) file annual
and periodic reports required under ERISA and Regulations; and
(ii) distribute disclosure documents including (but not limited
to) the summary plan description, a form permitting the recipient
to reject federal income tax withholding from a distribution, a
notice informing the recipient of the requirements and effects of
lump-sum, five or ten year averaging or of a qualifying rollover
under the Code, the summary annual report, Form 5500 series,
requested and required benefit statements, and notices to
Employees of applications for determination;
(l) Penalties; Excise Tax. Report and pay any penalty tax
or excise taxes incurred by the Plan or Trust or the Employer in
connection with the Plan on the proper tax form designated by the
Internal Revenue Service and within the time limits specified for
the tax form;
(m) Advisers. Employ attorneys, actuaries, accountants,
clerical employees, agents, or other Persons who are necessary
for operation, administration, and management of the Plan and
Trust;
(n) Expenses, Fees, and Charges. Present to the Trustee
for payment (if not paid by the Employer) or reimbursement (if
advanced by the Employer) all reasonable and necessary expenses,
fees and charges, including fees for attorneys, actuaries, ac-
countants, clerical employees, agents, or other Persons, incurred
in connection with the administration, management, or operation
of the Plan and Trust;
(o) Nondiscrimination. Apply all rules, policies, proce-
dures, and other acts without discrimination among Participants;
(p) Bonding. Review compliance with the bonding require-
ments of ERISA; and
(q) Other Powers and Duties. Exercise all other powers and
duties necessary or appropriate under the Plan and Trust, except
those powers and duties allocated to another named fiduciary.
8.6 Delegation of Administrative Duties.
The powers and duties of the Employer and the Administrator
set forth in Sections 8.1 and 8.5 may be delegated to another
fiduciary.
(a) In Writing. The written delegation shall specify
(i) the date of the action and the effective date of the delega-
tion; (ii) the responsibility delegated; (iii) the name, office,
or other reference of each fiduciary to whom the responsibility
is delegated; and (iv) if a responsibility is delegated to more
than one fiduciary, the allocation of the responsibility among
the fiduciaries.
(b) Acceptance of Responsibility. The delegation shall be
communicated to the fiduciary to whom the responsibility is as-
signed, and written acceptance of the responsibility shall be
made by the fiduciary. A fiduciary shall retain the responsibil-
ity until the fiduciary resigns or rejects the responsibility in
writing, or the Administrator takes a superseding action.
(c) Conflict. If a fiduciary's powers or actions conflict
with those of the Administrator, the powers of and actions of the
Administrator will control.
8.7 Interrelationship of Fiduciaries; Discretionary Authority.
A Person may serve in more than one fiduciary capacity with
respect to the Plan and Trust.
(a) Performance of Duties. Each fiduciary shall act in ac-
cordance with the Plan and Trust. Each fiduciary shall be re-
sponsible for the proper exercise of its responsibilities.
(b) Reliance on Others. Except as required by ERISA Sec-
tion 405(b), each fiduciary may rely upon the action of another
fiduciary and is not required to inquire into the propriety of
any action.
(c) Discretionary Authority of Fiduciaries. Each fiduciary
shall have full discretionary authority in the exercise of the
powers, duties, and responsibilities allocated or delegated to
that fiduciary under this instrument.
8.8 Compensation; Indemnification.
An Employee fiduciary who is compensated on a full-time
basis by the Employer shall not receive compensation from the
Plan and Trust, except for reimbursement of expenses, unless per-
mitted under a prohibited transaction exemption issued by the
Department of Labor. The Employer shall indemnify and hold harm-
less each member of the board of directors, each of its Employ-
ees, and each other Person (except a fiduciary independent of the
Employer), to whom responsibilities for the operation and admin-
istration of the Plan have been assigned or fiduciary duties have
been delegated from any and all claims, loss, damages, expense,
and liability arising from any action or failure to act.
Indemnification shall not be required if a Person's action or
inaction is judicially determined to be due to gross negligence
or willful misconduct of the Person. The Employer may purchase
and maintain liability insurance covering itself, any Related
Employer, and any Person against part or all of any claim, loss,
damage, expense, and liability arising from the performance or
failure to perform any power, duty, or responsibility with
respect to the Plan and Trust.
8.9 Fiduciary Standards.
Each fiduciary shall act solely in the interest of Partici-
pants and Beneficiaries:
(a) Prudence. With the care, skill, and diligence of a
prudent Person;
(b) Exclusive Purpose. For the exclusive purpose of pro-
viding benefits and paying expenses of administration; and
(c) Prohibited Transaction. To avoid engaging in a prohib-
ited transaction under the Code or ERISA unless an exemption for
the transaction is available or obtained.
8.10 Claims Procedure.
The Administrator shall determine all issues arising from
the administration of the Plan and Trust.
(a) Initial Determination. Upon application by a Partici-
pant or Beneficiary, the Administrator shall make an initial de-
termination and communicate the determination to the Participant
or Beneficiary within 90 days after the application. If the ini-
tial determination requires a longer period, the Administrator
shall notify the Participant or Beneficiary that the 90-day pe-
riod is extended to 180 days.
(b) Method. The decision of the Administrator shall be in
writing. The decision shall set forth (i) the decision and the
specific reason for the decision; (ii) specific reference to the
Plan provisions on which the decision is based; (iii) a descrip-
tion of additional material, information, or acts that may change
or modify the decision; and (iv) an explanation of the procedure
for further review of the decision.
(c) Further Review. Within 60 days of receipt of the ini-
tial written decision, the Participant or Beneficiary filing the
original application, or the applicant's authorized representa-
tive, may make a request for redetermination by the Administra-
tor. The applicant (or the authorized representative) may review
all pertinent documents and submit issues, comments, and
arguments.
(d) Redetermination. Within 60 days of receipt of an ap-
plication for redetermination, unless special circumstances re-
quire a longer period of time (but not longer than 120 days after
receipt of the application), the Administrator shall provide the
applicant with its final decision, setting forth specific reasons
for the decision with specific reference to Plan provisions on
which the decision is based.
8.11 Participant's Responsibilities.
All requests for action of any kind by a Participant or Ben-
eficiary under the Plan and Trust shall be in writing, executed
by the Participant or Beneficiary, and shall be subject to any
other Plan rules applicable to any specific type of request.
8.12 Responsibility for Determination of Allocations.
The allocations under the Plan shall be made by the
Administrator, or an agent of the Administrator, retained for
this purpose. Upon receipt of the allocations, the Trustee shall
adjust its records accordingly. The Trustee shall rely on
information delivered to it and shall have no independent duty to
ascertain the accuracy of the information and no liability for
its inaccuracy.
ARTICLE 9
Investment/Trust
9.1 Trust Fund.
The Employer shall establish a Trust to be held and invested
by the Trustee, into which the Employer Contributions to the Plan
shall be deposited. The terms for the investment of Trust assets
are described in this article and in the Trust.
9.2 Voting of Employer Stock.
(a) Participant Direction. Each Participant shall have the
right to direct the Trustee as to the manner in which all
Employer Stock, including fractional shares, held in the
Participant's accounts shall be voted. The Trustee shall total
the fractional directions of all Participants who have directed
the vote in the same manner and shall cast the largest number of
whole votes possible from the total of the fraction. Any
remaining fraction shall be disregarded.
(b) Notification. The Employer shall notify the Trustee
and Participants when voting rights are to be exercised and,
within periods as required by law or Employer charter or bylaws
for other shareholders, shall furnish the Trustee and
Participants with information similar to that furnished to other
shareholders of the Employer.
(c) Proxy Solicitation. Management and other may solicit
proxies from Participants, to the same extent as authorized for
other shareholders. Any such proxy will be in the form of an
instruction to the Trustee that will be voted by the Trustee in
the manner indicated in the Participant's direction, and will not
be returned or disclosed to the solicitor.
(d) Unallocated Shares; Nondirected Shares. Allocated
shares of Employer Stock held in the TRASOP Accounts, for which
no voting direction is given, shall not be voted. The Trustee
shall vote unallocated shares of Employer Stock and allocated
shares of Employer Stock, other than shares held in TRASOP
Accounts, for which no voting direction is given, as directed by
the Participants. The number of shares that each directing
Participant may direct shall be determined by multiplying the
number of shares described in the preceding sentence by a
fraction. The numerator of the fraction is one, and the
denominator is the total number of Participants directing the
vote of shares under this subsection (d).
If voting of the unallocated shares and nondirected
shares in the manner described in the preceding paragraph is
precluded by Regulation or other guidance, or by a court of
competent jurisdiction, so that in the opinion of the Trustee
such method may not be used, the Trustee (except as may be
otherwise required by Regulation or other guidance, or by a court
of competent jurisdiction) shall vote such shares in the same
manner, and in the same proportions, as allocated shares were
directed by Participants under (a) above.
(e) Confidentiality. The Trustee may not divulge
information with respect to any Participant's directions under
subsections (a) or (d) to any Person, including the Employer.
9.3 Tender Offer.
The following provisions apply if any Person makes an offer
to purchase or solicits an offer to sell to that Person 1% or
more of the outstanding shares of Employer Stock ("Tender
Offer").
(a) Participant Direction. Each Participant may direct the
Trustee to sell, offer to sell, exchange, or otherwise dispose of
Employer Stock held in the Participant's accounts, in accordance
with the terms of the Tender Offer. Participant direction shall
be filed with the Trustee in the form and at the time specified
by the Trustee.
(b) Trustee's Response - Valid Directions. The Trustee
shall follow all Participants' valid directions with respect to
the potential sale, offer, exchange, or other disposal of the
Employer Stock held in the Participant's accounts. The proceeds
from the disposition of Employer Stock under this section shall
be credited to each Participant's applicable account and shall be
subject to the investment provisions applicable to such account.
(c) Invalid Directions or No Directions. The Trustee shall
treat invalid directions from a Participant, and failure to give
the Trustee directions, as a direction by the Participant not to
dispose of the Employer Stock held in the Participant's accounts.
The Trustee, or its agent, shall determine the validity of
directions from Participants.
(d) Unallocated Shares. The Trustee shall dispose of
Employer Stock after a Tender Offer with respect to unallocated
shares of Employer Stock, as directed by the Participants. The
number of unallocated shares that each Participant may direct
shall be determined by multiplying the number of those shares
described in the preceding sentence by a fraction. The numerator
of the fraction is one, and the denominator is the total
number of Participants giving valid directions under this
subsection (d).
If disposition of unallocated shares in the manner
described in the preceding paragraph is precluded by Regulation
or other guidance or by a court of competent jurisdiction, so
that in the opinion of the Trustee such method may not be used,
the Trustee (except as may be otherwise required by Regulation or
other guidance, or by a court of competent jurisdiction) shall
dispose of a number of unallocated shares determined by multi-
plying the total number of unallocated shares by a fraction. The
numerator of the fraction is the number of shares for which
Participants gave valid directions for disposition under
(a) above, and the denominator is the total number of shares for
which the Participants gave valid directions.
(e) Allocation of Proceeds. The proceeds from any
disposition of Employer Stock held in the Participant's accounts
as a result of a Tender Offer shall be allocated to Participants'
applicable accounts. Proceeds from unallocated Employer Stock
shall be used to repay the Exempt Loan with which such Employer
Stock was purchased.
(f) Confidentiality. The Trustee may not divulge
information with respect to any Participant's directions under
subsections (a) or (d) to any Person, including the Employer.
9.4 Diversification of Investments.
Upon the request of a Participant who has attained at least
age 55 and has at least ten years of participation in the Plan,
the Administrator may direct the Trustee to establish a
segregated account for the Participant and to liquidate up to 25%
of the number of shares of Available Employer Stock allocated to
the Participant. The proceeds shall be reinvested in investments
described in (f) below and held in the segregated account.
(a) Available Employer Stock. "Available Employer Stock"
means Employer Stock acquired by or contributed to the Plan after
December 31, 1986, and held in the Participant's ESOP Account.
(The term does not include Employer Stock held in TRASOP Accounts
or After-Tax Employee Contributions Accounts since no Employer
Stock allocated to these accounts was acquired after December 31,
1986.) Employer Stock acquired by or contributed to the Plan
will not be Available Employer Stock if the Fair Market Value of
the Employer Stock allocated to the eligible Participant's ESOP
Account as of the Valuation Date immediately preceding the first
day the Participant is eligible to make an election under this
section is $500 or less.
(b) Timing of Direction. The direction to liquidate and
reinvest Available Employer Stock under this provision may be
given during the first 90 days after the last day of each Plan
Year in the Qualified Election Period. During the first 90 days
after the last day of the last (sixth) Plan Year in the Qualified
Election Period, the Participant may request the liquidation and
reinvestment of up to 50% of the number of shares of Available
Employer Stock allocated to the Participant.
(c) Determination of Number of Shares To Be Liquidated and
Reinvested. The total amount liquidated and reinvested at any
time shall not exceed 25% (or 50%) of the number of shares of
Available Employer Stock held allocated to the Participant, in-
cluding shares of Available Employer Stock previously liquidated
and reinvested. Any fractional number of shares to be liquidated
and reinvested shall be rounded up to the next highest whole num-
ber of shares.
(d) Qualified Election Period. "Qualified Election Period"
means the six-year period beginning on the first day of the first
Plan Year in which the Participant attains at least age 55 and
has at least ten years of participation.
(e) Value of Shares to Be Liquidated and Reinvested. A di-
rection to liquidate Available Employer Stock and reinvest the
proceeds in accordance with this provision shall apply to the
Available Employer Stock held in the Participant's ESOP Account
as of the last day of the Plan Year immediately preceding the
date of liquidation. Dividends paid on Available Employer Stock
before the date of reinvestment of the proceeds from the liquida-
tion of Available Employer Stock shall be reinvested under this
section. No interest or earnings shall be credited to the Avail-
able Employer Stock liquidated for the period beginning on the
last day of the Plan Year immediately preceding the date of
liquidation and the date of liquidation.
(f) Investments. The amount in the segregated account
shall be transferred to the Kysor Industrial Corporation Savings
Plan to be held, administered, and distributed in accordance with
the terms of that plan. The account shall be invested pursuant
to the rules set forth in that plan and the related trust in
available investments (other than investment in an Employer Stock
fund).
ARTICLE 10
Amendment, Mergers, Successor Employer
10.1 Amendment.
The Employer may amend the Plan and Trust. An amendment may
be retroactive or prospective, in the sole discretion of the Em-
ployer, except where prohibited by ERISA or the Code. An amend-
ment may be made without the consent of any other Person, except
that an amendment shall not:
(a) Exclude Participant. Exclude an Employee who previ-
ously became a Participant;
(b) Reduce Participant's Account. Decrease the amount
credited to a Participant's account;
(c) Reduce Vested Percentage. Reduce a Participant's
vested percentage, as of the later of the date of adoption of the
amendment or the effective date of the amendment;
(d) Vesting Schedule. Modify the vesting schedule for a
Participant who was a Participant on the later of the effective
date or the date of adoption of the amendment, except to increase
the Participant's vested percentage;
(e) Elimination of Protected Benefits. Eliminate any
early retirement benefits and retirement-type subsidy under
Code Section 411(d)(6)(B)(i) or any optional forms of distri-
bution with respect to benefits attributable to service earned
before the amendment except as may be permitted under Code Sec-
tions 401(a)(4) and 411; and
(f) Alter Trustee's Duties. Alter the duties, responsibil-
ities, or liabilities of the Trustee without the consent of the
Trustee.
10.2 Merger of Plans.
The Plan and Trust may be merged or consolidated, or its
assets and liabilities may be transferred, in whole or in part,
to another qualified retirement plan and trust if:
(a) Preservation of Account Balance. Each Participant's
account balance would be equal to or greater than the account
balance the Participant would have been entitled to receive if
the Plan had terminated immediately before the merger, consoli-
dation, or transfer.
(b) Authorization. The Employer and any new or successor
employer authorize the merger, consolidation, or transfer.
10.3 Successor Employer.
If an Employer is dissolved, merged, consolidated, restruc-
tured, or reorganized, or if the assets of the Employer are
transferred, the Plan and Trust may be continued by the succes-
sor, and in that event, the successor will be substituted for the
Employer.
ARTICLE 11
Termination
11.1 Right to Terminate or Discontinue Contributions.
The Employer reserves the right to revoke this instrument
and terminate the Plan and Trust, or to cease or suspend further
contributions.
11.2 Discontinuance of Contributions.
If the Employer determines that it is no longer possible or
desirable to make Employer Contributions, it may, without ter-
minating the Plan and Trust, take appropriate action to perma-
nently discontinue further Employer Contributions. Upon discon-
tinuance of Employer Contributions, the accounts of all affected
Participants shall be nonforfeitable. The Plan and Trust will
remain in force, and the Administrator and the Trustee will
continue to administer the Plan and Trust under its provisions
except for Employer Contributions.
11.3 Effect of Termination or Partial Termination.
(a) Nonforfeitability. Upon termination or partial termi-
nation of the Plan, accounts of affected Participants shall be
nonforfeitable.
(b) Distribution. The Administrator shall direct the
Trustee to make distributions to affected Participants under
Article 7.
11.4 No Reversion of Assets.
The Employer shall not receive an amount from the Trust
upon termination, partial termination, or discontinuance of
contributions.
ARTICLE 12
General Provisions
12.1 Spendthrift Provision.
An interest in the Trust shall not be subject to assignment,
conveyance, transfer, anticipation, pledge, alienation, sale, en-
cumbrance, or charge, whether voluntary or involuntary, by a Par-
ticipant or Beneficiary except under a QDRO or as permitted in
subsection (a).
(a) Not Security. An interest shall not provide collateral
or security for a debt of a Participant or Beneficiary or be sub-
ject to garnishment, execution, assignment, levy, or to another
form of judicial or administrative process or to the claim of a
creditor of a Participant or Beneficiary, through legal process
or otherwise, except under a voluntary revocable assignment
permitted by Regulation 1.401(a)-13.
(b) Attempts Void. An attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, or otherwise
dispose of benefits payable, before actual receipt of the bene-
fits, or a right to receive benefits, shall be void. The trust
shall not be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of a Person entitled to bene-
fits. The benefits and Trust assets under the Plan shall not be
considered an asset of a Participant or Beneficiary in the event
of insolvency or bankruptcy.
12.2 Effect Upon Employment Relationship.
The adoption of the Plan shall not create a contract of
employment between the Employer and an Employee, confer upon an
Employee a legal right to continuation of employment, limit or
qualify the right of the Employer to discharge or retire an Em-
ployee at will, or affect the right of the Employee to remain in
service after the Normal Retirement Date.
12.3 No Interest in Employer Assets.
Nothing in the Plan and Trust shall be construed to give an
Employee, Participant, or Beneficiary an interest in the assets
or the business affairs of the Employer, or the right to examine
the books and records of the Employer. A Participant's rights
are solely those granted by this instrument.
12.4 Construction.
The singular includes the plural, and the plural includes
the singular, unless the context clearly indicates the contrary.
Capitalized terms have the meaning specified in the Plan or
Trust. If a term is not defined, the term shall have the
general, accepted meaning of the term.
Any period of time described in the Plan shall consist of
consecutive days, months, or years, as appropriate.
12.5 Severability.
If any provision of the Plan or Trust is invalid,
unenforceable, or disqualified under the Code, ERISA, or
Regulations, for any period of time, the affected provisions
shall be ineffective but the remaining provisions shall be
unaffected.
12.6 Governing Law.
The Plan and Trust shall be interpreted, administered, and
managed in compliance with the Code, ERISA, and Regulations.
To the extent not preempted by federal law, the Plan and Trust
shall be interpreted, administered, and managed in compliance
with the laws of the State of Michigan.
12.7 Nondiversion.
The Plan is established and shall be administered for the
exclusive benefit of Participants and their beneficiaries.
ARTICLE 13
Top-Heavy Plan Provisions
13.1 Top-Heavy/Super Top-Heavy Determination.
If the Plan is or becomes a Top-Heavy Plan or a Super Top-
Heavy Plan in a Plan Year, the provisions of this article shall
supersede all conflicting Plan provisions.
(a) Top-Heavy Plan. "Top-Heavy Plan" means the Plan for a
Plan Year if:
(i) Not Required or Permissive Aggregation Group. The
Plan is not part of a Required Aggregation Group or a Permissive
Aggregation Group, and the Top-Heavy ratio exceeds 60%;
(ii) Required Aggregation Group. The Plan is part of a
Required Aggregation Group (but not part of a Permissive Aggrega-
tion Group), and the Top-Heavy Ratio for the Required Aggregation
Group exceeds 60%; or
(iii) Permissive Aggregation Group. The Plan is part of
a Permissive Aggregation Group, and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(b) Super Top-Heavy Plan. "Super Top-Heavy Plan" means the
Plan for a Plan Year if the Top-Heavy Ratio for the plans or
groups (set forth in (a) above) exceeds 90%.
(c) Calculation. The calculation of the Top-Heavy Ratio
and the extent to which distributions, rollovers, and transfers
are taken into account will be made in accordance with Code Sec-
tion 416 and Regulations.
(i) Disregard Certain Employees. In calculating the
Top-Heavy Ratio, the account balance or accrued benefit of a Par-
ticipant who was a Key Employee in a prior year but is no longer
a Key Employee or has not performed services for an Employer
maintaining the Plan at any time during the five-year period
ending on the Determination Date(s) will be disregarded.
(ii) Ownership. Ownership shall be determined under
Code Section 318 as modified by Code Section 416(i)(1)(B)(iii)
without regard to the aggregation rules under Code Section 414.
(iii) Rollovers and Transfers. A distribution rolled
over or an amount transferred from the Plan to another qualified
retirement plan of the Employer or a Related Employer shall not
be included in the Present Value of Accrued Benefits under the
Plan. A distribution rolled over or an amount transferred from
another qualified retirement plan of the Employer or a Related
Employer to the Plan shall be included in the Present Value of
Accrued Benefits under the Plan. If a rollover or transfer to a
qualified retirement plan of an unrelated employer was initiated
by the former Participant, it shall be deemed a distribution from
the Plan. If a rollover or transfer from a qualified retirement
plan of an unrelated employer to the Plan for a Participant was
initiated by the Participant, it shall not be included in the
Present Value of Accrued Benefits under the Plan.
13.2 Top-Heavy Definitions.
For purposes of this article, the following terms have the
stated meanings:
(a) Top-Heavy Ratio. "Top-Heavy Ratio" means the ratio, as
of the Plan's Determination Date, calculated by dividing the ag-
gregate Present Value of Accrued Benefits of all Key Employees of
each plan in the Required Aggregation Group (and each other plan
in the Permissive Aggregation Group, if necessary or desirable)
by the aggregate Present Value of Accrued Benefits of all Partic-
ipants under all plans in the Required (or Permissive) Aggrega-
tion Group.
(b) Present Value of Accrued Benefits.
(i) This Plan. "Present Value of Accrued Benefits"
under the Plan means the account balances of all Participants and
Beneficiaries determined as of the Determination Date, including
forfeitures reallocated as of such Determination Date. The Pres-
ent Value of Accrued Benefits includes the amount of a
distribution made from the Plan during the Plan Year that in-
cludes the Determination Date and any of the four preceding Plan
Years and the value of each Participant's After-Tax Employee
Contributions Account.
(ii) Other Plans. The Present Value of Accrued Bene-
fits shall be determined with respect to, and pursuant to the
provisions of, all qualified retirement plans (including a sim-
plified employee pension plan) in the aggregation group.
(iii) Unpaid Contribution. A contribution not paid as
of a Determination Date for any plan in the aggregation group
shall be included in the determination of the Present Value of
Accrued Benefits as required in Code Section 416 and Regulations.
(iv) Actuarial Assumptions. If the Plan is part of a
Permissive Aggregation Group or a Required Aggregation Group and
at least one of the qualified retirement plans aggregated with
the Plan is a defined benefit plan, the Present Value of Accrued
Benefits under any such defined benefit plan shall be determined
based on the following:
Interest rate - 6% per annum
Mortality table - UP 1984 Mortality Table
(v) Accrual Rate. The accrued benefit under any
defined benefit plan maintained by the Employer or a Related
Employer for any Participant who is not a Key Employee shall be
determined (A) under the method, if any, that uniformly applies
for accrual purposes under all defined benefit plans maintained
by the Employer or a Related Employer, or (B) if there is no
uniform method, as if the benefit accrued not more rapidly than
the slowest accrual rate permitted under the fractional rule of
Code Section 411(b)(1)(C).
(c) Required Aggregation Group. "Required Aggregation
Group" means all qualified retirement plans, including terminated
plans, of the Employer and each Related Employer in which at
least one Key Employee participates, or participated at any time
during the five-year period ending on the Determination Date,
plus all other qualified retirement plans of the Employer and
each Related Employer, that enable one or more of the plans cov-
ering at least one Key Employee to meet the requirements of Code
Sections 401(a)(4) or 410.
(d) Permissive Aggregation Group. "Permissive Aggregation
Group" means all qualified retirement plans, including terminated
plans, if any, of the Employer and each Related Employer that are
part of a Required Aggregation Group that includes the Plan, plus
any other qualified retirement plan (designated by the Employer)
of the Employer and each Related Employer that is not part of the
Required Aggregation Group but that, when considered part of the
Permissive Aggregation Group, does not prevent the group from
meeting the requirements of Code Sections 401(a)(4) and 410.
(e) Determination Date. "Determination Date" means the
last day of the preceding Plan Year.
(i) Present Value of Accrued Benefits. The Present
Value of Accrued Benefits are determined as of the most recent
Top-Heavy Valuation Date within the 12-month period ending on the
Determination Date.
(ii) Multiple Plans. When aggregating plans, the Pres-
ent Value of Accrued Benefits will be calculated with reference
to the Determination Dates that fall within the same calendar
year.
(f) Key Employee. "Key Employee" means an Employee or
former Employee (including any deceased Employee or the Benefi-
ciary of any deceased Employee) who, under Code Section 416(i),
is or was, during the current Plan Year or any of the four Plan
Years immediately preceding the current Plan Year, one of the
following:
(i) Officer. An officer (determined under Sec-
tion 2.4) of an Employer or Related Employer if the officer's
HCE Compensation exceeds 50% of the defined benefit dollar limit
under Code Section 415(b)(1)(a) (as adjusted under Code Sec-
tion 415(d)) for the Plan Year;
(ii) Top 10 Owners. One of the 10 Employees owning the
largest interests, exceeding 1/2%, in an Employer or Related Em-
ployer if the Employee's HCE Compensation exceeds $30,000 (or the
Defined Contribution Dollar Limit, if greater);
(iii) 5% Owner. A 5% Owner; or
(iv) 1% Owner; $150,000 Compensation. A 1% owner, de-
termined under the definition of 5% Owner but replacing "5%" with
"1%," whose HCE Compensation exceeds $150,000.
Ownership under (ii) above, as well as under (iii) and
(iv) pursuant to the definition of 5% Owner, shall be determined
separately for each Employer and Related Employer. Compensation
for (i), (ii), and (iv) above for a Plan Year includes HCE Com-
pensation from the Employer and all Related Employers.
(g) Top-Heavy Valuation Date. "Top-Heavy Valuation Date"
means, for a defined contribution plan (including a simplified
employee pension plan), the date for revaluation of the assets to
market value coinciding with, or occurring most recently within
the 12-month period ending on, the Determination Date. For a de-
fined benefit plan, the term means the most recent date used for
computing the plan costs for minimum funding purposes (whether or
not an actuarial valuation is performed during that Plan Year)
occurring within the 12-month period ending on the Determination
Date.
13.3 Minimum Allocation/Benefit.
For each Plan Year in which the Plan is or becomes a Top-
Heavy Plan, the minimum allocation or benefit shall be provided
under any defined benefit pension plan maintained by the
Employer. If a Participant is not a participant under any
defined benefit pension plan maintained by the Employer, the
Employer Contributions and forfeitures allocated to the account
of each such Participant who is not a Key Employee and who is
employed on the last day of the Plan Year shall be not less than
the lesser of 4% of the Participant's HCE Compensation, or the
largest percentage of HCE Compensation allocated to any Key
Employee from all Employer Contributions. A Participant who is
not a Key Employee and whose employment terminates during the
Plan Year on or after the Participant's Normal Retirement Date or
due to death or Total Disability shall be eligible for this
minimum allocation. If necessary, the Employer shall make an
additional contribution to provide this minimum allocation.
13.4 Vesting Schedule.
The vesting schedule for each Participant who has an Hour
of Service during a Plan Year in which the Plan is or becomes a
Top-Heavy Plan shall be replaced with the following schedule:
Years of Service Vested Percentage
Less than 2 years -0-
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
(a) Cessation. If the Plan ceases to be a Top-Heavy Plan,
vested percentages shall continue to be determined under this
schedule.
(b) Vesting Schedule Change. Any change in the vesting
schedule due to the Plan becoming, or ceasing to be, a Top-Heavy
Plan shall be treated as an amendment to the Plan, and all rules
applying to the amendment of a vesting schedule shall apply.
13.5 Plan Modifications.
If the Administrator determines the Plan to be a Super Top-
Heavy Plan for a Plan Year, or the words "125% of" are deleted
from each place they appear in the Defined Contribution Plan
Fraction and the Defined Benefit Plan Fraction, the minimum
allocation percentage under Section 13.3 shall be decreased from
4% of HCE Compensation to 3%.
The Employer has executed this instrument this ______ day of
_________________, 1993.
KYSOR INDUSTRIAL CORPORATION
By ________________________________
Its ____________________________
Employer
SCHEDULE A
A. Original Plan. The Kysor Industrial Corporation
Administrative Employee Stock Ownership Plan was originally
adopted on August 23, 1985, effective January 1, 1985. The plan
was subsequently amended on December 27, 1985; April 10, 1986;
and March 22, 1988. Effective January 1, 1988, the Kysor
Industrial Corporation Administrative TRASOP was merged into the
Kysor Industrial Corporation Administrative Employee Stock
Ownership Plan.
B. First Amendment and Restatement. The Kysor Industrial
Corporation Administrative Employee Stock Ownership Plan was
amended and restated on February 24, 1989, effective January 1,
1989. The plan was renamed the Kysor Industrial Corporation
Employee Stock Ownership Plan. The trust provisions of the plan
were separated from the plan instrument effective January 1,
1989, and amended and restated in the Kysor Industrial
Corporation Employee Stock Ownership Trust. The plan was
subsequently amended by an instrument dated June 15, 1989.
C. Second Amendment and Restatement. The Kysor Industrial
Corporation Employee Stock Ownership Plan and the Kysor
Industrial Corporation Employee Stock Ownership Trust have been
amended and restated to comply with the Tax Reform Act of 1986,
effective January 1, 1989.
[{932020007.0010.PLP}]<PAGE>
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Page
ARTICLE 1 - Establishment of Plan and Trust. . . . . . . . . . . . . . . 1
1.1 Establishment of Plan. . . . . . . . . . . . . . . . . . . . . 1
(a) Employer. . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Plan History. . . . . . . . . . . . . . . . . . . . . . . 1
(c) Adoption by Another Employer. . . . . . . . . . . . . . . 1
1.2 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . 1
1.3 Compliance With Law. . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effective Dates of Plan Provisions . . . . . . . . . . . . . . 2
1.5 Application to Inactive and Former Participants. . . . . . . . 2
ARTICLE 2 - Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2
Table of Definitions . . . . . . . . . . . . . . . . . . . . . ix
2.1 Break in Service . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Employer Contributions . . . . . . . . . . . . . . . . . . . . 3
2.3 5% Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Corporation . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Partnership . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Proprietorship. . . . . . . . . . . . . . . . . . . . . . 3
2.4 Highly Compensated Employee. . . . . . . . . . . . . . . . . . 3
(a) Definition. . . . . . . . . . . . . . . . . . . . . . . . 3
(b) HCE Compensation. . . . . . . . . . . . . . . . . . . . . 4
(c) Determination Rules . . . . . . . . . . . . . . . . . . . 4
2.5 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Back Pay. . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Periods Credited. . . . . . . . . . . . . . . . . . . . . 5
2.6 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Related Employer . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Year of Service. . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Aggregate Elapsed Time. . . . . . . . . . . . . . . . . . 6
(b) Continuous. . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Less Than One Year Absence. . . . . . . . . . . . . . . . 6
(d) Severance Date. . . . . . . . . . . . . . . . . . . . . . 7
(e) Qualified Maternity or Paternity Absence. . . . . . . . . 7
(f) Time of Credit. . . . . . . . . . . . . . . . . . . . . . 7
(g) Aggregation . . . . . . . . . . . . . . . . . . . . . . . 7
(h) Military Service. . . . . . . . . . . . . . . . . . . . . 7
(i) No Duplication. . . . . . . . . . . . . . . . . . . . . . 7
(j) Non-Covered Employment. . . . . . . . . . . . . . . . . . 7
(k) Subject to Break-in-Service Rules . . . . . . . . . . . . 7
(l) Regulations . . . . . . . . . . . . . . . . . . . . . . . 8
(m) Predecessor Plan. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 - Eligibility to Participate . . . . . . . . . . . . . . . . . 8
3.1 Eligibility Requirements . . . . . . . . . . . . . . . . . . . 8
(a) Employee. . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Entry Date. . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Requirement of Covered Employment. . . . . . . . . . . . . . . 8
3.3 Participation Rules. . . . . . . . . . . . . . . . . . . . . . 9
(a) Termination of Participation. . . . . . . . . . . . . . . 9
(b) Reemployment. . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . . 9
(a) One-Year Period . . . . . . . . . . . . . . . . . . . . . 9
(b) Full-Time Basis . . . . . . . . . . . . . . . . . . . . . 9
(c) Conditions. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4 - Contributions. . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Contributions. . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) ESOP Contributions. . . . . . . . . . . . . . . . . . . . 10
(b) Restoration of Forfeiture . . . . . . . . . . . . . . . . 10
4.2 ESOP Contribution. . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Limits on Employer Contributions . . . . . . . . . . . . . . . 11
(a) Deduction . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Annual Additions. . . . . . . . . . . . . . . . . . . . . 11
4.4 Return of Employer Contributions . . . . . . . . . . . . . . . 11
(a) Mistake of Fact . . . . . . . . . . . . . . . . . . . . . 11
(b) Nondeductible . . . . . . . . . . . . . . . . . . . . . . 11
(c) Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Reduction Of Employer Contribution for Leased
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Timing of Contributions. . . . . . . . . . . . . . . . . . . . 12
4.7 Limitations on ESOP Contributions. . . . . . . . . . . . . . . 12
(a) ACP Limit . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Prevention of Excess Aggregate
Contributions . . . . . . . . . . . . . . . . . . . . . . 13
(c) Correction of Excess Aggregate
Contribution. . . . . . . . . . . . . . . . . . . . . . . 13
(d) Additional 401(m) Rules . . . . . . . . . . . . . . . . . 14
ARTICLE 5 - Allocations. . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Specific Accounts . . . . . . . . . . . . . . . . . . . . 17
(b) General Rules . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) ESOP Contribution . . . . . . . . . . . . . . . . . . . . 18
(b) Restoration of Forfeiture . . . . . . . . . . . . . . . . 21
5.3 Stock Dividends on Employer Stock, Stock Splits,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Timing. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Annual Addition Limitation. . . . . . . . . . . . . . . . 22
(c) Investment Experience . . . . . . . . . . . . . . . . . . 22
(d) Limitation on Allocation. . . . . . . . . . . . . . . . . 22
5.5 Allocation of Earnings, Losses, and Expenses;
Revaluation of Assets. . . . . . . . . . . . . . . . . . . . . 22
(a) Earnings, Losses, and Expenses. . . . . . . . . . . . . . 22
(b) Revaluation of Trust. . . . . . . . . . . . . . . . . . . 23
(c) No Earnings on Distributions. . . . . . . . . . . . . . . 23
5.6 Sale or Purchase of Employer Stock . . . . . . . . . . . . . . 23
(a) Sale of Employer Stock. . . . . . . . . . . . . . . . . . 24
(b) Purchase of Employer Stock. . . . . . . . . . . . . . . . 24
5.7 Limitation on Annual Additions . . . . . . . . . . . . . . . . 24
(a) Annual Additions. . . . . . . . . . . . . . . . . . . . . 24
(b) Defined Contribution Dollar Limit . . . . . . . . . . . . 25
(c) Percentage Limit. . . . . . . . . . . . . . . . . . . . . 25
(d) ESOP Exceptions . . . . . . . . . . . . . . . . . . . . . 25
(e) Section 415 Compensation. . . . . . . . . . . . . . . . . 26
(f) Limitation Year . . . . . . . . . . . . . . . . . . . . . 27
(g) Related Employer Aggregation. . . . . . . . . . . . . . . 27
5.8 Excess Additions . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Before Contribution . . . . . . . . . . . . . . . . . . . 27
(b) After Contribution. . . . . . . . . . . . . . . . . . . . 27
(c) No Distribution . . . . . . . . . . . . . . . . . . . . . 28
(d) Plan Order. . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Limitation on Total Retirement Benefits. . . . . . . . . . . . 28
(a) Defined Contribution Plan Fraction. . . . . . . . . . . . 28
(b) Defined Benefit Plan Fraction . . . . . . . . . . . . . . 29
(c) Benefit Accrual Reduction . . . . . . . . . . . . . . . . 30
(d) Application of Limitations. . . . . . . . . . . . . . . . 30
(e) Maximum Limitations . . . . . . . . . . . . . . . . . . . 30
(f) Reduction of Limits . . . . . . . . . . . . . . . . . . . 30
ARTICLE 6 - Determination of Vested Percentage . . . . . . . . . . . . . 30
6.1 Year of Service. . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Vested Percentage. . . . . . . . . . . . . . . . . . . . . . . 31
(a) 100% Vesting. . . . . . . . . . . . . . . . . . . . . . . 31
(b) Vesting Schedule. . . . . . . . . . . . . . . . . . . . . 31
(c) Normal Retirement Date, Death, or
Disability. . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Change in Control . . . . . . . . . . . . . . . . . . . . 31
6.3 Cashout. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Partial Vesting . . . . . . . . . . . . . . . . . . . . . 32
(b) Zero Vesting. . . . . . . . . . . . . . . . . . . . . . . 32
6.4 Break in Service . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Cancellation of Vesting Service . . . . . . . . . . . . . 33
(b) Forfeiture of Nonvested Amount. . . . . . . . . . . . . . 33
6.5 Death After Termination/Lost Recipient . . . . . . . . . . . . 33
(a) Death After Termination . . . . . . . . . . . . . . . . . 33
(b) Lost Recipient. . . . . . . . . . . . . . . . . . . . . . 33
6.6 Vested Account Balance and Nonvested Amount. . . . . . . . . . 33
(a) Vested Amount . . . . . . . . . . . . . . . . . . . . . . 33
(b) Nonvested Amount. . . . . . . . . . . . . . . . . . . . . 34
(c) Partial Distribution of Vested Account
Balance . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.7 Source of Forfeitures. . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 7 - Distributions. . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Distributive Events. . . . . . . . . . . . . . . . . . . . . . 34
(a) Normal Retirement Date. . . . . . . . . . . . . . . . . . 34
(b) Death . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Total Disability. . . . . . . . . . . . . . . . . . . . . 35
(d) Other Termination of Employment . . . . . . . . . . . . . 35
(e) Attainment of Age 70 1/2. . . . . . . . . . . . . . . . . 35
(f) QDRO. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Plan Termination; Partial Termination . . . . . . . . . . 36
7.2 Valuation for Distribution . . . . . . . . . . . . . . . . . . 36
7.3 Method and Form of Distribution. . . . . . . . . . . . . . . . 36
(a) Method of Distribution. . . . . . . . . . . . . . . . . . 36
(b) Form of Distribution. . . . . . . . . . . . . . . . . . . 36
7.4 Minimum Distribution . . . . . . . . . . . . . . . . . . . . . 37
7.5 Time of Distribution.. . . . . . . . . . . . . . . . . . . . . 37
(a) Immediate Distribution. . . . . . . . . . . . . . . . . . 37
(b) Normal Distribution Date. . . . . . . . . . . . . . . . . 38
(c) Required Distribution . . . . . . . . . . . . . . . . . . 38
7.6 Death of Participant . . . . . . . . . . . . . . . . . . . . . 39
(a) Death Before Required Beginning Date. . . . . . . . . . . 39
(b) Death After Required Beginning Date . . . . . . . . . . . 39
7.7 Election of Method and Time of Distribution. . . . . . . . . . 40
(a) Permitted Elections . . . . . . . . . . . . . . . . . . . 40
(b) Required Consent. . . . . . . . . . . . . . . . . . . . . 40
(c) Election Requirements . . . . . . . . . . . . . . . . . . 40
(d) Failure to Elect. . . . . . . . . . . . . . . . . . . . . 40
(e) Additional Information. . . . . . . . . . . . . . . . . . 41
(f) No Reduction or Delay of Distribution . . . . . . . . . . 41
7.8 Designation of Beneficiary . . . . . . . . . . . . . . . . . . 41
(a) Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Spousal Consent . . . . . . . . . . . . . . . . . . . . . 41
(c) Failure to Designate. . . . . . . . . . . . . . . . . . . 42
(d) Death of Beneficiary. . . . . . . . . . . . . . . . . . . 42
(e) No Beneficiary. . . . . . . . . . . . . . . . . . . . . . 42
(f) Determination . . . . . . . . . . . . . . . . . . . . . . 43
7.9 Facility of Payment. . . . . . . . . . . . . . . . . . . . . . 43
(a) Incapacity. . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Legal Representative. . . . . . . . . . . . . . . . . . . 43
(c) Determination . . . . . . . . . . . . . . . . . . . . . . 43
7.10 Notice of Penalties. . . . . . . . . . . . . . . . . . . . . . 43
(a) Distribution Before Age 59 1/2. . . . . . . . . . . . . . 43
(b) Excess Distributions. . . . . . . . . . . . . . . . . . . 43
(c) Failure to Receive a Minimum Distribution . . . . . . . . 44
7.11 Special Rules--Distribution of Employer Stock. . . . . . . . . 44
(a) Distributee's Option to Sell Benefit
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Right of First Refusal. . . . . . . . . . . . . . . . . . 45
(c) Terms of Purchase . . . . . . . . . . . . . . . . . . . . 45
7.12 Distribution of Cash Dividends . . . . . . . . . . . . . . . . 47
7.13 Distributions After December 31, 1992. . . . . . . . . . . . . 47
(a) Election of Direct Rollover . . . . . . . . . . . . . . . 47
(b) Definitions . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 8 - Administration of the Plan . . . . . . . . . . . . . . . . . 48
8.1 Duties, Powers, and Responsibilities of the
Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Required. . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Discretionary . . . . . . . . . . . . . . . . . . . . . . 49
8.2 Employer Action. . . . . . . . . . . . . . . . . . . . . . . . 49
8.3 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 49
8.4 Administrative Committee . . . . . . . . . . . . . . . . . . . 49
(a) Appointment . . . . . . . . . . . . . . . . . . . . . . . 49
(b) Agent; Powers and Duties. . . . . . . . . . . . . . . . . 49
(c) Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . 49
(d) Membership. . . . . . . . . . . . . . . . . . . . . . . . 49
(e) Records . . . . . . . . . . . . . . . . . . . . . . . . . 50
(f) Actions . . . . . . . . . . . . . . . . . . . . . . . . . 50
(g) Report to Administrator . . . . . . . . . . . . . . . . . 50
(h) Compensation. . . . . . . . . . . . . . . . . . . . . . . 50
(i) Conflict of Interest. . . . . . . . . . . . . . . . . . . 50
8.5 Duties, Powers, and Responsibilities of the
Administrator. . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Plan Interpretation . . . . . . . . . . . . . . . . . . . 50
(b) Participant Rights. . . . . . . . . . . . . . . . . . . . 50
(c) Limits; Nondiscrimination Tests; Top-Heavy
Tests . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) Allocations and Vesting . . . . . . . . . . . . . . . . . 51
(e) Errors in Participants' Accounts. . . . . . . . . . . . . 51
(f) Claims and Elections. . . . . . . . . . . . . . . . . . . 51
(g) Benefit Payments. . . . . . . . . . . . . . . . . . . . . 51
(h) QDRO Determination. . . . . . . . . . . . . . . . . . . . 51
(i) Administration Information. . . . . . . . . . . . . . . . 51
(j) Recordkeeping . . . . . . . . . . . . . . . . . . . . . . 51
(k) Reporting and Disclosure. . . . . . . . . . . . . . . . . 51
(l) Penalties; Excise Tax . . . . . . . . . . . . . . . . . . 51
(m) Advisers. . . . . . . . . . . . . . . . . . . . . . . . . 52
(n) Expenses, Fees, and Charges . . . . . . . . . . . . . . . 52
(o) Nondiscrimination . . . . . . . . . . . . . . . . . . . . 52
(p) Bonding . . . . . . . . . . . . . . . . . . . . . . . . . 52
(q) Other Powers and Duties . . . . . . . . . . . . . . . . . 52
8.6 Delegation of Administrative Duties. . . . . . . . . . . . . . 52
(a) In Writing. . . . . . . . . . . . . . . . . . . . . . . . 52
(b) Acceptance of Responsibility. . . . . . . . . . . . . . . 52
(c) Conflict. . . . . . . . . . . . . . . . . . . . . . . . . 53
8.7 Interrelationship of Fiduciaries; Discretionary
Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Performance of Duties . . . . . . . . . . . . . . . . . . 53
(b) Reliance on Others. . . . . . . . . . . . . . . . . . . . 53
(c) Discretionary Authority of Fiduciaries. . . . . . . . . . 53
8.8 Compensation; Indemnification. . . . . . . . . . . . . . . . . 53
8.9 Fiduciary Standards. . . . . . . . . . . . . . . . . . . . . . 54
(a) Prudence. . . . . . . . . . . . . . . . . . . . . . . . . 54
(b) Exclusive Purpose . . . . . . . . . . . . . . . . . . . . 54
(c) Prohibited Transaction. . . . . . . . . . . . . . . . . . 54
8.10 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 54
(a) Initial Determination . . . . . . . . . . . . . . . . . . 54
(b) Method. . . . . . . . . . . . . . . . . . . . . . . . . . 54
(c) Further Review. . . . . . . . . . . . . . . . . . . . . . 54
(d) Redetermination . . . . . . . . . . . . . . . . . . . . . 54
8.11 Participant's Responsibilities . . . . . . . . . . . . . . . . 55
8.12 Responsibility for Determination of Allocations. . . . . . . . 55
ARTICLE 9 - Investment/Trust . . . . . . . . . . . . . . . . . . . . . . 55
9.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Voting of Employer Stock . . . . . . . . . . . . . . . . . . . 55
(a) Participant Direction . . . . . . . . . . . . . . . . . . 55
(b) Notification. . . . . . . . . . . . . . . . . . . . . . . 55
(c) Proxy Solicitation. . . . . . . . . . . . . . . . . . . . 56
(d) Unallocated Shares; Nondirected Shares. . . . . . . . . . 56
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . 56
9.3 Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . 56
(a) Participant Direction . . . . . . . . . . . . . . . . . . 56
(b) Trustee's Response - Valid Directions . . . . . . . . . . 57
(c) Invalid Directions or No Directions . . . . . . . . . . . 57
(d) Unallocated Shares. . . . . . . . . . . . . . . . . . . . 57
(e) Allocation of Proceeds. . . . . . . . . . . . . . . . . . 57
(f) Confidentiality . . . . . . . . . . . . . . . . . . . . . 58
9.4 Diversification of Investments . . . . . . . . . . . . . . . . 58
(a) Available Employer Stock. . . . . . . . . . . . . . . . . 58
(b) Timing of Direction . . . . . . . . . . . . . . . . . . . 58
(c) Determination of Number of Shares To Be
Liquidated and Reinvested . . . . . . . . . . . . . . . . 58
(d) Qualified Election Period . . . . . . . . . . . . . . . . 58
(e) Value of Shares to Be Liquidated and
Reinvested. . . . . . . . . . . . . . . . . . . . . . . . 59
(f) Investments . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 10 - Amendment, Mergers, Successor Employer. . . . . . . . . . . 59
10.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(a) Exclude Participant . . . . . . . . . . . . . . . . . . . 59
(b) Reduce Participant's Account. . . . . . . . . . . . . . . 59
(c) Reduce Vested Percentage. . . . . . . . . . . . . . . . . 59
(d) Vesting Schedule. . . . . . . . . . . . . . . . . . . . . 59
(e) Elimination of Protected Benefits . . . . . . . . . . . . 60
(f) Alter Trustee's Duties. . . . . . . . . . . . . . . . . . 60
10.2 Merger of Plans. . . . . . . . . . . . . . . . . . . . . . . . 60
(a) Preservation of Account Balance . . . . . . . . . . . . . 60
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . 60
10.3 Successor Employer . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 11 - Termination . . . . . . . . . . . . . . . . . . . . . . . . 60
11.1 Right to Terminate or Discontinue
Contributions. . . . . . . . . . . . . . . . . . . . . . . . . 60
11.2 Discontinuance of Contributions. . . . . . . . . . . . . . . . 61
11.3 Effect of Termination or Partial Termination . . . . . . . . . 61
(a) Nonforfeitability . . . . . . . . . . . . . . . . . . . . 61
(b) Distribution. . . . . . . . . . . . . . . . . . . . . . . 61
11.4 No Reversion of Assets . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 12 - General Provisions. . . . . . . . . . . . . . . . . . . . . 61
12.1 Spendthrift Provision. . . . . . . . . . . . . . . . . . . . . 61
(a) Not Security. . . . . . . . . . . . . . . . . . . . . . . 61
(b) Attempts Void . . . . . . . . . . . . . . . . . . . . . . 62
12.2 Effect Upon Employment Relationship. . . . . . . . . . . . . . 62
12.3 No Interest in Employer Assets . . . . . . . . . . . . . . . . 62
12.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 63
12.7 Nondiversion . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 13 - Top-Heavy Plan Provisions . . . . . . . . . . . . . . . . . 63
13.1 Top-Heavy/Super Top-Heavy Determination. . . . . . . . . . . . 63
(a) Top-Heavy Plan. . . . . . . . . . . . . . . . . . . . . . 63
(b) Super Top-Heavy Plan. . . . . . . . . . . . . . . . . . . 63
(c) Calculation . . . . . . . . . . . . . . . . . . . . . . . 64
13.2 Top-Heavy Definitions. . . . . . . . . . . . . . . . . . . . . 64
(a) Top-Heavy Ratio . . . . . . . . . . . . . . . . . . . . . 64
(b) Present Value of Accrued Benefits . . . . . . . . . . . . 64
(c) Required Aggregation Group. . . . . . . . . . . . . . . . 65
(d) Permissive Aggregation Group. . . . . . . . . . . . . . . 65
(e) Determination Date. . . . . . . . . . . . . . . . . . . . 66
(f) Key Employee. . . . . . . . . . . . . . . . . . . . . . . 66
(g) Top-Heavy Valuation Date. . . . . . . . . . . . . . . . . 67
13.3 Minimum Allocation/Benefit . . . . . . . . . . . . . . . . . . 67
13.4 Vesting Schedule . . . . . . . . . . . . . . . . . . . . . . . 67
(a) Cessation . . . . . . . . . . . . . . . . . . . . . . . . 67
(b) Vesting Schedule Change . . . . . . . . . . . . . . . . . 68
13.5 Plan Modifications . . . . . . . . . . . . . . . . . . . . . . 68
SCHEDULE A
<PAGE>
TABLE OF DEFINITIONS
Defined Terms
Term Location
ACP 4.7(a)(ii)
ACP Compensation 4.7(a)(iv)
ACP Contributions 4.7(a)(v)
ACP Limit 4.7(a)
Administrator 8.3
After-Tax Employee Contributions
Account 5.1(a)(iii)
Annual Additions 5.7(a)
Available Employer Stock 9.4(a)
Beneficiary 7.8(a)
Benefit Shares 7.11(a)
Benefit Starting Date 7.7(b)(ii)
Break in Service 2.1
Change in Control 6.2(d)
Code 1.3
Compensation 5.2(a)(iii)(B)
Continuing Director 6.2(d)
Contribution Percentage 4.7(a)(iii)
Covered Employment 3.2
Current Obligations 4.2
Defined Benefit Dollar Limit 5.9(b)(ii)
Defined Benefit Plan Fraction 5.9(b)
Defined Contribution Dollar Limit 5.7(b)
Defined Contribution Plan Fraction 5.9(a)
Determination Date 13.2(e)
Earliest Distribution Date 7.5(a)
Effective Date 1.4
Elective Contributions 5.2(a)(iii)(C)
Elective Deferrals 5.2(a)(iii)(B)
Employee 3.1(a)
Employer 1.1(a)
Employer Contributions 2.2
Employer Stock 5.1(a)(i)(C)
Employer Stock Account 5.1(a)(i)(A)
Entry Date 3.1(b)
ERISA 1.3
Term Location
ESOP Account 5.1(a)(i)
ESOP Contribution 4.2
Exempt Loan Trust
Excess Aggregate Contribution 4.7(c)(i)
Fair Market Value 7.11(c)(iv)
5% Owner 2.3
HCE Compensation 2.4(b)
Highly Compensated Employee 2.4(a)
Hour of Service 2.5
Key Employee 13.2(f)
Leased Employee 3.4
Limitation Year 5.7(f)
Look-Back Year 2.4(a)(i)
Minimum Distribution 7.4
Normal Retirement Date 7.1(a)
Other Investments Account 5.1(a)(i)(B)
Participant 3.1
Participating Compensation 5.2(a)(iii)(A)
Percentage Limit 5.7(c)
Permissive Aggregation Group 13.2(d)
Person 2.6
Plan Preamble
Plan Year 2.7
Present Value of Accrued Benefits 13.2(b)(i)
Projected Annual Benefit 5.9(b)(i)
QDRO 7.1(f)
Qualified Election Period 9.4(d)
Qualified Maternity or
Paternity Absence 2.10(e)
Regulations 1.3
Related Employer 2.8
Required Aggregation Group 13.2(c)
Required Beginning Date 7.5(c)(i)
Section 415 Compensation 5.7(e)
Securities Acquisition Loan Trust
Severance Date 2.10(d)
Spouse 7.8(b)(ii)
Tender Offer 9.3
Super Top-Heavy Plan 13.1(b)
Top-Heavy Plan 13.1(a)
Top-Heavy Ratio 13.2(a)
Term Location
Top-Heavy Valuation Date 13.2(g)
Total Disability 7.1(c)
TRASOP Account 5.1(a)(ii)
Trust 1.2
Valuation Date 2.9
Vested Account Balance 6.6(a)
Year of Service 2.10
EXHIBIT 10(w)
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
This instrument is an agreement and declaration of trust be-
tween Kysor Industrial Corporation ("Employer") and Old Kent Bank
and Trust Company ("Trustee"). By this instrument, the Employer
amends and restates the companion trust to the Kysor Industrial
Corporation Employee Stock Ownership Plan ("Plan") effective
January 1, 1989.
ARTICLE 1
Establishment of Trust
1.1 Declaration of Trust.
The Trustee declares that Plan assets delivered to it under
the Plan will be held in trust and will be administered in ac-
cordance with the provisions of this instrument. The Trust is
established and shall be operated for the exclusive benefit of
Participants and their beneficiaries. The Trust shall not be
diverted to other purposes, except that Trust assets may be used to
pay reasonable expenses of administration.
1.2 Designation of Trust.
This trust shall be known as the Kysor Industrial Corporation
Employee Stock Ownership Trust ("Trust").
1.3 Compliance With Law; Interpretation.
This restated Trust is intended to continue as a qualified
tax-exempt trust under Code Section 501, ERISA, and all Regulations
issued thereunder, and as part of an employee stock ownership plan
under Code Sections 401(a) and 4975(e)(7). This Trust shall be
interpreted, administered and managed in compliance with those
requirements. To the extent not superseded by federal law, the
Trust shall be interpreted, administered, and managed in compliance
with the laws of the State of Michigan.
ARTICLE 2
Duties and Powers of the Employer
2.1 Duties, Powers, and Responsibilities of the Employer.
(a) Required. The Employer shall be responsible for:
(i) Employer Contributions.
(A) Amount. Determining the amount of Employer
Contributions;
(B) Payment. Paying, ceasing, or suspending
Employer Contributions (including additional contributions if
necessary to correct an error in allocation, vesting, or
distribution of a Participant's interest); and
(C) Compliance. Determining that the amount and
time of Employer Contributions comply with the Plan;
(ii) Agent for Service of Process. Serving as the agent
for service of process;
(iii) Trustee. Appointing the Trustee;
(iv) Amendment. Amending the Plan and Trust;
(v) Plan Termination. Revoking this instrument and
terminating the Plan and Trust; and
(vi) Mergers; Spin-Offs. Merging the Plan with another
qualified retirement plan maintained by the Employer or dividing
the Plan into multiple plans.
(b) Discretionary. The Employer may exercise the following
responsibilities:
(i) Alternate Administrator. Designating a Person other
than the Employer as the Administrator; and
(ii) Payment of Administrative Expenses. Paying admin-
istrative expenses incurred in the operation, administration,
management, and control of the Plan or the Trust. These expenses
shall be the obligation of the Trust unless paid by the Employer.
2.2 Powers.
The Employer shall have the power to do all acts with respect
to the Trust necessary, suitable, or desirable to carry out its
duties under this instrument and the Plan.
2.3 Limitation on Duties of the Employer.
Except as otherwise stated, the Employer shall have no respon-
sibility or power for the investment and management of the assets
of the Trust.
ARTICLE 3
Administration of the Trust
3.1 Duties and Powers of the Trustee.
(a) Duties of the Trustee. The Trustee shall be a named
fiduciary having the following duties:
(i) Control, Manage, and Invest Assets. To control,
manage, and invest the assets of the Trust primarily in Employer
Stock, in accordance with the Plan;
(ii) Administrator's Instructions. To carry out proper
instructions of the Administrator; and
(iii) Records; Reports. To maintain records and to pre-
pare and file reports required by law or Regulations, other than
those for which the Administrator is responsible under the terms of
the Plan and Trust.
(b) Powers of the Trustee. The Trustee shall have the fol-
lowing powers:
(i) Control of Property. To hold, manage, improve,
repair, and control all property, real or personal, forming part of
the Trust;
(ii) Asset Investment. To invest assets of the Trust
subject to the limitations in the Plan;
(iii) Disposition of Assets. Subject to Section 4.6 of
the Trust, to sell, convey, transfer, exchange, partition, lease
for any term (even extending beyond the duration of the Trust), or
otherwise dispose of any asset of the Trust from time to time, in
the manner, for the consideration, and upon the terms and condi-
tions that the Trustee, in its discretion, determines;
(iv) Agents, Advisers, and Counsel. To employ and to
compensate from the Trust, agents, advisers, and legal counsel rea-
sonably necessary in managing the Trust and advising the Trustee as
to its powers, duties, and liabilities;
(v) Claims. To prosecute, defend, settle, arbitrate,
compromise, or abandon all claims and demands in favor of or
against the Trust, with or without the assistance of legal counsel;
(vi) Vote Securities. Subject to Section 4.4 of the
Trust, to vote a corporation's stock or other securities, either in
person or by proxy, for any purpose;
(vii) Exercise Trust Rights. To exercise, refrain from
the exercise of, or convey a conversion privilege or subscription
right applicable to an asset of the Trust;
(viii) Collection. To demand, collect, and receive the
principal, dividends, interest, income, and all other moneys or
other property due upon Trust assets;
(ix) Change of Structure. To consent to, oppose, or take
another action in connection with a bankruptcy, composition,
arrangement, reorganization, consolidation, merger, liquidation,
readjustment of the financial structure, or sale of assets of a
corporation or other organization, the securities of which may
constitute a portion of the Trust;
(x) Issue, Hold, or Register Securities. To cause se-
curities or other property that may form part of the Trust to be
issued, held or registered in the individual name of the Trustee,
in the name of its nominee (with the consent of the Employer), or
in such form that title will pass by delivery, provided that the
records of the Trustee shall indicate the ownership of the property
or security;
(xi) Borrowing. To borrow money for the benefit of the
Trust without binding itself individually, and to secure the loan
by pledge, mortgage, or creation of another security interest in
the property;
(xii) Distributions. To make distributions from the Trust
as directed by the Administrator;
(xiii) Expenses. Unless paid by the Employer, to pay from
the Trust all reasonable fees, taxes, commissions, charges, pre-
miums, and other expenses, including the reasonable fees of the
Trustee, incurred in connection with the administration of the Plan
or Trust, provided that no individual who is compensated on a full-
time basis shall receive compensation from the Trust for services
rendered to the Plan or Trust, except for reimbursement of
expenses;
(xiv) Insure Assets. To insure the assets of the Trust
through a policy or contract of insurance;
(xv) Incorporate. To incorporate (or participate in an
incorporation) under the laws of any state for the purpose of
acquiring and holding title to any property that is part of the
Trust;
(xvi) Allocations. To adjust its records upon receipt of
allocations under Article 5 of the Plan from the Administrator or
its agent and to rely on the accuracy of that information; and
(xvii) Other Acts. To perform all other acts the Trustee
deems necessary, suitable, or desirable for the control and manage-
ment of the Trust and discharge of its duties.
(c) Limitation on Duties and Powers of the Trustee. The
Trustee shall have no duty or power:
(i) Employer Contributions. To determine whether the
amount of an Employer Contribution to the Trust is proper, or to
enforce the payment of a contribution to the Trust;
(ii) Participant Eligibility. To determine the eligi-
bility of an individual to participate in the Plan, the vested
percentage for a Participant, the right to receive distributions
from the Trust, or the method of a distribution to be made;
(iii) Annual Addition Compliance. To determine whether
the limitation on Annual Additions under Article 5 of the Plan has
been met;
(iv) Allocations. To determine allocations under
Article 5 of the Plan, or to have any independent duty to ascertain
the accuracy of the allocations or liability for their inaccuracy;
and
(v) Top-Heavy Status. To determine whether or not the
Plan is a Top-Heavy Plan or a Super Top-Heavy Plan for a Plan Year.
3.2 Accounting.
The Trustee shall maintain accurate and detailed records of
all investments, receipts, disbursements, and other transactions
for the Trust. The records shall be available for inspection at
all reasonable times by Persons designated by the Administrator.
(a) Report. As soon as administratively feasible after each
Valuation Date and each other date agreed to by the Administrator
and the Trustee, the Trustee shall prepare and furnish to the
Administrator a statement of account containing the information
required by ERISA Section 103(b)(3).
(b) Judicial Settlement. A dispute concerning the Trustee's
records or statement of account may be settled by a suit for an
accounting brought by a Person having an interest in the Plan and
Trust.
(c) Exempt Loan. Separate accounting shall be maintained for
each separate Exempt Loan, including a separate suspense account
for each such Exempt Loan.
3.3 Appointment, Resignation, and Removal of Trustee.
The Trustee shall be at least one individual or eligible cor-
poration with Trust powers appointed in writing by the Employer and
authorized to act as Trustee by ERISA and the Code.
(a) Resignation. The Trustee may resign with at least 60
days' written notice to the Employer, effective as of the date
specified in the notice.
(b) Removal. The Employer may remove the Trustee with writ-
ten notice to the Trustee, effective as of the date specified in
the notice.
(c) Successor Trustee. The Employer shall appoint a succes-
sor Trustee by written instrument delivered to the Trustee with the
acceptance of the successor Trustee endorsed on the instrument.
(d) Effective Date of Resignation or Removal. The resigna-
tion or removal of the Trustee shall not be effective before the
appointment is made and accepted by the successor Trustee.
(e) Procedure Upon Transfer. Upon the resignation or removal
of the Trustee, the Trustee shall pay from the Trust all accrued
fees and expenses of the Trust, including its own fees, and, as of
the effective date of its resignation or removal, shall deliver a
statement of account to the Administrator and the successor
Trustee.
(f) Earlier Transfer. In order to facilitate the prompt
transfer of fiduciary responsibility and Trust assets to the suc-
cessor Trustee, the Administrator, and the Trustee may agree upon
a procedure by which the Trustee shall deliver all Trust assets
(less a reasonable reserve for fees and expenses) to the successor
Trustee as soon as administratively feasible after receipt of
notice of appointment of the successor Trustee and acceptance of
Trust by the successor Trustee. The Administrator and the Trustee
may agree to the transfer of Trust assets to the successor Trustee
pending preparation and approval of the final Trust accountings.
(g) Final Transfer. As soon as administratively feasible,
the Trustee shall deliver the remaining assets of the Trust to the
successor Trustee, together with records maintained by the Trustee.
(h) In Kind Transfer. The Trustee shall consult with the
Administrator concerning the liquidation of Trust assets to be
transferred for the purpose of determining the feasibility of the
transfer of certain Trust assets in kind before implementing the
liquidation.
(i) Limitation on Liability of Successor. The successor
Trustee shall not be liable for the acts or omissions of any prior
Trustee.
3.4 Trustee Action.
Actions by a corporate Trustee shall be either by a resolution
of its board of directors or by a written instrument executed by
one of its authorized officers. Actions taken by any other Trustee
shall be by a written instrument executed by the Trustee.
3.5 Indemnification of Trustee.
To the extent permitted by applicable law, the Trustee shall
be indemnified by the Employer against any and all liabilities,
settlements, judgments, fines, losses, costs, and expenses (in-
cluding legal fees and expenses and internal allocated staff time)
of whatever kind and nature (collectively, "Liabilities") which may
be imposed on, incurred by, or asserted against the Trustee by
reason of the performance or nonperformance of the Trustee's func-
tions, so long as such Liabilities do not arise or result from, or
so long as the Trustee's performance or nonperformance did not
constitute recklessness, gross negligence, willful misconduct, or
unlawful acts or omissions in the performance of its duties, in
either of which cases the Employer shall not be obligated to in-
demnify the Trustee. Notwithstanding the foregoing, the Trustee
shall not be deemed to have violated the standard of care set forth
in this section if it shall have acted in accordance with the
written directions of the Administrator or its agent.
Whenever the Trustee receives notice of any action, suit,
arbitration, proceeding, demand, or claim (collectively, a "Pro-
ceeding") in connection with which it believes it would be entitled
to be indemnified, it shall promptly give written notice to the
Employer. The Employer will assume the defense of any such
Proceeding and will employ counsel reasonably satisfactory to the
Trustee and will pay the reasonable fees and expenses of such
counsel on a current basis; provided, however, the Trustee shall be
entitled to employ counsel separate from the Employer if, in the
opinion of independent counsel, a conflict of interest exists which
would make representation of the Trustee by the Employer's counsel
unadvisable. Neither the Employer nor the Trustee shall settle any
Proceeding without the consent of the other which consent shall not
be unreasonably withheld.
The Trustee shall cooperate fully in the defense or settlement
of any Proceeding, shall comply with the reasonable requests of the
Employer and the Employer's counsel, and shall notify the Employer
promptly of any occurrence relevant to any Proceeding and furnish
the Employer promptly with copies of any pleading, papers, notices,
or other documents received by it in connection with the
Proceeding.
The foregoing rights of indemnification shall be in addition
to other rights of the Trustee by law or by reason of insurance
coverage of any kind; provided, however, that if the Employer
obtains fiduciary liability insurance to protect the Trustee, the
provisions of this paragraph shall be applicable only to the extent
that such insurance coverage is insufficient.
3.6 Confidentiality.
The Trustee shall hold in strict confidence any confidential
information concerning the Employer or any Related Employer that it
receives in connection with the performance of its duties as
Trustee, and will not disclose any such information to any third
party without the prior written consent of the Employer. In the
event that the Trustee shall cease for any reason to serve in such
capacity, it shall promptly return all such confidential informa-
tion to the Employer.
ARTICLE 4
Investment of Funds
4.1 Investment Responsibility.
The Trustee shall have sole and complete authority and re-
sponsibility for the investment, management, and control of the
assets of the Trust, subject to the provisions of the Plan and
Trust including the requirement that the Plan is designed to invest
primarily in Employer Stock.
4.2 Investments.
The Plan is designed to operate as an employee stock ownership
plan and to be invested primarily in Employer Stock. The Trustee
shall use available cash and other assets in the Trust to buy
Employer Stock from other stockholders, from the Employer, or on
the open market. The Trustee may borrow funds or issue its pro-
missory note or notes to finance the purchase of Employer Stock.
(a) Acquisition Limit. The Trustee may acquire and hold
Employer Stock in an amount up to 100% of the market value of the
Trust.
(b) Adequate Consideration. A purchase or sale of Employer
Stock by the Trustee shall be for not more than, or less than (as
applicable), adequate consideration and in accordance with the Plan
and with Regulations under ERISA Section 3(18).
(c) No Commissions. No commissions on the purchase or sale
of Employer Stock from or to a disqualified person, as defined in
Code Section 4975 or a party in interest, as defined in ERISA Sec-
tion 3(14), may be paid to any Person.
(d) Indebtedness. A Securities Acquisition Loan or other
extension of credit ("Exempt Loan") to the Trust shall bear a rea-
sonable rate of interest and shall be for a term certain.
Collateral pledged to a creditor by the Trust shall consist solely
of the Employer Stock purchased with the borrowed funds (although
the Employer may guarantee payment of the Exempt Loan and may give
security for such guaranty).
(e) Securities Acquisition Loan. "Securities Acquisition
Loan" means any loan obtained by the Trust which is used to pur-
chase Employer Stock for the Trust.
(f) Unallocated and Pledged Employer Stock. The Employer
Stock shall be maintained in a suspense account, if not pledged as
collateral, and shall be released from the suspense account or, if
pledged as collateral, shall be released from encumbrance as
provided in (i) below.
(g) No Recourse. Under the terms of an Exempt Loan, the
creditor shall be given no recourse against the Trust, except with
respect to the collateral pledged.
(h) Repayment of Loan. An Exempt Loan shall be repaid solely
from Employer Contributions (other than contributions in the form
of Employer Stock) and forfeitures, proceeds from the sale of
unallocated shares of Employer Stock purchased with the Exempt
Loan, and from Trust earnings on such contributions or on the
Employer Stock purchased with such Exempt Loan, and the Employer
Contributions shall be sufficient to enable the Trust to pay each
and every installment of principal and interest when due, even if
no tax benefit results from the contributions.
(i) Release of Pledged Employer Stock. An Exempt Loan must
provide that upon payment of a portion of the balance due, the
creditor shall release a Pro Rata Portion of the pledged collateral
or, if not pledged as collateral, a Pro Rata Portion of the
Employer Stock shall be released from the suspense account, as the
Exempt Loan is paid. Employer Stock purchased with each Exempt
Loan shall be released separately.
(i) Pro Rata Portion. "Pro Rata Portion" means the
number of pledged securities or number of shares in the suspense
account held immediately before release for the current Plan Year
multiplied by a fraction. The numerator of the fraction is the
amount of principal and interest paid during the Plan Year and the
denominator is the sum of the numerator and the remaining principal
and interest to be paid under the obligation in all future years.
The number of future years shall be determined without taking into
account possible extensions or renewals of the obligation. If the
interest rate under the obligation is variable, the interest to be
paid in future years shall be computed by using the interest rate
applicable as of the end of the current Plan Year. If the
collateral or suspense account includes more than one class of
Employer Stock, the number of shares of each class to be released
for a Plan Year must be determined by applying the same fraction to
each class.
(ii) Alternate Determination of Pro Rata Portion. At the
direction of the Administrator, Pro Rata Portion of securities may
be determined with reference solely to principal payments, but only
if (A) the obligation provides for annual payments of principal and
interest at a cumulative rate that is not less rapid at any time
than level annual payments of the amounts for 10 years, and (B) the
interest included in any payment is disregarded only to the extent
that it would be determined to be interest under standard loan
amortization tables. This alternate determination shall not be
applicable from the time that, by reason of a renewal, extension,
or refinancing, the sum of the expired duration of the obligation,
plus any renewal period, extension period, or the duration of a new
obligation used to refinance the existing obligation, exceeds 10
years.
(iii) Special Release Rule. Notwithstanding (i) and (ii)
above, to the extent provided in Section 5.2(a)(ii)(C) of the Plan,
at the direction of the Employer, the Trustee shall release addi-
tional shares of Employer Stock for purposes of allocation to
Participant accounts.
(j) Pending Investment. Pending investment in Employer Stock
or distribution, funds that are to be invested in Employer Stock
may be invested and reinvested as follows:
(i) Interest-Bearing Deposits. The funds may be in-
vested in deposits, certificates, or share accounts of a bank,
savings and loan association, credit union, or similar financial
institution, including a fiduciary, if the deposits bear a rea-
sonable rate of interest, whether or not the deposits or certifi-
cates are insured or guaranteed by an agency of the United States
Government.
(ii) Pooled Investment Funds. The funds may be invested
through ownership of assets or shares in a common trust fund,
pooled investment fund, mutual fund, or other commingled
investment, including any pooled or common fund maintained,
sponsored, or provided investment management services by, or
otherwise associated with the Trustee, or affiliate of the Trustee,
that allows participation by a trust fund established under a
qualified retirement plan. For this purpose, the terms and
provisions of the declaration of trust or other governing documents
through which the common trust fund, pooled investment fund or
mutual fund is maintained are incorporated in, and made applicable
to, the Plan and Trust.
(iii) Cash or Cash Equivalents. The funds may be held in
cash or invested in cash equivalent funds or in other short-term
investments.
4.3 Stock Dividends, Stock Splits, etc.
Employer Stock received by the Trustee as a stock dividend or
stock split or as the result of a reorganization or other
recapitalization of the Employer shall be allocated under Sec-
tion 5.3 of the Plan. If any rights, warrants, or options are
issued on Employer Stock held in the Trust, the Trustee may exer-
cise them for the acquisition of additional shares of Employer
Stock to the extent cash is then available. Employer Stock ac-
quired in this manner shall be treated as Employer Stock bought by
the Trustee for the net price paid. If any rights, warrants, or
options on Employer Stock that are not exercised shall be sold by
the Trustee, the proceeds shall be treated as a current cash
dividend received on Employer Stock.
4.4 Voting of Employer Stock.
(a) Participant Direction. Each Participant shall have the
right to direct the Trustee as to the manner in which all Employer
Stock, including fractional shares, held in the Participant's
accounts shall be voted. The Trustee shall total the fractional
directions of all Participants who have directed the vote in the
same manner and shall cast the largest number of whole votes
possible from the total of the fraction. Any remaining fraction
shall be disregarded.
(b) Notification. The Employer shall notify the Trustee and
Participants when voting rights are to be exercised and, within
periods as required by law or Employer charter or bylaws for other
shareholders, shall furnish the Trustee and Participants with in-
formation similar to that furnished to other shareholders of the
Employer.
(c) Proxy Solicitation. Management and others may solicit
and exercise proxies from Participants to the same extent as au-
thorized for other shareholders. Any such proxy will be in the
form of an instruction to the Trustee that will be voted by the
Trustee in the manner indicated in the Participant's direction, and
will not be returned or disclosed to the solicitor.
(d) Unallocated Shares; Nondirected Shares. Allocated shares
of Employer Stock held in the TRASOP accounts, for which no voting
direction is given, shall not be voted. The Trustee shall vote
unallocated shares of Employer Stock and allocated shares of
Employer Stock, other than shares held in TRASOP accounts, for
which no voting direction is given, as directed by the Partici-
pants. The number of such shares that each directing Participant
may direct shall be determined by multiplying the number of shares
described in the preceding sentence by a fraction. The numerator
of the fraction is one, and the denominator is the total number of
Participants directing the vote of shares under this subsection
(d).
If voting of the unallocated shares and nondirected shares in
the manner described in the preceding paragraph is precluded by
Regulation or other guidance, or by a court of competent
jurisdiction, so that in the opinion of the Trustee such method may
not be used, the Trustee (except as may be otherwise required by
Regulation or other guidance, or by a court of competent
jurisdiction) shall vote such shares in the same manner, and in the
same proportions, as allocated shares were directed by Participants
under (a) above.
(e) Confidentiality. The Trustee may not divulge information
with respect to any Participant's directions under subsections (a)
or (d) to any Person, including the Employer.
4.5 Investment and Reinvestment.
Except amounts estimated to be required for current payments
and expenses, the Trust may be invested and reinvested without
distinction between principal and income.
4.6 Tender Offer.
The following provisions apply if any Person makes an offer to
purchase or solicits an offer to sell to that Person 1% or more of
the outstanding shares of Employer Stock ("Tender Offer").
(a) Participant Direction. Each Participant may direct the
Trustee to sell, offer to sell, exchange, or otherwise dispose of
Employer Stock held in the Participant's accounts, in accordance
with the terms of the Tender Offer. Participant direction shall be
filed with the Trustee in the form and at the time specified by the
Trustee.
(b) Trustee's Response - Valid Directions. The Trustee shall
follow all Participants' valid directions with respect to the
potential sale, offer, exchange, or other disposal of the Employer
Stock held in the Participant's accounts. The proceeds from the
disposition of Employer Stock under this section shall be credited
to each Participant's applicable account and shall be subject to
the investment provisions applicable to such account.
(c) Invalid Directions or No Directions. The Trustee shall
treat invalid directions from a Participant, and failure to give
the Trustee directions, as a direction by the Participant not to
dispose of the Employer Stock held in the Participant's accounts.
The Trustee, or its agent, shall determine the validity of direc-
tions from Participants.
(d) Unallocated Shares. The Trustee shall dispose of Em-
ployer Stock after a Tender Offer with respect to unallocated
shares of Employer Stock as directed by the Participants. The
number of unallocated shares that each Participant may direct shall
be determined by multiplying the number of those shares by a frac-
tion. The numerator of the fraction is one, and the denominator is
the total number of Participants giving valid directions under this
subsection (d).
If disposition of unallocated shares in the manner
described in the preceding paragraph is precluded by Regulation or
other guidance, or by a court of competent jurisdiction, so that in
the opinion of the Trustee such method may not be used, the Trustee
(except as may be otherwise required by Regulation or other
guidance, or by a court of competent jurisdiction) shall dispose of
a number of unallocated shares determined by multiplying the total
number of unallocated shares by a fraction. The numerator of the
fraction is the number of shares for which Participants gave valid
directions for disposition under (a) above, and the denominator is
the total number of shares for which the Participants gave valid
directions.
(e) Allocation of Proceeds. The proceeds from any disposi-
tion of Employer Stock held in the Participant's accounts as a
result of a Tender Offer shall be allocated to Participants'
applicable accounts. Proceeds from unallocated Employer Stock
shall be used to repay the Exempt Loan with which such Employer
Stock was purchased.
(f) Confidentiality. The Trustee may not divulge information
with respect to any Participant's directions under subsections (a)
or (d) to any Person, including the Employer.
4.7 Diversification of Investments.
Upon the request of a Participant who has attained at least
age 55 and has at least ten years of participation in the Plan, the
Administrator may direct the Trustee to establish a segregated
account for the Participant and to liquidate up to 25% of the
number of shares of Available Employer Stock allocated to the
Participant. The proceeds shall be reinvested in investments
described in (f) below and held in the segregated account.
(a) Available Employer Stock. "Available Employer Stock"
means Employer Stock acquired by or contributed to the Plan after
December 31, 1986, and held in the Participant's ESOP Account.
(The term does not include Employer Stock held in TRASOP Accounts
or After-Tax Employee Contributions Accounts since no Employer
Stock allocated to these accounts was acquired after December 31,
1986.) Employer Stock acquired by or contributed to the Plan will
not be Available Employer Stock if the Fair Market Value of the
Employer Stock allocated to the eligible Participant's ESOP Account
as of the Valuation Date immediately preceding the first day the
Participant is eligible to make an election under this section is
$500 or less.
(b) Timing of Direction. The direction to liquidate and re-
invest Available Employer Stock under this provision may be given
during the first 90 days after the last day of each Plan Year in
the Qualified Election Period. During the first 90 days after the
last day of the last (sixth) Plan Year in the Qualified Election
Period, the Participant may request the liquidation and reinvest-
ment of up to 50% of the number of shares of Available Employer
Stock allocated to the Participant.
(c) Determination of Number of Shares To Be Liquidated and
Reinvested. The total amount liquidated and reinvested at any time
shall not exceed 25% (or 50%) of the number of shares of Available
Employer Stock held allocated to the Participant, including shares
of Available Employer Stock previously liquidated and reinvested.
Any fractional number of shares to be liquidated and reinvested
shall be rounded up to the next highest whole number of shares.
(d) Qualified Election Period. "Qualified Election Period"
means the six-year period beginning on the first day of the first
Plan Year in which the Participant attains at least age 55 and has
at least ten years of participation.
(e) Value of Shares to Be Liquidated and Reinvested. A di-
rection to liquidate Available Employer Stock and reinvest the
proceeds in accordance with this provision shall apply to the
Available Employer Stock held in the Participant's ESOP Account as
of the last day of the Plan Year immediately preceding the date of
liquidation. Dividends paid on Available Employer Stock before the
date of reinvestment of the proceeds from the liquidation of
Available Employer Stock shall be reinvested under this section.
No interest or earnings shall be credited to the Available Employer
Stock liquidated for the period beginning on the last day of the
Plan Year immediately preceding the date of liquidation and the
date of liquidation.
(f) Investments. The amount in the segregated account shall
be transferred to the Kysor Industrial Corporation Savings Plan to
be held, administered, and distributed in accordance with the terms
of that plan. The account shall be invested pursuant to the rules
set forth in that plan and the related trust, in available invest-
ments (other than investment in an Employer Stock fund).
ARTICLE 5
Amendment and Termination
5.1 Amendment.
The Employer shall have the right at any time to amend this
instrument by written document executed by it and delivered to the
Trustee. No amendment shall cause any part of the Trust to be used
for, or diverted to, purposes other than for the exclusive benefit
of the Participants and Beneficiaries of the Plan. The rights,
duties, and responsibilities of the Trustee shall not be changed in
any manner without its written consent.
5.2 Termination.
The Employer reserves the right to terminate the Trust co-
incident with the termination of the Plan and, in such event, the
Trust assets shall be distributed pursuant to the direction of the
Employer in accordance with the provisions of the Plan.
ARTICLE 6
Plan Provisions
6.1 Trust to be Consistent With Plan.
This instrument is intended to be consistent with the Plan
and, in the event of conflict or ambiguity, the language of the
Plan shall control.
6.2 Defined Terms.
Capitalized terms have the definition specified in the Plan or
Trust. Definitions in the Trust are found at the following
locations:
Term Location
Available Employer Stock 4.7(a)
Employer Preamble
Exempt Loan 4.2(d)
Liabilities 3.5
Plan Preamble
Term Location
Pro Rata Portion 4.2(i)(i)
Proceeding 3.5
Qualified Election Period 4.7(d)
Securities Acquisition Loan 4.2(e)
Tender Offer 4.6
Trust 1.2
Trustee Preamble
6.3 Incorporation of Plan Provisions.
To the extent not expressly included, the definitions in the
Plan and the provisions of Articles 10, 11, and 12 of the Plan are
incorporated herein by reference and made a part of this
instrument.
IN WITNESS WHEREOF, the Employer has executed this instrument
this day of , 1993.
KYSOR INDUSTRIAL CORPORATION
By
Its
Employer
OLD KENT BANK AND TRUST COMPANY
By
Its
Trustee
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
(Amended and Restated Effective January 1, 1989)
Warner, Norcross & Judd
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503-2489
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
TABLE OF CONTENTS
Page
ARTICLE 1 - Establishment of Trust . . . . . . . . . . . . . . . . . . . 1
1.1 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . 1
1.2 Designation of Trust . . . . . . . . . . . . . . . . . . . . . 1
1.3 Compliance With Law; Interpretation. . . . . . . . . . . . . . 1
ARTICLE 2 - Duties and Powers of the Employer. . . . . . . . . . . . . . 2
2.1 Duties, Powers, and Responsibilities of the
Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Required. . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Discretionary . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Limitation on Duties of the Employer . . . . . . . . . . . . . 3
ARTICLE 3 - Administration of the Trust. . . . . . . . . . . . . . . . . 3
3.1 Duties and Powers of the Trustee . . . . . . . . . . . . . . . 3
(a) Duties of the Trustee . . . . . . . . . . . . . . . . . . 3
(b) Powers of the Trustee . . . . . . . . . . . . . . . . . . 3
(c) Limitation on Duties and Powers of the
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Appointment, Resignation, and Removal of Trustee . . . . . . . 6
(a) Resignation . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Removal . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Successor Trustee . . . . . . . . . . . . . . . . . . . . 6
(d) Effective Date of Resignation or Removal. . . . . . . . . 6
(e) Procedure Upon Transfer . . . . . . . . . . . . . . . . . 6
(f) Earlier Transfer. . . . . . . . . . . . . . . . . . . . . 7
(g) Final Transfer. . . . . . . . . . . . . . . . . . . . . . 7
(h) In Kind Transfer. . . . . . . . . . . . . . . . . . . . . 7
(i) Limitation on Liability of Successor. . . . . . . . . . . 7
3.4 Trustee Action.. . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Indemnification of Trustee . . . . . . . . . . . . . . . . . . 7
3.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4 - Investment of Funds. . . . . . . . . . . . . . . . . . . . . 9
4.1 Investment Responsibility. . . . . . . . . . . . . . . . . . . 9
4.2 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Acquisition Limit . . . . . . . . . . . . . . . . . . . . 9
(b) Adequate Consideration. . . . . . . . . . . . . . . . . . 9
(c) No Commissions. . . . . . . . . . . . . . . . . . . . . . 9
(d) Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 9
(e) Securities Acquisition Loan . . . . . . . . . . . . . . . 9
(f) Unallocated and Pledged Employer Stock. . . . . . . . . 10
(g) No Recourse . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Repayment of Loan . . . . . . . . . . . . . . . . . . . . 10
(i) Release of Pledged Employer Stock . . . . . . . . . . . . 10
(j) Pending Investment. . . . . . . . . . . . . . . . . . . . 11
4.3 Stock Dividends, Stock Splits, etc.. . . . . . . . . . . . . . 11
4.4 Voting of Employer Stock . . . . . . . . . . . . . . . . . . . 12
(a) Participant Direction . . . . . . . . . . . . . . . . . . 12
(b) Notification. . . . . . . . . . . . . . . . . . . . . . . 12
(c) Proxy Solicitation. . . . . . . . . . . . . . . . . . . . 12
(d) Unallocated Shares; Nondirected Shares. . . . . . . . . . 12
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . 13
4.5 Investment and Reinvestment. . . . . . . . . . . . . . . . . . 13
4.6 Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Participant Direction . . . . . . . . . . . . . . . . . . 13
(b) Trustee's Response - Valid Directions . . . . . . . . . . 13
(c) Invalid Directions or No Directions . . . . . . . . . . . 13
(d) Unallocated Shares. . . . . . . . . . . . . . . . . . . . 14
(e) Allocation of Proceeds. . . . . . . . . . . . . . . . . . 14
(f) Confidentiality . . . . . . . . . . . . . . . . . . . . . 14
4.7 Diversification of Investments . . . . . . . . . . . . . . . . 14
(a) Available Employer Stock. . . . . . . . . . . . . . . . . 14
(b) Timing of Direction . . . . . . . . . . . . . . . . . . . 15
(c) Determination of Number of Shares To Be
Liquidated and Reinvested . . . . . . . . . . . . . . . . 15
(d) Qualified Election Period . . . . . . . . . . . . . . . . 15
(e) Value of Shares to Be Liquidated and
Reinvested. . . . . . . . . . . . . . . . . . . . . . . . 15
(f) Investments . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 - Amendment and Termination. . . . . . . . . . . . . . . . . . 16
5.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 6 - Plan Provisions. . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Trust to be Consistent With Plan . . . . . . . . . . . . . . . 16
6.2 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Incorporation of Plan Provisions . . . . . . . . . . . . . . . 17
EXHIBIT 11 - S-K Item 601 (b) (11)
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
(in thousands except per share)
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION
Income before cumulative effect of accounting change $10,098 $9,127 ($725) $5,065 ($4,804)
Less dividends on preferred stock 1,584 1,591 1,595 1,599 1,347
Plus tax benefit from preferred dividends 601 541 542 544 458
----- ----- ----- ----- -----
Earnings applicable to common stock before accounting change 9,115 8,077 (1,778) 4,010 (5,693)
Cumulative effect of change in accounting (7,628) - - - -
------ ------ ------ ------ ------
Earnings (Loss) applicable to common stock $1,487 $8,077 ($1,778) $4,010 ($5,693)
====== ====== ====== ====== ======
Weighted average common shares outstanding 5,322 5,079 5,101 5,471 6,032
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based
on year to date average price 314 229 0 102 0
----- ----- ----- ----- -----
Weighted average common shares and common
equivalent shares outstanding 5,636 5,307 5,101 5,572 6,032
====== ====== ====== ====== ======
Primary earnings per share
Income before accounting change $1.62 $1.52 ($0.35) $0.72 ($0.94)
Accounting change ($1.35) - - - -
Net earnings $0.27 $1.52 ($0.35) $0.72 ($0.94)
====== ====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE CALCULATION
A.
Weighted average common shares outstanding 5,322 5,079 5,101 5,471 6,032
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based on
the greater of year to date average or end of period price 316 401 0 102 0
----- ----- ----- ----- -----
Weighted average common shares and common
equivalent shares outstanding 5,638 5,480 5,101 5,573 6,032
====== ====== ====== ====== ======
Fully diluted earnings per share (A)
Income before accounting change $1.62 $1.47 ($0.35) $0.72 ($0.94)
Accounting change ($1.35) - - - -
Net earnings $0.27 $1.47 ($0.35) $0.72 ($0.94)
====== ====== ====== ====== ======
B.
Assuming preferred stock converted to common
Vested Preferred shares issued 147 116 83 50 15
Non-vested Preferred shares issued 663 699 735 770 806
----- ----- ----- ----- -----
Total Preferred shares issued 810 815 818 820 821
Vested Preferred shares issued 147 116 83 50 15
Guaranteed floor price for involuntary conversions $24.375 $24.375 $24.375 $24.375 $24.375
------- ------- ------- ------- -------
Subtotal $3,573 $2,817 $2,031 $1,214 $354
The lower of year to date average or end of period common
stock price $17.330 $11.430 $7.000 $7.250 $12.750
------- ------- ------- ------- -------
Required common shares to be issued assuming involuntary
conversion of vested shares at guaranteed floor price 205 245 289 167 28
Required common shares to be issued assuming voluntary
conversion of non-vested shares on one-for-one basis 664 699 735 770 806
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part A. 5,638 5,480 5,101 5,572 6,032
------- ------- ------- ------- -------
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part B. 6,507 6,424 6,125 6,510 6,866
====== ====== ====== ====== ======
Income before cumulative effect of accounting change $10,098 $9,127 ($725) $5,065 ($4,804)
Additional ESOP expense presently funded by preferred divide (1,584) (1,591) (1,595) (1,599) (1,347)
Plus tax benefit on additional ESOP expense 74 412 351 353 311
Common stock dividends to reduce ESOP expense 383 378 564 562 432
------- ------- ------- ------- -------
Adjusted Income before cumulative effect of accounting chang $8,971 $8,326 ($1,406) $4,380 ($5,408)
====== ====== ====== ====== ======
Fully diluted earnings per share (B)
Income (loss) before accounting change $1.38 $1.30 ($0.23) $0.67 ($0.79)
Accounting change ($1.35) - - - -
Net earnings (loss) $0.03 $1.30 ($0.23) $0.67 ($0.79)
======== ====== ====== ====== ======
Fully diluted earnings per share (Lower of (A) or (B)) $0.03 $1.30 ($0.35) $0.67 ($0.94)
======== ======== ======== ======== ========
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME STATE/COUNTRY OF
INCORPORATION
Charles Needham Industries, Inc. Texas
Westran Corporation Michigan
Kysor Europe Marketing England
Kysor Industries, S.A. Belgium
Kysor/Warren Refrigeration BmbH Germany
Kysor/Warren - U.K. United Kingdom
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
Kysor Industrial Corporation
Cadillac, Michigan
We consent to the incorporation by reference in the registration
statements of Kysor Industrial Corporation on Form S-8 (as listed below)
of our reports dated February 14, 1994, on our audits of the consolidated
financial statements and financial statement schedules of Kysor Industrial
Corporation as of December 31, 1993 and 1992, and for the years ended
December 31, 1993, 1992 and 1991, which report is included in this
Annual Report on Form 10-K.
PLAN SEC FILE
1980 Stock Option and Appreciation Rights Plan 2-67607
1983 Incentive Stock Option Plan 2-86346
1984 Stock Option Plan 2-99855
1987 Stock Option and Restricted Stock Plan 33-18438 and 33-30463
Employee Stock Ownership Plan 33-27360
401(K) Savings Plan for Bargaining Employees 33-59420
401(K) Savings Plan for Non-Bargaining Employees 33-59412
1993 Long-Term Incentive Plan 33-71758
Detroit, Michigan
March 25, 1994
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his capacity as a director or officer, or both, as the
case may be, of Kysor Industrial Corporation, does hereby appoint George R.
Kempton and Terry M. Murphy, or either of them, his true and lawful attorneys or
attorney to execute in his name, place and stead, in his capacity as a director
or officer or both, as the case may be, of Kysor Industrial Corporation, a Form
10-K Annual Report of Kysor Industrial Corporation for its fiscal year ended
December 31, 1993, any and all amendments to said report, and to file the same
with the Securities and Exchange Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
SIGNATURE TITLE DATE
William E. Callahan Director March 9, 1994
Timothy J. Campbell Director March 9, 1994
Thomas P. Forrestal Director March 9, 1994
Paul K. Gaston Director March 9, 1994
Grant C. Gentry Director March 9, 1994
Peter W. Gravelle Director March 9, 1994
George R. Kempton Director March 9, 1994
Philip LeBoutillier, Jr. Director March 9, 1994
Robert W. Navarre Director March 9, 1994
John D. Selby Director March 9, 1994
Frederick W. Schwier Director March 9, 1994
Raymond A. Weigel Director March 9, 1994
Terry M. Murphy V.P., Chief Financial Officer March 9, 1994
(Principal Financial Officer)
Robert L. Joseph Comptroller March 9, 1994
(Principal Accounting Officer)
EXHIBIT 99
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
_______
REPORT ON AUDITS OF FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
for the years ended December 31, 1993 and 1992
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
_______
Pages
Report of Independent Accountants 2
Financial Statements:
Statement of Net Assets Available for Plan Benefits as
of December 31, 1993 and 1992 3
Statement of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 1993,
1992 and 1991 4
Notes to Financial Statements 5-8
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1993 9
Item 27d - Schedule of Reportable Transactions for
the year ended December 31, 1993 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Committee of
Kysor Industrial Corporation
Employee Stock Ownership Plan:
We have audited the accompanying statement of net assets available
for plan benefits of Kysor Industrial Corporation Employee Stock
Ownership Plan as of December 31, 1993 and 1992, and the related
statement of changes in net assets available for plan benefits for
each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 1993 and 1992, and the
changes in net assets available for plan benefits for each of the
three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules as listed in the accompanying index on page 1 are
presented for purposes of complying with the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 and are not a
required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion,
are fairly stated, in all material respects, in relation to the
basic financial statements taken as a whole.
Detroit, Michigan
March 9, 1994
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
as of December 31, 1993 and 1992
_______
ASSETS 1993 1992
Cash and cash equivalents $ 61,306 -
Receivables:
Preferred stock dividend 658,362 $ 662,632
Contributions 36,000 33,600
Investments, at fair value (Note 3) 25,813,079 26,313,680
Total assets 26,568,747 27,009,912
LIABILITIES
Notes payable 20,697,453 21,046,179
Accrued interest 694,362 696,232
Accounts payable - 18,420
Total liabilities 21,391,815 21,760,831
Net assets available for plan benefits $ 5,176,932 $ 5,249,081
The accompanying notes are an integral
part of the financial statements.
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1993, 1992 and 1991
_______
1993 1992 1991
Additions:
Employer contributions $ 367,683 $ 381,159 $ 367,561
Dividend and interest income 1,733,198 1,737,561 1,819,465
Net appreciation in fair value
of investments - 4,008,104 -
2,100,881 6,126,824 2,187,026
Deductions:
Benefits paid to withdrawing
participants 246,778 211,980 133,168
Interest expense 1,733,014 1,763,415 1,813,064
Net depreciation in fair value
of investments 193,238 - 68,257
2,173,030 1,975,395 2,014,489
Net additions (deductions) (72,149) 4,151,429 172,537
Net assets available for plan
benefits, beginning of year 5,249,081 1,097,652 925,115
Net assets available for
plan benefits, end
of year 5,176,932 $ 5,249,081 $ 1,097,652
The accompanying notes are an integral
part of the financial statements.
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
_______
1. Summary of Significant Accounting Policies:
Investment Valuation
Investments in common stock traded on a national securities
exchange are valued at the last reported sales price on the
last business day of the year. The preferred stock was valued
at $24.50 per share on December 31, 1993, based on a market
comparable analysis performed by an independent investment
firm. On December 31, 1992, the preferred stock was valued at
its liquidation preference of $24.375 per share. Units of the
collective investment fund are valued at $1. The Plan's
assets, which consist primarily of the items noted above, are
held by the trustee of the Plan.
Investment Transactions
Purchases and sales of securities are reflected on a trade-date
basis. The basis on which cost is determined in computing
realized gains or losses from sales or distributions of
investments is average cost.
Change in Unrealized Appreciation (Depreciation) of Investments
In accordance with the policy of stating investments at fair
value, the Plan presents the net appreciation (depreciation) in
the fair value of its investments in the statement of changes
in net assets available for plan benefits. Net appreciation
(depreciation) consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
Interest and Dividend Recognition
Interest income and expense are recorded as earned or incurred.
Common stock dividend income is recorded on the ex-dividend
date. Dividends on the shares of preferred stock are recorded
as declared. Preferred stock dividends are cumulative, in the
amount of eight percent per annum, from the date of their
original issuance.
Financial Instruments
The Plan has investments and notes payable which are considered
financial instruments. The investments are carried at fair
value. The fair value of notes payable, as determined through
information obtained from banking sources and management
estimates, approximates their carrying value.
2. Description of Plan and Benefits:
The Plan is a noncontributory stock ownership plan available to
all U. S. salaried and hourly employees of Kysor Industrial
Corporation (the "Company") not covered by a collective
bargaining agreement. The Plan is designed to invest primarily
in the preferred stock and common stock of the Company and is
intended to meet the requirements of Section 141 of the Revenue
Act of 1978, as amended, and Section 401(a) of the Internal
Revenue Code of 1954, as amended.
On February 24, 1989, the Plan purchased 820,513 shares of
newly issued eight percent cumulative Series A Convertible
Voting Preferred Stock, $24.375 stated value per share
("Convertible Stock"), from the Company. The Plan's purchase
of preferred stock was financed by a loan from the company
which issued a $20,000,000, 15-year ESOP note to raise
necessary funds. The Plan pledges all such Convertible Stock
as collateral for the purpose of securing payment and
performance of all obligations and indebtedness of the Plan
pursuant to the exempt loan agreement. The Company will
service the debt obligation plus interest primarily through the
distribution of preferred stock dividends. In 1993, 1992 and
1991, dividends on preferred stock of $1,587,000, $1,593,000
and $1,597,000, plus $85,000, $79,000 and $75,000 of additional
contributions, respectively, were received from the Company.
The Convertible Stock may be voluntarily converted at the
option of the Plan into shares of the Company's common stock on
a one-for-one basis, subject to certain antidilution
adjustments. The Convertible Stock is subject to redemption by
the Company generally beginning March 1, 1992.
As the debt is serviced, a proportionate number of shares will
be allocated among plan participants based on participants'
compensation levels. At December 31, 1993, 1992 and 1991,
663,588, 699,051 and 734,514 shares, respectively, were
unallocated to plan participants.
During 1985, the Plan purchased 357,668 shares of the Company's
common stock. The Plan's purchase was financed through a bank
loan, guaranteed by the Company. Over a period of 10 years,
the Company will repay the cost of the shares plus interest.
As the loan is repaid, the proportionate number of shares will
be allocated among plan participants based upon participants'
compensation levels. At December 31, 1993, 1992 and 1991,
71,530, 107,297 and 143,064 shares, respectively, of common
stock of the Company remained unallocated to plan participants.
The Company's contributions will vest over 7 years, beginning
with 20 percent vesting after 3 years and 20 percent vesting
each year thereafter. Forfeitures will be allocated among the
accounts of all eligible participants for that year. The
Company is obligated to make contributions to the Plan which,
when aggregated with the Plan's dividends and interest
earnings, equal the amount necessary to enable the Plan to make
its regularly scheduled payments of principal and interest due
on its notes payable.
Upon termination or retirement, the balance in a participant's
account may be distributed in cash or in shares of the
Company's common stock at the participant's option. During
1993, 1992 and 1991, the Plan(s) distributed 4,578 shares,
5,955 shares and 1,546 shares, respectively, of the Company's
common stock to withdrawing participants. Additionally, 4,448
shares of preferred stock were converted into common stock
during 1993.
3. Investments:
The following is a summary of plan assets at December 31:
1993 1992
Market Market
Value Cost Value Cost
Kysor Industrial Corporation
common stock, 341,201
shares in 1993 and 351,996
shares in 1992 $ 5,928,368 $ 3,259,424 $ 6,423,927 $ 3,429,119
Kysor Industrial Corporation
preferred stock, 810,164
shares in 1993 and 814,612
shares in 1992 19,849,006 19,747,748 19,856,162 19,856,162
Short-term investments 35,705 35,705 33,591 33,591
$25,813,079 $23,042,877 $26,313,680 $23,318,872
4. Tax Status:
The United States Treasury Department advised on August 8, 1989
that the Plan constitutes a qualified trust under
Section 401(a) of the Internal Revenue Code and, therefore, is
exempt from federal income taxes under the provisions of
Section 501(a). The Plan has been amended since receiving the
determination letter. However, the plan administrator and the
Plan's tax counsel believe that the Plan is currently designed
and being operated in compliance with the applicable
requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was
tax-exempt as of the financial statement date.
5. Notes Payable:
Notes payable consist of the following:
1993 1992
Loan from Kysor Industrial Corporation,
$1,250,000 semiannual principal pay-
ments, starting July 25, 1996, plus
interest payable quarterly at 8.36
percent $ 20,000,000 $ 20,000,000
Note payable to National Bank of Detroit,
$174,363 semiannual principal payments,
through September 30, 1995, plus interest
payable quarterly at 7.0 percent 697,453 1,046,179
Total notes payable $ 20,697,453 $ 21,046,179
6. Administrative Expenses:
Administrative expenses of the Plan are paid by the Company.
7. Plan Termination Priorities:
The Company has no intention of terminating the Plan.
However, conditions which would cause plan termination are
specified in the plan agreement. Upon termination of the
Plan, the assets of the Plan would continue to be applied for
the exclusive benefit of participants and/or their
beneficiaries, as directed by the Committee.
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
as of December 31, 1993
_______
Description of Investment
Including Maturity Date,
Rate of Interest, Collateral, Current
Identity of Issuer Par or Maturity Value Cost Value
Kysor Industrial Corp. Common stock, 341,201 shares $ 3,259,424 $ 5,928,368*
Kysor Industrial Corp. Preferred stock, 810,164 shares 19,747,748 19,849,006*
Old Kent Bank Collective Investment Fund 35,705 35,705
$23,042,877 $25,813,079
*Represents investments in excess of five percent of net assets
available for plan benefits.
<TABLE>
KYSOR INDUSTRIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1993
_______
<CAPTION>
Expenses
Incurred
Number of Number of Purchase Selling with Cost of Net Gain
Party Involved Description of Asset Transactions Shares Price Price Transactions* Asset or (Loss)
<S> <C> <C> <C> <C> <C> <C> <C>
Old Kent Bank Old Kent Bank Money Market Funds:
Total assets purchased 98 249,683 $249,683 $249,683 -
Total assets sold 16 247,569 $247,569 247,569
114 497,252 $249,683 $247,569 $497,252 -
Total reportable transactions 114 497,252 $249,683 $247,569 $497,252 -
<F1>
Note:
The above transactions include transactions with respect to the
same issue of securities, which, when aggregated, exceeded five
percent of the Plan's assets.
*Information regarding expenses incurred with each transaction
was not available from the trustee.
</TABLE>
