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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-8585
UNITED DOMINION INDUSTRIES LIMITED
(Exact name of registrant as specified in its charter)
Canada 98-0125322
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 One First Union Center, Charlotte, NC 28202-6039
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, is (704) 347-6800.
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
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Common Shares (without par value) The Toronto Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such other 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 __
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
included as it is inapplicable to the registrant, a foreign private issuer. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately U.S. $635,000,000 as of March 14, 2000, assuming
that officers and directors are affiliates. As of the same date, 39,122,355
Common Shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1999 are incorporated by reference into Parts I and II and filed as Exhibit 13
hereto.
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PART I
ITEM 1. BUSINESS
GENERAL
United Dominion Industries Limited (the "Company" or the "Registrant") was
initially incorporated in Canada as Dominion Bridge Company, Limited in 1882,
reincorporated with the same name under the Companies Act of Canada on July 30,
1912, and continued with unlimited duration under the Canada Business
Corporations Act effective May 8, 1980. The Company changed its name to AMCA
International Limited on June 1, 1981 and to United Dominion Industries Limited
effective June 4, 1990.
The registered office of the Company is Suite 5300, Commerce Court West,
P.O. Box 85, Toronto, Ontario, Canada M5L 1B9. Its principal executive office is
at 2300 One First Union Center, 301 South College Street, Charlotte, North
Carolina, 28202, USA.
The Company manufactures proprietary engineered products for sale primarily
to industrial and commercial markets worldwide. The Company's businesses are
organized in four segments: Flow Technology, Machinery, Specialty Engineered
Products and Test Instrumentation.
The Company's Flow Technology businesses include:
o Marley Cooling Tower, Spig and Cofimco -- cooling towers for
power generation, refrigeration, HVAC and industrial uses.
o Flair -- filters and dryers for compressed air systems.
o Weil-McLain -- cast iron boilers for commercial and
residential customers.
o Waukesha Cherry-Burrell and Bran + Luebbe -- valves, pumps,
fittings, and integrated systems for sanitary (i.e. food,
beverages, dairy, pharmaceutical and cosmetics) and industrial
processing markets.
o Marley Pump -- submersible petroleum and water pumps and leak
detection equipment.
o Mueller Steam -- pipeline strainers and check, butterfly and
plug valves.
o CMB -- backflow prevention devices.
The Company's Machinery businesses include:
o BOMAG, HYPAC, Compaction America and Stow -- soil, asphalt and
landfill compactors and light equipment for concrete placement
and treatment.
o Sunflower, Feterl and Richardton -- tilling equipment, augers,
grain drills and handling systems.
The Company's Specialty Engineered Product businesses include:
o Door Products (Ceco, Trussbilt, Fleming and Dominion Building
Products/Amsco) -- steel frames and doors for commercial,
industrial and institutional markets.
o Door Products (Serco, Kelley, TKO and Lee Engineering) -- dock
levelers, vehicle restraints, dock seals and shelters,
stackers, scissor lifts and tilters.
o Marley Electric Heating -- electric resistant heaters and
ventilation equipment for industrial, commercial and
residential markets.
o Fenn Manufacturing -- close-tolerance machining primarily for
the aerospace industry and metal forming equipment.
o C & M -- powered roller conveyor systems for the corrugated
and solid fiber carton industry.
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The Company's Test Instrumentation businesses include:
o Test Measurement (Radiodetection, Riser-Bond and Bicotest) --
portable pipe and cable locators, and line management and
monitoring systems for the utilities and telecommunications
industries.
o ATP (Amprobe TIF and Promax) -- hand-held testing equipment,
refrigerant recovery and handling systems and refrigerant leak
detection devices.
o AIT -- diagnostic tools, precision fastening systems, and
gaging devices primarily for the automotive industry; carbide
machine parts and scales and weighing systems.
o Lunaire/LDS -- environmental testing chambers, industrial
ovens and electro-dynamic shakers for vibration testing.
o Atmospheric Air (TMI and King) -- air supply systems for the
automotive and food processing industries.
The Company has consolidated assets of approximately $2.2 billion and
employs approximately 14,000 people at over 90 manufacturing locations in more
than 20 countries. The Company sells its products in over 120 countries and had
1999 consolidated sales of approximately $2.15 billion.
References herein to the Company are, where the context so requires, to
the Company and one or more of its subsidiaries. Dollar references are to U.S.
dollars unless otherwise indicated.
RECENT DEVELOPMENTS
The Company completed twelve product line acquisitions during 1999 and
early 2000, adding annualized sales approaching $300 million. During the first
quarter, the Company purchased Riser-Bond, a manufacturer of cable fault
locators, for Radiodetection, and Ranieri, an Italian producer of stick ice
cream molds, for Waukesha Cherry-Burrell's ice cream division. The Company added
Aqua-Cool, an Australian cooling tower company, in the second quarter. In
August, the Company made a large acquisition, Bran + Luebbe, a German
manufacturer of metering pumps and analyzers, which compliments the Company's
Waukesha Cherry-Burrell business. Also in the third quarter, the Company added
TKO Doors for Serco, Fleming, a Canadian steel door manufacturer, for Door
Products, and Radiodetection China for Radiodetection. In the fourth quarter,
the Company added the Williamson & Milwaukee-Thermoflo product lines to
Weil-McLain, Patton industrial fans, heaters and ventilation equipment to Marley
Electric Heating, Bicotest, a British producer of instruments to detect the
distance to fault on wire cables, to Radiodetection and General Electronic
Systems, a manufacturer of industrial platform scales, to the AIT group. In the
first week of 2000 the Company added the Kelley Company, a full-line producer of
dock equipment, to its Dock Products division. Kelley will compliment the
Company's Serco business.
The Company's UDXcellence initiative became the number one operating
priority of the Company during 1999. The program was launched during the first
quarter and is a comprehensive Company-wide initiative designed to improve
productivity, increase efficiency and lower asset utilization. As part of the
UDXcellence program, the Company incurred one-time charges during the year of
$22.2 million in connection with the following initiatives:
o Closing a Flair operation in Virginia and combining it with
one in North Carolina;
o Moving the King Company's manufacturing operations from
Minnesota to South Carolina and thereby reducing the cost
structure;
o Rationalizing door and frame production at its Door Products
division;
o Combining and rationalizing the Test Measurement division,
closing two facilities and reducing headcount; and
o Consolidating some of Mueller Flow's product lines with
Mueller Steam and Bran + Luebbe, and exiting others.
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In September 1999, the Company completed its 2 million share repurchase
program accomplished pursuant to a normal course issuer bid in Canada. That
program began in October 1998. Together with its 3 million share issuer bid
repurchase at the beginning of 1998, and its 2 million share normal course bid
accomplished in 1997 and 1998, the Company has purchased approximately 15% of
its outstanding common shares during the period 1997 through 1999.
The Company announced in December a reorganization of its senior
management, promoting Glenn A. Eisenberg to President and Chief Operating
Officer, B. Bernard Burns, Jr. to Executive Vice President and Chief
Administrative Officer and William Dries, Senior Vice President, to Chief
Financial Officer. The Company's segment organization remains in place with
James M. Gibbs continuing as President of Flow Technology and Lothar Wahl as
President of Machinery. Richard F. Bradbury was named President of Specialty
Engineered Products and Timothy J. Verhagen became President of Test
Instrumentation.
INDUSTRY SEGMENTS
The Company's businesses are organized into four industry segments: Flow
Technology, Machinery, Specialty Engineered Products and Test Instrumentation.
The following table sets out the sales and operating income by segment for
the Company's ongoing businesses:
Year Ended December 31
1999 1998 1997
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(in millions)
Sales
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Flow Technology $ 992 $ 946 $ 846
Machinery 456 454 364
Specialty Engineered Products 388 349 310
Test Instrumentation 312 271 124
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Total $2,148 $2,020 $1,643
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Operating Income
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Flow Technology $ 94 $ 97 $ 79
Machinery 51 51 42
Specialty Engineered Products 42 39 42
Test Instrumentation 18 21 12
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Total $ 205 $ 207 $ 175
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Additional information about the Company's industry segments for each of
the last three fiscal years is contained in Note 12 of the Notes to Consolidated
Financial Statements incorporated by reference into this document.
FLOW TECHNOLOGY SEGMENT
Marley Cooling Tower
According to industry sources, Marley Cooling Tower is the leading United
States-based manufacturer of water cooling towers. It manufactures and markets
products globally ranging from small, factory-assembled cooling towers used in
refrigeration and air conditioning systems to large mechanical draft and
hyperbolic concrete cooling towers constructed on-site for electric utilities
and industrial applications. Marley Cooling Tower also furnishes spare parts and
rebuilds and upgrades cooling towers designed by
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Marley or its competitors. Its Recold Division manufactures and markets
evaporative condensers and closed circuit coolers for the air conditioning and
refrigeration industry. Marley Cooling Tower's principal competitors include
Baltimore Aircoil, Balcke-Durr, Evapco, GEA, Hamon, Psychometric Services and
Liang Chi.
Marley Cooling Tower's business is divided among the industrial, utility
and HVAC markets. It has nine regional sales offices and more than 70
representative offices across the United States and Canada, as well as
subsidiary companies in England, Germany, Spain, Australia and Malaysia, and
sales offices and joint venture partners in various places throughout the world.
The Company's 1999 acquisition of Aqua-Cool, in Australia, increased Marley
Cooling Tower's Australian presence.
Marley Cooling Tower's Resolite business produces engineered fiberglass
reinforced plastic composite panels in opaque and light transmitting versions
which are used in industrial applications requiring superior corrosion
resistance. Resolite uses the pultrusion process to manufacture fiberglass
reinforced composite products, principally for the electrical and structural
markets. Resolite's principal competitors are Enduro Composite Systems and
Bedford Reinforced Plastics, Inc.
Flair
According to industry sources, Flair is the leading United States
manufacturer of equipment used to dehydrate, filter and purify air and gas in
various industrial applications. Flair's products include dryer and purification
equipment such as regenerative and refrigerated compressed air and oil dryers
that eliminate moisture and contaminants from compressed gases. Flair also
supplies filter assemblies, elements, valves and desiccant used in the
replacement market. Products are marketed under the following names: Pneumatic
Products (regenerative dryers); General Pneumatics (refrigerated and
regenerative dryers); Deltech (refrigerated and regenerative dryers); Dollinger
(filters and oil mist eliminators); Delair (refrigerated and regenerative air
dryers for the European market); Kemp (regenerative dryers for liquids and gases
other than air); Siva (solvent distillation equipment); and Technolab
(compressed air filters).
Components for compressed air systems plus replacement filters and parts
represent a majority of Flair's business. Flair produces substantially all of
the components in a compressed air system with the exception of the compressor
itself. Ingersoll-Rand, the largest United States manufacturer of compressors,
is Flair's largest customer. Flair has operations throughout North America and
Western Europe, and certain products are marketed by distributors and sales
representatives. Its international presence includes a global strategic alliance
with Ingersoll-Rand for the supply of private label compressed air dryers and
other products for worldwide distribution. In addition to its presence in
Europe, Flair has formed joint ventures in India, Japan and Korea. Flair's
principal competitors for compressed air products include Hankison, Zeks Air
Dryer, General Air, Henderson Engineering, Balston, Finite, Ultrafilter and
Domnick Hunter.
Waukesha Cherry-Burrell
Waukesha Cherry-Burrell manufactures stainless steel equipment for dairy,
food, beverage, pharmaceutical and industrial processing. Product families
include: positive displacement, centrifugal, gear and high pressure piston
pumps; automated and manual valves; tubular fittings and clamps; scraped
surface, tubular and plate heat exchangers; homogenizers and other dispersion
equipment; and freezers, ingredient feeders, fillers, stick novelty and wrapper
equipment for frozen confectionery.
The 1999 acquisition of Ranieri, along with the acquisitions of
PMS/Alliance (1997) and APV Ice Cream (1998), have positioned Waukesha
Cherry-Burrell as a leading, full-line equipment supplier to the ice cream
industry. Waukesha Cherry-Burrell manufactures its
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products in the United States, Mexico, Denmark and Italy, and also has
engineering groups in Mexico City and Louisville, Kentucky that design and
install turnkey food and beverage systems throughout North, Central and South
America.
The primary markets for Waukesha Cherry-Burrell are the Americas, Western
Europe and the Pacific Rim. Its primary competitors are Tetra Laval, APV and
GEA. These companies are European-based and also manufacture broad equipment
lines. Waukesha Cherry-Burrell markets its products through a combination of
direct sales and independent distributor partners and systems integrators.
Bran + Luebbe
Bran + Luebbe, a German-based company acquired in August 1999, manufactures
a broad line of metering pumps and systems (the metering division) and a range
of analyzers for laboratories and the process industry (the analyzers division).
Its product families include precision diaphragm metering pumps, high-pressure
pumps, screw feeders, solids metering systems, blending systems, laboratory
analyzers, in-line process analyzers and environmental monitors.
Bran + Luebbe's primary markets are chemical, petrochemical, pulp and
paper, pharmaceuticals and cosmetics, oil and gas, food and beverage,
agriculture and private and public laboratories. It serves these industries
through thirteen marketing companies in strategic locations around the world.
Bran + Luebbe's primary manufacturing facility is located near Hamburg, Germany,
with systems assembly facilities in Sweden, France, the United States and the
U.K. Bran + Luebbe's major competitors in metering are Milton Roy and LEWA. The
analyzer market is more fragmented, with Foss and Thermo Electron among the more
significant competitors.
Weil-McLain
According to industry sources, Weil-McLain is the leading North American
manufacturer of oil and gas fired cast iron boilers used for heating homes,
apartment buildings, offices and schools. In addition, Weil-McLain manufactures
and markets products associated with the sale of its boilers, such as hydronic
baseboards, in-floor radiation, oil burners, control panels and indirect water
heaters. In 1999, Weil-McLain expanded its boiler line and entered the oil
furnace market by acquiring Williamson and Milwaukee-Thermoflo. Approximately
80% of Weil-McLain's total revenue is derived from the replacement market.
Boilers are sold throughout North America, with the largest volume concentrated
in the New England, middle Atlantic and midwest sections of the United States.
Weil-McLain's principal United States competitors in the cast iron boiler market
are Burnham, Peerless, Earl Reed International and Mestek.
Weil-McLain believes it is the lowest cost producer of cast iron boilers in
the United States and the industry technology leader. In addition, management
believes that Weil-McLain's distribution system is a leader in its industry,
with approximately 250 distributors in 650 locations. Distributors sell to
independent heating contractors and dealers who install the boilers.
Marley Pump
Marley Pump designs, manufactures and sells pumps for gasoline service
stations, bulk petroleum facilities and water well systems. Products are sold
under the "Red Jacket" brand name to major oil companies and various equipment
distributors. According to industry sources, Marley Pump has a leading United
States market share in submersible gasoline pumps. Marley Pump also produces
mechanical and electronic leak detection devices that monitor underground
storage tanks and pumping equipment at service stations and other bulk fuel
facilities worldwide. In addition, Marley Pump competes in the submersible and
surface
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pump water systems market worldwide. At year end 1998, Marley Pump sold its
motor manufacturing business, which permitted it to focus on its core pump
manufacturing business. Marley Pump's principal competitors are Goulds Pumps,
Sta-Rite Industries, The Grundfos Group, F.E. Meyers, Aermotor and F.E. Petro.
Marley Pump's products are marketed domestically primarily through distributors,
and internationally through distributors and sales representatives.
Mueller Steam
Mueller Steam Specialty manufactures three primary product lines:
strainers, check valves and butterfly valves. Strainers and valves are used in
various industrial processes in which piping systems exist. Mueller Steam
believes that it is the largest manufacturer of non-automatic pipeline strainers
in the world. In addition, Mueller Steam designs and manufactures a line of
specialized products directed primarily to the oil, gas and petrochemical
industries. These products include fabricated strainers, lined plug and ball
valves, temporary strainers and other flow products. Mueller Steam has
international sales offices in the United Kingdom, Singapore, Canada and the
United Arab Emirates and serves Latin America from the United States. Mueller
Steam serves industrial and commercial markets through independent sales
representatives and distributors. Principal competitors include Haywood,
Keckley, Keystone & Bray, and Crane.
CMB
CMB designs and manufactures fluid control valves and distributes them
worldwide through its network of distributors and sales representatives. FEBCO,
CMB's complete line of bronze and ductile iron backflow prevention assemblies,
is used in irrigation, plumbing, industrial, municipal and fire protection
markets. CMB also manufactures the Polyjet Control Valve, a custom-designed,
multi-jet sleeve valve designed to control high pressure or rapid flow or to
provide very precise flow control. POLYJET valves are used primarily in hydro or
dam construction projects and in other unique waterworks applications. CMB's
K-FLO AWWA Butterfly Valves are used in specialized applications including
waterworks and waste water systems, which are sold throughout the world. CMB's
competitors include Watts Industries, Zurn/Wilkins, Henry Pratt Co. and
Kvaerner.
MACHINERY SEGMENT
Compaction
Management believes that BOMAG, headquartered in Germany, is the world
leader in the production and sale of compaction equipment for soil and asphalt
applications. BOMAG also manufactures equipment for soil stabilizing, recycling
and sanitary landfill applications, and offers an integrated Compaction
Management System which processes on-line compaction data for the most advanced
dynamic compaction control methods. BOMAG pioneered the double vibratory roller
concept and its product line consists of more than 100 models ranging from
small, hand-operated tampers up to its 36-ton landfill compactor. BOMAG entered
the grader business in 1998 with four models in the 60-132 kW classes. With its
acquisition of Stow Manufacturing (1997), BOMAG broadened its light equipment
product offering to include equipment for concrete placement and treatment,
paving and site preparation.
Products are marketed under the BOMAG, HYPAC and STOW brand names
throughout the world by independent distributors and licensees and through
direct sales to the rental industry and all segments of the general construction
and waste management industries, including a wide range of governmental
agencies. Compaction America, BOMAG's manufacturing base in North America,
produces both BOMAG and HYPAC products. BOMAG Light Equipment, located in
Conklin, New York, is a division of Compaction America and produces the STOW
products.
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BOMAG operates through subsidiaries in the United States, Canada, England,
France, Austria and Germany, with manufacturing facilities located in Germany,
Illinois and New York and additional sales and service centers located in Jordan
and Singapore. BOMAG owns an interest in Nippon BOMAG in Japan and has license
or cooperation agreements with partners in India, Malaysia and the Czech
Republic.
BOMAG competes directly with a number of small regional companies and
several major international companies, including Ingersoll Rand, Caterpillar,
Dynapac and Wacker, some of which are larger than BOMAG and offer other
construction-related products in addition to compaction equipment.
Agricultural Equipment
Agricultural Equipment consists of three businesses: Sunflower
Manufacturing Company, Feterl Manufacturing Company and Richardton Manufacturing
Company. Management believes that Sunflower is among the world's leading
producers of high-quality disc harrows. Its other tillage equipment, grain
drills and grain carts are used for seedbed preparation, seeding and harvesting
operations. Sunflower's primary market is the midwestern and high plains areas
of the United States. Its products, which are sold through a direct sales force
and a network of more than 700 independent dealers, compete against equipment
manufactured by John Deere, Case IH, Krause, D.M.I., Landoll, Brillion, Brent
and Parker. Feterl, which manufactures grain augers, cleaners and service
bodies, primarily serves the same areas as Sunflower. Its products are sold
through independent sales representatives and a network of more than 600
independent dealers. Its principal competitors are Westfield, Hutch-Mayrath and
Sudenga. Richardton manufactures grain carts which are marketed by and sold with
the Sunflower name. Richardton also manufactures and sells forage and specialty
crop wagons. Its products are marketed primarily in the northeastern and
peanut-producing regions of the United States. Richardton's products are sold
through independent sales representatives and a network of more than 600
dealers. Its principal competitors are Byron and United Farm Tool.
SPECIALTY ENGINEERED PRODUCTS SEGMENT
Door Products
Door Products consists of a group of companies that manufacture and market
standard, specialty and custom steel doors and door frames for commercial,
industrial and institutional applications. Management believes that Door
Products is the United States market leader in the commercial-distributor,
commercial-OEM and detention steel door markets.
Ceco Door manufactures side-hinged steel doors and frames for commercial
and industrial markets nationwide and in selected overseas locations. It
maintains service centers in major cities throughout the United States. Ceco
products can be found in office buildings, schools, hospitals and nursing homes,
apartments, hotels and motels, and retail, industrial and commercial buildings.
Door Products expanded its commercial market share and product offerings in 1999
by acquiring Fleming Limited. Management believes that S.W. Fleming is the
leading Canadian manufacturer of commercial side-hinged steel doors and frames
and a low cost producer.
Trussbilt manufactures heavy gauge steel doors and frames for security and
detention markets. Trussbilt also produces security ceilings for detention and
other applications.
Dominion Building Products/Amsco manufactures and distributes pre-hung and
unassembled steel doors, frames and windows for the metal building industry.
While most of its products are sourced from Ceco, Amsco provides the unit its
own manufacturing capability.
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According to industry sources, Door Products, Steelcraft and Curries are
the three largest participants by market share in the U.S. side-hinged steel
door industry.
Dock Products
Dock Products is comprised of four businesses: Serco, Kelley, TKO Doors and
Lee Engineering. Serco manufactures and distributes a broad range of loading
dock equipment for industrial and commercial markets in North America. Serco's
products include dock levelers, vehicle restraints and loading dock seals and
shelters. These products are sold through an extensive distribution network,
including captive sales and service centers (The Paul Reilly Company, Casco and
Just Rite Equipment) and independent material handling distributors.
The Kelley Company was acquired on January 5, 2000. Like Serco, Kelley
manufactures and distributes dock levelers, vehicle restraints and loading dock
seals and shelters. Kelley also offers elevating dock platforms, scissor lift
tables, rail lift tables and truck levelers. Kelley sells its products through
an extensive distribution network. Primary markets for both Serco and Kelley
include industrial plants, distribution centers and wholesale and retail
warehouses. Principal competitors of Serco and Kelley include Rite-Hite,
McGuire, and Blue Giant.
TKO Doors, acquired in 1999, is the leading designer, manufacturer and
seller of "knockout" doors for loading docks in the United States. Knockout
doors contain spring-loaded plungers that permit door panels to release under
pressure, thereby absorbing impact without sustaining damage. TKO's competitors
include Rite-Hite, Overhead Door, Wayne Dalton and Albany International.
Lee Engineering manufactures material handling equipment such as manually
propelled pallet lifts, stackers, and stationary and portable scissor lift
tables. Its products are sold to the industrial market under the Presto and
Regal brand names, primarily through third party catalog companies, sales
representatives and independent distributors. Lee's principal competitors
include Big Joe, Bishamon and Southworth, each of which is larger than Lee, and
a number of smaller, regional material handling manufacturers.
Marley Electric Heating
Management believes that Marley Electric Heating is the leading United
States producer of electric resistance heating products for residential,
commercial and light industrial markets. It manufactures a full range of
electrical heating products, including baseboard, wall, portable and unit
heaters. The base product line is supplemented by a complete line of commercial
convectors, infrared heaters and numerous specialty application heaters.
Products are sold under the Q-Mark, Berko, Aztec and Fahrenheat brand names.
Principal competitors are TPI, Cadet and Dimplex. Q-Mark, Berko and Aztec
products are marketed through independent sales representatives to wholesale
electrical and mechanical distributors. Fahrenheat products serve the consumer
"Do it Yourself" market through hardware and home center stores.
Marley Electric Heating entered the commercial/industrial ventilation
business in 1998 through the acquisition of Leading Edge and increased that
presence in 1999 by acquiring Patton Industrial and Building Supply Products.
Patton manufactures a broad line of industrial heating and ventilating products
such as industrial fans, blowers and heaters and building supply products,
including kitchen and bath ventilators, ceiling fans, door chimes and electric
heaters for residential, commercial and light industrial markets.
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C & M
C & M engineers, manufactures and installs material handling systems for
the corrugated industry. C & M's primary product is an accumulating belt driven
roller conveyor which includes specialty devices for the transfer of corrugated
product "on" and "off" the conveyor. It also manufactures power transfer cars
that deliver and retrieve product from staging systems for delivery to
converting operations. All systems are specially engineered to the individual
customer's application. C & M has direct regional sales managers throughout the
United States who provide on-site consultation. Foreign accounts are handled
through sales agents who are geographically positioned in the region and
represent other corrugated equipment. ACS and United Pentek are C & M's
principal competitors.
Fenn
Fenn provides new and overhauled precision-machined critical parts and
assemblies, principally for helicopter rotor and transmission systems. It also
produces metal forming equipment for the ferrous and non-ferrous metal
industries for rolling, shaping, forming, drawing and swaging metal strip, rod,
wire and tube. Fenn's critical parts division sells primarily to the United
States defense sector. Markets for the machinery division are diverse, ranging
from a large number of small customers to large manufacturing companies. Markets
include automotive forging, hand tool, medical, armament, specialty metal and
tube. Fenn has a sales office in the United Kingdom to serve as its European
machinery marketing arm. Competition is highly fragmented and depends on the
specific product line.
TEST INSTRUMENTATION SEGMENT
Test Measurement
The Company's Test Measurement division consists of Radiodetection and ATP.
Radiodetection specializes in the design, manufacture and sale of products for
the location and maintenance of buried pipes and cables. While portable pipe and
cable locators are Radiodetection's primary products, Radiodetection also has
developed line management systems (LMS) for locating and identifying metallic
sheathed fiber optic cables. LMS products are sold primarily to long distance
telecommunication carriers such as AT&T, MCI and Sprint. Other products include
trenchless products (horizontal boring guidance systems), inspection products
(inspection cameras for pipes and ducts) and power products (test sets for use
in the power industry). Radiodetection expanded its product offerings in 1999 by
acquiring Riser-Bond Instruments and Bicotest Limited, both of which design,
manufacture and sell time domain reflectometers, which are used to find the
"distance to fault" on a metallic cable. Bicotest also manufactures portable
test equipment for the power industry. Radiodetection has a wide customer base
that includes major utility and industrial companies, municipalities and
thousands of independent contractors in over 80 countries throughout the world.
The Company believes that Radiodetection is the market leader in portable
locators in the UK, the United States and Germany. It also opened Radiodetection
China during 1999 as a result of a small acquisition there. Radiodetection's
competitors include Dynatel, Seba, Tektronix, Metrotech, C-Scope, Heath, Fuji
and Takochiho.
ATP is comprised of three businesses: Amprobe, Promax and TIF Instruments,
which manufacture hand-held devices for testing and measuring electrical
properties, for recovering and handling refrigerants, and for testing for leaks
in refrigeration systems. Primary products include clamp-on ammeters,
multimeters (volt/amp/ohmmeters), circuit tracers, harmonic analyzers,
recorders, leak detectors and refrigerant recovery products. Test Measurement
serves the HVAC/R, electrical, electronic, transportation and automotive
markets. Sales are made through distributors and manufacturer representatives in
the
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United States and abroad. The Company believes that Amprobe is a market leader
of selected electrical test and measurement products.
Test Measurement believes that it is one of the largest suppliers of
professional test and service tools for HVAC/R tradesmen. Its competitors are a
mix of large companies such as Greenlee and Yokagawa, medium-sized companies
such as Fluke (division of Danaher) and Robinaire (division of SPX) and small,
privately-held companies such as Wavetek, CPS and Thermoflow.
Advanced Industrial Technologies
Advanced Industrial Technologies is comprised of four businesses which
primarily serve the transportation and internal combustion markets. Advanced
Assembly Group (AAG) supports the precision assembly and test markets with the
tech-motive tool product line of electronic fastening tools and the GSE torque
and force measurement products for production, test and audit of the assembly
process. In addition, the AAG Systems Group provides solutions for specific
customer applications such as multi-spindle nutrunner fastening systems and ABS
brake system testing. Air Gage Company supplies manufacturers throughout the
world with dimensional inspection gaging systems and calibration and
certification services that satisfy a wide-range of automotive and
non-automotive part inspection requirements. Great Lakes Eglinton manufactures
reference equipment and carbide-based industrial tooling for wear resistance and
dimensional stability (dies for forming cans, extruding dies for wire and
precision plug gage members). GSE Scale Systems provides a broad line of
industrial weighing equipment specializing in programmable controls for
automated processing systems. Its products can be found in applications ranging
from baggage weighing for air transportation to micro-ingredient batching
systems for food processing to heavy truck weighing for land-fill management.
GSE Scale added to its offerings in 1999 with the acquisition of General
Electronic Systems, which designs and manufactures weighing equipment platforms
and parts counters.
Advanced Industrial Technologies markets its products throughout the world
through a combination of direct sales, distributors and manufacturer
representatives. Principal competitors include Atlas-Copco, Ingersoll Rand,
Marposs, Glastonbury Gage and Oberg Manufacturing.
Lunaire/LDS
Lunaire manufactures a complete line of environmental test chambers for
simulation and testing, heat processing equipment, and industrial and
pharmaceutical ovens and dryers. Lunaire's principal competitors include Blue-M,
Despatch Industries and Thermotron.
Management believes that Ling Dynamic Systems (LDS) is an industry leader
in supplying vibration test equipment for a broad array of industries including
aerospace, automotive and electronic, with the express advantage of a strong
European presence. Competitors include Unholtz Dickie and Ling Electronics.
Lunaire and LDS market their products throughout the world through direct sales,
distributors and manufacturer representatives.
Atmospheric Air
The Company's Atmospheric Air group, consisting of TMI and King, produces
air supply systems to control critical processes such as automotive paint lines
and food and pharmaceutical production. It also manufactures a complete line of
heating, refrigeration and filtration equipment primarily for commercial and
industrial markets. Principal competitors include Gamewell, Engineered Air,
Applied Air, Industrial Air, Webco and Accuaire.
11
<PAGE> 12
BACKLOG
Backlog (firm orders for products not yet shipped) is one indicator of the
Company's operating condition. However, for most of the Company's businesses,
year-end backlog is not particularly predictive of the following year's
performance because of short lead times and seasonality in those businesses.
On a consolidated basis, the Company's ongoing businesses booked new work
of $2.2 billion in 1999, representing a 10% increase from 1998's level. Backlog
at the end of 1999 was $373 million, up 8% from $345 million a year earlier.
Substantially all of the 1999 year-end backlog represents bookings for 2000
delivery.
The following table sets out backlog for the periods indicated:
As of December 31
1999 1998
---- ----
(in millions)
Flow Technology $195 $173
Machinery 52 52
Specialty Engineered Products 73 71
Test Instrumentation 53 49
---- ----
Total $373 $345
==== ====
SEASONALITY
Many of the Company's businesses have historically been stronger in the
second, third and fourth quarters than in the first quarter, primarily because
of winter weather conditions impacting the production and sales of their
respective products in the first quarter. Note 15 to the Consolidated Financial
Statements, which is an unaudited summary of quarterly results, at page 44 of
the Company's Annual Report to Shareholders for the year ended December 31,
1999, provides the numerical analysis of the seasonality of the Company's
businesses, and is incorporated herein by this reference.
RAW MATERIALS
The principal raw material used in the Company's products is steel. Other
significant materials used in the production of the Company's products include
certain electrical and mechanical components. All such materials and components
used are readily available from a number of sources, and the Company is not
dependent on any single supply source.
PATENTS
The Company possesses rights under a number of patents in the U.S., Canada
and Europe and is involved in various licensing arrangements. Although these
patents and licenses are important to the Company's businesses, the Company does
not believe that any of its business units is dependent on any single patent or
license or any group of patents and licenses.
RESEARCH AND DEVELOPMENT EXPENDITURES
Many of the Company's businesses are involved in on-going research and
development activities. During 1999, the Company spent approximately $29 million
on these activities.
12
<PAGE> 13
ENVIRONMENTAL EXPENDITURES
Each of the Company's operating plants from time to time makes changes or
modifications to comply with current United States and other federal, state and
local provisions regulating the discharge of materials into the environment. In
1999, the Company performed a number of environmental audits, conducted seminars
and took other actions necessary to ensure the Company's compliance with
environmental laws, all consistent with its environmental policy. Capital
expenditures for environmental control facilities in 1999 were not material. The
Company believes compliance with environmental protection requirements and its
environmental policy will not have a material adverse effect on the business or
the consolidated financial position of the Company.
EMPLOYEES AND LABOR RELATIONS
As of March 2000, the Company had approximately 14,000 employees worldwide
at over 90 locations and had 26 collective bargaining agreements covering
approximately 2,200 employees at 28 unionized manufacturing and service
locations. The Company believes its relations with its unions and its employees,
both union and non-union, are satisfactory.
INTERNATIONAL OPERATIONS
During 1999, 1998 and 1997, approximately 28%, 25% and 23%, respectively,
of the Company's sales were generated by units located outside the United
States, and 33%, 32% and 31%, respectively, of the Company's sales were to
destinations outside the United States. Information concerning the Company's
sales and identifiable assets attributable to each of the Company's geographic
segments is set forth in Note 12 to the Consolidated Financial Statements of the
Company incorporated by reference into this document.
International operations are necessarily subject to various risks that
differ in certain respects from risks encountered in the United States and
Canada. These different risks, including political pressures, exchange and
currency fluctuations and controls, export controls, tax changes, labor
difficulties, price controls and other governmental actions, are difficult to
appraise.
ITEM 2. PROPERTIES
The Company owns and leases plant facilities, offices and warehouses in
various parts of the world. The Company has more than 80 primary operating
locations. Management believes that the Company's properties and equipment are
in good condition, well maintained and suitable for their intended uses. The
location and approximate size of the Company's 15 largest facilities are
included in the table below.
13
<PAGE> 14
TOTAL
LOCATION UNIT SQUARE FEET
-------- ---- -----------
Boppard, Germany ..................... BOMAG 645,100
Michigan City, Indiana ............... Weil-McLain 535,500
Milan, Tennessee ..................... Door Products 426,000
Bennettsville, South Carolina(1)...... Marley Electric Heating 387,000
Kewanee, Illinois .................... BOMAG/HYPAC 299,000
Olathe, Kansas ....................... Marley Cooling Tower 231,700
St. Pauls, North Carolina ............ Mueller Steam 216,000
Louisville, Kentucky ................. Marley Cooling Tower 214,800
Norderstedt, Germany ................. Bran + Luebbe 200,000
Delavan, Wisconsin ................... Waukesha Cherry-Burrell 197,000
Newington, Connecticut ............... Fenn Manufacturing 190,000
Jeffersontown, Kentucky .............. Waukesha Cherry-Burrell 186,000
Davenport, Iowa ...................... Marley Pump 175,000
Beloit, Kansas ....................... Sunflower 165,000
Etten Leur, Netherlands .............. Flair 156,000
- ----------
(1) The Bennettsville, South Carolina facility is leased from The Industrial
Development Corporation of the City of Bennettsville, South Carolina
through 2034.
ITEM 3. LEGAL PROCEEDINGS
Although the Company and its subsidiaries are parties to a number of
pending legal proceedings seeking damages and other relief, management is of the
opinion, based upon information presently available to it, that it is unlikely
that any liability, to the extent not provided for through insurance or
otherwise, would be material in relation to the Company's consolidated financial
condition.
The Company has been named along with several other parties in a number of
administrative proceedings maintained by federal and state agencies arising out
of alleged releases or contributions of hazardous substances into the
environment. None of the proceedings is, in the opinion of management, either
individually or viewed in connection with all the proceedings, material to the
business or consolidated financial condition of the Company. The Company has
participated and in the future will participate in the funding of clean up costs
in connection with certain of the proceedings. However, it does not believe that
monetary sanctions in excess of $100,000 will be imposed against it as a result
of any of the proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common shares (hereinafter "Common Shares") are traded on The
Toronto Stock Exchange and the New York Stock Exchange. As of March 14, 2000 the
Company had 1,353 holders of record of its Common Shares. The additional
information called for by this Item appears in the Company's Annual Report to
Shareholders for the year ended December 31, 1999 on page 46 under the heading
"Six-Year Statistical Summary" opposite the captions "Number of common
shareholders" and "Common dividends," and on the inside back cover under the
14
<PAGE> 15
heading "Common Share Market Prices." Such information, limited where applicable
to the years 1998 and 1999, is incorporated herein by this reference.
It is the Company's policy to review the declaration of dividends on the
Common Shares quarterly. The payment of future dividends will be determined by
the Company's Board of Directors in light of circumstances then existing,
including the Company's earnings, financial requirements and general business
conditions.
The following is a general summary of the principal tax considerations
under the laws of Canada for owners of Common Shares who hold such shares as
capital property, who are neither resident, nor deemed to be resident, in
Canada, and who neither carry on business, nor are deemed to carry on business,
in Canada.
Dividends, including stock dividends, paid, or deemed to be paid, on Common
Shares held by nonresidents of Canada are subject to Canadian withholding tax.
Withholding tax is levied at a basic rate of 25%. Depending on the terms of any
applicable tax treaty, the basic 25% rate may be reduced. For residents of the
United States, generally the rate is 15% under the United States/Canada tax
treaty. U.S. resident trusts that are exempt from U.S. tax and are operated
exclusively to provide pension, retirement, or employee benefits, generally are
exempt from Canadian withholding tax.
No other income or capital gains tax is payable by such owners under the
laws of Canada in respect of Common Shares or the dividends thereon, except on a
capital gain realized on the disposition of Common Shares by a holder, if,
subject to applicable tax treaties, at any time during the period of five years
immediately preceding the disposition of Common Shares by such holder, not less
than 25% of the issued shares of any class of capital stock of the Company were
owned by the nonresident holder and by persons with whom such holder did not
deal at arm's length.
At present, there are no estate taxes or succession duties imposed by
Canada or any of its provinces.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this Item appears in the Company's Annual
Report to Shareholders for the year ended December 31, 1999 under the heading
"Six-Year Statistical Summary" on page 46 opposite the captions "Operating
Results" - "Sales" and "Income from continuing operations," "Per Common Share
Data" - "Continuing operations" and "Common dividends," and "Financial Condition
and Ratios" - "Total assets" and "Long-term debt (including current portion),"
and in the notes on page 46. Such information, limited where applicable to the
years 1995 through 1999, is incorporated herein by this reference. Also, see
Note 2 appearing in the Notes to Consolidated Financial Statements on page 34 of
the Company's Annual Report to Shareholders for the year ended December 31,
1999, which is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information called for by this Item appears on pages 23-28 of the
Company's Annual Report to Shareholders for the year ended December 31, 1999 and
is incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risks from changes in interest rates
relates primarily to the fair value of its long-term fixed interest rate debt
and the effects that changes in interest rates have on floating rate debt and
short-term investments and cash
15
<PAGE> 16
equivalents. Generally, the fair market value of fixed interest rate debt will
increase as interest rates fall and decrease as interest rates rise. A 50 basis
point increase in interest rates would have a $5.3 million effect on the fair
value of the Company's long-term debt as of December 31, 1999. A 50 basis point
movement in the interest rate on the Company's floating rate debt and short-term
investments and cash equivalents would result in an approximate $2.2 million
annualized increase or decrease in net interest expense and cash flows. The
Company does not trade in derivative financial instruments for trading or
speculative purposes. However, it does enter into a limited range and number of
derivative financial instrument contracts.
The Company has operations in several foreign countries and conducts
business in numerous foreign currencies. Changes in foreign currency exchange
rates affect the Company's translation of its foreign companies' results into
United States dollars and can impact the transaction costs of specific
transactions denominated in foreign currencies. The Company has a program in
place to manage foreign currency risk and as part of that program enters into a
limited number of foreign currency foreign exchange contracts to hedge
anticipated or specific foreign currency transactions. These foreign exchange
contracts do not subject the Company to market risk due to exchange rate
movement because gains and losses on these contracts offset losses and gains on
the transactions being hedged. The Company has also mitigated its exposure to
changes in foreign currency exchange rates by denominating certain long-term
borrowings in foreign currencies. A 10% change in the value of all foreign
currencies would not have a material effect on the Company's financial position,
liquidity or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The financial statements listed on the Index to Consolidated Financial
Statements and Schedule on page 16 of this report are incorporated
herein by this reference.
(b) Supplementary Financial Information
The selected quarterly financial data required by Item 302(a) of
Regulation S-K appears on page 44 of the Company's Annual Report to
Shareholders for the year ended December 31, 1999 as Note 15 to the
Consolidated Financial Statements which is an unaudited summary of
quarterly results and is incorporated herein by this reference.
(c) Other Financial Statements and Schedules
Other financial statements and schedules required under Regulation S-X
are filed pursuant to Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and financial
disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding reports filed by officers and directors under Section
16(a) of the Securities Exchange Act is not required as a result of the
Company's status as a foreign private issuer.
16
<PAGE> 17
Set forth below are the names and ages of each person serving as a
director, such person's present principal occupation or employment, the period
during which such person has served as director of the Company, and additional
biographical information.
The directors are elected annually.
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS WITH THE COMPANY AND SIGNIFICANT DIRECTOR OF THE
AFFILIATES, PRINCIPAL OCCUPATIONS, AND RECENT BUSINESS EXPERIENCE COMPANY SINCE
- ----------------------------------------------------------------- ---------------
<S> <C>
DONALD N. BOYCE (1) (61). Chairman of the Board of IDEX Corporation (a 1997
diversified manufacturing company), 1988 to present. President and Chief
Executive Officer of IDEX Corporation, 1988 to 1998. Director of IDEX
Corporation and Walter Industries, Inc.
HERMANN BUERGER (2) (56). Executive Vice President of Commerzbank AG 1997
(international bank), 1989 to present. Director of Security Capital Group
Incorporated and Paging Network, Inc.
JAMES E. COURTNEY (1) (3) (68). Chairman of the Board of First Community Bank of 1989
Southwest Florida (commercial bank), 1998 to present. Chairman of the
Board, First Independence Bank of Fort Myers (commercial bank), 1996-1997.
President of The Mariner Group, Inc. (real estate management and development
company), 1992-1995.
PETER A. CROSSGROVE (1) (63). Chairman of Premdor Inc. (international door 1993
manufacturing company), 1998 to present. President and Chief Executive
Officer of Southern Africa Minerals Corporation (diamond exploration company),
1994 to present. Chairman and Chief Executive Officer of Brush Creek Corporation
(investment holding company), 1993 to present. Director of Premdor Inc., Dundee
Realty, Inc., Acadia Minerals Corp., Quadra Logic Technologies Inc., Southern
Africa Minerals Corporation, Barrick Gold Corporation, Band-Ore Resources Inc.,
A.M.T. International Mining Corporation, QLT Photo Therapeutics Inc. and Philex
Gold, Inc.
R. STUART DICKSON (2) (4) (70). Chairman of the Executive Committee, Ruddick 1990
Corporation (industrial thread, regional supermarket and venture capital
company), 1994 to present. Director of Textron, Inc., First Union Corporation,
Dimon Incorporated and PCA International, Inc.
JERE A. DRUMMOND (2) (60). Vice Chairman of BellSouth Communications Group 1999
(telecommunications company), January 1, 2000 to present. Group President and
Chief Executive Officer, BellSouth Communications Group, 1998 to 1999. President
and Chief Executive Officer, BellSouth TeleCommunications, Inc., 1995-1997.
Director of Borg Warner Automotive, Inc.
THE HONORABLE JAMES A. GRANT, P.C., Q.C. (3) (4) (62). Partner of Stikeman 1989
Elliott (law firm), 1970 to present. Chairman of Executive Committee of
Stikeman Elliott, 1988 to 1999. Director of BioChem Pharma Inc., CAE Industries
Ltd. and Canadian Imperial Bank of Commerce.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
WILLIAM R. HOLLAND (4)(5) (61). Chairman of the Company and United Dominion 1985
Industries, Inc., 1987 to present. Chief Executive Officer of the Company
and United Dominion Industries, Inc., 1986 to present. Director of The
BFGoodrich Company and Lance, Inc.
RUSSELL C. KING, JR. (2) (65). Retired as of May 20, 1994. President and Chief 1992
Operating Officer of Sonoco Products Company (international manufacturer of
packaging products), 1990-1994. Director of Integrated Business Systems and
Services, Inc.
JOHN T. MAYBERRY (2) (55). President and Chief Executive Officer of Dofasco Inc. 1999
(steel producer), 1993 to present. Director of Dofasco Inc., Decoma
International Inc. and The Bank of Nova Scotia.
DR. HARRY A. NURKIN (3) (56). President and Chief Executive Officer of Carolinas 1999
Healthcare System (integrated healthcare services system), 1983 to present.
DALTON D. RUFFIN (1) (4) (5) (70). Retired as of January 1, 1989. Regional Vice 1974
President of Wachovia Bank & Trust Company, N.A. (commercial bank),
1980-1988.
WILLIAM W. STINSON (4)(5) (66). Retired as of May 1, 1996. Chairman of Canadian 1986
Pacific Limited (transportation, energy and hotel company), 1989-1996.
President and Chief Executive Officer of Canadian Pacific Limited, 1985-1996.
Director of PanCanadian Petroleum Limited, Western Star Ltd., Westshore
Investment Trust, Sun Life Assurance Company of Canada and Massachusetts
Financial Services Company.
GEORGE S. TAYLOR (2) (59). Retired as of December 31, 1995. President and Chief 1995
Executive Officer of John Labatt Limited, 1992-1995. Director of Great
Lakes Power Inc., EdperBrascan Limited, Acanthus Real Estate Corporation and
Teknion Corporation.
</TABLE>
- ---------
(1) Member of Compensation & Human Resources Committee.
(2) Member of Audit & Risk Management Committee.
(3) Member of Nominating & Corporate Governance Committee.
(4) Member of Executive Committee.
(5) Also a member of the board of directors of United Dominion Holdings, Inc.
and United Dominion Industries, Inc., wholly owned subsidiaries of the
Company.
18
<PAGE> 19
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of each Executive Officer of the
Company, such person's position with the Company, and the year in which such
person became an executive officer.
<TABLE>
<CAPTION>
Year Individual
Became An
Name Age Offices Held Executive Officer
---- --- ------------ -----------------
<S> <C> <C> <C>
W. R. Holland.........61 Chairman of the Board 1977
and Chief Executive
Officer
G. A. Eisenberg.......38 President and 1992
Chief Operating Officer
B. B. Burns, Jr.......51 Executive Vice President and 1989
Chief Administrative Officer
R. F. Bradbury........54 Senior Vice President; 1998
President - Specialty Engineered
Products
J. M. Childress, II...42 Senior Vice President 1996
W. Dries..............48 Senior Vice President and 1990
Chief Financial Officer
J. M. Gibbs...........47 Senior Vice President; 1999
President - Flow Technology
T. J. Verhagen........53 Senior Vice President; 1993
President - Test Instrumentation
L. Wahl...............58 Senior Vice President; 1998
President - Machinery
J. P. Hassett.........54 Vice President 1996
C. T. Leinbach III....47 Vice President and Controller 1999
R. L. Magee...........42 Vice President, General Counsel 1996
and Secretary
B. J. Smith...........39 Vice President 1999
T. J. Snyder..........49 Vice President and Treasurer 1991
N. H. Spurlock........51 Vice President 1999
</TABLE>
Each executive officer is appointed by the Board of Directors of the
Company and holds office until his successor is appointed or until the earlier
of his death, resignation, or removal by the Board of Directors. All officers
serve United Dominion Holdings, Inc. and United Dominion Industries, Inc.,
wholly-owned subsidiaries of the Company, in identical capacities.
19
<PAGE> 20
WILLIAM R. HOLLAND has been Chairman of the Company since 1987 and Chief
Executive Officer since 1986. Mr. Holland, who joined the Company in 1973,
served as President of the Company from 1985 to 1988.
GLENN A. EISENBERG was named President and Chief Operating Officer of the
Company in December 1999, having served as President of the Company's Test
Instrumentation Segment since September 1998 and Executive Vice President since
January 1998. Mr. Eisenberg served as Chief Financial Officer from July 1995,
and was Senior Vice President from July 1995 until January 1998. Mr. Eisenberg
was Vice President, Planning and Development from 1992 until 1995. Mr. Eisenberg
joined the Company in 1990 as Manager of Treasury Analysis and Services.
B. BERNARD BURNS, JR. was named Executive Vice President in December 1999,
having served as Senior Vice President since 1993. He was President of the
Company's Specialty Engineered Products Segment from September 1998 until
December 1999, President of the Company's Door Products division from 1997 to
1998, and President of the Company's former Building Products segment from 1996
to 1997. Mr. Burns was General Counsel of the Company from 1993 to 1996. Mr.
Burns joined the Company in September 1989 as Vice President and Associate
General Counsel.
RICHARD F. BRADBURY was named President of the Company's Specialty Engineered
Products Segment in December 1999, and remains a Senior Vice President of the
Company, a position he was appointed to in September 1998. Mr. Bradbury had
served as President of Flair Corporation since April 1998. Mr. Bradbury was
President of the Company's Specialty Engineered Products division from 1997 to
1998 and President of Ceco Door Products from 1989 to 1997.
J. MILTON CHILDRESS, II became a Senior Vice President of the Company in
December 1999, having been a Vice President since July 1996. Mr. Childress was
Director of Corporate Development from 1992 and Assistant Vice President from
July 1995. Prior to joining the Company, Mr. Childress worked with Ernst &
Young's Corporate Finance Advisory Group.
WILLIAM DRIES was named Chief Financial Officer in December 1999. Mr. Dries has
served as Senior Vice President of the Company since February 1999. He joined
the Company in 1985 as Manager of Accounting and Auditing, became Director of
that same department in 1986, was appointed Controller in 1988 and a Vice
President in 1990.
JAMES M. GIBBS was named Senior Vice President in February 1999 and has been
President of the Flow Technology Segment since September 1998. Mr. Gibbs was
President of The Marley Company in 1998, President of Marley Pump from 1996 to
1998, and President of Serco from 1994 to 1996. Prior to the Company's
acquisition of Serco in April 1994, Mr. Gibbs was Chairman and Chief Executive
Officer of Serco Corporation.
TIMOTHY J. VERHAGEN was named President of the Company's Test Instrumentation
Segment in December 1999, continuing as Senior Vice President, a position he has
held since January 1998. Mr. Verhagen served as Vice President of the Company
from October 1993 until January 1998. Prior to joining the Company, Mr. Verhagen
was Vice President and Associate General Counsel for The Marley Company in
Mission, Kansas from 1985 to 1993.
LOTHAR WAHL was named President of the Company's Machinery Segment in September
1998 and has been Senior Vice President of the Company since January 1998. Mr.
Wahl has served as President of the Company's Compaction Segment since 1994. Mr.
Wahl joined BOMAG in 1969 and has held various positions since that time,
including Senior Vice President of BOMAG from 1985 until 1993 and Chief
Operating Officer of BOMAG from 1993 until 1994.
JUNE P. HASSETT became a Vice President of the Company in July 1996. She joined
the Company in 1980 as a research tax accountant, was named Manager of Federal
Taxes in 1982, Director of Taxes in 1991, and Assistant Vice President in July
1995.
20
<PAGE> 21
C. THEODORE LEINBACH III was named Controller in December 1999, continuing as a
Vice President of the Company, a position to which he was appointed in February
1999. Mr. Leinbach joined the Company in 1989 as a Manager of Accounting, became
a director of that department in 1992, and an Assistant Vice President in 1996.
RICHARD L. MAGEE became a Vice President of the Company in July 1996 and
Secretary of the Company in July 1997. He was appointed General Counsel in 1998.
Mr. Magee joined the Company in 1989 as Assistant General Counsel and was
appointed Associate General Counsel in 1993 and an Assistant Vice President in
July 1995.
B. J. SMITH became a Vice President of the Company in December 1999, having
joined the Company as Assistant Vice President in November 1998. Prior to
joining the Company, Mr. Smith worked in various human resources positions at
Duke Energy Corporation, a Charlotte-based energy services company, most
recently as senior human resources executive for its engineering services
subsidiary DE&S, Inc.
THOMAS J. SNYDER became a Vice President of the Company in June 1993. Mr. Snyder
has been with the Company since 1977 in various positions within the corporate
treasury department. He was appointed Treasurer of the Company in 1991.
NANCY H. SPURLOCK was appointed Vice President of the Company in December 1999,
having served as Assistant Vice President since August 1998. Ms. Spurlock joined
the Company as Manager of Corporate Communications in October 1993 and has held
various positions in that department during her tenure at the Company.
21
<PAGE> 22
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table, presented in accordance with the Canada Business
Corporations Act ("CBCA") and the applicable provincial securities legislation
in Canada, sets forth information concerning compensation paid to the Chief
Executive Officer, and each of the other four most highly compensated executive
officers of the Company (the "Named Executive Officers"), for services rendered
to the Company and its subsidiaries during the financial years ended December
31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------------------
AWARDS PAYOUTS
------------------------- -------
OTHER ALL
ANNUAL RESTRICTED SECURITIES LTIP OTHER
COMPEN- STOCK UNDERLYING PAYOUTS COMPENSA-
SALARY(1) BONUS(2) SATION(3) AWARDS(4) OPTIONS(5) (6) TION(7)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ---- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. R. Holland.............. 1999 850,000 615,825 126,808 894,160 72,750 536,831 4,322
Chairman & CEO 1998 850,000 603,202 85,942 38,097 70,000 571,954 4,843
1997 805,000 681,040 80,615 85,377 -- 656,860 4,250
G. A. Eisenberg............ 1999 315,000 117,731 48,810 243,698 15,000 124,168 333
President & COO 1998 293,750 144,749 28,981 30,652 58,000 100,209 302
1997 257,000 100,230 28,285 64,764 20,000 95,468 24,687
B. B. Burns, Jr............ 1999 292,000 159,505 36,059 177,699 15,000 103,148 631
Executive VP 1998 292,000 162,346 28,295 21,646 7,000 109,267 46,616
1997 286,000 130,425 25,422 69,191 22,500 88,745 99,780
J. M. Gibbs................ 1999 275,000 118,594 29,758 215,062 15,000 76,812 --
Senior VP and 1998 227,333 109,709 18,998 70,088 35,000 94,887 --
Segment President 1997 209,000 24,210 6,927 6,948 9,000 103,800 --
L. Wahl.................... 1999 348,600 325,419 8,328 -- 31,875 145,161 --
Senior VP and 1998 303,477 210,234 7,661 -- 47,500 151,182 --
Segment President 1997 289,353 162,761 7,510 65,104 12,000 283,067 --
</TABLE>
- ----------
(1) Includes amounts voluntarily deferred pursuant to United Dominion
Industries, Inc.'s Compass Plan (the "401(k) Plan"), a qualified defined
contribution plan designed to satisfy the provisions of Section 401(k) of
the United States Internal Revenue Code, and United Dominion Industries,
Inc.'s Excess Deferred Compensation Plan (the "Excess Plan"), a
non-qualified deferred compensation plan.
(2) Bonuses were approved by the Compensation & Human Resources Committee (the
"Comp Committee") and were paid in February of the following year. See
"Report of the Compensation & Human Resources Committee on Executive
Compensation." Amounts shown include amounts deferred pursuant to the
401(k) Plan and the Excess Plan. Amounts shown include only the cash
portion of annual bonuses; Common Shares received pursuant to elections to
receive shares in lieu of cash for a portion of the annual bonus are
included in the column headed "Restricted Stock Awards." See Note (4)
below.
(3) Includes personal use of company airplane, gross-up of taxable use of
company airplane, insurance on personal automobiles, automobile allowance,
membership dues, executive tax service, health care benefits and credits,
parking and matching contributions by the Company under the 401(k) Plan.
(4) Includes the value of Common Shares issued in lieu of cash compensation
under the Annual Management Incentive Plan of the Company (the "Annual
Plan") and the Long-Term Management Performance Incentive Plan of the
Company (the "Long-Term Plan"). These plans allow participants to elect to
receive shares in lieu of a portion of cash bonuses, subject to the
decision of the Comp Committee as to award multiple and eligible bonus
percentage. The Comp Committee determines the maximum percentage of a
participant's award that will be eligible for payment in Common Shares and
an award multiple not to exceed 1.25. Participants in each of these plans
may elect to receive Common Shares instead of cash, subject to the
limitations established in the respective plans and by the Comp Committee.
For awards each year, the Comp Committee approved an award multiple of 1.20
and allowed participants to elect to receive up to 35% of their incentive
awards in Common Shares. Amounts shown in the "Bonus" column under "Annual
Compensation" reflect the actual cash bonus received. Amounts shown in the
"Restricted Stock Awards" column reflect the value of shares issued in lieu
22
<PAGE> 23
of the cash bonus award otherwise payable under the Annual Plan (taking
into account the award multiple). Amounts shown in the column "LTIP
Payouts" include the cash award and the value of any Common Shares issued
under the Long-Term Plan (taking into account the award multiple). Also
includes for Mr. Holland, Mr. Eisenberg, Mr. Burns and Mr. Gibbs, the value
of restricted share awards received in February 1999.
(5) Stock options with respect to the indicated number of Common Shares were
granted by the Comp Committee in February of each year indicated, except
1998, when options were awarded in February and October, and 1999 for Mr.
Wahl, when options were also awarded in April.
(6) Payments were approved by the Comp Committee and made pursuant to the
Company's Long-Term Plan in February of each year based on performance
units granted for the three-year period ended December 31 of the prior
year. Amounts stated include the value of shares received pursuant to the
plan as a result of elections by participants to receive shares in lieu of
a portion of the cash bonus due.
(7) Includes the following: for Mr. Burns (1997 and 1998), relocation
reimbursements; for Mr. Eisenberg (1997), membership fees and related tax
gross-up. Also includes imputed income on split dollar life insurance
policies. Does not include amounts realized upon the exercise of stock
options (see "Aggregated Option Exercises During the Most Recently
Completed Financial Year and Financial Year-End Option Values").
STOCK OPTIONS
The following table shows the stock options granted to the Named Executive
Officers in February and April 1999. These non-qualified stock options become
exercisable in thirds, one-third one year after date of grant, another one-third
two years after date of grant, and the final one-third three years after date of
grant. Options held by persons (including Mr. Holland) who are eligible to
retire under United Dominion Industries, Inc.'s Revised Retirement Plan (age 55
plus not less than five years' service), become exercisable six months after
grant.
OPTION GRANTS IN MOST RECENT FINANCIAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------------------- MARKET VALUE ANNUAL RATES OF
% OF TOTAL OF SECURITIES SHARE PRICE
NUMBER OF OPTIONS UNDERLYING APPRECIATION FOR
UNDERLYING GRANTED TO OPTIONS OPTION TERM
OPTIONS EMPLOYEES EXERCISE ON THE -------------------------
GRANTED IN FINANCIAL PRICE(1) DATE OF GRANT EXPIRATION 5% 10%
NAME (#) YEAR ($CDN/SH) ($CDN) DATE(2) ($CDN) ($CDN)
- ---- --- ---- --------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
W. R. Holland........ 72,750 12.3% 29.80 2,167,950 02/11/09 1,363,000 3,455,000
G. A. Eisenberg...... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
B. B. Burns, Jr. .... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
J. M. Gibbs.......... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
L. Wahl.............. 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
L. Wahl.............. 16,875 2.9% 32.775 553,078 04/26/09 348,000 881,000
</TABLE>
- ----------
(1) The Exercise Price is the fair market value of the Common Shares on the
grant date, defined to be the average of the previous day's high and low
board-lot trading prices on the TSE.
(2) Options expire 10 years after the date of the grant. If an officer retires,
the 10-year period continues.
The following table provides information as to options exercised by the
Named Executive Officers in 1999 and the value of options held by such
executives at year-end.
23
<PAGE> 24
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES AGGREGATED OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE ------------------------------- ---------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE (2) UNEXERCISABLE
- ---- ----------- -------------- -------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. R. Holland........ 48,000 267,008 332,750 100,000 251,644 --
G. A. Eisenberg...... -- -- 103,200 112,000 72,057 --
B. B. Burns, Jr. .... -- -- 106,333 64,667 242,935 --
J. M. Gibbs.......... -- -- 35,333 56,667 4,219 --
L. Wahl.............. -- -- 56,366 82,709 10,224 --
</TABLE>
- ----------
(1) The values represent the difference between the exercise price of the
options and the market price of Common Shares on the date of exercise (with
respect to exercised options) and at year-end (with respect to unexercised
options).
(2) Exercisability was determined as of March 14, 2000.
LONG-TERM INCENTIVE AWARDS
The following table contains information regarding Performance Units
awarded to the Named Executive Officers under the Long-Term Plan during the
financial year ended December 31, 1999. The Long-Term Plan provides long-term
cash incentive to focus corporate executives on achieving longer-term
shareholder value. Shareholders approved the Long-Term Plan on April 27, 1999.
Under the Long-Term Plan, participants receive annual grants of participation
units that are payable at the end of three-year performance cycles. Long-Term
incentive plans are also maintained on behalf of the Company's operating units
for their key employees. Mr. Wahl participates in an operating unit plan; the
other Named Executive Officers participate in the Long-Term Plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FINANCIAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OTHER PERIOD NON-STOCK PRICE-BASED PLANS($)
PERFORMANCE UNTIL MATURATION -------------------------------------------
NAME UNITS OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ----- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
W. R. Holland............. 5,950 1999-2001 301,070 595,000 N/A
G. A. Eisenberg........... 1,260 1999-2001 63,756 126,000 N/A
B. B. Burns, Jr........... 1,168 1999-2001 59,100 116,800 N/A
J. M. Gibbs............... 1,100 1999-2001 55,660 110,000 N/A
L. Wahl................... 1,394 1999-2001 70,536 139,400 N/A
</TABLE>
UNITED DOMINION INDUSTRIES, INC. RETIREMENT PLAN
The executive officers of the Company (other than Mr. Wahl) participate in
the United Dominion Industries, Inc. Revised Retirement Plan (the "United
Dominion Plan"), a qualified defined benefit plan available to all salaried
employees of United Dominion Industries, Inc. The amount payable at age 65 is
0.8% of participant's final average earnings ("FAE"), defined as the annualized
average of the highest consecutive five years of compensation out of the last
ten years of employment, plus 0.6% of the participant's FAE in excess of the
covered compensation (the average of the thirty-five social security wage bases
in effect or projected to be in effect during the thirty-five years prior to the
year during which the participant will reach age 65) multiplied by up to a
maximum of 35 years of service. For each year of service over 35 years, the
retirement benefit is increased by 0.5% of FAE. Compensation covered by the
United Dominion Plan is total cash compensation paid during the plan year,
including bonuses and awards made under the Annual Plan and Long-Term Plan
described above, but excluding directors' fees and non-service related
compensation.
24
<PAGE> 25
The following table shows estimated annual gross benefits payable from the
United Dominion Plan as a single life annuity upon retirement at age 65 in 1999
for employees in the salary classifications and with the years of service
specified. The amount shown for each category is the total benefit payable under
the United Dominion Plan benefit formula without regard to United States
regulations which limit both the maximum benefit that can be paid from a
qualified defined benefit plan and the amount of salary that can be included in
a qualified plan's salary-based benefit formula. The Company pays the full
amount due pursuant to the United Dominion Plan's benefit formula through a
combination of the qualified defined benefit plan and either a non-qualified
pension restoration plan or the Supplemental Plan described below. The
Supplemental Plan provides additional retirement benefits to certain executives.
See "Other Plans and Agreements."
<TABLE>
<CAPTION>
AVERAGE CONTINUOUS BEST YEARS OF SERVICE
FIVE YEARS OF ----------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 100,000.......... $ 18,030 $ 24,040 $ 30,050 $ 36,060 $ 42,070
200,000.......... 39,030 52,040 65,050 78,060 91,070
300,000.......... 60,030 80,040 100,050 120,060 140,070
400,000.......... 81,030 108,040 135,050 162,060 189,070
500,000.......... 102,030 136,040 170,050 204,060 238,070
600,000.......... 123,030 164,040 205,050 246,060 287,070
800,000.......... 165,030 220,040 275,050 330,060 385,070
1,000,000.......... 207,030 276,040 345,050 414,060 483,070
1,200,000.......... 249,030 332,040 415,050 498,060 581,070
1,400,000.......... 291,030 388,040 485,050 582,060 679,070
1,600,000.......... 333,030 444,040 555,050 666,060 777,070
1,800,000.......... 375,030 500,040 625,050 750,060 875,070
2,000,000.......... 417,030 556,040 695,050 834,060 973,070
</TABLE>
The Named Executive Officers (other than Mr. Wahl) have the credited years
of service indicated beside each of their names: Mr. Holland -- 27, Mr. Burns --
10, Mr. Eisenberg -- 10, Mr. Gibbs -- 22.
Mr. Wahl does not participate in the United Dominion Plan; instead, he is
covered by a German pension plan for BOMAG management. The plan is based on his
salary, taking into account social security pension payments and years of
service. The maximum annual amount payable under the BOMAG management plan is
approximately 55% of Mr. Wahl's final salary.
OTHER PLANS AND AGREEMENTS
The Company provides a Supplemental Executive Retirement Plan (the
"Supplemental Plan") to 12 of its key executives, including the Named Executive
Officers except Mr. Wahl. Under the Supplemental Plan, a fully vested
participant is eligible to receive a target annual benefit at age 62 equal to
60% of Final Average Earnings, reduced by retirement income from the United
Dominion Plan described in the preceding section and Social Security. "Final
Average Earnings" is defined for purposes of the Supplemental Plan as the
average of the highest three years of "Eligible Income" out of the ten years
immediately preceding retirement; Eligible Income includes salary and all
incentive earnings under the Company's established incentive plans. To become
fully vested under the Supplemental Plan a participant must accumulate, or be
granted by the Comp Committee (as in the case of Messrs. Eisenberg and Burns),
fifteen years of service. For purposes of the Supplemental Plan, Mr. Gibbs has
been granted twelve years credit, five for his period of service with United
Dominion and seven for his service with United Dominion's Serco business prior
to its acquisition by United Dominion. Benefit accruals begin after five full
years of service, with one-tenth of the target benefit vesting each year
thereafter. All of the benefits under the Supplemental Plan are paid in a 50%
joint and survivorship annuity for the life of the participant. A participant
may elect to retire at any time after age 55 and receive a benefit, actuarially
reduced, for life.
25
<PAGE> 26
Pursuant to an agreement between Mr. Holland and the Company dated April
28, 1999, Mr. Holland will be entitled to receive his Supplemental Plan benefit
in a lump sum upon his retirement or other separation from the Company. Also
pursuant to the agreement, the discount computation rate that will be used to
compute the lump sum benefit has been fixed at 5.25% (the 1999 GATT cash lump
sum discount rate used in the United Dominion Plan).
United Dominion Industries, Inc. has established a "grantor trust" (the
"Trust") for the purpose of providing certain executives (including all of the
Named Executive Officers other than Mr. Wahl) with greater assurances that the
supplemental pension benefits to which such executives may be entitled under the
Supplemental Plan and the change in control agreements described under the
heading "Change in Control Agreements" would be satisfied in the event of a
"change in control" as defined in the Trust (collectively, the "Covered
Benefits"). The Trust is intended to constitute an "unfunded" arrangement.
However, United Dominion Industries, Inc. has deposited into the Trust a letter
of credit in the face amount of approximately $32.8 million, which is equal to
120% of the estimated value of the Covered Benefits that would be payable
assuming a change in control had occurred on January 1, 1999 and all of the
covered executives had terminated employment on that date. The Covered Benefits
are redetermined annually as of January 1 of each year. To the extent the
aggregate value of the Covered Benefits increases, additional contributions (in
the form of letters of credit or otherwise) are required to be made to maintain
the assets of the Trust at a level equal to 120% of the estimated benefit
values. Upon the occurrence of a change in control, United Dominion Industries,
Inc. is required to make additional contributions to the Trust in cash so that
the aggregate amount of the assets held by the Trust equals 120% of the Covered
Benefits determined as of the date such change occurs. The letter(s) of credit
would be drawn upon to the extent any supplemental pension benefits which become
payable under the Supplemental Plan or the change in control agreements are not
otherwise paid by United Dominion Industries, Inc. The assets of the Trust are
subject to the claims of the creditors of United Dominion Industries, Inc. in
the event United Dominion Industries, Inc. becomes "Insolvent" as defined in the
Trust.
The Company also provides several other supplemental executive benefit
plans to the Named Executive Officers, including split-dollar life insurance and
long-term disability insurance. The life insurance plan provides participants a
death benefit equal to one hundred percent of their current salary and prior
year's incentive bonus. The supplemental long-term disability plan provides a
make-up benefit to ensure that participants receive a disability benefit at
least equal to 60% of eligible total compensation when combined with the
Company's group long-term disability benefit plan.
CHANGE IN CONTROL AGREEMENTS
United Dominion Industries, Inc. has agreements with fifteen of its key
employees, including each of the Named Executive Officers except Mr. Wahl,
providing for protection in the event of a change in control of the Company. In
general, the agreements provide for (a) a lump-sum severance payment by United
Dominion Industries, Inc. to the employee equal to the amount of base salary
that the employee would have earned had he continued to be employed until the
earlier of (i) the end of the thirty-six month period following the date of
termination or (ii) the attainment of normal retirement age, assuming the
employee's salary rate would be equal to his highest monthly rate during the
thirty-six month period preceding termination, (b) amounts in lieu of continued
participation in incentive compensation and stock option plans based on
assumptions concerning the Company's results for the thirty-six month period
following termination and the employee's continued participation for the period,
(c) insurance and other benefits for the thirty-six month period after
termination (to the extent the employee does not receive comparable benefits
during the period), and (d) supplemental pension benefits, if the Company
experiences a change in control and the employee is terminated for reasons other
than death, disability, retirement or cause, or terminates his employment for
reasons relating
26
<PAGE> 27
to a change in, among other things, his compensation, duties, benefits or
location. These agreements are designed to provide the benefits the employee
would have received had he continued working for United Dominion Industries,
Inc. for three additional years.
The amount to be paid is not subject to reduction for compensation earned
from subsequent employment or from subsequent pension benefits. The agreements
provide for a "gross-up" of the awards to reimburse participants for any excise
tax payable on account of any "excess parachute payment" under United States
Internal Revenue Code Section 280(G).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN PERSONS
The directors and officers of the Company believe that, as of March 14,
2000, the following persons beneficially owned, directly or indirectly, or
exercised control or direction over, Common Shares carrying more than 5% of the
votes attached to the Common Shares:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF COMMON SHARES OUTSTANDING
- ------------------------------------ ----------------------- -----------
<S> <C> <C>
Ontario Teachers' Pension Plan Board (1)............. 4,679,031 12.0%
5650 Yonge Street, 5th Floor
Toronto, Ontario M2M 4H5
TAL Global Asset Management Inc. (2)................. 3,475,016 8.9%
1000 de la Gauchetiere West, Suite 3100
Montreal, Quebec H3B 4W5
Mackenzie Financial Corporation (3).................. 3,067,400 7.8%
150 Bloor Street West, Suite M111
Toronto, Ontario M5S 3B5
The Prudential Insurance Company of America (4)...... 2,058,500 5.3%
751 Broad Street
Newark, New Jersey 07102-3777
</TABLE>
- ------
(1) Ontario Teachers' Pension Plan Board ("Ontario Teachers") provides pension
services to active and retired teachers and is the largest single invested
pension plan in Canada. As of March 14, 2000, according to a Schedule 13D/A
filed with the Company and the United States Securities and Exchange
Commission on March 15, 2000, Ontario Teachers had sole dispositive and
voting power in respect of the number of Common Shares shown.
(2) On February 12, 2000, TAL Global Asset Management Inc. ("TAL"), filed a
report on Schedule 13G indicating that, in its capacity as a registered
investment advisor and in the ordinary course of its business, it has sole
dispositive power over the referenced number of Common Shares and sole
voting power over 181,497 Common Shares. TAL manages common stock and bond
portfolios for mutual funds and institutional and private investors.
According to T.A.L., none of the several accounts that it manages has an
interest in more than 5% of the Common Shares.
(3) On February 14, 2000, Mackenzie Financial Corporation filed a report on
Schedule 13G in its capacity as an investment advisor indicating that
several accounts it manages have the right to receive dividends and
proceeds from the sale of the referenced number of Common Shares.
Mackenzie, a registered investment adviser, indicated that none of these
accounts individually owns more than 5% of the Common Shares.
(4) The Prudential Insurance Company of America informed the Company in March
2000 that, at the end of February 2000, it had direct or indirect voting
and/or investment discretion over the referenced number of Common Shares,
which are held for the benefit of its clients. Prudential is a Newark, New
Jersey based insurance company and a registered investment adviser.
The directors and officers of the Company are not aware of any other person who
beneficially owns, directly or indirectly, or exercises control or direction
over, 5% or more of the Common Shares.
27
<PAGE> 28
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table presents the number of equity securities of the Company
beneficially owned, directly or indirectly, or controlled or directed by, its
directors, nominees and executive officers (with sole voting and investment
power, except as otherwise indicated) as of March 14, 2000. Beneficial ownership
has been determined in accordance with subsection 2(1) of the CBCA and Rule
13d-3 under the United States Securities Exchange Act of 1934, as amended.
<TABLE>
<CAPTION>
TOTAL SHARES
NUMBER OF OPTIONS PRESENTLY BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(A) EXERCISABLE OWNED CLASS
- ------------------------ --------- ----------- ----- -----
<S> <C> <C> <C> <C>
Donald N. Boyce....................... 1,000 7,000 8,000 (b)
Hermann Buerger....................... 2,000 7,000 9,000 (b)
James E. Courtney..................... 1,535 13,000 14,535 (b)
Peter A. Crossgrove................... 5,000 12,000 17,000 (b)
R. Stuart Dickson..................... 1,790 14,000 15,790 (b)
Jere A. Drummond...................... 0 0 0 (b)
James A. Grant........................ 1,000 14,000 15,000 (b)
William R. Holland.................... 253,041(c)(d) 332,750 585,791 1.5%
Russell C. King, Jr................... 5,000 9,000 14,000 (b)
John T. Mayberry...................... 1,000 0 1,000 (b)
Harry A. Nurkin....................... 1,000 0 1,000 (b)
Dalton D. Ruffin...................... 6,757 14,000 20,757 (b)
William W. Stinson..................... 15,042 19,000 34,042 (b)
George S. Taylor....................... 11,000 10,000 21,000 (b)
All directors and executive
officers as a group
(28 persons)......................... 424,901(c)(d) 993,422 1,418,323 3.5%
</TABLE>
- ----------
(a) Shares listed are Common Shares actually owned beneficially, not including
presently exercisable options.
(b) Less than 1% of the outstanding Common Shares.
(c) Includes, for Mr. Holland, 88,626 restricted Common Shares, and for all
directors and executive officers as a group, 154,691 restricted Common
Shares.
(d) Does not include Common Shares held in United Dominion Industries, Inc.'s
Compass Plan, a qualified defined contribution plan designed to satisfy the
provisions of Section 401(k) of the United States Internal Revenue Code,
which permits investment of employee accounts in a pooled fund invested
principally in Common Shares and maintained for the plan by its plan
administrator.
The following table shows the fees payable to directors of the Company.
Directors who also serve as executive officers of the Company are not separately
compensated for serving as directors. Directors are also paid their
out-of-pocket expenses for attending each meeting of the Board of Directors of
the Company and its committees.
SCHEDULE OF BOARD AND COMMITTEE FEES
Board of Directors
Annual Retainer................................. $30,000
Fee per Meeting................................. 1,200
Executive Committee
Annual Retainer................................. 4,500
Compensation & Human Resources Committee
Annual Retainer................................. 4,000
Fee per Meeting................................. 1,200
Audit & Risk Management Committee
Annual Retainer................................. 4,000
Fee per Meeting................................. 1,200
Nominating & Corporate Governance Committee
Annual Retainer................................. 4,000
Fee per Meeting................................. 1,200
In the most recently completed financial year, the Company paid fees in the
aggregate amount of U.S. $642,775 to thirteen directors. In 1999, ten directors
were each granted options to purchase 2,000 Common Shares pursuant to the
Company's non-qualified Stock Option and Restricted Stock Plan.
28
<PAGE> 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Company and its directors and officers are covered under a directors'
and officers' liability insurance policy maintained by the Company that has
aggregate coverage limits of $100,000,000. This policy includes a per-loss
deductible of $250,000 with regard to claims against the Company, but no
deductible with regard to claims against individual directors and officers. The
premium paid by the Company in 1999 was $273,750 in respect of its officers and
directors as a group. The Company paid all of the premiums.
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
The Honorable James A. Grant, P.C., Q.C., a director of the Company (and a
nominee for re-election), is a partner in the law firm Stikeman Elliott, which
provides certain legal services to the Company.
Mr. William W. Stinson, a director of the Company (and a nominee for
re-election) entered into a management consulting agreement with the Company
effective January 1, 1998. That agreement was renewed for successive additional
one-year terms effective January 1, 1999 and January 1, 2000. Mr. Stinson was
paid $150,000 during 1999 and will be paid $150,000 during 2000 pursuant to the
agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The Index to Consolidated Financial Statements and Schedule on
page 32 of this report is incorporated herein by this reference.
2. Financial Statement Schedules
The portion of the Index to Consolidated Financial Statements and
Schedule under the caption "Consolidated Financial Statement Schedule"
on page 32 of this report is incorporated herein by this reference.
3. Exhibits
The list of the Exhibits contained in the Exhibit Index on pages
36-38 of this report is incorporated herein by this reference. The
Company is a foreign private issuer and accordingly has not included
financial data schedules.
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the fourth quarter of
1999.
29
<PAGE> 30
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, on the 28th day of
March, 1999.
UNITED DOMINION INDUSTRIES LIMITED
By: /s/ W. R. Holland
----------------------------------
W. R. Holland
Chairman of the Board and
Chief Executive Officer
By: /s/ R. L. Magee
----------------------------------
R. L. Magee
Vice President and Secretary
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 capacity and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ W. R. Holland Chairman of the Board, March 28, 2000
- ------------------------------ Chief Executive Officer
W. R. Holland and Director
/s/ G. A. Eisenberg President and March 28, 2000
- ------------------------------ Chief Operating Officer
G. A. Eisenberg
/s/ W. Dries Senior Vice President and March 28, 2000
- ------------------------------ Chief Financial Officer
W. Dries
/s/ C. T. Leinbach III Vice President and March 28, 2000
- ------------------------------ Controller
C. T. Leinbach III
/s/ D. N. Boyce * Director March 28, 2000
- ------------------------------
D. N. Boyce
/s/ H. Buerger * Director March 28, 2000
- ------------------------------
H. Buerger
/s/ J. E. Courtney * Director March 28, 2000
- ------------------------------
J. E. Courtney
/s/ P. A. Crossgrove * Director March 28, 2000
- ------------------------------
P. A. Crossgrove
30
<PAGE> 31
/s/ R. S. Dickson * Director March 28, 2000
- ------------------------------
R. S. Dickson
/s/ J. A. Drummond * Director March 28, 2000
- ------------------------------
J. A. Drummond
/s/ J. A. Grant * Director March 28, 2000
- ------------------------------
J. A. Grant
/s/ R. C. King, Jr. * Director March 28, 2000
- ------------------------------
R. C. King, Jr.
/s/ J. T. Mayberry * Director March 28, 2000
- ------------------------------
J. T. Mayberry
/s/ H. A. Nurkin * Director March 28, 2000
- ------------------------------
H. A. Nurkin
/s/ D. D. Ruffin * Director March 28, 2000
- ------------------------------
D. D. Ruffin
/s/ W. W. Stinson * Director March 28, 2000
- ------------------------------
W. W. Stinson
/s/ G. S. Taylor * Director March 28, 2000
- ------------------------------
G. S. Taylor
- ------------
* By R. L. Magee, Attorney-in-Fact, pursuant to Powers of Attorney filed as
Exhibits hereto.
31
<PAGE> 32
United Dominion Industries Limited and Consolidated Subsidiaries
Index to Consolidated Financial Statements and Schedule
Page
----
Consolidated Financial Statements
Consolidated Statements of Financial Position as of
December 31, 1999 and 1998......................................... *
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997............................. *
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1999, 1998 and 1997................... *
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997....................... *
Notes to Consolidated Financial Statements........................... *
Auditors' Report..................................................... *
Auditors' Report..................................................... 33
Consent of Chartered Accountants..................................... 34
Consolidated Financial Statement Schedule for the
years ended December 31, 1999, 1998 and 1997
Schedule II - Allowance for Doubtful Accounts........................ 35
Schedules not included have been omitted because the required information
is not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the Consolidated Financial
Statements or the Notes thereto.
* Incorporated herein by reference to pages 32-45 of the Company's 1999 Annual
Report to Shareholders.
32
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
The Shareholders
United Dominion Industries Limited:
Under date of January 28, 2000, we reported on the consolidated statements of
financial position of United Dominion Industries Limited as at December 31, 1999
and 1998, and the related consolidated statements of income, cash flows and
changes in shareholders' equity for each of the years in the three-year period
ended December 31, 1999, as contained in the 1999 annual report to shareholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1999. In connection
with our audits of the aforementioned consolidated financial statements, we have
audited the related financial statement schedule in the accompanying Index to
Consolidated Financial Statements and Schedule as of and for the years ended
December 31, 1999, 1998 and 1997. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Chartered Accountants
Toronto, Canada
January 28, 2000
33
<PAGE> 34
INDEPENDENT AUDITORS' CONSENT
The Shareholders
United Dominion Industries Limited:
We consent to incorporation by reference in Registration Statements Nos.
33-46701, 2-92247, 33-65044, 33-97696, 333-1824 and 333-8230 of United Dominion
Industries Limited on Forms S-8 and Registration Statement No. 333-94847 of
United Dominion Industries Limited, United Dominion Holdings, Inc. and United
Dominion Industries, Inc. on Form F-3 of our reports dated January 28, 2000,
relating to the consolidated statements of financial position of United Dominion
Industries Limited as at December 31, 1999 and 1998 and the related consolidated
statements of income, cash flows and changes in shareholders' equity and the
related financial statement schedule for each of the years in the three-year
period ended December 31, 1999, which reports appear in or are incorporated by
reference in the December 31, 1999 annual report on Form 10-K of United Dominion
Industries Limited.
KPMG LLP
Chartered Accountants
Toronto, Canada
March 29, 2000
34
<PAGE> 35
UNITED DOMINION INDUSTRIES LIMITED
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Balance, Additions Balance,
beginning charged to Write-off of end of
Description of year income receivables Other (1) year
- ----------- --------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
1999:
Reserve deducted from assets:
Allowance for doubtful
accounts.................. $10,725 $ 2,306 $ (2,450) $ (935) $ 9,646
======= ======= ======== ====== =======
1998:
Reserve deducted from assets:
Allowance for doubtful
accounts.................. $10,114 $ 1,991 $ (1,358) $ 22 $10,725
======= ======= ======== ====== =======
1997:
Reserve deducted from assets:
Allowance for doubtful
accounts.................. $ 9,919 $ 4,104 $ (3,156) $ (753) $10,114
======= ======= ======== ====== =======
</TABLE>
(1) In 1997, relates primarily to the sale of Varco-Pruden, Windsor Door and
Centria partially offset by the acquisition of Core Industries.
35
<PAGE> 36
EXHIBIT INDEX**
Exhibit
Number
-------
3.1 o The Company's Charter as amended (Exhibit 3.1 to
Registrant's Form 10-K filed March 29, 1991)
3.2 o The Company's Bylaws as amended (Exhibit 3.2 to Registrant's
Form 10-K filed March 29, 1995)
4.1 o Description of Registrant's Securities (See Registrant's
Form 8-K filed May 9, 1996)
*10.1 o Amended and Restated United Dominion Industries, Inc.
Corporate Annual Incentive Compensation Plan, as approved by
shareholders on April 27, 1999
*10.1(a) o Amended and Restated United Dominion Industries, Inc.
Operating Unit Annual Incentive Compensation Plan
10.2 o $450,000,000 Second Amendment and Restatement of the Credit
Agreement and Guaranty dated as of July 28, 1997 among
United Dominion Industries Limited, United Dominion
Industries, Inc. and United Dominion Holdings, Inc., as
obligors, Royal Bank of Canada, as agent bank, and the bank
group named therein (Exhibit 10.2 to Registrant's Form 10-K
filed March 26, 1998)
10.3 o United Dominion Industries, Inc. Compass Plan (Exhibit 4 to
Registrant's Form S-8 filed October 3, 1995)
*10.4 o United Dominion Industries, Inc. Supplemental Executive
Retirement Plan (as amended and restated effective
January 1, 1999)
*10.5 o Form of United Dominion 1999 Change of Control Agreement
with certain executive officers dated on or about
March 1, 1999
*10.6 o United Dominion Industries Limited 1999 Stock Option and
Restricted Stock Plan, as approved by shareholders on
April 27, 1999
*10.7 o Amended and Restated United Dominion Industries, Inc.
Long-Term Performance Incentive Plan as approved by
shareholders on April 27, 1999
*10.7(a) o Amended and Restated United Dominion Industries, Inc.
Operating Unit Long-Term Performance Incentive Plan
10.8 o United Dominion Industries Restoration Plan for the
Salaried Defined Benefit Retirement Plans of United
Dominion Industries, Inc. (Exhibit 10.8 to Registrant's
Form 10-K filed March 29, 1996)
10.9 o Form of Executive Life Insurance Agreement for executive
officers of United Dominion Industries, Inc. (Exhibit 10.9
to Registrant's Form 10-K filed March 29, 1996)
10.10 o Statements of Policy Cost and Benefit Information for split
dollar life insurance policies on the life of W. R. Holland
(Exhibit 10.10 to Registrant's Form 10-K filed
March 29, 1996)
36
<PAGE> 37
10.11 o Note Agreement dated September 21, 1992 between the Company,
as Issuer, United Dominion Industries, Inc., as Guarantor,
and the several United States insurance companies party
thereto, in connection with the Company's issuance of
U.S. $75 million 8.25% Senior Notes due 2002 (Exhibit 10.9
to Registrant's Form 10-K filed March 27, 1993)
10.12 o Note Agreement dated December 21, 1993 between United
Dominion Industries, Inc., as Issuer, the Registrant, as
Guarantor, and the several United States insurance companies
party thereto, in connection with the issuance by United
Dominion Industries, Inc. of U.S. $117 million 6.80% Senior
Notes due 2002 (Exhibit 10.15 to Registrant's Form 10-K
filed March 28, 1994)
10.13 o Note Purchase and Private Shelf Facility dated June 25, 1995
between United Dominion Industries, Inc., as Issuer, the
Registrant, as Guarantor, and the Prudential Insurance
Company of America in connection with the issuance by United
Dominion Industries, Inc. of U.S. $50 million 7.67% Senior
Series A Notes due 2007 and the possible issuance of up to
U.S. $50 million of additional Senior Notes (Exhibit 10.13
to Registrant's Form 10-K filed March 29, 1996)
10.14 o Amended and Restated Receivables Sale Agreement dated as of
January 31, 1995 among United Dominion Industries, Inc., as
Seller and Collection Agent, Asset Securitization
Cooperative Corporation, as Purchaser, and Canadian Imperial
Bank of Commerce, as Servicing Agent, in connection with
United Dominion Industries, Inc.'s $115 million facility for
the on-going sale and collection of trade receivables of
certain of its business units (Exhibit 10.10 to Registrant's
Form 10-K filed March 29, 1995)
10.16 o Summary of Terms relating to the consulting arrangements
between William W. Stinson and the Registrant (Exhibit 10.16
to Registrant's Form 10-K filed March 26, 1998)
10.17 o Letter Agreement dated February 16, 1996 between William R.
Holland and the Registrant granting Mr. Holland restricted
common shares (Exhibit 10.17 to Registrant's Form 10-K
filed March 26, 1998)
*10.18 o Letter Agreement dated April 28, 1999 between William R.
Holland and the Registrant relating to the application to
Mr. Holland of the Registrant's Supplemental Executive
Retirement Plan
*10.18 (a) o Letter Agreement dated November 30, 1999 between William R.
Holland and the Registrant relating to the application to
Mr. Holland of the Registrant's Supplemental Executive
Retirement Plan
10.19 o Note Purchase Agreement dated as of May 1, 1998 among
United Dominion Industries, Inc., as Issuer, United
Dominion Holdings, Inc. and the Registrant, as Guarantors,
and the several United States insurance companies party
thereto, in connection with the Company's issuance of
U.S. $110 million 6.64% Senior Notes, Series 1998-A due
2008 (Exhibit 10.19 to Registrant's Form 10-K filed
March 26, 1999)
*13 o Portions of the Company's Annual Report to Shareholders for
the year ended December 31, 1999 that are expressly
incorporated by reference into this Form 10-K
*21 o Subsidiaries of United Dominion Industries Limited
*24(a) o Power of Attorney of D. N. Boyce dated February 11, 2000
*24(b) o Power of Attorney of H. Buerger dated February 11, 2000
37
<PAGE> 38
*24(c) o Power of Attorney of J. E. Courtney dated February 11, 2000
*24(d) o Power of Attorney of P. A. Crossgrove dated February 11,
2000
*24(e) o Power of Attorney of R. S. Dickson dated February 11, 2000
*24(f) o Power of Attorney of J. A. Drummond dated February 11, 2000
*24(g) o Power of Attorney of J. A. Grant dated February 11, 2000
*24(h) o Power of Attorney of R. C. King, Jr. dated February 11, 2000
*24(i) o Power of Attorney of J. T. Mayberry dated February 11, 2000
*24(j) o Power of Attorney of H. A. Nurkin dated February 11, 2000
*24(k) o Power of Attorney of D. D. Ruffin dated February 11, 2000
*24(l) o Power of Attorney of W. W. Stinson dated February 11, 2000
*24(m) o Power of Attorney of G. S. Taylor dated February 11, 2000
*99 o Management Proxy Circular/Proxy Statement dated March 22,
2000 in connection with the Annual and Special Meeting of
Shareholders of United Dominion Industries Limited to be
held on April 25, 2000
* Included herewith. The exhibits not so included are incorporated herein by
reference to the exhibits to the prior filings indicated in parentheses.
Each included exhibit is to be deemed "filed" herewith except Exhibit 99,
the Company's Management Proxy Circular/Proxy Statement dated March 22,
2000, which is furnished herewith for information purposes and not deemed
"filed".
** The Company is a foreign private issuer and accordingly has not included
financial data schedules.
38
<PAGE> 39
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
o Amended and Restated United Dominion Industries, Inc. Corporate Annual
Incentive Compensation Plan, as approved by shareholders on April 27, 1999
(Exhibit 10.1 to this Form 10-K)
o Amended and Restated United Dominion Industries, Inc. Operating Unit Annual
Incentive Compensation Plan (Exhibit 10.1(a) to this Form 10-K)
o United Dominion Industries, Inc. Compass Plan effective January 1, 1995
(Exhibit 4 to Registrant's Form S-8 filed October 3, 1995)
o United Dominion Industries, Inc. Supplemental Executive Retirement Plan as
amended and restated effective January 1, 1999 (Exhibit 10.4 to this Form
10-K)
o Form of United Dominion 1999 Change in Control Agreement effective March 1,
1999 (Exhibit 10.5 to this Form 10-K)
o United Dominion Industries Limited Stock Option and Restricted Stock Plan
(Revised and Restated), as approved by shareholders on April 27, 1999
(Exhibit 10.6 to this Form 10-K)
o Amended and Restated United Dominion Industries, Inc. Long-Term Performance
Incentive Plan, as approved by shareholders on April 27, 1999 (Exhibit 10.7
to this Form 10-K)
o Amended and Restated United Dominion Industries, Inc. Operating Unit
Long-Term Performance Incentive Plan (Exhibit 10.7(a) to this Form 10-K)
o United Dominion Industries Restoration Plan for the Salaried Defined
Benefit Retirement Plans of United Dominion Industries, Inc. effective
January 1, 1995 (Exhibit 10.8 to Registrant's Form 10-K filed March 29,
1996)
o Form of Executive Life Insurance Agreement for executive officers of United
Dominion Industries, Inc. (Exhibit 10.9 to Registrant's Form 10-K filed
March 29, 1996)
o Statements of Policy Cost and Benefit Information for split dollar life
insurance policies on the life of W. R. Holland (Exhibit 10.10 to
Registrant's Form 10-K filed March 29, 1996)
o Letter Agreement dated February 16, 1996 between William R. Holland and the
Registrant (Exhibit 10.17 to Registrant's Form 10-K filed March 26, 1998)
o Letter Agreement dated April 28, 1999 between William R. Holland and the
Registrant relating to the application to Mr. Holland of the Registrant's
Supplemental Executive Retirement Plan (Exhibit 10.18 to this Form 10-K)
o Letter Agreement dated November 30, 1999 between William R. Holland and the
Registrant relating to the application to Mr. Holland of the Registrant's
Supplemental Executive Retirement Plan (Exhibit 10.18(a) to this Form 10-K)
39
<PAGE> 1
EXHIBIT 10.1
ANNUAL MANAGEMENT INCENTIVE
COMPENSATION (MIC) PLAN FOR
CORPORATE OFFICERS
1. PURPOSE
The purpose of the United Dominion Industries, Inc. (the "Company") Annual
Management Incentive Compensation Plan for Corporate Officers (the "Plan") is to
provide an opportunity for corporate officers to earn incentive compensation
based upon the performance of the corporation, including its divisions and
subsidiaries. In particular, this Plan is designed to (a) pay Participants
incentive compensation for meeting or exceeding various performance targets for
the fiscal year; (b) link corporate management with the Company's strategic
performance objectives; and (c) maintain competitiveness with general industry
norms in executive compensation.
2. DEFINITIONS
The following words shall have the following meanings unless the context
clearly states otherwise:
Board of Directors means the Company's Board of Directors.
Target Award means the amount of annual incentive to be paid to a
Participant under the Plan in the event the corporation achieves 100% of its
Plan targets for the fiscal year.
CEO means the Chief Executive Officer of the Company.
CHRC means the Compensation and Human Resources Committee of the UDIL Board
of Directors, which also handles compensation and human resources matters for
the Company.
Company means United Dominion Industries, Inc., a Delaware corporation.
Annual Incentive means the incentive amount payable to a Participant under
the Plan.
Fiscal Year means the fiscal year of the Company, which currently is the
twelve-month period ending December 31.
Participant means an employee of the Company eligible to receive an annual
incentive under this Plan.
Plan means the United Dominion Industries, Inc. Annual Management Incentive
Compensation Plan for Corporate Officers.
Performance Targets means the performance targets assigned to the corporate
unit.
UDIL means United Dominion Industries Limited, a Canadian Corporation,
which is the ultimate parent company of the Company. The Company provides
management services for UDIL pursuant to a management agreement.
3. ELIGIBILITY
Participation in the Plan shall be limited to corporate officers or other
key corporate managers appointed by the CEO, with the approval of the CHRC.
Additions or deletions to the Plan during a Fiscal Year shall be made only in
the event of an unusual circumstance, such as a promotion or new hire.
4. DETERMINATION OF MAXIMUM AMOUNT PAYABLE
The CHRC, after consultation with the CEO, may determine a maximum
aggregate payment under the Plan to be made by the corporate unit for each
Fiscal Year. The final determination of the maximum aggregate payment under the
Plan for each Fiscal Year shall be made prior to the commencement of such Fiscal
Year. In no event may any award payable pursuant to the Plan exceed 2.5 times
the Participant's eligible base salary, or $2.5 million, whichever is the lesser
amount.
1
<PAGE> 2
5. DETERMINATION OF TARGET AWARDS AND PERFORMANCE TARGETS
(a) Target Awards -- Each Participant shall be assigned a Target Award
consistent with guidelines published by the Company's corporate Human Resources
Department. All assignments are subject to the final approval of the CEO and
CHRC. Generally, the Target Award categories will be designated as follows, with
the percent listed below Target being the percent of Participant's base salary:
<TABLE>
<CAPTION>
CATEGORY TARGET
- -------- ------
<S> <C>
AA.......................................................... 70%
A........................................................... 50%
BB.......................................................... 45%
B........................................................... 40%
CC.......................................................... 35%
C........................................................... 30%
DD.......................................................... 25%
D........................................................... 20%
EE.......................................................... 15%
E........................................................... 10%
</TABLE>
(b) Performance Targets -- Performance Targets shall be assigned for the
Fiscal Year, against which the corporation's performance will be measured. The
CEO will determine the Performance Targets, subject to the approval of the CHRC.
Until revised pursuant to the Plan, the Performance Targets will be based upon
predetermined Sales Growth and Return on Equity (ROE) measures. The category
definitions are:
Sales Growth is UDIL's Net Sales for the relevant Plan year compared to
UDIL's Net Sales for the prior Plan year, expressed as a percentage. The
percentage is derived from the following formula:
Net Sales Current Year - Net Sales Prior Year
---------------------------------------------------
Net Sales Prior Year
ROE is UDIL's Return on Equity. The percentage is derived from the
following formula:
Net Income
-----------------------
Ave. Common Equity
Net Income is UDIL's Net Income as reported in UDIL's Annual Report and
Average Common Equity is UDIL's monthly Average Common Equity during the Plan
Year. The accounting definitions of Net Income and Average Common Equity shall
be as determined by the Company's corporate Accounting Department from
time-to-time.
As soon as practicable after the beginning of each Fiscal Year, each
Participant shall be notified of the Performance Targets by the Company's
corporate Human Resources Department.
6. DETERMINATION OF ANNUAL INCENTIVE
The incentive is derived by comparing the actual full-year Sales Growth and
ROE accomplishment to the Plan Matrix. The Matrix has Sales Growth values on one
axis and ROE values on a second axis. The actual award, if any, is determined by
identifying the intersecting cell value in the Sales Growth row and ROE column
that most nearly matches UDIL's actual performance in both categories. When an
actual performance value is equidistant between two cell values in the Matrix,
rounding up derives the applicable cell value. This "Point of Intersection" of
the applicable row and column contains an award multiplier. To determine the
amount of the bonus earned, the Participant multiplies his or her target bonus
2
<PAGE> 3
by the value (expressed as a percentage) in the Point of Intersection. Below is
a sample of the Plan matrix:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12% 100 110 120 140 160
SALES 11% 90 100 110 120 130
GROWTH 10% 80 90 100 110 120
9% 65 75 85 95 105
8% 55 65 75 85 95
9.6% 10.8% 12.0% 13.2% 14.4%
ROE
</TABLE>
The CEO, subject to approval of the CHRC, or the CHRC, may make negative
adjustments to the calculated awards, but may not make any positive adjustments
pursuant to this Plan.
As soon as practicable after the end of the Fiscal Year, the Company's
corporate Human Resources Department shall ensure that each Participant is
notified of the amount of his Annual Incentive.
7. TIME FOR PAYMENTS
Annual Incentives normally will be paid by the end of the second month
following the Fiscal Year. Notwithstanding the normal payment date, each
Participant shall have the right to elect to defer all or a part of his payment
under the Award pursuant to the Company's Excess Deferral Plan.
8. FORM OF PAYMENTS
(a) At the end of the Company's fiscal year, after the Company's financial
results are final and the CHRC has approved such results, any awards earned
under the Plan shall be paid in cash to Participants. However, in the discretion
of the CHRC, Participants may be allowed to elect to have all or part of such
award paid in common shares of UDIL ("Common Shares") at "Fair Market Value."
The "Fair Market Value" of a Common Share is the average of the daily high and
low board lot trading prices of a Common Share on The Toronto Stock Exchange on
the most recent trading day next preceding the date an award is approved.
(b) In an effort to encourage stock ownership, and subject to all
applicable regulations of any securities or exchange body having jurisdiction
over the Company or UDIL, the CHRC may, at its sole discretion, allow
Participants to elect to have all or a portion of a predetermined multiple of
their earned awards paid to them in Common Shares, subject to the following
conditions:
(i) The award multiple payable in Common Shares shall be 1.25 times
the award's calculated cash value under the Plan for the relevant Plan year
(the "Share Premium"). The CHRC, in its sole discretion, may reduce the
Share Premium, but in no instance may it increase the Share Premium above
1.25 times the cash award otherwise payable.
(ii) The CHRC, at its sole discretion, may limit the percentage of any
Participant's calculated award that is eligible for payment in Common
Shares under the Plan.
(iii) Any Participant who elects to receive Common Shares in lieu of
cash shall be obligated to retain ownership of such shares for at least
eighteen months after the date of grant; provided, however, in the event
the Share Price of the Common Shares at any time declines to 75% or less of
the Fair Market Value at the time of grant, the Participant shall be
permitted to immediately sell or otherwise transfer such shares free of
such restrictions. The aforesaid restrictions shall survive the
Participant's termination of employment from the Company for any reason,
other than in the case of Participant's death, disability, retirement or
other termination of employment in which case all such restrictions on the
sale or transfer of the affected Participant's Common Shares immediately
shall lapse.
3
<PAGE> 4
(iv) In order for a Participant to be eligible to receive any Common
Shares under the Plan, he or she must complete a written election form and
tender it to the Company's corporate Human Resources Department on or
before such date as it may set. Such election must state that the
Participant elects to receive a percentage (from 5% to 100% in 5%
increments, subject to any maximum established by the CHRC) of his or her
incentive award in Common Shares. To facilitate an informed election, the
Company shall inform all eligible Participants at least twenty (20) days
prior to the end of the year upon which any incentive is based: (1) whether
any Common Shares in lieu of cash will be offered, (2) the maximum
percentage of any incentive subject to the Common Shares election, and (3)
the amount of the Share Premium, if any. In the event a Participant has
elected to defer a portion (or all) of his or her applicable incentive
award, such deferred portion (or all such award, as the case may be) shall
not be available for the Common Share election described in this subsection
8(b), above.
(v) In the event the CHRC elects to grant a share election option, the
Company shall provide a written disclosure of the general tax treatment of
such action prior to and as a condition of accepting any election to accept
Common Shares in lieu of cash under this Plan.
(vi) The Company will withhold from any payments made pursuant to the
Plan any taxes required to be withheld under applicable federal, state and
local tax regulations. In addition, if necessary under the circumstances to
ensure compliance with applicable withholding requirements, the Company
reserves the right to condition the tender of Shares to the Participant on
the Participant's prior payment of required withholding taxes to the
Company.
(vii) The aggregate number of Common Shares available for issuance
from and after April 27, 1999 under the terms of the Plan at any time shall
not exceed an aggregate of 50,000 Common Shares.
9. ADMINISTRATION OF THE PROGRAM
The overall control of the Program, including final determination of the
Awards to each Participant, is the responsibility of the CHRC and the CEO. The
Company's senior corporate human resources officer shall be responsible for
administering and implementing any actions required under the Program.
10. STATUS CHANGES OF PARTICIPANT DURING YEAR
In the event a Participant's base salary changes during the course of the
Plan Year, the eligible salary for purposes of calculating any incentive due
shall be no greater than 130% of the Participant's base salary rate in effect as
of January 1 of said Year. In the event a Participant changes positions or makes
an inter-company transfer during the course of the Plan Year, and a result, is
assigned a different incentive category, any incentive due shall be prorated,
based on the number of complete months in each such category. In the event an
employee is appointed a Participant in the Plan after the start of a Plan Year,
the Participant shall receive a prorated award reflecting the number of full
months actually worked during the Plan Year. Subject to paragraph 11, below, in
the event a Participant terminates employment during the Plan Year, other than
through death, disability or retirement, no incentive is due.
11. VESTING
A Participant must be in the employ of the Company (or another of UDIL's
subsidiary corporations) on the last day of the applicable Plan Year in order to
be eligible for an Award. The final determination as to Awards to be granted and
the amount of such Awards shall be made by the CHRC. Notwithstanding any other
provision hereof, and in accordance with this paragraph, in the event a
Participant terminates employment or is terminated by the Company at any time
for any reason, including, but not limited to retirement, disability or death,
the CHRC shall have the sole discretion as to whether any such Award shall be
granted and, if so, the amount of any such Award. While such discretion includes
a negative adjustment or appropriate proration of an earned award, it does not
include discretion to make a positive adjustment to an earned award.
4
<PAGE> 5
12. MISCELLANEOUS
(a) All payments under the Plan shall be made from the general assets of
the Company. To the extent any Participant acquires a right to receive payments
under the Plan, such rights shall be no greater than those of an unsecured
general creditor of the Company.
(b) Nothing contained in the Plan and no action taken pursuant thereto
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any other person.
(c) No amount payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, either voluntary or involuntary, and any attempt to so alienate,
anticipate, sell, transfer, assign, pledge, encumber or charge the same shall be
null and void. No such amount shall be liable for or subject to the debts,
contracts, liabilities, engagements, or torts of any person to whom such
benefits or funds are or may be payable.
(d) Nothing contained in the Plan shall be construed as conferring upon any
Participant the right to continue in the employ of the Company or any of its
direct or indirect subsidiaries, nor to limit the right of an employee's
employer to discharge such employee at any time, with or without cause.
(e) The Company reserves the right to terminate the Plan at any time;
provided however, such termination shall not cause a forfeiture of any incentive
accrued up to the time the Participant was notified of such termination.
(f) The Plan shall be construed and administered in accordance with the
laws of the State of North Carolina.
5
<PAGE> 1
EXHIBIT 10.1(a)
UNITED DOMINION INDUSTRIES
ANNUAL MANAGEMENT INCENTIVE
COMPENSATION (MIC) PLAN FOR
OPERATING UNIT OFFICERS
1. PURPOSE
The purpose of the United Dominion Industries Limited (the "Company")
Annual Management Incentive Compensation Plan for Operating Unit
Officers (the "Plan") is to provide an opportunity for operating unit
officers to earn incentive compensation based upon the performance of
their respective units in relation to predetermined performance
targets. In particular, this Plan is designed to (a) pay Participants
incentive compensation for meeting or exceeding various performance
targets for a given fiscal year; (b) link operating management with the
Company's strategic performance objectives; and (c) maintain
competitiveness with general industry norms in executive compensation.
2. DEFINITIONS
The following words shall have the following meanings unless the
context clearly states otherwise:
BOARD OF DIRECTORS means the Company's Board of Directors.
TARGET AWARD means the amount of annual incentive to be paid
to a Participant under the Plan in the event his Segment,
Division or Operating Unit achieves 100% of its Plan targets
for the Plan year.
CEO means the Chief Executive Officer of the Company.
CHRC means the Compensation and Human Resources Committee of
the Company's Board of Directors.
COMPANY means United Dominion Industries Limited, a Canadian
Corporation.
OPERATING UNIT means a single profit center owned or managed,
directly or indirectly, by the Company.
DIVISION means two or more operating units reporting under a
common management structure.
1
<PAGE> 2
SEGMENT means a line of business containing two or more
Divisions or Operating Units, the results of which are
reported in the Company's Annual Report.
ANNUAL INCENTIVE means the amount payable to a Participant
under the Plan.
FISCAL YEAR means the fiscal year of the Company, which
currently is the twelve-month period ending December 31.
SEGMENT EXECUTIVE means the executive officer of the Company
primarily responsible for Segment operations, which currently
is the Segment President.
PARTICIPANT means an employee of the Company or any of its
operating entities eligible to receive an annual incentive
under this Plan.
PLAN means the United Dominion Management Incentive
Compensation Plan for Operating Unit Officers.
PERFORMANCE TARGETS means the performance targets assigned to
a Segment, Division or Operating Unit for a Fiscal Year.
3. ELIGIBILITY
Participation in the Plan shall be limited to Division or Operating
Unit officers or other key managers appointed by the Segment President.
The CEO, with the approval of the CHRC, shall make the final
determination of eligible Plan Participants. Additions or deletions to
the Plan during a Fiscal Year shall be made only in the event of an
unusual circumstance, such as a promotion or new hire.
4. DETERMINATION OF MAXIMUM AMOUNT PAYABLE
The CHRC, after consultation with the CEO, may determine a maximum
aggregate payment under the Plan to be made by any Segment, Division or
Operating Unit for each Fiscal Year. The final determination of the
maximum aggregate payment under the Plan for each Fiscal Year shall be
made prior to the commencement of such Fiscal Year.
5. DETERMINATION OF TARGET AWARDS AND PERFORMANCE TARGETS
a.) TARGET AWARDS - Each Participant shall be assigned a Target Award
consistent with guidelines published by the Company's corporate Human
Resources Department. The appropriate Segment Executives may recommend
adjustments to the guidelines, subject to the final approval of the CEO
and CHRC. Generally, the Target Award categories will be designated as
follows, with the percent listed below Target being the percent of
Participant's base salary:
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<PAGE> 3
CATEGORY TARGET
-------- ------
A 50%
B 40%
C 30%
D 20%
E 15%
b.) PERFORMANCE TARGETS - Each applicable business unit shall be
assigned Performance Targets for each Plan Year, against which the
performance of such unit will be measured. The appropriate Segment
Executive shall determine the Performance Targets for each such unit,
subject to the approval of the CEO. Until revised pursuant to this
Plan, the Performance Targets will be based upon predetermined Sales
Growth and Return on Investment objectives. The category definitions
are:
SALES GROWTH is the relevant operating unit's Net Sales compared to the
unit's prior year's Net Sales, expressed as a percentage. The
percentage is derived from the following formula:
Net Sales Current Year - Net Sales Prior Year
---------------------------------------------
Net Sales Prior Year
ROI is the relevant unit's Net Operating Profit expressed as a
percentage of relevant Average Net Capital Employed. The formula is:
Net Operating Profit
----------------------------
Average Net Capital Employed
The accounting definitions of Net Operating Profit and Average Net
Capital employed shall be as determined by the Company's corporate
Accounting Department from time-to-time. The Average Net Capital
Employed is the daily average.
The Company will review the aggregate Performance Targets to ensure
consistency with overall corporate Planning for the Fiscal Year. The
relevant segment president, subject to the approval of the CEO and
CHRC, shall make the final determination of the Performance Targets. As
soon as practicable after the beginning of each Fiscal Year, each
Participant shall be notified of his unit's Performance Targets by the
corporate Human Resources Department.
6. DETERMINATION OF ANNUAL INCENTIVE
The incentive is derived by comparing the relevant unit's actual
full-year Sales Growth and ROI accomplishment to the values contained
the Plan Matrix. The Matrix has Sales Growth values on one axis and ROI
values on a second axis. The actual award, if any, is determined by
identifying the intersecting cell value in the Sales Growth row and ROI
column that most nearly matches the relevant unit's actual performance
in both categories. When an actual performance value is equidistant
between two cell
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<PAGE> 4
values in the Matrix, the applicable cell value is derived by rounding
up. This "Point of Intersection" of the applicable row and column
contains an award multiplier. To determine the amount of the bonus
earned, the Participant multiplies his or her target bonus by the value
(expressed as a percentage) in the Point of Intersection. Below is a
sample of the Plan matrix:
12% 100 110 120 140 160
Sales 11% 90 100 110 120 130
Growth 10% 80 90 100 110 120
9% 65 75 85 95 105
8% 55 65 75 85 95
20.0% 22.5% 25.0% 27.5% 30.0%
ROI
The appropriate Segment Executives may make requests for negative
adjustments to the calculated awards in the appropriate circumstances.
The CEO with the CRHC's approval or the CHRC may make negative
adjustments to the calculated awards, but may not make any positive
adjustments pursuant to this Plan.
As soon as practicable after the end of the Fiscal Year, the Company's
corporate Human Resources Department shall ensure that each Participant
is notified of the amount of his Annual Incentive.
7. TIME FOR PAYMENTS
Annual Incentives normally will be paid by the end of the second month
following the Fiscal Year. Notwithstanding the normal payment date,
each Participant shall have the right to elect to defer all or a part
of his payment year under the Award pursuant to the Company's Excess
Deferral Plan.
8. FORM OF PAYMENTS
a.) At the end of the Company's fiscal year, after the Company's
financial results are final and the CHRC has approved such results, any
awards earned under the Plan shall be paid in cash to Participants.
However, in the discretion of the CHRC, Participants may be allowed to
elect to have all or part of such award paid in common shares of the
Company ("Common Shares") at "Fair Market Value." The "Fair Market
Value" of a Common Share is the average of the opening and closing
price of a Common Share on the Toronto Stock Exchange on the business
day next preceding the date an award is approved.
b.) In an effort to encourage stock ownership, and subject to all
applicable regulations of any securities or exchange body having
jurisdiction over the Company, the CHRC may, at its sole discretion,
allow Participants to elect to have all or a portion of a predetermined
multiple of their earned awards paid to them in Common Shares, subject
to the following conditions:
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<PAGE> 5
(i) The award multiple payable in Common Shares shall be 1.25
times the award's calculated cash value under the Plan for the
relevant Plan year (the "Share Premium"). The CHRC, in its
sole discretion, may reduce the Share Premium, but in no
instance may it increase the Share Premium above 1.25 times
the cash award otherwise payable.
(ii) The CHRC, at its sole discretion, may limit the
percentage of any Participant's calculated award that is
eligible for payment in Common Shares under the Plan.
(iii) Any Participant who elects to receive Common Shares in
lieu of cash shall be obligated to retain ownership of such
shares for at least eighteen months after the date of grant;
provided, however, in the event the Share Price of the Common
Shares at any time declines to 75% or less of the Fair Market
Value at the time of grant, the Participant shall be permitted
to immediately sell or otherwise transfer such shares free of
such restrictions. The aforesaid restrictions shall survive
the Participant's termination of employment from the Company
for any reason, other than in the case of Participant's death,
disability, retirement or other termination of employment in
which case all such restrictions on the sale or transfer of
the affected Participant's Common Shares immediately shall
lapse.
(iv) In order for a Participant to be eligible to receive any
Common Shares under the Plan, he or she must complete a
written election form and tender it to the Company's corporate
Human Resources Department on or before such date as it may
set Such election must state that the Participant elects to
receive a percentage (from 5% to 100% in 5% increments,
subject to any maximum established by the CHRC) of his or her
incentive award in Common Shares. To facilitate an informed
election, the Company shall inform all eligible Participants
at least twenty (20) days prior to [the end of the year upon
which any incentive is based] the date by which an election
must be made: (1) whether any Common Shares in lieu of cash
will be offered, (2) the maximum percentage of any incentive
subject to the Common Shares election, and (3) the amount of
the Share Premium, if any. In the event a Participant has
elected to defer a portion (or all) of his or her applicable
incentive award, such deferred portion (or all such award, as
the case may be) shall not be available for the Common Share
election described in this subsection 9(b), above.
(v) In the event the CHRC elects to grant a share election
option, the Company shall provide a written disclosure of the
general tax treatment of such action prior to and as a
condition
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<PAGE> 6
of accepting any election to accept Common Shares in lieu of
cash under this Plan.
(vi) The Company will withhold from any payments made pursuant
to the Plan any taxes required to be withheld under applicable
federal, state and local tax regulations. In addition, if
necessary under the circumstances to ensure compliance with
applicable withholding requirements, the Company reserves the
right to condition the tender of Shares to the Participant on
the Participant's prior payment of required withholding taxes
to the Company.
(vii) The aggregate number of Common Shares available for
issuance under the terms of the Plan at any time shall not
exceed .30% of the then outstanding Common Shares; provided
that in no circumstance can more than an aggregate of 120,000
Common Shares be reserved for issuance under the Plan, and
provided further that no Common Shares may be issued under
this Plan if, after such issuance, the total number of Common
Shares issued under this Plan together with the total number
of Common Shares issued under all other incentive compensation
plans of the Company after the date of the 1999 annual and
special meeting of the shareholders, exceed 1.9% of the
outstanding Common Shares of the Company at the time of
issuance.
9. ADMINISTRATION OF THE PROGRAM
The overall control of the Program, including final determination of
the Awards to each Participant, is the responsibility of the CHRC and
the CEO. The Company's senior corporate human resources officer shall
be responsible for administering and implementing any actions required
under the Program.
10. STATUS CHANGES OF PARTICIPANT DURING YEAR.
In the event a Participant's base salary changes during the course of
the Plan Year, the eligible salary for purpose of calculating any
incentive due shall such Participant's monthly average salary for the
year. In the event a Participant changes positions or makes an
inter-company transfer during the course of the Plan Year, and a
result, is assigned a different incentive category, any incentive due
shall be prorated, based on the number of complete months in each such
category. In the event an employee is appointed a Participant in the
Plan after the start of a Plan Year, the Participant shall receive a
prorated award reflecting the number of full months actually worked
during the Plan Year. Subject to paragraph 11, below, in the event a
Participant terminates employment during the Plan Year, other than
through death, disability or retirement, no incentive is due.
11. VESTING
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<PAGE> 7
A Participant must be in the employ of the Company (or another of the
Company's subsidiary corporations) on the last day of the applicable
Plan Year in order to be eligible for an Award. The final determination
as to Awards to be granted and the amount of such Awards shall be made
by the CHRC. Notwithstanding any other provision hereof, and in
accordance with this paragraph, in the event a Participant terminates
employment or is terminated by the Company at any time for any reason,
including, but not limited to retirement, disability or death, the CHRC
shall have the sole discretion as to whether any such Award shall be
granted and, if so, the amount of any such Award. While such discretion
includes a negative adjustment or appropriate proration of an earned
award, it does not include discretion to make a positive adjustment to
an earned award.
12. MISCELLANEOUS
a.) All payments under the Plan shall be made from the general assets
of the Company. To the extent any Participant acquires a right to
receive payments under the Plan, such rights shall be no greater than
those of an unsecured general creditor of the Company.
b.) Nothing contained in the Plan and no action taken pursuant thereto
shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any other person.
c.) No amount payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, either voluntary or involuntary, and any attempt
to so alienate, anticipate, sell, transfer, assign, pledge, encumber or
charge the same shall be null and void. No such amount shall be liable
for or subject to the debts, contracts, liabilities, engagements, or
torts of any person to whom such benefits or funds are or may be
payable.
d.) Nothing contained in the Plan shall be construed as conferring upon
any Participant the right to continue in the employ of the Company or
any of its direct or indirect subsidiaries, nor to limit the right of
an employee's employer to discharge such employee at any time, with or
without cause.
e.) The Company reserves the right to terminate the Plan at any time;
provided however, such termination shall not cause a forfeiture of any
incentive accrued up to the time the Participant was notified of such
termination.
f.) The Plan shall be construed and administered in accordance with the
laws of the State of North Carolina.
UNITED DOMINION INDUSTRIES
CHARLOTTE, N.C.
7
<PAGE> 1
EXHIBIT 10.4
UNITED DOMINION INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated effective January 1, 1999)
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I NAME AND PURPOSE.............................................................................1
Section 1.1. Name.............................................................................1
Section 1.2. Purpose..........................................................................1
ARTICLE II CONSTRUCTION, DEFINITIONS AND APPLICABLE LAW................................................2
Section 2.1. Construction and Definitions.....................................................2
Section 2.2. Applicable Law..................................................................13
ARTICLE III PARTICIPATION...................................................................13
Section 3.1. General.........................................................................13
Section 3.2. Eligibility.....................................................................13
ARTICLE IV BENEFITS...................................................................................14
Section 4.1. General.........................................................................14
Section 4.2. Normal Retirement...............................................................14
Section 4.3. Early Retirement................................................................15
Section 4.4. Delayed Retirement..............................................................15
Section 4.5. Termination After Six or More Years of Creditable Service.......................16
Section 4.6. Disability......................................................................16
Section 4.7. Death...........................................................................18
Section 4.8. Adjustment in Benefits..........................................................18
Section 4.9. Minimum Benefit.................................................................19
Section 4.10. Beneficiary or Beneficiaries....................................................19
Section 4.11. Change in Control...............................................................20
Section 4.12. Separation From Service Prior to Assumed Retirement Date........................21
ARTICLE V PLAN COMMITTEE..............................................................................21
</TABLE>
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<TABLE>
<S> <C>
Section 5.1. Appointment, Term of Office and Vacancy.........................................21
Section 5.2. Organization of Plan Committee..................................................21
Section 5.3. Powers of the Plan Committee....................................................22
Section 5.4. Expenses of Plan Committee......................................................22
Section 5.5. Indemnification of Plan Committee...............................................22
ARTICLE VI AMENDMENT AND TERMINATION..................................................................22
Section 6.1. Amendment of Plan...............................................................22
Section 6.2. Termination of Plan.............................................................22
Section 6.3. Procedure for Amendment or Termination..........................................23
Section 6.4. Effect of Amendment or Termination on Certain Benefits..........................23
ARTICLE VII MISCELLANEOUS.............................................................................23
Section 7.1. Adoption by a Subsidiary Corporation............................................23
Section 7.2. Authorization and Delegation to the Compensation and Human Resources Committee..24
Section 7.3. Spendthrift Clause..............................................................24
Section 7.4. Benefits Payable From General Assets of the Participating Employers.............24
Section 7.5. Allocation of Benefits Among theParticipating Employers.........................24
Section 7.6. Benefits Limited to the Plan....................................................25
ARTICLE VIII CLAIMS PROCEDURE.........................................................................25
Section 8.1. Claims Procedure................................................................25
Section 8.2. Agent for Service of Process....................................................27
</TABLE>
ii
<PAGE> 4
UNITED DOMINION INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated effective January 1, 1999)
THIS INSTRUMENT is executed as of the _____ day of _______________,
1999 by UNITED DOMINION INDUSTRIES, INC. ("UDI").
Statement of Purpose
UDI and certain of its subsidiaries (collectively, the "Participating
Employers") sponsor the United Dominion Industries, Inc. Supplemental Executive
Retirement Plan (the "Plan"). The Participating Employers desire to amend the
Plan to (i) modify the definition of "Change in Control," (ii) provide for the
full accrual of the "Target Retirement Benefit" following a Change in Control
and (iii) provide for a reduction in benefits in the event of premature
separation from service for certain Participants. The Participating Employers
believe that such amendments can best be made by amending and restating the Plan
in its entirety effective as of January 1, 1999. In Section 6.1 of the Plan, the
Participating Employers have reserved the right to amend the Plan at any time in
whole or part by resolution of the Compensation and Human Resources Committee,
and such Committee has authorized and approved the amendments set forth herein.
NOW, THEREFORE, the Participating Employers do hereby amend and restate
the Plan effective as of January 1, 1999 to consist of the terms and provisions
set forth in Article I through Article VIII, inclusive, as follows:
ARTICLE I
NAME AND PURPOSE
Section 1.1. Name. The Plan shall be known as the "United Dominion
Industries, Inc. Supplemental Executive Retirement Plan."
Section 1.2. Purpose. The purpose of the Plan is to provide certain Key
Officers of the Participating Employers who are designated as Participants in
this Plan with certain benefits in accordance with the provisions of the Plan.
<PAGE> 5
ARTICLE II
CONSTRUCTION, DEFINITIONS AND APPLICABLE LAW
Section 2.1. Construction and Definitions.
(a) Construction. Article, section and paragraph headings have been
inserted for convenience of reference only in the Plan and are to be ignored in
any construction of the provisions hereof. If any provision of the Plan shall
for any reason be invalid or unenforceable, the remaining provisions shall
nevertheless be valid, enforceable and fully effective.
(b) Definitions. Whenever used in the Plan, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
(1) Adjusted Retirement Plan Compensation, with respect to a
Retirement Plan, means:
(i) in the case of the United Dominion Industries,
Inc. Retirement Plan, "Earnings" as defined in that Retirement
Plan;
(ii) in the case of the Marley Company Pension Plan
for Salaried Employees, "gross annual earnings" as defined in
that Retirement Plan;
(iii) in the case of the Marley Cooling Tower Company
Pension Plan for Salaried Employees, "Compensation Base" as
defined in that Retirement Plan;
(iv) in the case of the CMB Industries Pension Plan,
"Plan Compensation" as defined in that Retirement Plan; and
(v) in the case of the Core Industries Inc. Pension
Plan and the Benefit Equalization Plan for Certain Employees
of Core Industries Inc., "Compensation" as defined in the Core
Industries Inc. Pension Plan;
provided, however, that notwithstanding any contrary provision in the
applicable Retirement Plan (A) a Participant's Adjusted Retirement Plan
Compensation for a Plan Year shall include any amount of such
Participant's compensation that is (x) reduced during such Plan Year in
accordance with Code Sections 401(k) or 125 or (y) deferred under any
other plan or arrangement sponsored by a Participating Employer and (B)
a Participant's Adjusted Retirement Plan Compensation for a Plan Year
shall be
2
<PAGE> 6
determined without regard to the compensation limitation set forth in
Code Section 401(a)(17).
(2) Assumed Retirement Benefit means, with respect to a
Participant as of any date, the sum of annual benefits, if any, which
would have been payable to such Participant as of such date under the
applicable Retirement Plan, assuming for such purpose:
(A) in the case of a married Participant, that the
Participant had elected to receive such benefits in the form
of a Joint and 50% Survivor Annuity; and
(B) in the case of an unmarried Participant, that the
Participant had elected to receive such benefits in the form
of a Ten-Year Certain and Life Annuity.
The foregoing assumptions are made solely for the purpose of
determining the benefits, if any, payable under this Plan, and such
assumptions shall be applied regardless of the actual method of payment
used to provide such Participant's benefits under the applicable
Retirement Plan.
(3) Assumed Retirement Date means, with respect to a
Participant, the date the Participant attains the age of fifty-five
(55) or such later date determined by the Compensation and Human
Resources Committee in its sole and exclusive discretion at the time
the Participant commences participation in the Plan.
(4) Beneficiary means the person(s) or entity(ies) designated
by a Participant or the provisions of the Plan to receive such benefits
as may become payable to such person(s) or entity(ies) in accordance
with the provisions of the Plan.
(5) Change in Control means a change in control of United
Dominion Industries, Inc., a Delaware corporation (the "Company"), of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement; provided
that, without limitation, a Change in Control shall be deemed to have
occurred if:
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<PAGE> 7
(A) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of
common stock of the Company or United Dominion Industries
Limited, a Canadian corporation ("Limited") (in each case, the
"Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Company or Limited entitled to vote generally in the election
of directors (in each case, the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (A), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly
from the Company or Limited, (ii) any acquisition by the
Company or Limited, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or Limited or any corporation controlled by or under
common control with the Company or Limited or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (C);
or
(B) Individuals who, as of the date hereof,
constitute the board of directors of Limited (the "Limited
Board") cease for any reason to constitute at least a majority
of the Limited Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by Limited's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Limited Board shall be
considered as though such individual were a member of the
Limited Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Limited Board; or
4
<PAGE> 8
(C) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or Limited (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting
power or the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or
Limited or all or substantially all of the Company's or
Limited's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or Limited or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of
the board of directors of any corporation resulting from such
Business Combination, or any corporation with direct or
indirect control over any such corporation, were members of
the Limited Board at the time of the execution of the
5
<PAGE> 9
initial agreement, or of the action of the Board or the
Limited Board, providing for such Business Combination; or
(D) Approval by the shareholders of the Company or
Limited of a complete liquidation or dissolution of the
Company or Limited; or
(E) The Company or Limited executes an agreement, the
consummation of which would result in the occurrence of a
Change in Control as described above.
(6) Claim means a claim for benefits under the Plan.
(7) Claimant means a person making a Claim.
(8) Code means the Internal Revenue Code of 1986, as amended
from time to time, and references thereto shall include the valid
Treasury regulations issued thereunder.
(9) Commuted Payment Amount means an amount equal to the
actuarial equivalent single sum value of certain benefits payable under
the Plan to the subject Participant calculated as of the applicable
determination date, using the actuarial assumptions and procedures set
forth on Exhibit A which is attached hereto and made a part hereof.
(10) Compensation and Human Resources Committee means the
committee of United Dominion Industries, Ltd., the corporate parent of
UDI, designated from time to time as the "Compensation and Human
Resources Committee."
(11) Creditable Service means, with respect to a Participant
as of any date, the sum of (A) and (B) where
(A) is such Participant's Years of Credited Service
determined in accordance with the applicable Retirement Plan
as of January 1 of the Plan Year in which such Participant
commences participation in the Plan; provided, however, at the
time the Compensation and Human Resources Committee designates
a Key Officer as a Participant in the Plan the Compensation
and Human Resources Committee in its sole and exclusive
discretion may increase or decrease the number of Years of
Credited
6
<PAGE> 10
Service to be credited to such Participant for purposes of
this Section 2.1(b)(10)(A); and
(B) is such Participant's Years of Credited Service
determined in accordance with the provisions of the applicable
Retirement Plan for periods from and after January 1 of the
Plan Year in which such Participant commences participation in
the Plan.
In addition, at any time after a Key Officer has been designated a
Participant in the Plan and prior to such Participant's separation from
Service the Compensation and Human Resources Committee in its sole and
exclusive discretion may increase such Participant's Years of Credited
Service otherwise determined under Section 2.1(b)(10)(A) and
2.1(b)(10)(B) for purposes of determining such Participant's Creditable
Service under the Plan.
(12) Delayed Retirement means, with respect to a Participant,
such Participant's separation from Service after the Plan Year in which
such Participant attains the Normal Retirement Age.
(13) Delayed Retirement Benefit means, with respect to a
Participant, an annual amount equal to (A) minus (B) where
(A) is such Participant's Target Retirement Benefit
(computed on the basis of such Participant's Final Average
Compensation at the time such Participant attained the Normal
Retirement Age); and
(B) is the sum of such Participant's (i) Assumed
Retirement Benefit and (ii) Social Security Benefit.
(14) Disability means, with respect to a Participant, a
condition entitling the Participant to disability benefits under the
applicable Retirement Plan.
(15) Disabled means, with respect to a Participant, suffering
a "Disability" as defined above.
(16) Early Retirement means, with respect to a Participant,
such Participant's separation from Service after having attained age
fifty-five (55).
(17) Early Retirement Benefit means, with respect to a
Participant, an annual amount equal to (A) minus (B) where
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<PAGE> 11
(A) is such Participant's Target Retirement Benefit
reduced by one two hundredth (1/200) for each month that the
date such Participant commences receiving such Participant's
Early Retirement Benefit precedes the month in which such
Participant would have attained age sixty-two (62); and
(B) is the sum of such Participant's (i) Assumed
Retirement Benefit and (ii) Social Security Benefit, which
such Social Security Benefit shall be reduced by one two
hundredth (1/200) for each month that the date such
Participant commences receiving such Participant's Early
Retirement Benefit precedes the month in which such
Participant would have attained age sixty-two (62).
(18) Effective Date means, with respect to the Plan, January
1, 1996.
(19) Employment Commencement Date means, with respect to a
Participant, the date the Participant commences Service with the
Participating Employers or such other earlier date determined by the
Compensation and Human Resources Committee in its sole and exclusive
discretion at the time the Participant commences participation in the
Plan.
(20) Final Average Compensation means, with respect to a
Participant as of any determination date, the average of the annual
Adjusted Retirement Plan Compensation paid to such Participant during
the three (3) calendar years of highest Adjusted Retirement Plan
Compensation (which calendar years need not be consecutive) during the
ten (10) calendar years next preceding the earlier to occur of
(A) the calendar year in which such Participant
attains the Normal Retirement Age; or
(B) such Participant's separation from Service, to be
determined by dividing the aggregate Adjusted Retirement Plan
Compensation received by the Participant during the
appropriate three (3) calendar years by three (3). If a
Participant has completed less than three (3) calendar years
of Service as hereinabove provided, such Participant's Final
Average Compensation shall be determined by dividing the
aggregate Adjusted Retirement Plan Compensation received by
the Participant during said calendar years by the number of
such calendar years.
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(21) Involuntary Termination Without Cause means termination
by a Participating Employer of a Participant's employment with the
Participating Employer without "cause." For purposes of this Plan,
"cause" means: (i) conviction of the Participant for any crime
constituting a felony in the jurisdiction in which committed, or the
entry by the Participant of a plea of guilty to a felony in any such
jurisdiction, (ii) any violation by the Participant of such
Participant's fiduciary duty to any Participating Employer which has
the effect, or any willful or intentional act of the Participant
committed for the purpose, or having the reasonably foreseeable effect,
of materially injuring any Participating Employer or its business or
reputation or of improperly or unlawfully converting for the
Participant's own personal benefit any material property of any
Participating Employer, or (iii) chronic alcoholism or any other form
of addiction that impairs the Participant's abilities to perform
Participant's duties of employment with the Participating Employers.
(22) Joint and 50% Survivor Annuity means an annuity for the
life of a Participant with a survivor annuity for the life of such
Participant's spouse which is fifty percent (50%) of the amount of the
annuity payable during the joint lives of the Participant and such
Participant's spouse.
(23) Key Officer means a person employed by any of the
Participating Employers in the position of vice president or higher for
a period of at least one (1) year.
(24) Long Term Disability Plan means, with respect to a
Participant, the long term disability plan or arrangement (whether a
group plan or otherwise) sponsored by a Participating Employer in which
the Participant participates, if any.
(25) Long Term Disability Plan Benefit means, with respect to
a Participant, the annual amount of benefits payable to a Disabled
Participant from time to time pursuant to the provisions of the Long
Term Disability Plan in which the Participant participates, if any.
(26) Normal Retirement means, with respect to a Participant,
such Participant's separation from Service after attainment of the
Normal Retirement Age.
(27) Normal Retirement Age means, with respect to a
Participant, age sixty-two (62).
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(28) Normal Retirement Benefit means, with respect to a
Participant, an annual amount equal to (A) minus (B) where
(A) is such Participant's Target Retirement Benefit;
and
(B) is the sum of such Participant's (i) Assumed
Retirement Benefit and (ii) Social Security Benefit.
(29) Participant means a Key Officer who has been designated
as a Participant in the Plan as provided in Section 3.2 of the Plan.
(30) Participating Employers means:
(A) United Dominion Industries, Inc., a Delaware
corporation;
(B) the following Subsidiary Corporations of United
Dominion Industries, Inc.:
(i) The Marley Company, a Delaware
corporation;
(ii) The Marley Cooling Tower Company, a
Delaware corporation;
(iii) any other Subsidiary Corporations of
United Dominion Industries, Inc. participating in one
of the Retirement Plans as of January 1, 1999; and
(C) those Subsidiary Corporations of United Dominion
Industries, Inc. which in the future adopt the Plan pursuant
to the provisions of Section 7.1 hereof.
(31) Plan means the United Dominion Industries, Inc.
Supplemental Executive Retirement Plan, as amended from time to time.
(32) Plan Committee means the committee described in Article V
hereof.
(33) Plan Year means the calendar year.
(34) Retirement means, with respect to a Participant, such
Participant's separation from Service on account of such Participant's
Normal Retirement, Early Retirement or Delayed Retirement.
(35) Retirement Plan means each of the following as in effect
from time to time: (i) the United Dominion Industries, Inc. Retirement
Plan, (ii) the Marley Company Pension Plan for Salaried Employees,
(iii) the Marley Cooling Tower Company Pension
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<PAGE> 14
Plan for Salaried Employees, (iv) the CMB Industries Pension Plan, (v)
the Core Industries Inc. Pension Plan and (vi) the Benefit Equalization
Plan for Certain Employees of Core Industries Inc. These plans are
sometimes referred to collectively herein as the "Retirement Plans."
(36) Service means employment by United Dominion Industries,
Inc. or any Subsidiary Corporation.
(37) Social Security Benefit means, with respect to a
Participant, the annual Primary Insurance Amount estimated by the Plan
Committee to be payable to the Participant at age sixty-five (65) under
the Federal Social Security Act as in effect on the date of
determination; provided, however, that;
(A) the Social Security Benefit for a Participant who
dies, retires or terminates employment prior to age sixty-five
(65) shall be calculated assuming that (A) the Participant
will not receive any future wages which would be treated as
wages for purposes of the Federal Social Security Act and (B)
the Participant will elect to begin receiving the
Participant's Social Security Benefit as of the earliest age
then allowable under the Federal Social Security Act, or if
later, the actual date of Retirement; and
(B) the Social Security Benefit, once calculated,
shall be frozen as of the date the Participant dies, retires
or terminates employment, whichever is applicable.
(38) Subsidiary Corporation means
(A) any corporation more than fifty percent (50%) of
whose outstanding voting capital stock is owned by United
Dominion Industries, Inc.;
(B) any corporation at least eighty percent (80%) of
whose outstanding voting capital stock and at least eighty
percent (80%) of each class of whose outstanding non-voting
capital stock is owned by a corporation more than fifty
percent (50%) of whose outstanding voting capital stock is
owned by United Dominion Industries, Inc.; or
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(C) any corporation at least eighty percent (80%) of
whose outstanding voting capital stock and at least eighty
percent (80%) of each class of whose outstanding non-voting
capital stock is owned by a corporation described in
subparagraph (B) above.
(39) Surviving Spouse means, with respect to a deceased
Participant, the person, if any, who was married to such deceased
Participant on the date of such deceased Participant's death.
(40) Target Retirement Benefit means, with respect to a
Participant as of any date, an annual amount equal to the product of
(A) multiplied by (B) where
(A) is sixty percent (60%) of such Participant's
Final Average Compensation; and
(B) is a percentage determined under the following
schedule:
Completed Years of Applicable
Creditable Service Percentage
------------------ ----------
5 or less...................................0%
6..........................................10%
7..........................................20%
8..........................................30%
9..........................................40%
10.........................................50%
11.........................................60%
12.........................................70%
13.........................................80%
14.........................................90%
15 or more................................100%
Notwithstanding the foregoing schedule, if a Change in Control
occurs, then the "Applicable Percentage" for a Participant in
Service immediately prior to the date of the Change in Control
shall be one hundred percent (100%) from and after the date of
such Change in Control.
(41) Ten-Year Certain and Life Annuity means a monthly amount
payable to a Participant beginning on the date benefits are to commence
under the Plan and continuing on the last day of each calendar month
thereafter for ten (10) consecutive years certain and thereafter on the
last day of each calendar month until the death of such Participant and
providing that in the event that such Participant shall die prior to
the expiration of the
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<PAGE> 16
ten (10) year-certain period, payments for the remainder of such period
shall be made to such Participant's Beneficiary.
(42) Years of Credited Service means, with respect to a
Participant, (i) under (A) the United Dominion Industries, Inc.
Retirement Plan, (B) the Marley Company Pension Plan for Salaried
Employees, (C) the Marley Cooling Tower Company Pension Plan for
Salaried Employees, (D) the Core Industries Inc. Pension Plan and (E)
the Benefit Equalization Plan for Certain Employees of Core Industries
Inc., such Participant's "Years of Credited Service" determined in
accordance with the provisions of the applicable Retirement Plan and
(ii) under the CMB Industries Pension Plan, such Participant's "total
years of service" used for determining benefits in accordance with the
provisions of the CMB Industries Pension Plan.
(43) Years of Service Fraction means, with respect to a
Participant, a fraction (A) the numerator of which equals the number of
full or partial years between such Participant's Employment
Commencement Date and the date of such Participant's separation from
Service and (B) the denominator of which equals the number of full or
partial years between such Participant's Employment Commencement Date
and such Participant's Assumed Retirement Date.
Section 2.2. Applicable Law. The Plan shall be construed, administered,
regulated and governed in all respects under and by the laws of the United
States to the extent applicable, and to the extent such laws are not applicable,
by the laws of the State of North Carolina.
ARTICLE III
PARTICIPATION
Section 3.1. General. No person shall become a Participant unless
or until such person is or becomes a Key Officer. In addition, in no event shall
any Key Officer be eligible to participate in the Plan prior to the Effective
Date of the Plan.
Section 3.2. Eligibility. The Compensation and Human Resources
Committee, in its sole and exclusive discretion, shall determine which Key
Officers shall become Participants. Designation of Key Officers as Participants
shall be made in such manner as the Compensation and Human Resources Committee
shall determine from time to time.
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ARTICLE IV
BENEFITS
Section 4.1. General. In the event a Participant separates from Service
after completion of six (6) or more years of Creditable Service, such
Participant shall become entitled to the applicable retirement benefit provided
for in Section 4.2, Section 4.3, Section 4.4 or Section 4.5. In the event a
Participant becomes Disabled prior to the attainment of the Normal Retirement
Age, such Participant shall become entitled to the benefits, if any, provided
for in Section 4.6. In the event a Participant separates from Service on account
of death while in Service, the benefits, if any, provided for in Section 4.7
shall be paid to the Participant's Surviving Spouse. In the event a Participant
separates from Service for a reason other than as described above, then no
benefit shall be payable to such Participant under the Plan, subject to the
provisions of Section 4.9 (regarding certain minimum benefits) and Section 4.11
(regarding benefits after a Change in Control). The Participating Employers
shall withhold from any payment of Plan benefits to a Participant (or Surviving
Spouse or Beneficiary, if applicable) any federal, state or local income or
employment taxes required by law to be withheld from such payment and shall
remit such taxes to the proper taxing authority.
Section 4.2. Normal Retirement. Subject to the provisions of Sections
4.8 and 4.12 and Article VI, a Participant who separates from Service for a
reason other than death
(i) after having completed at least six (6) years of
Creditable Service, and
(ii) following the attainment of the Normal Retirement Age and
prior to the end of the Plan Year in which such Participant attains the
Normal Retirement Age,
shall become entitled to such Participant's Normal Retirement Benefit. If such
Participant is unmarried at the time of such Participant's separation from
Service, such Participant's Normal Retirement Benefit shall be payable in the
form of a Ten-Year Certain and Life Annuity in a monthly amount equal to
one-twelfth (1/12) of the annual amount of such Participant's Normal Retirement
Benefit. If such Participant is married at the time of such Participant's
separation from Service, such Participant's Normal Retirement Benefit shall be
payable in the form of a Joint and 50% Survivor Annuity in a monthly amount
equal to one-twelfth (1/12) of the annual amount of such Participant's Normal
Retirement Benefit. A Participant's Normal Retirement
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<PAGE> 18
Benefit shall commence and thereafter be paid at the same time as such
Participant's benefits under the applicable Retirement Plan.
Section 4.3. Early Retirement. Subject to the provisions of Sections
4.8 and 4.12 and Article VI, a Participant who separates from Service for a
reason other than death
(i) after having completed at least six (6) years of
Creditable Service, and
(ii) after having attained age fifty-five (55) but prior to
having attained the Normal Retirement Age,
shall become entitled to such Participant's Early Retirement Benefit. If such
Participant is unmarried at the time of such Participant's separation from
Service, such Participant's Early Retirement Benefit shall be payable in the
form of a Ten-Year Certain and Life Annuity in a monthly amount equal to
one-twelfth (1/12) of the annual amount of such Participant's Early Retirement
Benefit. If such Participant is married at the time of such Participant's
separation from Service, such Participant's Early Retirement Benefit shall be
payable in the form of a Joint and 50% Survivor Annuity in a monthly amount
equal to one-twelfth (1/12) of the annual amount of such Participant's Early
Retirement Benefit. A Participant's Early Retirement Benefit shall commence and
thereafter be paid at the same time as such Participant's benefits under the
applicable Retirement Plan.
Section 4.4. Delayed Retirement. Subject to the provisions of Sections
4.8 and 4.12 and Article VI, a Participant who separates from Service for a
reason other than death
(i) after having completed at least six (6) years of
Creditable Service, and
(ii) after the Plan Year in which such Participant attains the
Normal Retirement Age,
shall become entitled to such Participant's Delayed Retirement Benefit. If such
Participant is unmarried at the time of such Participant's separation from
Service, such Participant's Delayed Retirement Benefit shall be payable in the
form of a Ten-Year Certain and Life Annuity in a monthly amount equal to
one-twelfth (1/12) of the annual amount of such Participant's Delayed Retirement
Benefit. If such Participant is married at the time of such Participant's
separation from Service, such Participant's Delayed Retirement Benefit shall be
payable in the form of a Joint and 50% Survivor Annuity in a monthly amount
equal to one-twelfth (1/12) of the annual amount of such Participant's Delayed
Retirement Benefit. A Participant's Delayed Retirement
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<PAGE> 19
Benefit shall commence and thereafter be paid at the same time as such
Participant's benefits under the applicable Retirement Plan.
Section 4.5. Termination After Six or More Years of Creditable Service.
Subject to the provisions of Sections 4.8 and 4.12 and Article VI, a Participant
who separates from Service for a reason other than death
(i) after having completed at least six (6) years of
Creditable Service, and
(ii) before reaching age fifty-five (55),
shall become entitled to such Participant's Early Retirement Benefit. If such
Participant is unmarried at the time of such Participant's separation from
Service, such Participant's Early Retirement Benefit shall be payable in the
form of a Ten-Year Certain and Life Annuity in a monthly amount equal to
one-twelfth (1/12) of the annual amount of such Participant's Early Retirement
Benefit. If such Participant is married at the time of such Participant's
separation from Service, such Participant's Early Retirement Benefit shall be
payable in the form of a Joint and 50% Survivor Annuity in a monthly amount
equal to one-twelfth (1/12) of the annual amount of such Participant's Early
Retirement Benefit. A Participant's Early Retirement Benefit under this Section
4.5 shall commence and thereafter be paid at the same time as such Participant's
benefits under the applicable Retirement Plan; provided, however, that in no
event shall a Participant's Early Retirement Benefit under this Section 4.5
commence prior to the Participant attaining at least age fifty-five (55).
Section 4.6. Disability. In the event a Participant becomes Disabled
prior to the attainment of the Normal Retirement Age, the following provisions
shall apply:
(a) Such Participant shall be entitled to receive such
Participant's Long Term Disability Plan Benefit, if any, provided for
under the Long Term Disability Plan in which the Participant
participates, if any.
(b) For purposes of determining such Participant's benefits
under this Plan, such Participant's Creditable Service shall include
such Participant's period of Disability to the extent provided in the
applicable Retirement Plan, and such Participant's Final Average
Compensation shall be determined as of the date such Participant became
Disabled.
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<PAGE> 20
(c) In the event such Participant remains Disabled until such
Participant attains the Normal Retirement Age, then subject to the
provisions of Section 4.8 and Article VI, such Participant shall be
entitled to receive such Participant's Normal Retirement Benefit as
provided in Section 4.2 and Section 4.6(b); provided, however, the
amount of such Participant's Normal Retirement Benefit otherwise
payable as determined in accordance with Section 4.2 and Section 4.6(b)
shall be reduced by such Participant's Long Term Disability Plan
Benefit, if any, payable after such Participant attains the Normal
Retirement Age.
(d) In the event such Participant ceases to be Disabled for a
reason other than death prior to the attainment of the Normal
Retirement Age and such Participant does not reenter active Service
upon the cessation of such Participant's Disability, then such
Participant shall be deemed to have separated from Service as of the
date of the cessation of such Participant's Disability. If such
Participant is eligible for Early Retirement on the date such
Participant is deemed to have separated from Service, or if the
Participant has completed at least six (6) years of Creditable Service
as of such date, then subject to the provisions of Section 4.8 and
Article VI, such Participant shall become entitled to such
Participant's Early Retirement Benefit determined in accordance with
the provisions of Section 4.3 or Section 4.5, as applicable, and
Section 4.6(b). If such Participant is not eligible for Early
Retirement or had not completed at least six (6) years of Creditable
Service on the date such Participant is deemed to have separated from
Service, then no benefits shall be payable to such Participant under
this Plan.
(e) In the event such Participant ceases to be Disabled for a
reason other than death prior to the attainment of the Normal
Retirement Age and such Participant reenters active Service upon the
cessation of such Participant's Disability, then such Participant's
Creditable Service shall include such Participant's period of
Disability to the extent provided in the applicable Retirement Plan and
such Participant shall resume active participation in the Plan on the
date such Participant reenters active Service.
(f) If a Participant becomes eligible to receive such
Participant's Early Retirement Benefit determined in accordance with
the provisions of Section 4.3 or Section 4.5, as applicable, and
Section 4.6(b), the amount of such Early Retirement
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<PAGE> 21
Benefit shall be reduced by such Participant's Long-Term Disability
Plan Benefit, if any, payable after the commencement of such Early
Retirement Benefit.
Section 4.7. Death.
(a) Death After Commencement of Benefits. In the event a Participant
dies following the commencement of such Participant's benefits under the Plan,
the benefits, if any, payable after such Participant's death shall be determined
in accordance with the provisions of such Joint and 50% Survivor Annuity or
Ten-Year Certain and Life Annuity, as applicable, pursuant to which such
Participant was receiving or entitled to receive benefits at the time of such
Participant's death.
(b) Death While in Service. If a Participant dies while in Service or
while Disabled at a time when the Participant would have been eligible for a
benefit under the provisions of Sections 4.2, 4.3, 4.4 or 4.5 had the
Participant then separated from Service, a death benefit shall be payable to the
Participant's Surviving Spouse, if any, under the provisions of this Section
4.7(b). If there is no Surviving Spouse, there shall be no death benefit under
the Plan. If there is a Surviving Spouse, the amount of the death benefit shall
be determined as follows:
(i) First, the Participant shall be deemed to have separated
from Service immediately prior to death;
(ii) Second, the Participant shall be deemed to have begun the
benefits payable under this Plan as of the earliest possible date in
the form of a Joint and 50% Survivor Annuity; and
(iii) Third, the Participant shall be deemed to have died
immediately after commencement of the Joint and 50% Survivor Annuity.
For purposes of determining the amount of benefits payable under this Section
4.7(b), the deceased Participant's Assumed Retirement Benefit shall be
determined under the same assumptions set forth above. The death benefit payable
to a Surviving Spouse shall commence on the earliest possible date the survivor
benefit would have begun being paid to the Surviving Spouse under the
assumptions set forth above.
(c) Article VI Controlling. The provisions of this Section 4.7 shall be
subject to the provisions of Article VI.
Section 4.8. Adjustment in Benefits. A Participant's Assumed Retirement
Benefit and Long Term Disability Plan Benefit can vary from time to time under
the terms of the applicable
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<PAGE> 22
Retirement Plan and the applicable Long Term Disability Plan or because of
possible future amendments to such Plans at the election of the Participating
Employers or as may be required by applicable law. As of each date on which any
benefit payable to a Participant (or his Surviving Spouse or Beneficiary) under
the applicable Retirement Plan or the applicable Long Term Disability Plan
changes for any reason, there shall be a recalculation of the benefits, if any,
payable under this Plan (based on the assumptions contained herein) to such
Participant (or his Surviving Spouse or Beneficiary) using the benefits then
payable under the applicable Retirement Plan and the applicable Long Term
Disability Plan as a result of such changes. Such increased or decreased
benefits payable under this Plan shall become effective at the same time as the
change in benefits under the applicable Retirement Plan and the applicable Long
Term Disability Plan. Notwithstanding the provisions of this Section 4.8, once a
Participant's Social Security Benefit is determined for purposes of determining
benefits payable under this Plan, such benefits shall not be subject to
recalculation after benefits commence under the terms of this Plan due to
increases or decreases in benefits payable from time to time under the Federal
Social Security Act.
Section 4.9. Minimum Benefit. Notwithstanding any provision of the Plan
to the contrary, in no event shall the amount of a Participant's retirement
benefit under Sections 4.2, 4.3, 4.4 or 4.5, as applicable, or the amount of a
Surviving Spouse's death benefit under Section 4.7(b), if applicable, be less
than the amount of the benefit (expressed in the same form of benefit as payable
under this Plan) that would have been payable to the Participant or the
Participant's Surviving Spouse, if applicable, under the Restoration Plan for
the Salaried Defined Benefit Retirement Plans of United Dominion Industries,
Inc. as in effect from time to time had the Participant been a participant in
that plan.
Section 4.10. Beneficiary or Beneficiaries.
(a) Designation or Change of Beneficiary by a Participant. Each
Participant may from time to time designate the person(s) or entity(ies) to whom
any survivor benefit is to be paid under the Ten-Year Certain and Life Annuity
method. A Participant may from time to time change such designation and upon any
such change, any previously designated Beneficiary's right to receive any
benefits under the Plan shall terminate. In order to be effective, any
designation or change of designation of a Beneficiary must be made on a form
furnished by the Plan Committee and signed by the Participant and received by
the Plan Committee while the
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Participant is alive. If a Beneficiary of a deceased Participant shall survive
the deceased Participant but die prior to the receipt of all benefits payable to
said Beneficiary under the Plan, then such benefits as would have been payable
to said deceased Beneficiary shall be paid to such Beneficiary's estate at the
same time and in the same manner as such benefits would have been payable to
said deceased Beneficiary.
(b) Beneficiary Designated by the Plan. In the event that a Participant
shall die without having designated a Beneficiary, or in the event that a
Participant shall die having revoked an earlier Beneficiary designation without
having effectively designated another Beneficiary, or in the event that a
Participant shall die but the Beneficiary designated by such Participant shall
fail to survive such Participant, then and in any such event, the person(s) who
shall constitute the Beneficiary of such deceased Participant shall be
determined as follows:
(i) In the event said deceased Participant is survived by a
child, children or by issue of a deceased child or children, such
surviving children and surviving issue of such deceased children shall
share as Beneficiaries on a per stirpes basis, the issue of a deceased
child of the deceased Participant to take per stirpes the same share
their parent would have taken if living.
(ii) In the event said deceased Participant is not survived by
any person described in subparagraph (i), then said deceased
Participant's estate shall be such deceased Participant's Beneficiary.
Section 4.11. Change in Control.
(a) Separation From Service Prior to a Change in Control. If a
Participant separates from Service prior to a Change in Control and is receiving
benefits under the Plan as of the date of such Change in Control or is entitled
to receive future benefits under the Plan as of a date following such Change in
Control, then within thirty (30) days following the Change in Control the
Participant shall be paid in a single cash payment the Commuted Payment Amount
of the Participant's benefits (or, if applicable, remaining benefits) under the
Plan determined as of the date of such Change in Control unless the Participant
waived the application of this Section 4.11(a) at the time the Participant
separated from Service in accordance with procedures prescribed by the Plan
Committee for such purpose from time to time.
(b) Separation From Service On or After a Change in Control. If a
Participant separates from Service on or after the date of a Change in Control,
then within thirty (30) days following the Participant's separation from Service
the Participant shall be paid in a single cash
20
<PAGE> 24
payment the Commuted Payment Amount of the Participant's benefits under the Plan
determined as of the date of such separation from Service.
Section 4.12. Separation From Service Prior to Assumed Retirement Date.
Notwithstanding any provision of the Plan to the contrary, if a Participant
separates from Service prior to such Participant's Assumed Retirement Date for
any reason other than death, Disability or Involuntary Termination Without
Cause, then the amount of the Participant's retirement benefit under Section
4.2, 4.3, 4.4 or 4.5, as applicable, shall be reduced by multiplying the amount
of the applicable retirement benefit by the Participant's Years of Service
Fraction. In no event shall this Section 4.12 apply in the event of a
Participant's separation from Service after a Change in Control. In addition,
the provisions of this Section 4.12 shall not apply to any Participant who
became a Participant in the Plan prior to January 1, 1999.
ARTICLE V
PLAN COMMITTEE
Section 5.1. Appointment, Term of Office and Vacancy. The Plan
Committee shall consist of one or more persons from the United Dominion
Industries, Inc. Human Resources Department who are appointed to the Plan
Committee by the Compensation and Human Resources Committee and who shall serve
at the pleasure of the Compensation and Human Resources Committee. The
Compensation and Human Resources Committee shall have the absolute right to
remove any member of the Plan Committee at any time, with or without cause, and
any member of the Plan Committee shall have the right to resign at any time. If
a vacancy in the Plan Committee should occur, from death, resignation, removal
or otherwise, a successor shall be appointed by the Compensation and Human
Resources Committee.
Section 5.2. Organization of Plan Committee. The Compensation and Human
Resources Committee shall designate one of the members of the Plan Committee to
serve as its Chairman, one member as its Vice-Chairman and one member as its
Secretary. One person may hold more than one office. The Plan Committee may
appoint such agents, who need not be members of the Plan Committee, as it may
deem necessary for the effective performance of its duties, and may delegate to
such agent such powers and duties, whether ministerial or discretionary, as the
Plan Committee may deem expedient or appropriate. The Plan Committee shall act
by majority vote and may adopt such bylaws, rules and regulations as it deems
desirable
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for the conduct of its affairs. The members of the Plan Committee shall serve as
such without compensation.
Section 5.3. Powers of the Plan Committee. The Plan Committee shall
administer the Plan. The Plan Committee shall have all the powers to enable it
to carry out its duties under the Plan properly. Not in limitation of the
foregoing, the Plan Committee shall have the power to construe and interpret the
Plan and determine all questions that shall arise thereunder. It shall decide
all questions relating to eligibility to receive benefits under the Plan. The
Plan Committee shall have such other and further specified duties, powers,
authority and discretion as are elsewhere in the Plan either expressly or by
necessary implication conferred upon it. The decision of the Plan Committee upon
all matters within the scope of its authority shall be final and conclusive on
all persons, except to the extent otherwise provided by law.
Section 5.4. Expenses of Plan Committee. The reasonable expenses of the
Plan Committee incurred by the Plan Committee in the performance of its duties
under the Plan, including without limitation, reasonable counsel fees and
expenses of other agents, shall be paid by the Participating Employers.
Section 5.5. Indemnification of Plan Committee. To the extent permitted
by applicable law, the Participating Employers shall indemnify and hold harmless
each member of the Plan Committee from and against any and all liability,
claims, demands, costs, and expenses (including the costs and expenses of
attorneys incurred in connection with the investigation or defense of claims) in
any manner connected with or arising out of any actions or inactions in
connection with the administration of the Plan except for such actions or
inactions which are not in good faith or which constitute willful misconduct.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1. Amendment of Plan. Subject to the provisions of Section
6.4, the Participating Employers expressly reserve the right, at any time and
from time to time, to amend in whole or in part any of the terms and provisions
of the Plan for whatever reason(s) the Participating Employers may deem
appropriate.
Section 6.2. Termination of Plan. Subject to the provisions of Section
6.4, the Participating Employers expressly reserve the right, at any time and
for whatever reason they may deem appropriate, to terminate the Plan.
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Section 6.3. Procedure for Amendment or Termination. Any amendment to
the Plan or termination of the Plan shall be made by the Participating Employers
by resolution of the Compensation and Human Resources Committee, and evidenced
by a written instrument of United Dominion Industries, Inc., and shall not
require the approval or consent of any Participant or Beneficiary in order to be
effective.
Section 6.4. Effect of Amendment or Termination on Certain Benefits.
(a) No amendment or termination of the Plan shall reduce or eliminate
the benefits (if any) payable under the Plan (without regard to such amendment
or termination) to any Participant, Surviving Spouse or Beneficiary who
commenced receiving benefits under the Plan prior to the amendment or
termination date.
(b) No amendment or termination of the Plan shall:
(i) reduce the amount of a Participant's Normal, Early or
Delayed Retirement Benefit, as applicable, below the amount of such
benefit determined immediately prior to such amendment or termination
date based on the terms and provisions of the Plan then in effect as if
the Participant had separated from Service at such time;
(ii) reduce the amount of a Participant's death benefit
payable to the Participant's Surviving Spouse below the amount of such
benefit determined immediately prior to such amendment or termination
date based on the terms and provisions of the Plan then in effect as if
the Participant had died while in Service at such time;
(iii) from and after the date of a Change in Control, reduce
the Commuted Payment Amount of a Participant below the amount of such
benefit determined immediately prior to such amendment or termination
date based on the terms and provisions of the Plan then in effect as if
the Participant had separated from Service at such time; or
(iv) from and after the date of a Change in Control, modify or
eliminate a Participant's right to be paid the Commuted Payment Amount
in a single cash payment to the extent provided in the Plan immediately
prior to the Change in Control.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Adoption by a Subsidiary Corporation. A Subsidiary
Corporation may, with the approval of the Compensation and Human Resources
Committee and the Board of Directors of such Subsidiary Corporation, elect to
adopt the Plan as of the date mutually
23
<PAGE> 27
agreeable to the Compensation and Human Resources Committee and the Board of
Directors of such Subsidiary Corporation. Any such adoption of the Plan by a
Subsidiary Corporation shall be evidenced by an appropriate instrument of
adoption executed by such Subsidiary Corporation.
Section 7.2. Authorization and Delegation to the Compensation and Human
Resources Committee. Each Subsidiary Corporation which is or hereafter becomes a
Participating Employer authorizes and empowers the Compensation and Human
Resources Committee (i) to amend or terminate the Plan without further action by
said Subsidiary Corporation as provided in Article VI and (ii) to perform such
other acts and do such other things as the Compensation and Human Resources
Committee is expressly directed, authorized or permitted to perform or do as
provided herein.
Section 7.3. Spendthrift Clause. To the extent permitted by law, no
benefits payable under the Plan shall be subject to the claim of any creditor of
any Participant or to any legal process by any creditor of any Participant and
no Participant entitled to benefits hereunder shall have any right whatsoever to
alienate, commute, anticipate or assign any benefits under the Plan.
Section 7.4. Benefits Payable From General Assets of the Participating
Employers. All benefits payable hereunder shall be paid from the general assets
of the Participating Employers. No assets of the Participating Employers shall
be segregated or placed in trust pursuant to the Plan in a manner which would
put such asset beyond the reach of the general creditors of any of the
Participating Employers, and the rights of any Participant (or Surviving Spouse
or Beneficiary) to receive any benefits hereunder shall be no greater than the
right of any general, unsecured creditor of the Participating Employers. Nothing
contained in the Plan shall create or be construed as creating a trust of any
kind or any other fiduciary relationship between the Participating Employers and
a Participant. In the event the Participating Employers purchase any insurance
policies insuring the life of any Participant hereunder, no Participant shall
have any rights whatsoever therein and the Participating Employers shall be the
sole owner and beneficiary thereof and shall possess and exercise all incidents
of ownership therein.
Section 7.5. Allocation of Benefits Among the Participating Employers.
The benefits payable under the Plan to a particular Participant (or Surviving
Spouse or Beneficiary, if applicable) shall be allocated among the Participating
Employers in such proportion as shall reasonably reflect the proportion of such
Participant's benefits under the Plan that are
24
<PAGE> 28
attributable to such Participant's employment by, and compensation from, the
respective Participating Employers (or their predecessors in interest).
Section 7.6. Benefits Limited to the Plan. Participation in the Plan
shall not give a Participant any right to be retained in the employ of any one
or more of the Participating Employers nor, upon dismissal, any right or
interest in the Plan except as expressly provided herein.
ARTICLE VIII
CLAIMS PROCEDURE
Section 8.1. Claims Procedure.
(a) General. In the event that a Claimant has a Claim under the Plan,
such Claim shall be made by the Claimant's filing a notice thereof with the Plan
Committee within ninety (90) days after such Claimant first has knowledge of
such Claim. Each Claimant who has submitted a Claim to the Plan Committee shall
be afforded a reasonable opportunity to state such Claimant's position and to
present evidence and other material relevant to the Claim to the Plan Committee
for its consideration in rendering its decision with respect thereto. The Plan
Committee shall render its decision in writing within sixty (60) days after the
Claim is referred to it, and a copy of such written decision shall be furnished
to the Claimant.
(b) Notice of Decision of Plan Committee. Each Claimant whose Claim has
been denied by the Plan Committee shall be provided written notice thereof,
which notice shall set forth:
(i) the specific reason(s) for the denial;
(ii) specific reference to pertinent provision(s) of the Plan
upon which such denial is based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect such Claim and an explanation of
why such material or information is necessary; and
(iv) an explanation of the procedure hereunder for review of
such Claim;
all in a manner calculated to be understood by such Claimant.
(c) Review of Decision of Plan Committee. Each such Claimant shall be
afforded a reasonable opportunity for a full and fair review of the decision of
the Plan Committee denying
25
<PAGE> 29
the Claim. Such review shall be by the Compensation and Human Resources
Committee. Such appeal shall be made within ninety (90) days after the Claimant
received the written decision of the Plan Committee and shall be made by the
written request of the Claimant or such Claimant's duly authorized
representative of the Compensation and Human Resources Committee. In the event
of appeal, the Claimant or such Claimant's duly authorized representative may
review pertinent documents and submit issues and comments in writing to the
Compensation and Human Resources Committee. The Compensation and Human Resources
Committee shall review the following:
(i) the initial proceedings of the Plan Committee with respect
to such Claim;
(ii) such issues and comments as were submitted in writing by
the Claimant or the Claimant's duly authorized representative; and
(iii) such other material and information as the Compensation
and Human Resources Committee, in its sole discretion, deems advisable
for a full and fair review of the decision of the Plan Committee.
The Compensation and Human Resources Committee may approve, disapprove or modify
the decision of the Plan Committee, in whole or in part, or may take such other
action with respect to such appeal as it deems appropriate. The decision of the
Compensation and Human Resources Committee with respect to such appeal shall be
made promptly, and in no event later than sixty (60) days after receipt of such
appeal, unless special circumstances require an extension of such time within
which to render such decision, in which event such decision shall be rendered as
soon as possible and in no event later than one hundred twenty (120) days
following receipt of such appeal. The decision of the Compensation and Human
Resources Committee shall be in writing and in a manner calculated to be
understood by the Claimant and shall include specific reasons for such decision
and set forth specific references to the pertinent provisions of the Plan upon
which such decision is based. The Claimant shall be furnished a copy of the
written decision of the Compensation and Human Resources Committee. Such
decision shall be final and conclusive upon all persons interested therein,
except to the extent otherwise provided by applicable law.
26
<PAGE> 30
Section 8.2. Agent for Service of Process. United Dominion Industries,
Inc. shall be the agent for service of legal process upon this Plan, and its
address for such purpose shall be the address of its principal place of business
in Charlotte, North Carolina.
IN WITNESS WHEREOF, the undersigned authorized officers of United
Dominion Industries, Inc. have executed this instrument on behalf of the
Participating Employers as of the day and year first above written.
UNITED DOMINION INDUSTRIES, INC.
By: /s/ Glenn A. Eisenberg
Name: Glenn A. Eisenberg
Title: President & COO
By: /s/ Richard L. Magee
Name: Richard L. Magee
Title: Vice President & Secretary
27
<PAGE> 31
EXHIBIT A
Assumptions and Procedures for
Determining Commuted Payment Amount
In accordance with Section 2.1(b)(8), Section 4.11 and Section 6.4, the
following procedures and assumptions shall be used to determine the actuarial
equivalent single sum value ("AESSV") of certain benefits under the Plan:
(1) Benefit Calculation Date. For purposes of this Exhibit A, the "Benefit
Calculation Date" for a Participant shall be determined as follows:
(a) For a Participant who separates from Service on or after the
date of a Change in Control, the "Benefit Calculation Date"
shall be the date of such Participant's separation from
Service.
(b) For a Participant who separates from Service prior to the
Change in Control and is receiving benefits under the Plan as
of the date of such Change in Control or is entitled to
receive future benefits under the Plan as of a date following
such Change in Control, the "Benefit Calculation Date" shall
be the date of the Change in Control.
(2) Date of Distribution. The "Date of Distribution" shall be the date as
of which the Commuted Payment Amount shall be paid and shall occur
within thirty (30) days after the applicable Benefit Calculation Date;
provided, however, that if for reasons of administrative practicality a
later date is required, the Date of Distribution shall be such later
date which is the earliest possible date on which the calculation can
be finalized and payment made.
(3) Calculation Procedures.
(a) Participant Under Age 55 not in Pay Status. For a Participant
who is under age 55 and not receiving benefits under the Plan,
determine the AESSV at age 55 of the Participant's Early
Retirement Benefit calculated as of the Benefit Calculation
Date assuming that payment of such benefit commences at age 55
and using the actuarial assumptions set forth below. Then
discount that AESSV to the applicable Date of Distribution
using the interest rate assumption set forth below.
(b) Participant Age 55 or Older not in Pay Status. For a
Participant who is age 55 or older and not receiving benefits
under the Plan, determine the AESSV at the Date of
Distribution of the Participant's Normal, Early or Delayed
Retirement Benefit (as applicable) calculated as of the
Benefit Calculation Date assuming such benefit commences as of
the Date of Distribution and using the actuarial assumptions
set forth below.
<PAGE> 32
(c) Participant in Pay Status. For a Participant receiving
benefits under the Plan, determine the AESSV at the Date of
Distribution of the Participant's remaining benefits payable
under the Plan as of the Benefit Calculation Date using the
actuarial assumptions set forth below.
(4) Actuarial Assumptions. The mortality and interest/discount rate
assumptions for purposes of determining the AESSV of a benefit shall be
the mortality and interest rate assumptions for lump sum payments in
effect under the United Dominion Industries, Inc. Retirement Plan as in
effect on the applicable Benefit Calculation Date. As of the effective
date of this Plan, such assumptions are as follows:
Mortality: The "applicable mortality table," as such term in
defined in Section 417(e)(3) of the Code, as amended by the
Retirement Protection Act of 1994.
Interest: The "applicable interest rate," as such term is
defined in Section 417(e) of the Code, as amended by the
Retirement Protection Act of 1994. The "lookback month"
(within the meaning of Treas. Reg. Section
1.417(e)-1T(d)(4)(iii)) for the determination of the
applicable interest rate with respect to a calculation on a
Benefit Calculation Date during a Plan Year shall be the
November immediately preceding such Plan Year. The "stability
period" (within the meaning of Treas. Reg. Section
1.417(e)-1T(d)(4)(ii)) during which the applicable interest
rate remains constant shall be the Plan Year immediately
succeeding the lookback month.
(5) Special Rule. For purposes of Section 6.4 of the Plan, the Benefit
Calculation Date and Date of Distribution shall be the effective date
of the applicable Plan amendment, and the Commuted Payment Amount shall
be calculated assuming the Participant separated from Service as of
such date.
<PAGE> 1
EXHIBIT 10.5
[UNITED DOMINION Letterhead]
March 1, 1999
PRIVILEGED AND CONFIDENTIAL
[Participant]
Dear [Participant]:
United Dominion Industries, Inc. (the "Company") and its ultimate
parent company, United Dominion Industries Limited ("Limited"), for which the
Company provides management services, consider it essential to the best
interests of their shareholders to foster the continuous employment of key
Company management personnel. Further, the boards of directors of the Company
(the "Board") and of Limited (the "Limited Board") recognize that the
possibility of a change in control exists, and that such possibility, and the
uncertainty and questions which may arise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company, Limited and their shareholders.
The Board and the Limited Board have determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Company and its subsidiaries,
including yourself, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from any possible change in control
of the Company or Limited.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement (the "Agreement") in the event your employment with the Company is
terminated subsequent to a Change in Control
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<PAGE> 2
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. The term of this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect for a period
of three years from the date hereof; provided, however, the original
Term of this Agreement shall automatically be extended each year, on
the anniversary date of this Agreement, for an additional year unless,
not later than ninety (90) days prior to any such anniversary date, the
Company shall have given notice that it does not wish to extend the
Term, in which case this Agreement shall expire at the end of the
two-year period following such anniversary date. Notwithstanding any
such notice by the Company not to extend the Term, if a Change in
Control shall have occurred during the original or extended Term, the
Term shall continue in effect for a period of thirty-six (36) months
beyond such Change in Control.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control, as set forth below. For purposes
of this Agreement, a "Change in Control" shall mean any one or more of
the events set forth below or a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement. Without
limitation, a Change in Control shall be deemed to have occurred if:
(A) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company or Limited (in each case, the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company or Limited
entitled to vote generally in the election of directors (in
each case, the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (A),
the following acquisitions shall
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<PAGE> 3
not constitute a Change in Control: (i) any acquisition
directly from the Company or Limited, (ii) any acquisition by
the Company or Limited, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or Limited or any corporation controlled by or under
common control with the Company or Limited or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (C);
or
(B) Individuals who, as of the date hereof, constitute the Limited
Board cease for any reason to constitute at least a majority
of the Limited Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Limited's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Limited Board shall be
considered as though such individual were a member of the
Limited Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Limited Board; or
(C) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company or Limited (a "Business Combination"),
in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such
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<PAGE> 4
transaction owns the Company or Limited or all or
substantially all of the Company's or Limited's assets either
directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan
(or related trust) of the Company or Limited or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors
of any corporation resulting from such Business Combination,
or any corporation with direct or indirect control over any
such corporation, were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the
action of the Board or the Limited Board, providing for such
Business Combination; or
(D) Approval by the shareholders of the Company or Limited of a
complete liquidation or dissolution of the Company or Limited;
or
(E) The Company or Limited executes an agreement, the consummation
of which would result in the occurrence of a Change in Control
as described above,
then, with respect to a termination of your employment, other than a
termination resulting from your death or Retirement, or initiated by
the Company for Cause or Disability, or otherwise initiated by you
other than for Good Reason occurring after such event or the execution
of such agreement and prior to the expiration or termination of such
agreement, a Change in Control shall be deemed to have occurred as of
the date of such event or the execution of such agreement.
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<PAGE> 5
3. Potential Change in Control. You agree, subject to the terms and
conditions of this Agreement, to remain in the employ of the Company in
the event of a Potential Change in Control until the earliest of (a) a
date which is two hundred seventy (270) days from the occurrence of
such Potential Change in Control, (b) the termination of your
employment by reason of your death or your Disability or Retirement as
defined in Subsection 4(A) of this Agreement, respectively, or (c) the
date on which you first become entitled under this Agreement to receive
the benefits provided in Subsection 5(D) of this Agreement. For
purposes of this Agreement, a Potential Change in Control shall be
deemed to have occurred if:
(A) The Company or Limited enters into an agreement or agreements
which, if carried out, would result in the occurrence of a
Change in Control;
(B) Any person publicly announces an intention to take or to
consider taking actions which, if carried out, would
constitute a Change in Control;
(C) Any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
Limited (or a company owned, directly or indirectly, by the
shareholders of the Company or Limited in substantially the
same proportions as their ownership of shares of the Company
or Limited), who is or becomes the beneficial owner, directly
or indirectly, of securities of the Company or Limited
representing 10 percent or more of the combined voting power
of the Company's or Limited's then outstanding securities,
increases his beneficial ownership of such securities by 10
percentage points or more over the percentage so owned by such
person on the date hereof; or
(D) The Board or the Limited Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
4. Termination Following Change in Control. If any of the events described
in Section 2 hereof constituting a Change in Control shall have
occurred, you shall be entitled to the benefits provided in Subsection
5(D) hereof upon subsequent termination of your employment
-5-
<PAGE> 6
during the Term unless such termination is because of your death or
Retirement, by the Company for Cause or Disability, or by you other
than for Good Reason.
(A) Disability; Retirement. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for
six (6) consecutive months, and within thirty (30) days after
written Notice of Termination is given, you shall not have
returned to the full-time performance of your duties, the
Company may terminate your employment for "Disability". Any
question as to the existence of your Disability upon which you
and the Company cannot agree shall be determined by a
qualified independent physician selected by you (or, if you
are unable to make such selection, it shall be made by any
adult member of your immediate family), and approved by the
Company. The determination of such physician made in writing
to the Company and to you shall be final and conclusive for
all purposes of this Agreement. Termination of your employment
based on "Retirement" shall mean your voluntary termination of
employment on an Early or Normal Retirement Date as defined in
the United Dominion Industries, Inc. Revised Retirement Plan
(the "Pension Plan") as in effect immediately prior to the
occurrence of a Change in Control whether or not you are a
participant in the Pension Plan, or in accordance with any
retirement arrangement established with your consent with
respect to you.
(B) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful and
continued failure by you substantially to perform your duties
with the Company (other than any such failure resulting from
your incapacity due to physical or mental illness or from your
Retirement or any such actual or anticipated failure resulting
from termination by you for Good Reason) after a written
demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in
which the Board believes that you have not substantially
performed your duties, or, (ii) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company,
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<PAGE> 7
monetarily or otherwise. For purposes of this Subsection, no
act or failure to act on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was
in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for
Cause unless and until there shall be delivered to you a copy
of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
you were guilty of conduct set forth above in clause (i) or
(ii) of the first sentence of this Subsection and specifying
the particulars thereof in detail.
(C) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written
consent, any of the following:
(i) Inconsistent Duties. A meaningful and detrimental
alteration (in your reasonable good faith
determination) in the nature or status of your
responsibilities (including those as a director of
the Company, if any) from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction by the Company in your
annual base salary as in effect on the date hereof
or as the same may be increased from time to time;
(iii) Relocation. The relocation of the office of the
Company where you are employed at the time of the
Change in Control (the "CIC Location") to a
location that is more than fifty (50) miles from
your current location, or which in your good faith
assessment is an area not generally considered
conducive to maintaining the executive offices of a
company such as
-7-
<PAGE> 8
the Company because of hazardous or undesirable
conditions, including without limitation a high crime
rate or inadequate facilities;
(iv) Incentive Compensation Plans. The failure by the
Company to continue in effect any compensation plan
in which you participate, including but not limited
to the United Dominion Industries Corporate Net Worth
Incentive Compensation Plan or any other plans
adopted prior to the Change in Control, which failure
has a significant adverse effect on your total
compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan in
connection with the Change in Control, or the failure
by the Company to continue your participation therein
on at least as favorable a basis, in terms of the
amount of benefits available to you as existed at the
time of the Change in Control;
(v) Benefits and Perquisites. The failure by the Company
to continue to provide you with benefits and
perquisites substantially similar to those enjoyed by
you under the Company's pension, life insurance,
medical, health and accident, disability, savings and
other qualified and non-qualified executive benefit
plans in which you were participating at the time of
the Change in Control;
(vi) No Assumption by Successor. The failure of the
Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this
Agreement, as contemplated in Section 6 hereof or, if
the business of the Company for which your services
are principally performed is sold at any time after a
Change in Control, the purchaser of such business
shall fail to agree to provide you with the same or a
comparable position, duties, compensation and
benefits (as described in Clauses 4(C)(iv) and (v)
above) as provided to you by the Company
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<PAGE> 9
immediately prior to the Change in Control; or
(vii) No Notice. Any purported termination of your
employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of
Subsection (D) below (and, if applicable, the
requirements of Subsection (B) above); for purposes
of this Agreement, no such purported termination
shall be effective.
(D) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so
indicated.
(E) Date of Termination, Etc. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30)
days after a Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (ii) if your
employment is terminated pursuant to Subsection (B) or (C)
above or for any other reason (other than Disability), the
date specified in the Notice of Termination (which, in the
case of a termination pursuant to Subsection (B) above shall
not be less than thirty (30) days, and in the case of a
termination pursuant to Subsection (C) above shall not be less
than thirty (30) nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given); provided
that if within thirty (30) days after any Notice of
Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of
a
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<PAGE> 10
court of competent jurisdiction (which is not appealable or
the time for appeal therefrom having expired and no appeal
having been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
and continue you as a participant in all compensation,
benefit, and insurance plans and perquisites in which you were
participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance
with this Subsection. Amounts paid under this Subsection are
in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due
under this Agreement.
5. Compensation Upon Termination or During Disability. Following a Change
in Control, upon termination of your employment or during Disability
during the Term, the Company shall cause there to be provided to you
the following benefits:
(A) Disability. During any period that you fail to perform your
full-time duties with the Company as a result of your
Disability, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period,
inclusive of all compensation payable to you under the
Company's disability insurance coverage or other plan during
such period, until your employment is terminated pursuant to
Subsection 4(A) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's insurance programs
and other benefit or pension plans then in effect, including
those listed in Clause 4(C)(v) hereof.
(B) Termination for Other than Good Reason or for Cause. If your
employment shall be terminated by the Company for Cause or by
you other than for Good Reason, death or Retirement, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given and any
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amounts to be paid to you pursuant to the Company's benefit
and pension plans then in effect, including those listed in
Clause 4(C)(v), and the Company shall have no further
obligations to you under this Agreement.
(C) Retirement; Death. If your employment shall be terminated for
Retirement, or by reason of your death, your benefits shall be
determined in accordance with the Company's benefit and
pension plans then in effect, including those listed in Clause
4(C)(v).
(D) Termination Otherwise. If your employment with the Company
shall be terminated by the Company for a reason other than
Cause, Retirement, Disability, or your death, or if your
employment with the Company shall be terminated by you for
Good Reason, then you shall be entitled to the benefits
provided below:
(i) Base Salary. The Company shall pay you your full base
salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is
given;
(ii) Severance Payment. In lieu of any further salary
payments to you for periods subsequent to the Date of
Termination, the Company shall pay as severance pay
to you, not later than the fifth (5th) day following
the Date of Termination (the "Payment Date"), a lump
sum severance payment (the "Severance Payment") equal
to the amount of base salary you would have earned
had you continued to be employed until the earlier of
(a) the end of the thirty-six (36) month period
following the Date of Termination or (b) the
attainment of your Normal Retirement age (the
"Severance Period"), assuming that your rate of
monthly base salary during the Severance Period would
be equal to the highest monthly rate of base salary
which was payable to you by the Company (or any
company affiliated with the Company) during the
thirty-six (36) month period immediately preceding
the Date of Termination.
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(iii) Incentive Compensation Plans. The Company shall pay
you any amounts required to be paid to you under the
terms of the United Dominion Industries Corporate Net
Worth Incentive Compensation Plan and the United
Dominion Industries Long-Term Performance Incentive
Plan, other applicable management incentive
compensation programs in effect, or any successor
plan(s) in which you participate (each an "MIC
Plan"). The Company shall pay you, in cash, in a lump
sum, no later than the Payment Date, an amount in
lieu of your participation in an MIC Plan during the
Severance Period which shall be equal to the sum of:
(A) for the year during which the Date of Termination
occurs, an amount equal to the greater of (I) your
target bonus determined in accordance with your class
of participation in such MIC Plan, and (II) the
amount that would have been payable to you under such
MIC Plan for that year, if the actual performance of
the Company from the beginning of that year to the
end of the most recently completed fiscal quarter
during that year, if any, prior to the Date of
Termination, on an annualized basis, were the actual
performance of the Company for that year and (B) for
each other year or portion thereof remaining in the
Severance Period, an amount equal to your target
bonus determined in accordance with your class of
participation in such MIC Plan prior to your Date of
Termination multiplied by the number of full years
remaining in the Severance Period following the year
during which the Date of Termination occurs, plus a
portion of such annual bonus for any partial year
remaining during the Severance Period, prorated based
upon the number of days completed during such year.
(iv) Benefit and Perquisite Continuation. For a thirty-six
(36) month period after such termination (or for such
longer period that the Company may have obligated
itself by separate agreement
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with you), the Company shall arrange to provide you
with life, disability, accident, automobile
liability, health & dental insurance and such other
benefits and perquisites substantially similar to
those which you are receiving immediately prior to
the Notice of Termination. In addition, the Company
shall provide you with reasonable outplacement
benefits consistent with the Company's Corporate
Office Severance Policy in effect prior to the Change
in Control. Benefits otherwise receivable by you
pursuant to this Clause 5(D)(iv) shall be reduced to
the extent comparable benefits are actually received
by you during the thirty-six (36) month period
following your termination, and any such benefit
actually received by you shall be reported to the
Company.
(v) Supplemental Pension. In addition to the pension
benefits to which you are entitled under the Pension
Plan or any related excess benefit or supplemental
retirement programs or any successor plans thereto,
including without limitation the United Dominion
Industries, Inc. Supplemental Executive Retirement
Plan and the Restoration Plan for the Salaried
Defined Benefit Plans of United Dominion Industries,
Inc. (collectively, the "Defined Benefit Plans"), the
Company shall pay you in one sum in cash on the fifth
(5th) day following the Date of Termination, a lump
sum determined as of the Date of Termination equal to
the actuarial equivalent (determined based on your
attained age as of the Date of Termination) of the
excess of (1) the retirement pension (determined as a
joint and 50% survivor annuity if you are married or
a 10-year certain and life annuity if you are
unmarried, in either case such annuity commencing at
age fifty-five (55), or if you have already attained
age fifty-five (55) at the Date of Termination,
commencing at the Date of Termination) which you
would have accrued under the terms of the Defined
Benefit
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<PAGE> 14
Plans in which you are a participant as of the Date
of Termination (without regard to any amendment to
the Defined Benefit Plans made subsequent to the
Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any
manner the computation of pension benefits
thereunder) determined as if you had accumulated
(after the Date of Termination) thirty-six (36)
additional months of both age and service credit
under each of the Defined Benefit Plans in which you
participate as of the Date of Termination at your
highest annual rate of compensation during the twelve
(12) months immediately preceding the Date of
Termination (but in no event shall you be deemed to
have accumulated additional months of age or service
credit after your sixty-fifth (65th) birthday for
purposes of the Pension Plan), over (2) the
retirement pension (stated in the same form of
annuity and commencing on the same date as described
in subclause (1) above) which you had then accrued
pursuant to the provisions of the Defined Benefit
Plans in which you are a participant as of the Date
of Termination. For purposes of subclause (1), the
term "compensation" shall include amounts payable
pursuant to Clauses 5(D)(ii) and (iii) hereof, and
amounts payable pursuant to Clauses 5(D)(ii) and
(iii) hereof shall be deemed to represent thirty-six
(36) months of compensation (or for purposes of the
Pension Plan such lesser number of months of
compensation to your sixty-fifth (65th) birthday) for
purposes of determining benefits under the Defined
Benefit Plans. For purposes of this Subsection,
"actuarial equivalent" shall be determined using the
same methods and assumptions utilized under the
Pension Plan immediately prior to the Change in
Control.
(vi) Employee Benefit Plans. Any unvested rights in any
employee benefit plan in which you are eligible to
participate
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<PAGE> 15
shall immediately vest, such plans including but not
limited to those listed on Schedule A to this letter
agreement. You shall be entitled to receive all
benefits payable to you under the Company's benefit
and pension plans, not otherwise specifically
provided for in Subsection 4(D), including those
listed in Clause 4(C)(v).
(vii) Normal Retirement Date. In the event you become
eligible for pension benefits under the Pension Plan
on the first day of the month following your
attaining age sixty-five (65), your Normal Retirement
Date, during the thirty-six (36) month period
following the commencement of payments pursuant to
Subsection 5(D), then you will only be entitled to
the lump sum payment as provided by Clauses 5(D)(ii),
(iii) and (v) for that period between the Date of
Termination and the last day of the month immediately
preceding your Normal Retirement Date. In addition,
any entitlement you shall have to benefits provided
by Clauses 5(D)(iv) and (vi) shall also cease as of
the date you attain your Normal Retirement Date.
(E) No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 5 by
seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer or by pension benefits after
the Date of Termination, or otherwise except as specifically
provided in this Section 5.
(F) Gross-Up Payment. In the event that any payment received by
you or paid by the Company on behalf of you under this
Agreement or under any other plan, arrangement or agreement
with the Company or any person whose actions result in a
Change in Control (collectively, the "Total Payments") will be
subject to the excise tax (the "Excise Tax") imposed by
section 4999 (or any successor provision) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company
shall pay
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<PAGE> 16
to you an additional amount (the "Gross-Up Payment") such that
the net amount retained by you, after deduction of any Excise
Tax on the Total Payments and on any federal, state and local
income, excise and/or other taxes upon the Gross-Up Payment
provided for by this Section 6, shall be equal to the Total
Payments.
For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the written opinion of
tax counsel selected by the Company's independent auditors
such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section
280G(b)(4)(A) of the Code, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income and other
taxes at the highest applicable marginal rate of taxation in
the calendar year in which the Gross-Up Payment is to be made
and state and local income and other taxes at the highest
applicable marginal rate of taxation in the state and locality
of your residence on the date the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes and any other taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder, you shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is
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<PAGE> 17
finally determined or upon your receipt of a refund from the
taxing authorities of the amount attributable to the reduction
in the excise tax, whichever is later, the portion of the
Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax
and federal, state and local income and other taxes imposed on
the Gross-Up Payment being repaid by you to the extent that
such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by you with respect to such
excess) at the time that the amount of such excess is finally
determined. You and the Company shall each reasonably
cooperate with the other in connection with any administration
or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
The Gross-Up Payment payable pursuant to this subsection shall
be payable on the earlier of (i) the date the Company is
required to withhold the Excise Tax pursuant to Section 4999
of the Code, or (ii) the date you are required to pay the
Excise Tax.
You shall notify the Company of any audit or review by the
Internal Revenue Service of your federal income tax return for
the year in which a payment under this Agreement is made
within ten (10) days of your receipt of such audit or review.
In addition, you shall notify the Company of the final
resolution of such audit or review within ten (10) days of
such resolution.
6. Successors: Binding Agreement
(A) Assumption by Successor. The Company will require any successor
(whether direct or indirect, by
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<PAGE> 18
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms
as you would be entitled hereunder if you had terminated your
employment for Good Reason following a Change in Control, except that
for purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "the Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(B) Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed in the
United States, registered mail, return receipt requested, postage
prepaid, addressed to UNITED DOMINION INDUSTRIES, INC., ONE FIRST UNION
CENTER, SUITE 2300, CHARLOTTE, NC 28202, with a copy to the Senior Vice
President - Human Resources & Administration (or his successor) of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
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<PAGE> 19
8. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed
to in writing. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement
or representations, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement and this Agreement shall
supersede all prior agreements, negotiations, correspondence,
undertakings, and communications of the parties, oral or written, with
respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of North Carolina applicable to contracts entered
into and performed in such State. Notwithstanding the fact this
Agreement is governed by the laws of the State of North Carolina, any
action brought by you may be instituted in your state of residence.
9. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
11. Expenses of Enforcement. In the event of any dispute between the
Company and you with respect to the subject matter of this Agreement
and the enforcement of rights hereunder, the Company shall reimburse
you for all reasonable costs and expenses relating to litigation,
actions or other proceedings as they are incurred, including reasonable
attorney's fees and expenses reasonably incurred, regardless of whether
such litigation, actions or other proceedings result in any settlement
or judgment or order in favor of any party; provided, however, that
such costs and expenses will be reimbursable in the event of any claim
or action initiated by you relating to this Agreement only if such
claim shall have been made or
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brought after reasonable inquiry and shall be well-grounded in fact,
and warranted by existing law or a good faith argument for the
extension, modification or reversal of existing law, and that is not
interposed for any improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of litigation.
Unless required by applicable Delaware law, in no event shall you be
required to reimburse the Company for any of the costs and expenses
relating to such litigation or other proceeding. The obligation of the
Company under this Section 11 shall survive the termination for any
reason of this Agreement (whether such termination is by the Company,
by you, upon the expiration of this Agreement or otherwise).
12. No Contract of Employment. Nothing in this Agreement shall be construed
as giving you any right to be retained in the employ of the Company.
13. Headings. The headings contained in this Agreement are intended solely
for convenience and shall not affect the rights of the parties to this
Agreement.
14. Confidentiality. In consideration for the payments to be made by the
Company hereunder, you agree to maintain the confidentiality of all
information relating to the Company, Limited, or any of its or their
subsidiaries not otherwise available to the public during the term, and
following the expiration, of this Agreement.
15. Guarantee by Limited. In consideration of the management services
provided to it by the Company, and by its signature hereto, Limited
agrees that it will guarantee the payment and performance of all
obligations of the Company hereunder.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
[Signatures]
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EXHIBIT 10.6
UNITED DOMINION INDUSTRIES LIMITED
1999 STOCK OPTION AND RESTRICTED STOCK PLAN
ARTICLE I
PURPOSE
The purpose of the United Dominion Industries Limited 1999 Stock Option and
Restricted Stock Plan (the "Plan") is to stimulate the interest and efforts of,
and to retain in service, employees, officers and directors; to provide a
facility that would make it easier for members of the UDI Group (as hereinafter
defined) to attract employees, officers and directors; and to enable such
employees to participate in the long-term growth and financial success of United
Dominion Industries Limited.
ARTICLE II
DEFINITIONS
2.1 "Award" shall mean a grant of a Stock Option, Limited Stock
Appreciation Right or Restricted Stock Award under the Plan.
2.2 "Beneficiary" shall mean a person or persons designated by a
Participant to succeed to, in the event of death, any outstanding Award held by
the Participant. Any Participant may, subject to such limitations as may be
prescribed by the Committee, designate one or more persons primarily or
contingently as beneficiaries in writing by notice delivered to the Corporation,
and may revoke such designations in writing. If a Participant fails effectively
to designate a beneficiary, then the Participant's estate shall be the
Participant's beneficiary.
2.3 "Board" shall mean the Board of Directors of the Corporation.
2.4 "Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
2.5 "Committee" shall mean the Board's Compensation and Human Resources
Committee, as appointed from time to time by the Board, so long as each of the
voting members of the Committee is not an "insider" or a "related" director, as
such terms are defined and interpreted by The Toronto Stock Exchange. Otherwise,
"Committee" shall mean the outside, "unrelated" directors, as such term is
interpreted by The Toronto Stock Exchange, who serve on the Board's Compensation
and Human Resources Committee. The Committee shall be responsible for
administering the Plan in accordance with Article III of the Plan.
2.6 "Common Shares" shall mean the common shares (without par value) in
the capital of the Corporation.
2.7 "Corporation" shall mean United Dominion Industries Limited, or any
successor corporation.
2.8 "Disability" shall mean a condition resulting from an injury or
sickness that renders the Participant unable to perform any occupation for which
the Participant is qualified or may reasonably become qualified by reason of
education, training or experience, whether or not a job involving such
occupation is available within a member of the UDI Group.
2.9 "Employee" shall mean an individual employed by any member of the UDI
Group who is, in the judgment of the Board, of special value to such member.
2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
2.11 "Fair Market Value" of a share on a specified date shall mean the
average of the daily high and low board lot trading prices for such share on The
Toronto Stock Exchange on the most recent day prior to the grant date in which
Shares were traded on The Toronto Stock Exchange, or if no trade occurred on any
one of the preceding ten (10) trading days on such exchange, then on the New
York Stock Exchange, or if no trade occurred on any one of the preceding 10 days
on either the Toronto or New York exchanges, then on the Montreal Exchange, or
if no trade occurred on any one of the preceding 10 days
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<PAGE> 2
on any of the aforesaid exchanges, then on such other securities exchange or
market (including, without limitation, the automated quotation system of the
National Association of Securities Dealers, Inc. or the Canadian Dealing Network
System) on which such shares are listed or admitted for trading as may be
selected for such purpose by the Board with the consent of The Toronto Stock
Exchange. If Fair Market Value is determined in U.S. dollars, such Fair Market
Value shall be restated in Canadian dollars based upon the noon buying rate in
New York City for cable transfers of Canadian dollars payable in U.S. dollars as
certified for custom's purposes by the Federal Reserve Bank of New York on the
date an Award is granted.
2.12 "Incentive Stock Option" shall mean any Stock Option granted pursuant
to the Plan that is intended to be and is specifically designated as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
2.13 "Limited Stock Appreciation Right" or "Limited Right" shall mean an
Award granted in connection with the grant of a Stock Option pursuant to the
provisions of Section 6.1 of the Plan.
2.14 "Non-Qualified Stock Option" shall mean any Stock Option granted
pursuant to the provisions of the Plan that is not an Incentive Stock Option, or
is specifically identified as not being an Incentive Stock Option.
2.15 "Optionee" shall mean a Participant who has received the grant of a
Stock Option.
2.16 "Participant" shall mean an individual who is eligible to participate
and is granted an Award under the Plan.
2.17 "Plan" shall mean the United Dominion Industries Limited 1999 Stock
Option and Restricted Stock Plan set forth herein, as amended from time to time.
2.18 "Restricted Stock Award" shall mean an Award granted pursuant to the
provisions of Section 7.1 of the Plan. "Restricted Stock" means Shares granted
pursuant to Section 7.1 of the Plan. "Restricted Stock Agreement" means the
agreement between the Corporation and the recipient of Restricted Stock that
contains the terms, conditions and restrictions pertaining to such Restricted
Stock.
2.19 "Retirement" shall mean termination of employment because of normal or
early retirement under the UDI Group's Retirement Plan.
2.20 "Retirement Plan" shall mean the United Dominion Industries, Inc.
Retirement Plan, as amended or replaced from time to time, or such other similar
retirement plan applicable to an Employee as a result of such Employee's
employment with an entity in the UDI Group that does not participate in such
plan.
2.21 "Shares" shall mean Common Shares.
2.22 "Stock Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option granted pursuant to Article V of the Plan. "Stock Option Agreement"
means the agreement between the Corporation and the Optionee that contains the
terms and conditions pertaining to a Stock Option.
2.23 "UDI Group" shall mean the Corporation and its subsidiary corporations
(as that term is defined under Code Section 424(f)). The companies comprising
such group are hereinafter sometimes referred to collectively as "members of the
UDI Group" and individually as a "member of the UDI Group."
ARTICLE III
ADMINISTRATION
3.1 Composition of the Committee. The Plan shall be administrated by the
Committee. The Board may from time to time remove members from, or add members
to, the Committee. Subject to Section 2.5 of the Plan, the Board shall have the
authority to fill vacancies on the Committee, however caused.
3.2 Actions by the Committee. The Committee shall hold meetings at such
times and places as it may determine. Acts approved by a majority of the members
of the Committee present at a meeting at
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<PAGE> 3
which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
3.3 Powers of the Committee. The Committee shall have the authority to
administer the Plan in its sole discretion, subject, where applicable, to the
requirements of The Toronto Stock Exchange and, when required, to the approval
of the Corporation's shareholders. To this end, the Committee is authorized to
construe and interpret the Plan, to promulgate, amend and rescind rules relating
to the implementation of the Plan and to make all other determinations necessary
or advisable for the administration of the Plan, including, but not limited to,
the recommendation to the Board of individuals who may be granted Awards, the
number of Shares to be subject to each Award, the Award price, if any, the
vesting or duration of Awards, the designation of Stock Options as Incentive
Stock Options or Non-Qualified Stock Options, and any other terms and conditions
of Awards. The Committee may designate persons other than members of the
Committee to carry out its responsibilities and may prescribe such conditions
and limitations as it may deem appropriate. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding
upon all persons participating in the Plan and any person validly claiming under
or through persons participating in the Plan.
3.4 Compliance with Laws. The administration of the Plan by the Committee,
including the provisions of Sections 3.1-3.3 above, shall in all respects be
subject to the provisions of the Corporation's Bylaws, as amended from time to
time, and applicable laws, rules and regulations.
ARTICLE IV
ELIGIBILITY
4.1 Eligibility. The individuals eligible to be granted Awards under the
Plan are the officers and directors of the Corporation and Employees.
Participants shall include the officers, directors and such Employees as
determined by the Committee, subject to approval or rejection by the Board.
ARTICLE V
STOCK OPTIONS
5.1 Awards of Stock Options. Stock Options may be granted to an officer,
director or Employee, either alone or in addition to other Awards granted under
the Plan. The Committee shall from time to time recommend to the Board those
individuals to whom Stock Options should be granted, specifying the number of
Shares that should be placed under the Stock Option to each such individual.
Each Stock Option granted under this Plan shall be one of two types: (i) an
Incentive Stock Option or (ii) a Non-Qualified Stock Option. Participants may be
awarded one or more Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options.
The Board may (i) accept all or any part of such a recommendation of the
Committee or (ii) refer all or any part thereof back to the Committee for
further consideration and recommendation.
The grant of every Stock Option hereunder shall be made by written
agreement between the Corporation and the Optionee, the provisions of which
shall conform to the applicable provisions of the Plan and shall otherwise be
satisfactory to the Committee.
5.2 Incentive Stock Options. Anything in this Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under this Plan be so exercised, so as to disqualify this Plan under
Section 422 of the Code, or without the consent of the Participant affected, to
disqualify any Incentive Stock Option under Section 422 of the Code. No
Incentive Stock Options may be awarded after December 31, 2008. No Incentive
Stock Options shall be granted to a Participant who is not an Employee.
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<PAGE> 4
5.3 Terms of Stock Options. Stock Options granted under this Plan shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem desirable:
(a) Exercise Price. Each Stock Option shall state the price per
Share, as determined by the Committee, at which the Stock Option may be
exercised; provided, however, that the per Share exercise price shall not
be less than the Fair Market Value of a Share on the date of grant.
Further provided, in the case of an Incentive Stock Option granted to
an Employee who owns more than 10% of the total combined voting power of
all classes of stock of the Corporation, the exercise price per Share shall
not be less than 110% of the Fair Market Value of a Share on the date of
grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Stock Option is granted, or no more than five (5)
years in the case of an Employee who owns more than 10% of the total
combined voting power of all classes of stock of the Corporation.
(c) Exercisability and Nontransferability of Stock Options. Except as
provided below, no Stock Option may be exercised within one year of grant.
At the end of one year, one-third of the grant will become exercisable.
Thereafter, one-third of the grant will become exercisable at the
conclusion of each of the succeeding two years. Notwithstanding the
foregoing, an Optionee who is fully vested in the Retirement Plan may
exercise any of such Optionee's Stock Options upon reaching "retirement
age" as defined in the Retirement Plan so long as at least six months have
passed since the date on which such options were granted. Directors of the
Corporation who are not employees of the Corporation are subject only to
the six-month vesting requirement set forth below with respect to the
exercise of Options. The Committee may, in its entire discretion, at the
time of the granting of Stock Options hereunder, specify another particular
time period or periods following the date of the grant of the Stock Option
during which an Optionee may exercise his Stock Options to purchase, may
designate the number of Shares in respect of which such Optionee may
exercise his Stock Option to purchase, and may designate the number of
Shares in respect of which such Optionee may exercise his option during
each time period; provided, however, in no event may the Committee specify
a time period or periods following the date of the grant of Stock Options
that would enable an Optionee to exercise all or part of his Stock Options
within six months following the date of grant.
No Stock Option shall be transferable by the Optionee otherwise than
by will or the laws of descent and distribution. Stock Options shall be
exercisable during the Optionee's lifetime, only by the Optionee, or his
guardian, conservator, or other legal representative. An Optionee may elect
that, upon his death, no right to exercise his option shall be transmitted
or passed to his executors or other legal representatives. Such election
must be made by written instrument signed by such Optionee and addressed
and delivered to the Secretary of the Corporation and may thereafter, in
like manner, be revoked and again made and revoked at any time and from
time to time during the lifetime of such Optionee and so long as his Stock
Option rights have not terminated or been wholly exercised.
(d) Method of Exercise. Purchases of Shares by an Optionee shall be
in lots of not less than 25 Shares, and all Shares must be paid in full at
the time of their purchase.
Purchase may be made in cash or, unless prohibited by the Committee at
the time of the grant, by exchanging Shares owned by the Optionee or by a
combination of cash and Shares provided that the combined value of cash and
the Fair Market Value of Shares tendered is equal to the exercise price.
(e) Death. If an Optionee's employment is terminated because of his
death, all Stock Options previously granted will become exercisable and may
be exercised at any time before their expiration date.
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<PAGE> 5
(f) Disability. If an Optionee's employment is terminated because of
Disability, all Stock Options previously granted will remain exercisable
according to their original schedule of exercisability and may be exercised
until their expiration date. Stock Options exercised more than one year
after employment is terminated because of Disability shall be considered
Non-Qualified Stock Options.
(g) Retirement. If an Optionee's employment is terminated because of
Retirement, then in the event of Retirement (as defined in the Retirement
Plan) all Stock Options previously granted to such retiring Optionee will
become immediately exercisable and may be exercised at any time before
their expiration date to the extent the Optionee is entitled to do so under
clause (c) above. Stock Options exercised by a retired Optionee more than
three months after Retirement shall be considered Non-Qualified Stock
Options.
(h) Other Termination of Employment. If an Optionee's employment is
terminated for any reason other than death, Disability or Retirement, all
Stock Options owned by such Optionee shall terminate on the date ninety
(90) days after the date of the termination of such Optionee's employment;
provided, however, the Committee may, in its sole and exclusive discretion,
at any time either before or after the expiration of such ninety (90) day
period, extend the right to exercise the Stock Options (including Stock
Options not otherwise exercisable as of the date of such termination of
employment) beyond such ninety (90) day period. The foregoing sentence
notwithstanding, in no instance shall this paragraph operate to extend the
term of any Stock Option.
(i) Change in Control. All Stock Options shall become immediately
exercisable upon a Change in Control (as defined in Section 6.1(g) hereof).
(j) Directors. In the event the Optionee is a director of the
Corporation and not an Employee of the UDI Group at the time of the grant,
or at any time during the exercise period, Stock Options granted to such
Optionee may be exercised, to the extent the Optionee is entitled to do so
under clause (c) above, at any time until their expiration date. Stock
Options granted to non-Employee directors shall be Non-Qualified Stock
Options. The aggregate number of Shares subject to Stock Options granted to
non-Employee directors of the Corporation as a group during any one year
period shall not exceed 100,000 Shares.
(k) Buyout and Settlement Provisions. The Committee may at any time
offer to buy out a Stock Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
(l) Optionee's Shareholder Rights. An Optionee shall be entitled to
the rights appertaining to share ownership, such as to dividends and
voting, only with respect to Shares that have been fully paid for and
issued to him.
(m) Exercise of Options. Stock Options shall be exercised only in
accordance with the terms and conditions of the Stock Option Agreements
under which they are respectively granted and shall be exercisable only in
writing on forms to be provided by the Committee.
(n) Limitation on Exercise. To the extent that the Fair Market Value
of Shares with respect to which Incentive Stock Options (determined without
regard to this paragraph) are exercisable for the first time by any
individual during any calendar year exceeds $100,000, such Stock Option
shall be designated at the time of grant and otherwise be treated as
Non-Qualified Stock Options.
5.4 Replacement Options. As an incentive to encourage stock ownership in
the Corporation on the part of the Optionees, the Committee may, at its
discretion, subject to regulatory approval, authorize replacement Stock Option
grants ("Replacement Options") to Optionees who exercise all or a portion of a
grant by means of tendering Shares acquired not less than six months earlier. If
an Optionee exercised part or all of a Stock Option grant by tendering Shares,
the Committee may grant a Replacement Option grant equal to the number of
tendered Shares. In addition to the foregoing terms of Section 5.3 above, the
Replacement Option shall be subject to the following terms:
(a) the Optionee agrees to retain ownership of the exercised Shares
for a period of at least two years; and
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<PAGE> 6
(b) the exercise price of the Replacement Option will be equal to 100%
of the Fair Market Value at the time of the granting of the Replacement
Option; and
(c) the expiration date of the Replacement Option will be the same as
the expiration date of the original Stock Option that has been exercised.
ARTICLE VI
LIMITED STOCK APPRECIATION RIGHTS
6.1 Limited Stock Appreciation Rights.
(a) The Committee shall have the authority to grant Limited Stock
Appreciation Rights (the "Limited Rights") in connection with the grant of
Stock Options under this Plan to any Optionee, and such rights may be
granted either at or after the time of the grant of such Stock Option.
(b) Limited Rights or any applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination of the related Stock Option. Upon the
exercise of a Stock Option, the related Limited Right shall cease to be
exercisable to the extent of the Shares with respect to which such Stock
Option is exercised.
(c) An Optionee, in accordance with this Article VI, may exercise a
Limited Right related to a Stock Option by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
Optionee shall be entitled to receive an amount determined in the manner
prescribed in this Article VI, and the related Stock Option shall cease to
be exercisable to the extent that the Shares with respect to which such
Limited Rights are exercised.
(d) Limited Rights shall only be exercisable following a Change in
Control as defined in paragraph (g) of this Article VI, at which time all
optioned Shares and the related Limited Rights shall become exercisable
notwithstanding the provisions hereof; Limited Rights may only be exercised
during the 30-day period following a Change in Control, unless the first
six months of the term of the Limited Rights have not yet elapsed, in which
case, the 30-day period will commence at the conclusion of the sixth month.
(This six-month limitation shall not apply in the event of the Optionee's
death or Disability.)
(e) Upon the exercise of a Limited Right related to a Stock Option, an
Optionee shall be entitled to receive an amount in cash equal in value to
the excess of the higher of (i) the highest price per share paid in
connection with the Change in Control, or (ii) the average of the daily
high and low board lot trading prices for any five day continuous period on
The Toronto Stock Exchange, such excess to be multiplied by the number of
Shares in respect to which the Limited Right shall have been exercised.
(f) Limited Rights shall be subject to such other terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee.
(g) A "Change in Control" shall be deemed to have occurred if any of
the following events occur:
(i) The acquisition by any person, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of either the then outstanding voting
securities entitled to vote generally in the election of directors;
(ii) A change in the persons constituting the Board as it existed
in the immediately preceding calendar year (the "Incumbent Board") such
that the directors of the Incumbent Board no longer constitute a
majority of the Board; provided that any person becoming a director in a
subsequent year whose election, or nomination for election, by the
Corporation's shareholders was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the election of
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<PAGE> 7
the directors of the Corporation, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of the Plan, considered as though such person was a member of
the Incumbent Board;
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger, amalgamation, arrangement or consolidation, in
each case with respect to which persons who were the shareholders of the
Corporation immediately prior to such reorganization, merger,
amalgamation, arrangement or consolidation do not, immediately
thereafter, own more than 50% of the combined voting power of the
surviving corporation;
(iv) Approval by the shareholders of the Corporation of a sale or
other disposition of all or substantially all of the assets of the
Corporation to an individual, corporation, firm or other entity which is
not a wholly-owned subsidiary of the Corporation; or
(v) Approval by the shareholders of the Corporation of a
liquidation or dissolution of the Corporation or the sale of all or
substantially all of the assets of the Corporation.
ARTICLE VII
RESTRICTED STOCK
7.1 Restricted Stock Awards. In consideration for prior service with the
UDI Group and/or as an incentive for employment with the UDI Group, either as an
Employee or as a director of the Corporation, Shares of Restricted Stock may be
granted to an Employee or director of the Corporation either alone or in
addition to other Awards granted under this Plan. The Committee shall, from time
to time, recommend to the Board those individuals to whom, and the times at
which, grants of Restricted Stock will be made, the number of Shares of
Restricted Stock to be awarded, the time within which such Awards may be subject
to forfeiture or repurchase by the Corporation, and all other terms and
conditions not inconsistent with the express provisions of the Plan. The
aggregate number of Shares of Restricted Stock granted to non-Employee directors
of the Corporation as a group during any one year period shall not exceed 25,000
Shares.
The terms of each Restricted Stock Award shall be set forth in a Restricted
Stock Agreement between the Corporation and the Participant, which Agreement
shall contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of the Plan with respect to such Award. Each
Participant receiving a Restricted Stock Award shall be issued a stock
certificate in respect of such Shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Award. The Committee shall require that the Corporation hold
stock certificates evidencing such Shares until the restrictions thereon shall
have lapsed.
7.2 Restrictions and Conditions. The Shares of Restricted Stock awarded
pursuant to this Article VII shall be subject to the following terms, conditions
and restrictions:
(a) The Committee in its sole discretion shall specify the terms,
conditions and restrictions under which Shares of Restricted Stock shall
vest or be forfeited or repurchased by the Corporation. These terms,
conditions and restrictions may include continued employment with the
Corporation or other member of the UDI Group for a specified period of
time, termination of the Employee's employment for specified reasons such
as death, Disability or Retirement (as defined in the Retirement Plan)
prior to the completion of the specified period, or the attainment of
certain performance objectives. The period of time commencing with the date
of such Award and ending on the date on which all Shares of Restricted
Stock in such Award either vest or are forfeited or repurchased by the
Corporation shall be known as the "Restriction Period." With respect to the
Restricted Stock during the Restriction Period the Committee may, in its
sole and exclusive discretion, at any time either before or after the
termination of an Employee's employment, provide for the lapse of any such
term, condition or restriction in installments and may accelerate or waive
such term, condition or restriction in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may
determine in its sole discretion. During the Restriction
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<PAGE> 8
Period the Participant shall not be permitted to sell, transfer, pledge,
assign or encumber Shares of Restricted Stock awarded under the Plan.
(b) Except as provided in this paragraph (b) and paragraph (a) above,
the Participant shall have, with respect to the Shares of Restricted Stock,
all of the rights of a shareholder of the Corporation, including the right
to vote the Shares and the right to receive any cash or stock dividends.
The Committee, in its sole discretion, as determined at the time of an
Award, may provide that the payment of cash dividends shall or may be
deferred. Any deferred cash dividends may be reinvested as the Committee
shall determine in its sole discretion, including reinvestment in
additional Shares of Restricted Stock. Stock dividends issued with respect
to Restricted Stock shall be Restricted Stock and will be subject to the
same terms, conditions and restrictions that apply to the Shares with
respect to which such dividends are issued. Additional Shares of Restricted
Stock issued with respect to cash or stock dividends shall not be counted
against the maximum number of Shares for which Awards may be granted under
the Plan in each calendar year as set forth in Article VIII of the Plan.
(c) If and when the Restriction Period applicable to Shares of Restricted
Stock expires without a prior forfeiture or repurchase by the Corporation of the
Restricted Stock, certificates for an appropriate number of unrestricted Shares
shall be delivered promptly to the Participant upon request by the Participant
for exchange and cancellation.
ARTICLE VIII
SHARES SUBJECT TO THE PLAN
8.1 Number of Shares Available for Awards. The aggregate number of Shares
reserved for issuance under the Plan shall be equal to 1,200,000 Shares plus up
to 2,638,666 Shares as to which Awards under the United Dominion Industries
Limited Stock Option and Restricted Stock Plan dated effective as of February
11, 1994, as amended, may lapse, expire, terminate or be cancelled or
repurchased by the Corporation; provided, however, the aggregate number of such
Shares available for issuance under the Plan shall not exceed 10% of the
outstanding Common Shares of the Corporation as of the effective date of the
Plan determined in accordance with Article X below. The total number of Shares
subject to Awards granted to all persons in any calendar year under this Plan
shall not exceed 2% of the outstanding Common Shares of the Corporation as of
the effective date of the Plan determined in accordance with Article X below. In
addition, in no event shall more than an aggregate of 1,000,000 Shares be
reserved under the Plan for Incentive Stock Options.
8.2 Limitations on Individual Awards.
(a) The aggregate number of Shares subject to outstanding Awards
(determined at time of grant) under the Plan to any one person shall not
exceed the lesser of (i) 5% of the then outstanding Shares and
(ii) 1,750,000 Shares in the aggregate.
(b) No Participant shall be granted Awards under this Plan with
respect to more than 500,000 Shares in any calendar year.
(c) Awards to directors who are not Employees in the UDI Group shall
be limited to the per year aggregate amounts set forth in Sections 5.3(j)
and 7.1 above.
8.3 Lapsed or Terminated Awards. Shares that were subject to Awards that
have lapsed or terminated or shares of Restricted Stock that have been
repurchased at a nominal price and cancelled by the Corporation (and Shares
tendered for payment of withholding taxes) shall thereby become reinstated as
Shares reserved for Awards hereunder and, accordingly, shall again be available
for the grant of an Award under the Plan.
8.4 Adjustment in Number of Shares for Recapitalizations and Related
Transactions. If, through or as a result of any merger, amalgamation,
arrangement, consolidation, sale of all or substantially all of the assets of
the Corporation, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction, (i) the
outstanding Shares are increased, decreased or
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<PAGE> 9
exchanged for a different number or kind of shares or other securities of the
Corporation, or (ii) additional Shares or new or different shares or other
securities of the Corporation or other non-cash assets are distributed with
respect to such Shares or other securities, an appropriate and proportionate
adjustment may be made in (x) the maximum number and kind of shares reserved for
issuance under the Plan, (y) the number and kind of shares subject to any then
outstanding Awards under the Plan, and (z) the price for each Share subject to
any then outstanding Awards under the Plan (without changing the aggregate
purchase price, if any, of any Stock Options). Any adjustments under this
Section 8.4 shall be made by the Board, whose determination as to what
adjustments, if any, shall be made and the extent thereof shall be final,
binding and conclusive. No fractional Shares shall be issued under the Plan on
account of any such adjustments.
8.5 Merger, Consolidation, Asset Sale, Liquidation, etc. In the event of a
consolidation, merger, amalgamation, arrangement or sale of all or substantially
all of the assets of the Corporation in which outstanding Shares are exchanged
for securities, cash or other property of any other corporation or business
entity or in the event of a liquidation of the Corporation, the Board, or the
board of directors of any corporation assuming the obligations of the
Corporation, may, in its discretion, take any one or more of the following
actions as to the outstanding Awards under the Plan: (i) provide that such
Awards shall be assumed, or equivalent Awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof); provided that any
such Awards substituted for Incentive Stock Options shall meet the requirements
of Section 424(a) of the Code, (ii) upon written notice to the Participant,
provide that all unexercised Awards will terminate within a specified period
immediately prior to the consummation of such transaction unless exercised by
the Participant within a specified period following the date of such notice,
(iii) in the event of a merger, amalgamation or arrangement under the terms of
which holders of Shares of the Corporation will receive upon consummation
thereof a cash payment for each Share surrendered in the merger (the "Merger
Price"), make or provide for a cash payment to the Participants equal to the
difference between (A) the Merger Price times the number of Shares subject to
such outstanding Award and (B) the aggregate exercise price, if any, of all such
outstanding Awards in exchange for the termination of such Awards, and (iv)
provide that all or any outstanding Awards shall become exercisable in full
immediately prior to such event.
ARTICLE IX
GENERAL PROVISIONS
9.1 Shareholder Approval. The Plan, and any Award granted hereunder, shall
be conditional upon obtaining the approval of the Plan by the shareholders of
the Corporation within 12 months of adoption of the Plan by the Board.
Furthermore, if required by applicable law, the grant of any Award under the
Plan, including the terms thereof, shall be conditional upon obtaining the
approval of the shareholders of the Corporation.
9.2 Amendment of Plan. Subject to applicable laws, rules and regulations,
the Board may at any time and from time to time, by resolution, amend or
terminate the Plan. No such amendment or termination shall, except with the
written consent of the Participants concerned, affect the terms and conditions
of Awards previously granted under the Plan.
9.3 Rights of Participants. It is not intended that the Plan shall in any
way affect the policies or decision of any member of the UDI Group in relation
to the remuneration of Employees, officers or directors. Moreover, no Employee
shall have any claim or right to be granted an Award and the grant of an Award
shall not be construed as giving the Participant the right to be retained in the
employ of the Corporation or other member of the UDI Group.
9.4 Securities Law Requirements. No Shares shall be issued, and no Stock
Options shall become exercisable, pursuant to the Plan unless and until the
Corporation has determined that it and the Participant have taken all actions
required under the securities laws of both the United States and Canada and
including any applicable listing requirement of any stock exchange on which the
Common Shares are listed.
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9.5 Unfunded Status of Plan. This Plan is intended to be unfunded. With
respect to any payments as to which a Participant has a fixed and vested
interest but which are not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company.
9.6 Other Plans. Awards granted under this Plan shall not be treated as
compensation for purposes of any pension, profit sharing, life insurance,
disability or any other retirement or welfare benefit plan now maintained or
hereafter adopted by the members of the UDI Group, unless otherwise provided in
such plan.
9.7 Withholding Taxes.
(a) General. To the extent required by applicable federal, state,
provincial, local or foreign law, the recipient of any payment or
distribution under the Plan shall make arrangements satisfactory to the
Corporation for the satisfaction of any withholding tax obligations that
arise by reason of such payment or distribution. The Corporation shall not
be required to make such payment or distribution until such obligations are
satisfied.
(b) Stock Withholding. Unless otherwise provided by the Committee, a
Participant may satisfy all or part of his withholding tax obligations
incident to the exercise of a Non-Qualified Stock Option or the vesting of
Restricted Stock by having the Corporation withhold a portion of the Shares
that otherwise would be issued to him. Such Shares will be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in
cash. The payment of withholding taxes by surrendering Shares to the UDI
Group member, if permitted by the Committee, shall be subject to such
restrictions as the Committee may impose, including any restrictions
required by rules of the securities laws of Canada or the United States,
and the Code.
9.8 No Assignment of Benefits. No Award or other benefit payable under
this Plan shall, except as otherwise specifically provide by law or Section
5.3(c) hereof, be transferable in any manner, and any attempt to transfer any
such benefit shall be void, and any such benefit shall not in any manner be
subject to the debts, contracts, liabilities, engagements or torts of any person
who shall be entitled to such benefit, nor shall it be subject to attachment or
legal process for or against such person.
9.9 Governing Law. This Plan and actions taken in connection herewith
shall be governed by and construed in accordance with the laws of the Province
of Ontario.
9.10 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.11 Liability. No member of the Board, no member of the Committee and no
Employee shall be liable for any act or failure to act hereunder by any other
member or Employee or by any agent to whom duties in connection with the
administration of this Plan have been delegated or, except in circumstances
involving his bad faith, gross negligence or fraud, for any act or failure to
act by the member or Employee.
9.12 Awards in Foreign Countries. The Committee shall have the authority
to adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the members of the UDI Group may operate to assure the viability of the benefits
of Awards made to Participants employed in such countries and to meet the intent
of the Plan.
9.13 Severability. The provisions of the Plan shall be deemed severable
and the validity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
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ARTICLE X
EFFECTIVE DATE OF PLAN
This Plan was adopted by the Board on February 12, 1999. This Plan shall
become effective on the date it is approved by the shareholders of the
Corporation. This Plan shall continue in effect until terminated by the Board
pursuant to Section 9.2.
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EXHIBIT 10.7
LONG-TERM PERFORMANCE UNIT
PLAN FOR
CORPORATE OFFICERS
1. PURPOSE
The purpose of the United Dominion Industries, Inc. (the "Company")
Long-term Performance Unit Plan for Corporate Officers (the "Plan") is to
provide an opportunity for corporate officers to earn incentive compensation
based upon the performance of the corporation, including its divisions and
subsidiaries, over a long-term horizon. In particular, this Plan is designed to
(a) pay Participants incentive compensation for meeting or exceeding various
performance targets during a three-year Cycle; (b) link corporate management
with the Company's strategic performance objectives; and (c) maintain
competitiveness with general industry norms in executive compensation.
2. DEFINITIONS
The following words shall have the following meanings unless the context
clearly states otherwise:
Board of Directors means the Company's Board of Directors.
Target Award means the amount of long-term incentive to be paid to a
Participant under the Plan in the event the corporation achieves 100% of its
Plan targets for the three-year Plan Cycle.
CEO means the Chief Executive Officer of the Company.
CHRC means the Compensation and Human Resources Committee of the UDIL Board
of Directors, which also handles compensation and human resources matters for
the Company.
Company means United Dominion Industries, Inc., a Delaware corporation.
Cycle means the three-year term of the Plan, normally commencing on January
1 and ending on December 31 of the third year following Plan commencement.
Incentive means the amount payable to a Participant under the Plan.
Fiscal Year means the fiscal year of the Company, which currently is the
twelve-month period ending December 31.
Participant means an employee of the Company eligible to receive an
incentive under this Plan.
Plan means the United Dominion Industries, Inc. Long-term Performance Unit
Plan for Corporate Officers.
Performance Targets means the Cycle performance targets assigned to the
corporate unit.
UDIL means United Dominion Industries Limited, a Canadian company, which is
the ultimate parent company of the Company. The Company provides management
services for UDIL pursuant to a management agreement.
3. ELIGIBILITY
Participation in the Plan shall be limited to corporate officers or other
key corporate managers appointed by the CEO, with the approval of the CHRC.
Additions or deletions to the Plan during a Fiscal Year shall be made only in
the event of an unusual circumstance, such as a promotion or new hire.
4. DETERMINATION OF MAXIMUM AMOUNT PAYABLE
The CHRC, after consultation with the CEO, may determine a maximum
aggregate payment under the Plan to be made by the corporate unit for the Cycle.
The final determination of the maximum aggregate payment under the Plan for a
Cycle shall be made no later than ninety days after the commencement of the
first year of the Plan Cycle. In no event may any award payable pursuant to the
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Plan exceed 2.5 times the Participant's eligible base salary, or $2.5 million,
whichever is the lesser amount.
5. DETERMINATION OF TARGET AWARDS AND PERFORMANCE TARGETS
(a) Target Awards -- Each Participant shall be assigned a Target Award
level consistent with guidelines published by the Company's corporate Human
Resources Department. All assignments are subject to the final approval of the
CEO and CHRC. Generally, the Target Award categories will be designated as
follows, with the percent listed below Target being the percent of Participant's
base salary in effect as of the first day of the Plan Cycle:
<TABLE>
<CAPTION>
CATEGORY TARGET
- -------- ------
<S> <C>
AA.......................................................... 70%
A........................................................... 50%
B........................................................... 40%
C........................................................... 30%
D........................................................... 20%
</TABLE>
Each Participant shall be awarded performance units, with each unit having a
target value of $100.00. The aggregate number of performance units awarded to a
Participant at the start of the Plan Cycle shall equal his or her respective
Target Award. The value of those units at the end of the three-year Cycle shall
be contingent on UDIL's satisfaction of the Performance Objectives established
at the beginning of the three-year Cycle, as described below.
(b) Performance Targets -- The corporate unit shall be assigned Performance
Targets for at the beginning of the Plan Cycle, against which the corporation's
performance will be measured. The CEO will determine the Performance Targets to
be used, subject to the approval of the CHRC. Until revised pursuant to the
Plan, the Performance Targets will be based upon predetermined Sales Growth and
Return on Equity or ROE. The category definitions are:
Sales Growth is UDIL's three-year Compound Annual Growth Rate (CAGR),
expressed as a percentage. For purposes of calculating the CAGR, the base year
shall be the year immediately preceding the first year of the three-year Plan
Cycle.
ROE is UDIL's Average Return on Equity during the three-year Plan Cycle,
derived by dividing UDIL's three-year Average Net Income by UDIL's 36-month
Average Common Equity for the same period.
Net Income is UDIL's Net Income as reported in UDIL's Annual Report and
Average Common Equity is UDIL's monthly Average Common Equity during the Plan
Year. The accounting definitions of Net Income and Average Common Equity shall
be as determined by the Company's corporate Accounting Department from
time-to-time.
As soon as practicable after the beginning of the Plan Cycle, each
Participant shall be notified of the applicable Performance Targets by the
corporate Human Resources Department.
6. DETERMINATION OF INCENTIVE
The incentive is derived by comparing the actual three-year Sales Growth
and ROE accomplishment to the values in the Plan Matrix. The Matrix has Sales
Growth values on one axis and ROE values on a second axis. The actual award, if
any, is determined by identifying the intersecting cell value in the Sales
Growth row and ROE column that most nearly matches UDIL's actual performance in
both categories. When an actual performance value is equidistant between two
cell values in the Matrix, the applicable cell value is derived by rounding up.
This "Point of Intersection" of the applicable row and column contains an award
multiplier. To determine the amount of the bonus earned, the Participant
multiplies his or her target
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<PAGE> 3
bonus by the value (expressed as a percentage) in the Point of Intersection.
Below is a sample of the Plan matrix:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12% 100 110 120 140 160
SALES 11% 90 100 110 120 130
GROWTH 10% 80 90 100 110 120
9% 65 75 85 95 105
8% 55 65 75 85 95
9.6% 10.8% 12.0% 13.2% 14.4%
ROE
</TABLE>
The CEO, subject to approval of the CHRC, and the CHRC, may make negative
adjustments to the calculated awards, but may not make any positive adjustments
pursuant to this Plan.
As soon as practicable after the end of the Plan Cycle, the Company's Human
Resources Department shall ensure that each Participant is notified of the
amount of his or her incentive.
7. TIME FOR PAYMENTS
Plan incentives normally will be paid by the end of the second month
following the completion of the three-year Cycle. Notwithstanding the normal
payment date, each Participant shall have the right to elect to defer all or a
part of his payment year under the Award pursuant to the Company's Excess
Deferral Plan.
8. FORM OF PAYMENTS
(a) At the end of the Plan Cycle, after the Company's financial results are
final and the CHRC has approved such results, any awards earned under the Plan
shall be paid in cash to Participants. However, in the discretion of the CHRC,
Participants may be allowed to elect to have all or part of such award paid in
common shares of UDIL ("Common Shares") at "Fair Market Value." The "Fair Market
Value" of a Common Share is the average of the daily high and low board lot
trading prices of a Common Share on The Toronto Stock Exchange on the most
recent trading day next preceding the date an award is approved.
(b) In an effort to encourage stock ownership, and subject to all
applicable regulations of any securities or exchange body having jurisdiction
over the Company or UDIL, the CHRC may, at its sole discretion, allow
Participants to elect to have all or a portion of a predetermined multiple of
their earned awards paid to them in Common Shares, subject to the following
conditions:
(i) The award multiple payable in Common Shares shall be 1.25 times
the award's calculated cash value under the Plan for the relevant Plan year
(the "Share Premium"). The CHRC, in its sole discretion, may reduce the
Share Premium, but in no instance may it increase the Share Premium above
1.25 times the cash award otherwise payable.
(ii) The CHRC, at its sole discretion, may limit the percentage of any
Participant's calculated award that is eligible for payment in Common
Shares under the Plan.
(iii) Any Participant who elects to receive Common Shares in lieu of
cash shall be obligated to retain ownership of such shares for at least
eighteen months after the date of grant; provided, however, in the event
the Share Price of the Common Shares at any time declines to 75% or less of
the Fair Market Value at the time of grant, the Participant shall be
permitted to immediately sell or otherwise transfer such shares free of
such restrictions. The aforesaid restrictions shall survive the
Participant's termination of employment from the Company for any reason,
other than in the case of Participant's death, disability, retirement or
other termination of employment in which case all such restrictions on the
sale or transfer of the affected Participant's Common Shares immediately
shall lapse.
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<PAGE> 4
(iv) In order for a Participant to be eligible to receive any Common
Shares under the Plan, he or she must complete a written election form and
tender it to the Company's corporate Human Resources Department on or
before such date as it may set. Such election must state that the
Participant elects to receive a percentage (from 5% to 100% in 5%
increments, subject to any maximum established by the CHRC) of his or her
incentive award in Common Shares. To facilitate an informed election, the
Company shall inform all eligible Participants at least twenty (20) days
prior to the end of the year upon which any incentive is based: (1) whether
any Common Shares in lieu of cash will be offered, (2) the maximum
percentage of any incentive subject to the Common Shares election, and (3)
the amount of the Share Premium, if any. In the event a Participant has
elected to defer a portion (or all) of his or her applicable incentive
award, such deferred portion (or all such award, as the case may be) shall
not be available for the Common Share election described in this subsection
8(b), above.
(v) In the event the CHRC elects to grant a share election option, the
Company shall provide a written disclosure of the general tax treatment of
such action prior to and as a condition of accepting any election to accept
Common Shares in lieu of cash under this Plan.
(vi) The Company will withhold from any payments made pursuant to the
Plan any taxes required to be withheld under applicable federal, state and
local tax regulations. In addition, if necessary under the circumstances to
ensure compliance with applicable withholding requirements, the Company
reserves the right to condition the tender of Shares to the Participant on
the Participant's prior payment of required withholding taxes to the
Company.
(vii) The aggregate number of Common Shares available for issuance
from and after April 27, 1999 under the terms of the Plan at any time shall
not exceed 50,000 Common Shares.
9. ADMINISTRATION OF THE PROGRAM
The overall control of the Program, including final determination of the
Awards to each Participant, is the responsibility of the CHRC and the CEO. The
Company's senior corporate human resources officer shall be responsible for
administering and implementing any actions required under the Program.
10. STATUS CHANGES OF PARTICIPANT DURING PLAN CYCLE
In the event a Participant's base salary changes during the course of the
Plan Cycle, the eligible salary for purpose of calculating any incentive due
shall remain fixed at the level existing on the first day of the Plan Cycle. In
the event a Participant changes positions or makes an inter-company transfer
during the course of the Plan Cycle, and a result, is assigned a different
incentive category, any incentive due shall be prorated, based on the number of
complete months in each such category. In the event an employee is appointed a
Participant in the Plan after the start of a Plan Cycle, the Participant shall
receive a prorated award reflecting the number of full months actually worked
during the Plan Cycle, and the eligible base salary shall be the Participant's
salary rate as of the first day of his/her participation in the Plan. Subject to
paragraph 11, below, in the event a Participant terminates employment, other
than through death, disability or retirement, during the Plan Cycle, no
incentive is due.
11. VESTING
A Participant must be in the employ of the Company (or another of UDIL's
subsidiary corporations) on the last day of the applicable Plan Cycle in order
to be eligible for an Award. The final determination as to Awards to be granted
and the amount of such Awards shall be made by the CHRC. Notwithstanding any
other provision hereof, and in accordance with this paragraph, in the event a
Participant terminates employment or is terminated by the Company at any time
for any reason, including, but not limited to retirement, disability or death,
the CHRC shall have the sole discretion as to whether any such Award shall be
granted and, if so, the amount of any such Award. While such discretion includes
a negative adjustment or appropriate proration of an earned award, it does not
include discretion to make a positive adjustment to an earned award.
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<PAGE> 5
12. MISCELLANEOUS
(a) All payments under the Plan shall be made from the general assets of
the Company. To the extent any Participant acquires a right to receive payments
under the Plan, such rights shall be no greater than those of an unsecured
general creditor of the Company.
(b) Nothing contained in the Plan and no action taken pursuant thereto
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any other person.
(c) No amount payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, either voluntary or involuntary, and any attempt to so alienate,
anticipate, sell, transfer, assign, pledge, encumber or charge the same shall be
null and void. No such amount shall be liable for or subject to the debts,
contracts, liabilities, engagements, or torts of any person to whom such
benefits or funds are or may be payable.
(d) Nothing contained in the Plan shall be construed as conferring upon any
Participant the right to continue in the employ of the Company or any of its
direct or indirect subsidiaries, nor to limit the right of an employee's
employer to discharge such employee at any time, with or without cause.
(e) The Company reserves the right to terminate the Plan at any time;
provided however, such termination shall not cause a forfeiture of any incentive
accrued up to the time the Participant was notified of such termination.
(f) The Plan shall be construed and administered in accordance with the
laws of the State of North Carolina.
5
<PAGE> 1
EXHIBIT 10.7(a)
UNITED DOMINION INDUSTRIES
LONG-TERM PERFORMANCE UNIT
PLAN FOR
OPERATING UNIT OFFICERS
1. PURPOSE
The purpose of the United Dominion Industries Limited (the "Company")
Long-term Performance Unit Plan for Operating Unit Officers (the
"Plan") is to provide an opportunity for operating unit officers to
earn incentive compensation based upon the performance of their
respective units over a long-term horizon. In particular, this Plan is
designed to (a) pay Participants incentive compensation for meeting or
exceeding various performance targets during a three-year Cycle; (b)
link a portion of the operating unit management's pay with the
Company's strategic performance objectives; and (c) maintain
competitiveness with general industry norms in executive compensation.
2. DEFINITIONS
The following words shall have the following meanings unless the
context clearly states otherwise:
BOARD OF DIRECTORS means the Company's Board of Directors.
TARGET AWARD means the amount of long-term incentive to be
paid to a Participant under the Plan in the event his
employing unit achieves 100% of its Plan targets for the
three-year Plan Cycle.
CEO means the Chief Executive Officer of the Company.
CHRC means the Compensation and Human Resources Committee of
the Company's Board of Directors.
COMPANY means United Dominion Industries Limited, a Canadian
Corporation.
CYCLE means the three-year term of the Plan, normally
commencing on January 1 and ending on December 31 of the third
year following Plan commencement.
INCENTIVE means the amount payable to a Participant under the
Plan.
FISCAL YEAR means the fiscal year of the Company, which
currently is the twelve-month period ending December 31.
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<PAGE> 2
PARTICIPANT means an employee of the Company eligible to
receive a long-term incentive under this Plan.
PLAN means the United Dominion Long-term Performance Unit Plan
for Operating Unit Officers.
PERFORMANCE TARGETS means the Cycle performance targets
assigned to the relevant operating unit.
3. ELIGIBILITY
Participation in the Plan shall be limited to the operating unit
officers or other key managers appointed by the applicable segment
executive, with approval of the CEO and CHRC. Additions or deletions to
the Plan during a Cycle shall be made only in the event of an unusual
circumstance, such as a promotion or new hire.
4. DETERMINATION OF MAXIMUM AMOUNT PAYABLE
The CHRC, after consultation with the CEO, may determine a maximum
aggregate payment under the Plan to be made by the segment for the
Cycle. The final determination of the maximum aggregate payment under
the Plan for a Cycle shall be made no later than ninety days after the
commencement of the first year of the Plan Cycle.
5. DETERMINATION OF TARGET AWARDS AND PERFORMANCE TARGETS
a.) TARGET AWARDS - Each Participant shall be assigned a Target Award
level by the segment executive, consistent with guidelines published by
the Company's corporate Human Resources Department. All assignments are
subject to the final approval of the CEO and CHRC. Generally, the
Target Award categories will be designated as follows, with the percent
listed below Target being the percent of Participant's base salary in
effect as of the first day of the Plan Cycle:
CATEGORY TARGET
-------- ------
AA 35%
A 30%
B 25%
C 20%
D 15%
Each Participant shall be awarded performance units, with each unit
having a target value of $100.00. The aggregate number of performance
units awarded to a Plan Participant at the start of the Plan Cycle
shall equal his or her respective Target Award. The value of those
units at the end of the three-year Cycle shall be contingent on the
applicable operating unit's satisfaction of the Performance Objectives
established at the beginning of the three-year Cycle, as described
below.
2
<PAGE> 3
b.) PERFORMANCE TARGETS - The relevant operating unit shall be assigned
Performance Targets at the beginning of the Plan Cycle, against which
the unit's performance will be measured. The relevant segment executive
will determine the Performance Target to be used, subject to the
approval of the CEO and CHRC. Until revised pursuant to the Plan, the
Performance Targets will be based upon predetermined Sales Growth and
Return on Investment or ROI. The category definitions are:
SALES GROWTH is the relevant Unit's three-year Compound Annual Growth
Rate (CAGR), expressed as a percentage. For purposes of calculating the
CAGR, the base year shall be the year immediately preceding the first
year of the three-year Plan Cycle.
ROI is the relevant unit's Average Return on Investment during the
three-year Plan Cycle, derived by dividing the three-year Average Net
Operating Profit by the 36-month Average Net Capital Employed for the
unit.
The accounting definitions of Net Operating Profit and Average Net
Capital Employed shall be as determined by the Company's corporate
Accounting Department from time-to-time.
As soon as practicable after the beginning of the Plan Cycle, each
Participant shall be notified of his unit's Performance Targets by the
Company's corporate Human Resources Department.
6. DETERMINATION OF INCENTIVE
The incentive is derived by comparing the relevant unit's actual
three-year Sales Growth and ROI accomplishment to the values in the
Plan Matrix, a copy of which is attached hereto as Appendix A. The
Matrix has Sales Growth values on one axis and ROI values on a second
axis. The actual award, if any, is determined by identifying
intersecting cell value on the Sales Growth row and ROI column that
most nearly matches the relevant unit's actual performance in both
categories. If the actual performance values are equidistant between
two cell values, the applicable cell value is derived by rounding up.
This "Point of Intersection" of the applicable row and column contains
an award multiplier. To determine the amount of the bonus earned, the
Participant multiplies his or her target bonus by the value (expressed
as a percentage) in the Point of Intersection. Below is a sample of the
Plan matrix:
12% 100 110 120 140 160
11% 90 100 110 120 130
Sales 10% 80 90 100 110 120
Growth 9% 65 75 85 95 105
8% 55 65 75 85 95
20.0% 22.5% 25.0% 27.5% 30.0%
ROI
3
<PAGE> 4
The relevant segment executive, subject to approval of the CHRC, may
make negative adjustments to the calculated awards, but may not make
any positive adjustments pursuant to this Plan.
As soon as practicable after the end of the Plan Cycle, the Company's
corporate Human Resources Department shall ensure that each Participant
is notified of the amount of his or her incentive.
7. TIME FOR PAYMENTS
Plan incentives normally will be paid by the end of the second month
following the completion of the three-year Plan Cycle. Notwithstanding
the normal payment date, each Participant shall have the right to elect
to defer all or a part of his payment year under the Award pursuant to
the Company's Excess Deferral Plan.
8. FORM OF PAYMENTS
a.) At the end of the relevant unit's Plan Cycle, after the Company's
financial results are final and the CHRC has approved such results, any
awards earned under the Plan shall be paid in cash to Participants.
However, in the discretion of the CHRC, Participants may be allowed to
elect to have all or part of such award paid in common shares of the
Company ("Common Shares") at "Fair Market Value." The "Fair Market
Value" of a Common Share is the average of the opening and closing
price of a Common Share on the Toronto Stock Exchange on the business
day next preceding the date an award is approved.
b.) In an effort to encourage stock ownership, and subject to all
applicable regulations of any securities or exchange body having
jurisdiction over the Company, the CHRC may, at its sole discretion,
allow Participants to elect to have all or a portion of a predetermined
multiple of their earned awards paid to them in Common Shares, subject
to the following conditions:
(i) The award multiple payable in Common Shares shall be 1.25
times the award's calculated cash value under the Plan for the
relevant Plan year (the "Share Premium"). The CHRC, in its
sole discretion, may reduce the Share Premium, but in no
instance may it increase the Share Premium above 1.25 times
the cash award otherwise payable.
(ii) The CHRC, at its sole discretion, may limit the
percentage of any Participant's calculated award that is
eligible for payment in Common Shares under the Plan.
(iii) Any Participant who elects to receive Common Shares in
lieu of cash shall be obligated to retain ownership of such
shares for at least eighteen months after the date of grant;
4
<PAGE> 5
provided, however, in the event the Share Price of the Common
Shares at any time declines to 75% or less of the Fair Market
Value at the time of grant, the Participant shall be permitted
to immediately sell or otherwise transfer such shares free of
such restrictions. The aforesaid restrictions shall survive
the Participant's termination of employment from the Company
for any reason, other than in the case of Participant's death,
disability, retirement or other termination of employment in
which case all such restrictions on the sale or transfer of
the affected Participant's Common Shares immediately shall
lapse.
(iv) In order for a Participant to be eligible to receive any
Common Shares under the Plan, he or she must complete a
written election form and tender it to the Company's corporate
Human Resources Department on or before such date as it may
set Such election must state that the Participant elects to
receive a percentage (from 5% to 100% in 5% increments,
subject to any maximum established by the CHRC) of his or her
incentive award in Common Shares. To facilitate an informed
election, the Company shall inform all eligible Participants
at least twenty (20) days prior to [the end of the year upon
which any incentive is based] the date by which an election
must be made: (1) whether any Common Shares in lieu of cash
will be offered, (2) the maximum percentage of any incentive
subject to the Common Shares election, and (3) the amount of
the Share Premium, if any. In the event a Participant has
elected to defer a portion (or all) of his or her applicable
incentive award, such deferred portion (or all such award, as
the case may be) shall not be available for the Common Share
election described in this subsection 9(b), above.
(v) In the event the CHRC elects to grant a share election
option, the Company shall provide a written disclosure of the
general tax treatment of such action prior to and as a
condition of accepting any election to accept Common Shares in
lieu of cash under this Plan.
(vi) The Company will withhold from any payments made pursuant
to the Plan any taxes required to be withheld under applicable
federal, state and local tax regulations. In addition, if
necessary under the circumstances to ensure compliance with
applicable withholding requirements, the Company reserves the
right to condition the tender of Shares to the Participant on
the Participant's prior payment of required withholding taxes
to the Company.
(vii) The aggregate number of Common Shares available for
issuance under the terms of the Plan at any time shall not
exceed .30% of the then outstanding Common Shares; provided
that in
5
<PAGE> 6
no circumstance can more than an aggregate of 120,000 Common
Shares be reserved for issuance under the Plan, and provided
further that no Common Shares may be issued under this Plan
if, after such issuance, the total number of Common Shares
issued under this Plan together with the total number of
Common Shares issued under all other incentive compensation
plans of the Company after the date of the 1999 annual and
special meeting of the shareholders, exceed 1.9% of the
outstanding Common Shares of the Company at the time of
issuance.
9. ADMINISTRATION OF THE PROGRAM
The overall control of the Program, including final determination of
the Awards to each Participant, is the responsibility of the CHRC and
the CEO. The Company's senior corporate human resources officer shall
be responsible for administering and implementing any actions required
under the Program.
10. STATUS CHANGES OF PARTICIPANT DURING PLAN CYCLE.
In the event a Participant's base salary changes during the course of
the Plan Cycle, the eligible salary for purpose of calculating any
incentive due shall remain fixed at the level existing on the first day
of the Plan Cycle. In the event a Participant changes positions or
makes an inter-company transfer during the course of the Plan Cycle,
and a result, is assigned a different incentive category, any incentive
due shall be prorated, based on the number of complete months in each
such category. In the event an employee is appointed a Participant in
the Plan after the start of a Plan Cycle, the Participant shall receive
a prorated award reflecting the number of full months actually worked
during the Plan Cycle, and the eligible base salary shall be the
Participant's salary rate as of the first day of his/her participation
in the Plan. Subject to paragraph 11, below, in the event a Participant
terminates employment, other than through death, disability or
retirement, during the Plan Cycle, no incentive is due.
11. VESTING
A Participant must be in the employ of the Company (or another of the
Company's subsidiary corporations) on the last day of the applicable
Plan Year in order to be eligible for an Award. The final determination
as to Awards to be granted and the amount of such Awards shall be made
by the CHRC. Notwithstanding any other provision hereof, and in
accordance with this paragraph, in the event a Participant terminates
employment or is terminated by the Company at any time for any reason,
including, but not limited to retirement, disability or death, the CHRC
shall have the sole discretion as to whether any such Award shall be
granted and, if so, the amount of any such Award. While such discretion
includes a negative adjustment or appropriate proration of an earned
award, it does not include discretion to make a positive adjustment to
an earned award.
12. MISCELLANEOUS
6
<PAGE> 7
a.) All payments under the Plan shall be made from the general assets
of the Company. To the extent any Participant acquires a right to
receive payments under the Plan, such rights shall be no greater than
those of an unsecured general creditor of the Company.
b.) Nothing contained in the Plan and no action taken pursuant thereto
shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any other person.
c.) No amount payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, either voluntary or involuntary, and any attempt
to so alienate, anticipate, sell, transfer, assign, pledge, encumber or
charge the same shall be null and void. No such amount shall be liable
for or subject to the debts, contracts, liabilities, engagements, or
torts of any person to whom such benefits or funds are or may be
payable.
d.) Nothing contained in the Plan shall be construed as conferring upon
any Participant the right to continue in the employ of the Company or
any of its direct or indirect subsidiaries, nor to limit the right of
an employee's employer to discharge such employee at any time, with or
without cause.
e.) The Company reserves the right to terminate the Plan at any time;
provided however, such termination shall not cause a forfeiture of any
incentive accrued up to the time the Participant was notified of such
termination.
f.) The Plan shall be construed and administered in accordance with the
laws of the State of North Carolina.
UNITED DOMINION INDUSTRIES
CHARLOTTE, N.C.
7
<PAGE> 1
EXHIBIT 10.18
[UNITED DOMINION Letterhead]
April 28, 1999
Mr. William R. Holland
Chairman and Chief Executive Officer
United Dominion Industries Limited
2300 One First Union Center
301 S. College Street
Charlotte, NC 28202
Re: Supplemental Executive Retirement Plan
Dear Bill:
The purpose of this letter is to recite the agreement between you and the
Company, as approved by the Company's Compensation and Human Resources Committee
("CHRC"), regarding your benefit under the Company's Supplemental Executive
Retirement Plan ("SERP").
Under the current SERP plan design, upon your retirement at age 62, you are
eligible to receive your accrued SERP benefit in the form of a life annuity,
with a right of survivorship in your spouse. If you elect to retire before you
reach 62, your benefit is reduced using an actuarial factor to reflect the early
commencement of benefits. Additionally, in the event there is a "Change in
Control" (as defined in the SERP), you will receive your SERP benefit in a
single lump sum payment, calculated using the GATT discount rate determined from
time to time under the United Dominion Retirement Plan for Salaried Employees
(the "GATT rate").
The modifications to your SERP benefit are as follows:
Your SERP benefit will be paid in a single lump sum payment if your employment
terminates under any of the following circumstances prior to a Change in
Control:
1. retirement upon reaching age 62, or thereafter
2. death or "Disability" (as defined under the SERP), or
3. termination without "Good Cause" (as defined in the Company's
Corporate Office Severance Policy, as amended from time to
time).
In any of these events, the amount of the lump sum would be computed (i) using
the GATT rate in effect as of the date of such termination, and (ii) in the case
of your death, Disability
1
<PAGE> 2
or termination without Good Cause occurring before age 62, without regard to the
early retirement reduction factors that would otherwise apply to a SERP benefit
commencing before age 62. The lump sum would be paid to you on or about the
first business day of January of the calendar year following the calendar year
in which your employment terminates.
If you wish to waive this lump sum payment and receive the annuity benefits
otherwise provided for under the SERP, you must provide the Company with written
notice of this election before December 1, 1999, which election must be
irrevocable. If you chose to waive the lump sum payment and your employment
terminates prior to a Change in Control as a result of your death, Disability or
termination without Good Cause occurring before you reach age 62, your annuity
payments from the SERP will be calculated without regard to the early retirement
reduction factors that would otherwise apply to a SERP benefit commencing before
age 62.
Nothing in this letter is intended to modify your benefits provided under the
March 1, 1999 Change in Control agreement between you and the Company, or the
current provisions of the SERP regarding the lump sum payment of the "Commuted
Payment Amount" of your SERP benefits if your employment terminates after a
Change in Control.
Please sign below to acknowledge and agree to the changes described above. If
you have any questions on this subject, please don't hesitate to call Tim
Verhagen or me at any time.
Best regards,
UNITED DOMINION INDUSTRIES LIMITED
/s/ Dalton D. Ruffin
Dalton D. Ruffin
Chairman, Compensation and
Human Resources Committee
Accepted:
/s/ William R. Holland
- -----------------------------------
William R. Holland
2
<PAGE> 1
EXHIBIT 10.18(a)
[UNITED DOMINION Letterhead]
November 30, 1999
Mr. William R. Holland
Chairman & Chief Executive Officer
United Dominion Industries Limited
2300 One First Union Center
301 S. College St.
Charlotte, NC 28202
Re: United Dominion Industries, Inc. Supplemental
Executive Retirement Plan (the "SERP")
Dear Bill:
As outlined in my letter to you dated April 28, 1999 regarding your benefits
under United Dominion's SERP, you have been accorded the right to receive your
SERP benefit upon retirement or separation in the form of a single lump sum in
certain circumstances. In addition, you have been accorded the right to waive
the lump sum method of payment of your SERP benefit provided that you make a
written election of such intent by December 1, 1999.
Although not required by the terms of your April 28 letter, you have advised the
Company that you have decided not to waive your right to the lump sum payment of
your SERP benefit. Accordingly, upon your retirement or other eligible
separation, your accumulated SERP benefit will be paid to you in a lump sum.
In recognition of your past service and anticipated future contributions to the
corporation, the Compensation & Human Resources Committee has agreed to fix your
lump sum discount computation rate at 5.25% (the 1999 GATT cash
1
<PAGE> 2
lump sum discount rate used in the corporation's qualified pension plan). The
corporation will use this fixed discount rate of 5.25% for purposes of computing
the lump sum benefit due you upon retirement.
Attached to this letter is a pension estimate for you prepared by the
corporation's actuary, Towers Perrin. This estimate projects a lump sum benefit
of $16,418,565 assuming the following: a 5.25% discount rate, payment as of
January 1, 2002 and actual earnings through 1999, and projected income
thereafter. At the time of your actual retirement, Towers Perrin will calculate
a sum certain due you based on your actual earnings history through your
retirement date.
The SERP payment will be made to you as soon as practicable in the year next
following your year of retirement. For example, if you retire in December 2000,
the SERP benefit will be paid to you in January 2001. If you retire in April
2001, the SERP benefit will be paid to you in January 2002. In the event of a
delay of more than thirty days between the effective date of your retirement and
the date of payment, the corporation will pay to you interest on such sum at a
rate equal to the GATT rate in effect during the year in which you retire.
Interest will begin to accrue on the thirty-first day following your effective
date of retirement. In the event of your death after retirement but prior to
your receipt of the benefit, your estate will be immediately entitled to the
full lump sum benefit.
If you have any questions regarding this matter, please let me know.
UNITED DOMINION INDUSTRIES LIMITED
COMPENSATION & HUMAN RESOURCES COMMITTEE
Best regards,
/s/ D. D. Ruffin
D. D. Ruffin
Chairman
cc: Timothy J. Verhagen
Richard L. Magee
2
<PAGE> 1
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
The following is management's discussion and analysis of significant factors
that have affected the results of operations and financial condition of United
Dominion Industries Limited (the "company"). It should be read in conjunction
with the Consolidated Financial Statements and accompanying notes which have
been prepared based on accounting principles generally accepted in Canada. Note
14 to these statements describes differences between Canadian and United States
generally accepted accounting principles (GAAP). Also, as described in
"Accounting Pronouncements," the company's financial statements have been, and
will be, affected by certain newly issued accounting rules.
Results of Operations - 1999 vs. 1998
Sales of $2.15 billion in 1999 were 6% higher than the $2.02 billion reported
for 1998. There were a number of non-recurring items recorded in net income in
1999 and 1998 which impacted the comparison of results for the two years.
Excluding these items from both years, segment profit would have totaled $227.2
million, a 7% increase over 1998; net income would have totaled $98.4 million,
a 13% increase over 1998; related earnings per share would have totaled $2.48
per share, a 15% increase over $2.15 per share in 1998 and earnings before
goodwill charges would have equaled $2.99 per share, a 16% increase over 1998.
These improvements were driven largely by the impact of acquisitions.
The net impact of the non-recurring items was a decrease in per share
earnings of approximately $.24 in 1999 and an increase in per share earnings of
$.30 in 1998. After taking these items into account, the company reported net
income of $88.9 million ($2.24 per share) in 1999, an 11% decline from the
$99.7 million ($2.45 per share) reported for 1998. Income before goodwill
charges totaled $110.6 million ($2.79 per share) in 1999, a 6% decline from
$117.2 million ($2.88 per share) reported for 1998. Segment profit of $205.0
million in 1999 represented a 1% decrease from 1998 segment profit of $207.4
million.
The non-recurring items included the following:
- In late 1998, the company announced a cost reduction program which
included reductions in force and facility rationalizations. These
actions resulted in a pre-tax charge to 1998 earnings of $16.3 million,
of which $9.5 million was reflected in segment profit and $6.8 million
was reflected in corporate expenses. In 1999, the company expanded this
cost reduction program to include, among other initiatives, additional
facility rationalizations/relocations and the discontinuation of
several unprofitable product lines. These actions resulted in a pre-tax
charge to 1999 earnings of $22.2 million, all of which was reflected in
segment profit.
- The company recorded approximately $1.5 million and $15.2 million
(pre-tax) in 1999 and 1998, respectively, of non-recurring charges
primarily relating to previously divested units and litigation
settlements. See Note 3 in the accompanying Consolidated Financial
Statements.
- During 1999, the company recorded income of $5.6 million (after-tax)
associated with favorable foreign tax settlements, while in 1998 the
company recorded income of $23.8 million (after-tax) associated with a
foreign tax refund. See Note 4 in the accompanying Consolidated
Financial Statements.
- Also during 1998, the company completed the sale of the motor product
line assets of Marley Pump Company (included in the Flow Technology
segment) and recorded a pre-tax gain of $11.3 million. See Note 3 in
the accompanying Consolidated Financial Statements.
Other factors that influenced the year-to-year comparison were as follows:
- Net interest expense increased 12% from $35.8 million in 1998 to $40.2
million in 1999 primarily due to the aforementioned acquisitions and a
share repurchase program initiated in late 1998. The company spent
approximately $194 million on these actions which led to additional
borrowings in 1999. Although the share repurchases led to increased
borrowings and interest expense, the lower number of shares outstanding
had a beneficial impact on earnings per share.
- Excluding the previously mentioned tax settlements and refund, the
provision for income taxes in 1999 was 11% higher than in 1998 due to
an increase in pre-tax earnings. The overall effective tax rate would
have been 33.5% in 1999 as compared to 34.0% in 1998.
Flow Technology
Sales of $992 million in 1999 were 5% higher than 1998 sales of $946 million.
Excluding the affects of acquisitions, sales would have declined by 2%. Segment
profit of $94.0 million declined 3% from the $96.6 million reported in the
prior year. Eliminating non-recurring items in both years, segment profit would
have increased 9%, all of which was attributable to acquisitions. Operating
margins (excluding non-recurring items) would have increased from 9.8% in 1998
to 10.3% in 1999.
Marley Cooling Tower's sales, earnings and operating margins declined in
1999 from a very strong 1998. Steady HVAC and strong electric power markets
were more than offset by weakness overseas (most notably in Great Britain).
Domestic industrial sales declined which has caused extremely competitive
pricing levels in its key petroleum and petrochemical
United Dominion Industries 23
<PAGE> 2
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
markets. Results in 1999 were also negatively impacted by cost overruns on some
large projects.
Marley Pump experienced a decline in sales, earnings and operating margins
in 1999. Last year's results benefited from the gain on the sale of its motor
line assets and EPA compliance-driven petroleum sales. Water markets held
steady while sales in its electronics line declined due to reduced markets and
some product performance issues.
Weil-McLain's sales and earnings improved in 1999 primarily due to market
share gains and more favorable weather conditions. Unit volumes of boilers
were 6% higher than 1998 levels. Selling price increases, cost reduction
programs and improved foundry efficiencies also benefited 1999 results.
Results at Waukesha Cherry-Burrell improved substantially over 1998 due to
acquisitions, the benefit of 1998's cost reduction program and margin
improvement initiatives. Sales growth was achieved in all divisions although
weaker markets were experienced in Central and South America.
Sales and earnings were down at Flair as it experienced lower sales in both
its domestic and international markets. These volume shortfalls were partially
offset by operational improvements and reductions in SG&A spending stemming
from a major reduction in force in 1998. Excluding restructuring charges
recorded in both years, Flair's earnings would have increased 10%.
CMB reported double digit sales and earnings growth in 1999. All of its
product lines performed well in very competitive markets. Margin improvement
initiatives and increased focus on customer service contributed to 1999's
strong results.
Despite a decline in sales, Mueller Steam reported higher earnings in 1999.
Weakness in its oil and gas markets hurt sales but productivity improvements
and lower SG&A expenses stemming from 1998's reduction in force more than
offset the volume shortfall.
Mueller Flow was also negatively impacted by lower oil and gas prices as
its markets for capital equipment declined dramatically and it reported an
operating loss in 1999. Given the size and nature of this business, the company
has chosen to relocate two of Mueller Flow's product lines and completely exit
another. Accordingly, restructuring charges were recorded in 1999 in connection
with this decision.
Bran+Luebbe, a German manufacturer of precision metering pumps, analyzing
equipment and integrated blending systems, was acquired in August 1999.
Therefore, its results have been consolidated for five months. Its results are
normally very seasonal, as it typically incurs operating losses in the first
quarter with a significant increase in sales and earnings in the fourth
quarter. Pro forma results would show a sales decline in 1999 but a significant
improvement in earnings and operating margins.
Machinery
Total sales of $456 million in 1999 were basically unchanged from 1998 sales of
$454 million. Segment profit in 1999 of $50.7 million was 1% lower than 1998
segment profit of $51.0 million. While BOMAG had a record year, low grain
prices significantly impacted Agricultural Equipment's markets.
BOMAG turned in a strong performance, setting new sales and earnings
records for the third consecutive year. Increased volume in Europe more than
offset a sales decline in the United States where consolidations within the
equipment rental industry depressed sales. A more profitable mix of business
and improved productivity, primarily at BOMAG's German plant, benefited
year-over-year results.
The Agricultural Equipment Division reported significant sales and earnings
declines in 1999. Agricultural equipment markets in the United States were
depressed due to low grain prices and its impact on the farm economy. Price
discounting, lower volumes and the resulting absorption losses all contributed
to weak results.
Specialty Engineered Products
Segment profit of $42.0 million in 1999 was 8% higher than 1998 segment profit
of $38.9 million while 1999 sales of $388 million exceeded prior year sales of
$349 million by 11%. Excluding the impact of non-recurring charges, segment
profit would have shown a 4% improvement. Substantially all of the growth in
sales and earnings was attributable to acquisitions.
Door Products had a challenging year in 1999, as it addressed plant
rationalization issues. While sales increased in 1999, profits were lower due
to competitive pricing pressures and the inefficiencies and costs associated
with relocating and consolidating the manufacturing operations for certain of
its product lines. These plant rationalization efforts should result in lower
costs and improved productivity going forward.
Serco also had a disappointing year. Despite double digit sales growth from
its existing operations and the additional benefits of acquiring TKO Doors in
1999, it reported lower operating results. Price erosion was experienced across
all its product lines. In addition, productivity improvements could not be
maintained at the higher volume levels and gross margins dropped
year-over-year. In January 2000, the company acquired the Kelley Company, a
leading manufacturer of dock levelers, vehicle restraints and dock accessories.
The company's new Dock Products division, which was created as a result of the
Kelley acquisition, forms the largest dock equipment supplier in North America.
Marley Electric Heating produced double digit sales and earnings growth in
1999 benefiting in part from the 1998 acquisition of Leading Edge. Increased
demand through wholesale distribution channels and improving productivity also
increased margins. In December 1999, the Patton product line of industrial
fans, heaters and building supply products was acquired to complement Marley
Electric Heating's existing product lines.
Fenn Manufacturing reported slightly lower sales, earnings and operating
margins in 1999. An unfavorable change in the mix of products sold adversely
impacted both the Critical Parts and Machinery divisions. The Critical Parts
division also experienced some quality issues in the first half of 1999 with
respect to several products.
24 United Dominion Industries
<PAGE> 3
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
C&M, acquired in mid-1998, reported higher sales in 1999 but lower
earnings, all attributable to major consolidations and capacity reductions in
its primary market.
Test Instrumentation
Sales of $312 million in 1999 were 15% higher than 1998 sales of $271 million.
Segment profit decreased by 12% from $20.9 million in 1998 to $18.3 million in
1999. Excluding the impact of non-recurring charges, earnings would have shown
an increase of 25%.
While sales of the Atmospheric Air Division showed improvement,
restructuring charges related to the relocation of King's manufacturing
operations from Minnesota to South Carolina significantly impacted results.
This relocation is expected to be completed in early 2000 and should result in
improved operating margins in the future. Excluding the impact of these
one-time charges, results would have increased substantially. Almost all of the
year-over-year improvement resulted from TMI, which had a record year in 1999.
It benefited from an increase in volume, primarily related to one large
contract.
Sales in 1999 at Advanced Industrial Technologies were flat with 1998 while
earnings and operating margins declined. Material and overhead cost reductions
benefited results but this was more than offset by an increase in SG&A
spending. General Electronic Systems was acquired in November 1999 to expand
Advanced Industrial Technologies' industrial weighing equipment product line.
The Test Measurement Division reported a significant increase in sales in
1999, all due to Radiodetection. Strong markets worldwide and the 1999
acquisitions of Riser-Bond and Bicotest contributed to Radiodetection's strong
year. The division's overall operating earnings declined from 1998 due to
charges related to the consolidation and relocation of Advanced Test Products
(ATP) (Amprobe, Promax and TIF) into one facility in Florida. Excluding the
cost and inefficiencies caused by this move, Test Measurement Division's
results would have shown strong improvement year-over-year, again entirely
related to Radiodetection.
Sales and earnings at Lunaire/LDS were both up almost 50% in 1999 primarily
due to the acquisition of Ling Dynamic Systems (LDS) in mid-1998. On a pro
forma basis, 1999 sales were flat compared to 1998 while earnings showed
double-digit growth. Productivity improvements and lower material costs at LDS
contributed to the improved margins. Focus on cost reductions also resulted in
reduced SG&A spending at both Lunaire and LDS.
Outlook
Management anticipates continued modest growth in the U.S. economy, stable
conditions in Europe and improving markets in the Far East in 2000. Based on
these conditions, as well as savings that should result from cost reduction
initiatives and additional earnings provided by recent acquisitions, operating
results in 2000 are expected to continue to improve.
Results of Operations - 1998 vs. 1997
The company reported net income of $99.7 million ($2.45 per share) in 1998, as
compared to net income of $141.1 million ($3.17 per share) in 1997. Net income
in 1997 included $56.2 million ($1.26 per share) in earnings from discontinued
operations. Income from continuing operations in 1997 was $84.9 million ($1.91
per share).
Sales of $2.02 billion in 1998 increased by 22% over 1997 sales of $1.65
billion. Segment profit in 1998 of $207.4 million was 19% higher than 1997
results of $174.7 million. The increases in sales and segment profit were
driven largely by acquisitions completed in 1998 and late 1997.
There were a number of non-recurring items recorded in income from
continuing operations in 1998 and 1997 which impacted the comparison of results
for the two years. As noted previously, the net impact of these items was to
increase per share earnings by approximately $.30 in 1998. There was no net
effect on 1997 results. The items included in 1998 results were discussed
above. The following were the principal non-recurring items included in 1997
results:
- The company recorded charges related to reorganization activities and
asset write-offs of approximately $9.3 million (pre-tax) which were
reflected in segment profit.
- The company initiated a tender offer for the shares of Imo Industries
Inc. (Imo). The shareholders of Imo subsequently received a higher
offer, and Imo terminated the merger agreement. The company received a
$7.7 million (pre-tax) termination fee (net of expenses).
Excluding non-recurring items from both years would have resulted in
year-over-year increases in segment profit, income from continuing operations
and related per share amounts of 15%, 3% and 13%, respectively. These
improvements were driven largely by the impact of acquisitions, as noted
earlier, as well as share buyback programs implemented in 1998 and 1997. Other
factors that influenced the year-to-year comparison were as follows:
- Net interest expense almost doubled from $18.5 million in 1997 to $35.8
million in 1998 primarily due to the aforementioned acquisitions and
share repurchase programs for which the company spent approximately
$256 million.
United Dominion Industries 25
<PAGE> 4
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
- Excluding the previously mentioned tax refund, the provision for income
taxes in 1998 was approximately 3% lower than 1997 as pre-tax earnings
declined by 4%. The overall effective tax rate would have been 34.0% in
1998 as compared to 33.7% in 1997.
Flow Technology
Sales of $946 million in 1998 were 12% higher than 1997 sales of $846 million.
The increase would have been 2% excluding acquisitions. Segment profit of $96.6
million was 22% higher than the $79.4 million reported in the prior year.
Eliminating non-recurring items in both years, the increase in segment profit
would have amounted to 5%, all of which was attributable to acquisitions.
Operating margins (excluding non-recurring items) would have declined from
10.5% in 1997 to 9.8% in 1998.
Marley Cooling Tower produced higher sales, earnings and operating margins
(excluding restructuring charges) in 1998 as its Italian operations experienced
significantly improved activity levels. Earnings at its domestic operations were
lower as depressed oil prices caused extremely competitive pricing levels (with
resulting margin pressures) in its key petroleum and petrochemical markets.
However, markets were strong for its factory-assembled products and
reconstruction businesses.
Marley Pump reported significantly higher earnings, primarily due to the
gain on the sale of its motor line assets. Excluding this gain, results were
still up substantially over 1997 as volume levels were higher in all product
lines. The petroleum business benefited from new product introductions and EPA
regulations. The water and electronics lines also showed strong unit volume
increases, although margins were negatively impacted by higher costs which
could not be recovered in the marketplace.
Weil-McLain's sales and earnings declined substantially in 1998 primarily
due to unseasonably warm weather that persisted in most of its key markets.
Unit volumes of boilers were 16% lower than 1997 levels. The year-over-year
decline was partially mitigated by reduced SG&A spending and a one-time charge
in 1997 associated with a product replacement program.
Results at Waukesha Cherry-Burrell were substantially improved over 1997
due, in part, to acquisitions. The implementation of a cost reduction program
and several key margin improvement initiatives, principally two "focused
factories" at its Wisconsin facility, helped improve gross margins
significantly at this operation.
Sales and earnings were down substantially at Flair which produced very
disappointing results in both years. Low volumes in its engineered products
(particularly in its oil-related markets) and various operating issues
detracted from its operating margins. Charges were recorded in both years
related to restructuring activities as well as asset write-offs in 1997.
The Mueller Steam, CMB, Mueller Flow group of companies reported
significant improvements in sales and earnings in 1998 primarily due to
consolidating results for a full year (vs. only five months in 1997). On a pro
forma basis, sales improved slightly while earnings declined. Downturns in
petroleum markets depressed sales volumes at Mueller Flow. Competitive pricing,
quality problems and an unfavorable product mix all contributed to a decline in
margins at Mueller Steam. In 1998, results at Mueller Steam were also impacted
by restructuring activities. CMB's results improved slightly year-over-year as
it dealt with the effects of unusual weather on its markets and the integration
of a new product line.
Machinery
Total sales of $454 million in 1998 were 25% higher than 1997 sales of $364
million, while 1998 segment profit of $51.0 million represented a 20% increase
over 1997 segment profit of $42.5 million. The increases stemmed from an
exceptionally strong year at BOMAG and the consolidation of Agricultural
Equipment results for a full 12 months in 1998 (vs. five months in 1997). On a
pro forma basis, sales and earnings in 1998 were up by 13% and 9%,
respectively, over 1997 results.
BOMAG's unit volume levels were substantially improved as the North
American and most of the European markets remained very strong. The resulting
absorption gains, favorable exchange rates and several new product
introductions also contributed to its excellent performance. These positive
variances were only partly negated by weak Far Eastern markets, competitive
pricing pressures and increased strategic spending.
On a pro forma basis, Agricultural Equipment sales and earnings both
declined from 1997 levels. Recessionary conditions in the U.S. farm economy
drove grain prices to very low levels, negatively impacting operating results in
1998. A less favorable product mix also affected results.
26 United Dominion Industries
<PAGE> 5
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
Specialty Engineered Products
Segment profit of $38.9 million in 1998 was 7% lower than 1997 segment profit of
$41.6 million while 1998 sales of $349 million exceeded prior year levels of
$310 million by 12%. Excluding the impact of non-recurring charges, earnings
would have shown a 10% improvement. Most of the growth in sales and earnings was
attributable to acquisitions.
Door Products had a strong year in 1998. Buoyant markets, improved
productivity and expanded capacity enabled this unit to produce and sell
significantly higher unit volumes. It also increased penetration in its three
primary markets (commercial construction, detention facilities and metal
buildings) through two acquisitions. Competitive pricing pressures were a
restraining influence on margins which were basically flat compared to the
prior year.
Serco also had a strong year. While unit volumes of its seal and shelter
line were down from 1997, increases in leveler and vehicle restraint lines
helped improve margins. Its Lee Engineering division had a very disappointing
year as it generated nominal profitability in 1998, well off 1997 levels.
Results were hampered by lower unit volumes, poor productivity and various
operating issues.
Marley Electric Heating produced lower sales and earnings in 1998 despite
the acquisition of Leading Edge. Although it benefited from record shipments of
air circulators in 1998, its core heating business suffered from lower unit
volumes largely attributable to the unusually warm winter weather. An
unfavorable product mix and production inefficiencies also detracted from
profitability and resulted in lower margins.
Fenn Manufacturing produced solid improvements in both sales and earnings.
The Critical Parts business experienced a strong increase in sales due, in
part, to its entry into the commercial aerospace market. The Machinery Division
produced a solid improvement in earnings on essentially flat sales volumes due
to cost reductions initiated earlier in the year.
C&M was acquired in mid-1998 and its results were consolidated for the last
six months of 1998. As previously mentioned, its primary market has undergone a
series of major consolidations and restructurings which have curtailed customer
capital spending.
Test Instrumentation
Sales of $271 million in 1998 were more than double 1997 sales of $124 million
while segment profit increased by 82% from $11.5 million in 1997 to $20.9
million in 1998. The increases were primarily attributable to acquisitions in
1998 and late 1997. Excluding these acquisitions and various non-recurring
charges, sales and earnings would have shown increases of 13% and 2%,
respectively.
While sales of the Atmospheric Air Division showed strong improvement,
litigation expenses and reorganization charges resulted in a slight decline in
profitability. TMI was able to take advantage of an increase in automotive
ventilation projects and the exit of a key competitor from its market to
generate strong increases in sales and earnings over 1997 levels.
Sales and earnings at Advanced Industrial Technologies were higher in 1998
as a result of consolidating its results for a full year (vs. five months in
1997). On a pro forma basis, sales and earnings both declined in 1998 due to a
cutback in capital spending in the U.S. automotive market. Unit volumes for all
major product lines were lower in 1998. The slowdown was driven partly by the
Daimler Chrysler merger, which caused many programs to be put on hold, and the
prolonged General Motors strike. Very competitive pricing levels contributed to
a decline in operating margins.
Test Measurement Division sales and earnings were also higher in 1998 due
to consolidating ATP's results for a full year and the 1998 acquisition of
Radiodetection. Pro forma sales would have shown a slight improvement and
earnings and margins would have declined. Profitability suffered due to foreign
exchange and an unfavorable product mix at Radiodetection and a combination of
restructuring charges recorded in 1998, underabsorption, delays in bringing new
products to market, labor inefficiencies and scrap/rework issues at ATP.
Results at Lunaire/LDS were up strongly in 1998 primarily due to the
mid-year acquisition of LDS. On a pro forma basis, 1998 sales were flat
compared to 1997 while earnings declined. Lunaire showed improvements in both
sales and earnings over 1997, although margins were under pressure due to
competitive pricing levels. LDS's pro forma results in 1998 were off
dramatically from 1997 due to a number of factors including delays in
introducing a new product, weak Far Eastern markets and softness in its U.S.
automotive markets.
Liquidity and Capital Resources
The company generated $180 million of cash flow from operating activities in
1999 compared to $107 million in 1998. A decrease in working capital
requirements in 1999 was the primary reason for the increase as 1999 benefited
from the collection of a foreign tax refund of approximately $32 million. After
providing $76 million for capital and other operating expenditures and $14
million for dividends, free cash flow amounted to $89 million, up from $37
million in 1998. In 1999, the company spent approximately $155 million on
acquisitions and $38 million to repurchase 1.75 million common shares. These
activities were funded from free cash flow, additional borrowings and from
existing cash balances. Cash balances decreased by $15 million during the year
to $109 million at December 31, 1999.
Total "operating" working capital balances (excluding cash and borrowings)
increased to $416 million at December 31, 1999 from $409 million at the end of
1998. This was largely due to acquisitions.
The company's ratio of net debt (borrowings less cash on hand) to total
capital (net debt plus shareholders' equity) increased to 41% at December 31,
1999, up from 37% at the end of last year, primarily due to increased
borrowings to finance acquisitions and share repurchases.
United Dominion Industries 27
<PAGE> 6
FINANCIAL REVIEW INCLUDING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Dominion Industries
At December 31, 1999, the company had available approximately $250 million
of unused credit facilities. Management believes that the combination of cash
available and the remaining unused credit facilities are adequate to provide
for short-term cash needs and to support internal growth and future
acquisitions. In addition, in January 2000, the company filed a registration
statement for the issuance of up to $200 million in public debt.
The company plans to invest more than $80 million in new plant and
equipment in 2000. This amount represents approximately 140% of annual
depreciation expense.
Risks and Uncertainties
The company's operating plants from time to time make changes or modifications
to comply with current regulatory provisions governing the discharge of
materials into the environment. The company believes that capital expenditures
for environmental control facilities in 2000 will not be material. The company
maintains an environmental policy that requires the performance of environmental
audits, the conducting of seminars and other actions necessary to ensure
compliance with environmental laws. Management believes that compliance with
regulatory requirements and its environmental policy will have no material
adverse effect on the business or the consolidated financial position of the
company.
In 1997, the company initiated a comprehensive review of its computer
systems, equipment and facilities to identify any Year 2000 problems. By the
end of 1999, all of the company's essential computer applications and systems
were Year 2000 compliant and, to date, the company has not experienced, nor
does it expect to experience, any significant Year 2000 consequences. However,
there can be no assurance that all aspects of the Year 2000 issue that may yet
affect the company, including those related to vendors, customers or other
companies with which the company deals, have been fully resolved.
The costs expended to achieve Year 2000 compliance were funded through
operating cash flow and included approximately $3 million spent on
identification, correction, reprogramming and testing, all of which has been
expensed. While additional amounts were capitalized in connection with the
purchase of new computer systems, almost all of these amounts were necessary
capital expenditures that would have been made even had there been no Year 2000
issue.
Accounting Pronouncements
As described in Note 2 to the accompanying Consolidated Financial Statements,
effective January 1, 1999, the company adopted the Canadian Institute of
Chartered Accountants (CICA) Handbook Section 3465, Income Taxes. This adoption
has been retroactively applied to all years presented.
As further described in Note 2, the company has also adopted the new
presentation format allowed in Handbook Section 1580, Business Combinations,
and accordingly the accompanying Consolidated Statements of Income have been
reformatted to present income before goodwill charges and the related per share
amounts.
As described in Note 14, effective January 1, 2000, the company will be
adopting the provisions of Handbook Section 3461, Employee Future Benefits.
This new standard essentially harmonizes Canadian rules with United States GAAP
as it relates to postretirement benefits and pension expense. The company
intends to adopt CICA Handbook Section 3461 retroactively and will be restating
prior year amounts accordingly.
Effective January 1, 2001, the company will adopt, for United States GAAP
disclosure purposes, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (FAS 133). The
company is currently evaluating the effects of FAS 133 on its financial
position and results of operations but does not believe it will have a material
impact.
The foregoing discussion and analysis contains forward-looking statements
based on current expectations that are subject to the risks and uncertainties
described. Those risks arise from certain assumptions and factors that could
cause the actual results to differ, perhaps materially, from those set forth or
implied. Those assumptions and factors include those listed on page 48 of this
annual report.
28 United Dominion Industries
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME, RESTATED (note 2)
United Dominion Industries
Years Ended December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 2,148,338 $ 2,020,374 $ 1,654,679
- -----------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 1,480,866 1,401,802 1,168,654
Restructuring charges - inventory (note 3) 5,153 -- --
- -----------------------------------------------------------------------------------------------------------------
Total cost of sales 1,486,019 1,401,802 1,168,654
Selling, general and administrative expenses 447,583 429,591 328,271
Restructuring charges - other (note 3) 15,351 16,336 --
- -----------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,948,953 1,847,729 1,496,925
- -----------------------------------------------------------------------------------------------------------------
Operating income 199,385 172,645 157,754
Other income (expense)
Interest - net (note 10) (40,178) (35,750) (18,544)
Gain on sale of business (note 3) -- 11,285 --
Other (note 3) (1,500) (6,852) 7,700
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations before income
taxes and goodwill charges 157,707 141,328 146,910
Income tax provision (note 4) (47,151) (24,147) (49,528)
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations before goodwill charges 110,556 117,181 97,382
Goodwill charges, net of applicable income tax benefit of
$1,422 in 1999, $1,278 in 1998 and $690 in 1997 (note 3) (21,646) (17,493) (12,492)
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations 88,910 99,688 84,890
- -----------------------------------------------------------------------------------------------------------------
Income from discontinued operations (note 3)
Earnings, net of applicable income tax expense of $2,211 -- -- 3,088
Gain on disposal, net of applicable income tax
expense of $36,011 -- -- 53,086
- -----------------------------------------------------------------------------------------------------------------
-- -- 56,174
- -----------------------------------------------------------------------------------------------------------------
Net income $ 88,910 $ 99,688 $ 141,064
=================================================================================================================
Earnings per common share (note 1):
Continuing operations before goodwill charges $ 2.79 $ 2.88 $ 2.19
=================================================================================================================
Continuing operations $ 2.24 $ 2.45 $ 1.91
Discontinued operations -- -- 1.26
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 2.24 $ 2.45 $ 3.17
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
United Dominion Industries 29
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
United Dominion Industries
Years Ended December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided from operating activities
Income from continuing operations $ 88,910 $ 99,688 $ 84,890
Add (deduct) items not affecting cash
Depreciation 46,341 41,747 34,267
Amortization 28,376 23,118 16,570
Gain on sale of business -- (11,285) --
Deferred income taxes 2,839 (5,899) 15,395
Other 1,474 2,358 315
Net decrease (increase) in working capital
other than cash (note 14) 11,153 (36,258) (23,334)
Asset securitization 900 (6,100) (10,400)
- ----------------------------------------------------------------------------------------------------------------
179,993 107,369 117,703
- ----------------------------------------------------------------------------------------------------------------
Cash used by investing activities
Additions to fixed assets (61,278) (51,741) (60,596)
Acquisitions of businesses, net of cash balances (155,416) (172,181) (364,148)
Net proceeds from disposal of businesses -- 25,008 274,641
Proceeds from (investments in) other assets (9,952) 10,354 8,851
Other (874) (8,040) (1,545)
- ----------------------------------------------------------------------------------------------------------------
(227,520) (196,600) (142,797)
- ----------------------------------------------------------------------------------------------------------------
Cash provided from (used by) financing activities
Additional borrowings 155,597 331,907 119,020
Repayments of borrowings (71,488) (92,931) (66,886)
Issuance of common shares 1,537 7,302 1,780
Repurchase of common shares (38,476) (83,565) (56,954)
Dividends (14,158) (14,614) (12,413)
- ----------------------------------------------------------------------------------------------------------------
33,012 148,099 (15,453)
- ----------------------------------------------------------------------------------------------------------------
Cash used by discontinued operations (note 3) -- -- (61,135)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments (14,515) 58,868 (101,682)
Cash and short-term investments at beginning of year 123,455 64,587 166,269
- ----------------------------------------------------------------------------------------------------------------
Cash and short-term investments at end of year $ 108,940 $ 123,455 $ 64,587
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
30 United Dominion Industries
<PAGE> 9
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION, RESTATED (note 2)
United Dominion Industries
December 31, 1999 and 1998
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and short-term investments $ 108,940 $ 123,455
Accounts and notes receivable, less allowance for doubtful accounts of
$9,645 in 1999 and $10,725 in 1998 (note 12) 334,398 335,424
Inventories (note 5) 390,654 368,842
Other current assets 61,386 81,679
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 895,378 909,400
Fixed assets (note 6) 350,901 317,853
Goodwill (notes 1 and 3) 836,497 728,350
Other intangible assets (note 1) 43,547 46,470
Other assets (note 4) 115,252 88,584
- ----------------------------------------------------------------------------------------------------------------------
$ 2,241,575 $ 2,090,657
======================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities
Notes payable to banks (note 7) $ 103,544 $ 53,672
Current portion of long-term debt (note 7) 46,082 51,665
Accounts payable 169,362 158,708
Accrued liabilities 185,742 194,682
Customer advances 15,440 23,181
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 520,170 481,908
Long-term debt (note 7) 591,506 544,771
Other liabilities 210,654 178,148
- ----------------------------------------------------------------------------------------------------------------------
1,322,330 1,204,827
- ----------------------------------------------------------------------------------------------------------------------
Shareholders' equity (note 9)
Common shares - outstanding 39,047,937 in 1999 and
40,520,982 shares in 1998 537,355 557,574
Contributed surplus 4,283 4,057
Retained earnings 421,137 360,796
- ----------------------------------------------------------------------------------------------------------------------
962,775 922,427
Equity adjustment from foreign currency translation (notes 1 and 7) (43,530) (36,597)
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 919,245 885,830
- ----------------------------------------------------------------------------------------------------------------------
$ 2,241,575 $ 2,090,657
======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board - William R. Holland, Director; R. Stuart Dickson,
Director.
United Dominion Industries 31
<PAGE> 10
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY,
RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Common Shares
------------------------ Equity
Unamortized Adjustment/ Total
Shares Restricted Contributed Retained Currency Shareholders'
Issued Stock Surplus Earnings Translation Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 621,825 $(5,287) $1,409 $ 214,935 $(26,128) $ 806,754
Repurchase of 2,067,540 shares (28,222) -- -- (28,732) -- (56,954)
Stock options exercised (110,255 shares) 1,780 -- 450 -- -- 2,230
Amortization of restricted stock grants -- 1,406 -- -- -- 1,406
Net income for the year -- -- -- 141,064 -- 141,064
Cash dividends - $.28 per share -- -- -- (12,413) -- (12,413)
Net effect of currency translation adjustments -- -- -- -- (13,187) (13,187)
Effect of hedging transactions -- -- -- -- 3,649 3,649
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 595,383 (3,881) 1,859 314,854 (35,666) 872,549
Repurchase of 3,250,000 shares (44,433) -- -- (39,132) -- (83,565)
Stock options exercised (445,422 shares) 7,302 -- 2,198 -- -- 9,500
Incentive share election (43,845 shares) 1,219 -- -- -- -- 1,219
Amortization of restricted stock grants -- 1,984 -- -- -- 1,984
Net income for the year -- -- -- 99,688 -- 99,688
Cash dividends - $.36 per share -- -- -- (14,614) -- (14,614)
Net effect of currency translation adjustments -- -- -- -- (3,432) (3,432)
Effect of hedging transactions -- -- -- -- 2,501 2,501
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 559,471 (1,897) 4,057 360,796 (36,597) 885,830
Repurchase of 1,745,000 shares (24,065) -- -- (14,411) -- (38,476)
Stock options exercised (103,400 shares) 1,537 -- 226 -- -- 1,763
Incentive share election (55,365 shares) 1,105 -- -- -- -- 1,105
Restricted stock issued (113,190 shares) 2,263 (2,263) -- -- -- --
Amortization of restricted stock grants -- 1,204 -- -- -- 1,204
Net income for the year -- -- -- 88,910 -- 88,910
Cash dividends - $.36 per share -- -- -- (14,158) -- (14,158)
Net effect of currency translation adjustments -- -- -- -- (12,688) (12,688)
Effect of hedging transactions -- -- -- -- 5,755 5,755
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $ 540,311 $(2,956) $4,283 $ 421,137 $(43,530) $ 919,245
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
32 United Dominion Industries
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
1. Summary of Significant Accounting Policies
GENERAL
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. These accounting principles
are in conformity with accounting principles generally accepted in the United
States except as indicated in note 14. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CONSOLIDATION
All subsidiary companies are consolidated and all significant intercompany
accounts and transactions have been eliminated in consolidation.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash and short-term investments include highly liquid investments with a
maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (average or first-in, first-out) or
net realizable value.
FIXED ASSETS
Property, plant and equipment are recorded at cost. Major renewals and
betterments are capitalized; whereas, maintenance and repairs are expensed as
incurred. Cost of property sold or otherwise disposed and related accumulated
depreciation are removed from the accounts at the time of disposal and any
resulting gain or loss is included in income. Depreciation of plant and
equipment is determined on the straight-line method over the estimated useful
lives of the assets. The average annual rates of depreciation range from 4% for
buildings to 10% for machinery and equipment.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value of net
identifiable assets acquired, is amortized on the straight-line method over the
expected periods to be benefited, generally 40 years. The company assesses the
recoverability of this intangible asset based primarily upon an analysis of
undiscounted future operating cash flows from the acquired operations.
Accumulated amortization was $90,309 and $69,044 at December 31, 1999 and 1998,
respectively.
OTHER INTANGIBLE ASSETS
Amounts assigned to other intangible assets, primarily trademarks and patents,
are based on independent appraisals and are amortized on the straight-line
method over periods ranging from four to 40 years. Accumulated amortization was
$16,565 and $13,262 at December 31, 1999 and 1998, respectively.
FOREIGN CURRENCY TRANSLATION
The financial statements of those operations whose functional currency is a
foreign currency are translated into U.S. dollars using the current rate
method. Under this method, all assets and liabilities are translated into U.S.
dollars using current exchange rates and income statement items are translated
using weighted-average exchange rates. The translation adjustment is included
as a component of shareholders' equity; whereas, gains and losses on foreign
currency transactions are included in income. Foreign currency transaction
losses totaled $2,768, $3,530 and $3,959 for 1999, 1998 and 1997, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The company is party to certain derivative financial instruments, principally
forward exchange contracts used to manage foreign currency exposures. Gains and
losses on forward foreign exchange contracts are recognized in income in the
same period as the foreign currency transactions to which they relate.
FAIR VALUES
The carrying values of cash and short-term investments, accounts receivable,
accounts payable and accrued liabilities approximate their fair value due to
the relatively short periods to maturity of the instruments. The fair value of
the company's long-term debt is estimated based on the current rates available
to the company for debt of the same remaining maturities. Since the company's
fixed rate debt carries interest rates which are different than current market
rates, the estimated fair value of the company's long-term debt was
approximately $634,000 and $621,000 at December 31, 1999 and 1998,
respectively.
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing net income by the
weighted-average number of common shares outstanding during the year
(39,641,606 shares for 1999, 40,755,170 shares for 1998 and 44,439,004 shares
for 1997). The assumed exercise of outstanding stock options would not have a
materially dilutive effect on reported earnings per common share.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current year
presentation.
United Dominion Industries 33
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
2. Restatement Related to Adoption of
New Accounting Pronouncements
Effective January 1, 1999, the company adopted the Canadian Institute of
Chartered Accountants (CICA) Handbook Section 3465, Income Taxes. This adoption
has been retroactively applied to all years presented in the accompanying
consolidated financial statements. The adoption of this pronouncement did not
have a material effect on the Consolidated Statement of Income for the year
ended December 31, 1998 and it has not been restated. For the year ended
December 31, 1997, the adoption of Handbook Section 3465 resulted in an
increase in the gain on disposal of discontinued operations (note 3) and a
related increase in net income of $3,086, or $.07 per share.
At December 31, 1998, the adoption resulted in certain reclassifications
related to the cost basis of various amounts in the Consolidated Statement of
Financial Position. The reclassifications resulted in increases in fixed assets
of $5,515 and accrued liabilities of $5,174 and decreases in inventories of
$468, other current assets of $288, goodwill and other intangible assets of
$1,344, other assets of $33,801, other liabilities of $24,109 and retained
earnings of $11,451 as of December 31, 1998.
As of December 31, 1996, the adoption of Handbook Section 3465 resulted in a
reduction in retained earnings and total shareholders' equity of $14,537 in the
Consolidated Statement of Changes in Shareholders' Equity.
In 1999, the CICA amended Handbook Section 1580, Business Combinations, to
allow for the separate presentation of goodwill amortization expense and
goodwill impairment charges (collectively referred to as "goodwill charges"),
net of tax, in the income statement. Accordingly, the presentation of income
before goodwill charges, and the related per share amount, is also allowed. The
company has adopted this presentation format and has reclassified the prior
years' Consolidated Statements of Income to conform with the new presentation.
This reclassification does not affect net income or net earnings per share as
previously reported.
ACQUISITIONS
In February 1999, the company acquired Riser-Bond Instruments which designs and
manufactures cable fault locators principally used by the telecommunications
industry. In July, the company acquired TKO Doors, a manufacturer of loading
dock doors. In August, the company acquired Bran + Luebbe, a manufacturer of
precision metering pumps, analyzing equipment and integrated blending systems
for a broad range of process industries. In October, the company acquired S.W.
Fleming Limited, a manufacturer of commercial side-hinged steel doors and
frames. The cost of these and other smaller acquisitions totaled approximately
$155,000 and resulted in an increase in working capital of approximately
$17,000, an increase in fixed assets of approximately $24,000, an increase in
goodwill of approximately $129,000 and an increase in other liabilities of
approximately $15,000.
In February 1998, the company acquired Radiodetection which designs and
manufactures portable pipe and cable locators and related equipment used in the
utility and telecommunication industries. In March, the company acquired
Tex-Steel Corporation, a manufacturer of custom steel doors and frames for
commercial and detention markets. In April, the company acquired APV Ice Cream,
a manufacturer of industrial ice cream production equipment. In May, the
company acquired Leading Edge, Inc. which manufactures ceiling fans, air
curtains and air circulators supplied to the industrial and electrical
distributor markets. In July, the company acquired C&M, Inc., a manufacturer of
powered roller conveyor systems primarily servicing the corrugated and solid
fiber carton industry. In August, the company acquired Ling Dynamic Systems
Limited which designs and builds vibration test systems and related equipment.
The cost of these and other smaller acquisitions totaled approximately $172,000
and resulted in an increase in working capital of approximately $27,000, an
increase in fixed assets of approximately $14,000, an increase in other assets
of approximately $1,000 and an increase in goodwill of approximately $130,000.
In 1997, the company completed the purchase of the common stock of Core
Industries Inc (Core). Core was a diversified manufacturer of valves, strainers
and backflow prevention products, agricultural equipment, electrical test and
measurement equipment and integrated assembly systems used in automobile and
other manufacturing applications. The total cost of the acquisition was
approximately $302,000.
If the acquisition of Core had occurred at the beginning of 1997, unaudited
pro forma consolidated sales, net income and net earnings per share in 1997
would have been $1,826,273, $144,422 and $3.25, respectively.
In 1997, the company also made several smaller product line acquisitions. In
January, the company acquired Lee Engineering which produces vertical lifting
equipment used in various industrial applications. In March, the company
acquired Trussbilt, a manufacturer of doors, frames and related products for
the security and detention markets. In April, the company acquired Dominion
Door,
34 United Dominion Industries
<PAGE> 13
which produces steel doors, frames and pre-hung windows for metal buildings. In
September, the company acquired TIF Instruments, a manufacturer of electronic
test instruments used primarily by the HVAC market. In September, the company
also acquired Process Machinery & Supply Company and Alliance Food Equipment
Corp. Both companies manufacture and recondition equipment for the ice cream
industry. In November, the company acquired Stow Manufacturing, a manufacturer
of light construction equipment. The cost of these and other smaller
acquisitions totaled approximately $68,000.
The above mentioned acquisitions have been accounted for by the purchase
method and earnings have been included in the results of operations from the
dates of the acquisitions.
In 1997, the company initiated a tender offer for the shares of Imo
Industries Inc. (Imo). Imo's Board of Directors ultimately terminated the merger
agreement and, pursuant to the terms of the agreement, the company received a
$7,700 termination fee, net of expenses. This amount is included in "Other
income (expense)" in the Consolidated Statements of Income.
DIVESTITURES (OTHER THAN DISCONTINUED OPERATIONS)
In January 1998, the company sold its Little Falls Tank division of Waukesha
Cherry-Burrell for approximately $4,000 which equaled its book value. In
December 1998, the company sold the assets of its Marley Pump motor product line
and entered into various consulting and supply arrangements for total proceeds
of $17,500. The company recognized a pre-tax gain on the sale of $11,285 which
is included in "Other income (expense)" in the Consolidated Statements of
Income.
DISCONTINUED OPERATIONS
In 1997, the company sold Varco-Pruden, Centria and Windsor Door. These units
were part of the company's Building Products segment. The company received
approximately $240,000 in cash and recorded a net-of-tax gain of $53,086 on the
sale of these businesses. The results of operations of these units and the
related gain on sale have been separately classified as "Income from
discontinued operations" in the Consolidated Statements of Income. The operating
cash flows from these businesses have also been separately classified in the
Consolidated Statements of Cash Flows. The "Cash used by discontinued
operations" in the Consolidated Statement of Cash Flows for 1997 also includes
approximately $44,000 in income tax payments which were directly related to the
gain on the sale of discontinued operations.
In 1999 and 1998, the company incurred charges of $1,500 and $6,852,
respectively, related primarily to the settlement of legal claims and the
write-down of assets to be realized from prior years' divestiture activities to
their estimated net realizable value. These charges are included in "Other
income (expense)" in the Consolidated Statements of Income.
RESTRUCTURING CHARGES
In 1998, the company announced a company-wide cost reduction plan. The plan
included the net reduction of its global workforce by over 500 positions,
principally administrative personnel, rationalizations involving 12 facilities
and reduced discretionary spending. The company recorded a pre-tax charge to
earnings in 1998 of $16,336 related to the plan.
The company expanded the restructuring program in 1999 to include the
rationalization of 11 additional facilities, including the shutdown of four
manufacturing and one administrative facility, the transition of the
manufacturing of several product lines to different sites and the
discontinuation of several unprofitable product lines. Additional workforce
reductions of approximately 500 positions were announced of which approximately
130 had actually been terminated by December 31, 1999. The company reported a
pre-tax charge to earnings of $22,198 related to these new initiatives.
Selected financial information relating to the two years' restructuring
charges is as follows:
<TABLE>
<CAPTION>
Expensed Incurred Accrual at Expensed Incurred Accrual at
in 1998 in 1998 December 31, 1998 in 1999 in 1999 December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Severance and other employee costs $13,474 $(5,499) $7,975 $ 5,785 $ (6,990) $6,770
Facilities costs 1,930 (1,513) 417 5,791 (5,918) 290
Write-down of assets to net realizable value -- -- -- 8,693 (8,693) --
Other costs 932 -- 932 1,929 (2,522) 339
- -----------------------------------------------------------------------------------------------------------------------------------
Total $16,336 $(7,012) $9,324 $22,198 $(24,123) $7,399
===================================================================================================================================
</TABLE>
All costs are included in "Restructuring charges" in the Consolidated Statements
of Income with the exception of $1,694 of goodwill impairment charges which were
recorded in 1999 and are included in "Goodwill charges". Of the total charges,
$7,399 remains accrued at December 31, 1999. The majority of the remaining
restructuring activities should be completed during the first half of 2000.
United Dominion Industries 35
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
4. Income Taxes
The provision for income taxes on income from continuing operations before
goodwill charges is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Current
Canada $ (954) $ 3,264 $ 2,961
United States 10,386 24,094 10,161
Other countries 30,226 2,688 21,011
- ------------------------------------------------------------
39,658 30,046 34,133
- ------------------------------------------------------------
Deferred
Canada (5,148) (7,241) (3,886)
United States 15,199 9,686 26,257
Other countries (2,558) (8,344) (6,976)
- ------------------------------------------------------------
7,493 (5,899) 15,395
- ------------------------------------------------------------
$47,151 $24,147 $49,528
============================================================
</TABLE>
The related income (loss) from continuing operations before income taxes and
goodwill charges is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
Canada $ (8,835) $(13,491) $ (5,455)
United States 62,240 78,440 87,413
Other countries 104,302 76,379 64,952
- ----------------------------------------------------------------
$157,707 $141,328 $146,910
================================================================
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 22,909 $ 10,805
Difference between tax on distributed
and undistributed earnings 4,580 2,451
Accrued expenses not currently deductible 81,683 90,058
Other 2,975 4,240
- ----------------------------------------------------------------------------------
112,147 107,554
Less: valuation allowance (4,080) --
- ----------------------------------------------------------------------------------
Total deferred tax assets 108,067 107,554
- ----------------------------------------------------------------------------------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in basis and depreciation (35,081) (28,298)
Intangible assets, principally due to
differences in basis and amortization (13,601) (12,341)
Inventory, principally due to
differences in basis (6,427) (8,501)
Other (15,954) (13,078)
- ----------------------------------------------------------------------------------
Total deferred tax liabilities (71,063) (62,218)
- ----------------------------------------------------------------------------------
Net deferred tax asset $ 37,004 $ 45,336
==================================================================================
</TABLE>
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of December 31, 1999 will be allocated to goodwill. Based
on the company's historical and current earnings, management believes it is more
likely than not that the company will realize the benefit of the remaining
deferred tax assets that are not subject to the valuation allowance.
The difference between the company's effective income tax rate and the
statutory rate on income from continuing operations before goodwill charges is
reconciled below.
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense at
U.S. statutory rate of 35% $ 55,197 $(49,465) $ 51,419
State income taxes 2,792 3,563 3,618
Canadian and foreign tax
refunds and tax settlements (4,984) (23,838) --
Canadian and foreign
income taxes at less than
U.S. statutory rate (6,962) (7,806) (7,714)
Other 1,108 2,763 2,205
- -------------------------------------------------------------------------------------
$ 47,151 $(24,147) $ 49,528
=====================================================================================
</TABLE>
The company has Canadian net operating loss carry-forwards for income tax
purposes of approximately $43,000 which expire in 2003 through 2006.
"Other Assets" in the Consolidated Statements of Financial Position include
$4,580 and $2,451 at December 31, 1999 and 1998, respectively, primarily
representing German taxes refundable to the company when German earnings are
repatriated.
Income taxes paid totaled $2,224, $53,085 and $71,240 for 1999, 1998 and
1997, respectively.
5. Inventories
Inventories at December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------
<S> <C> <C>
Raw materials $131,444 $111,994
Work-in-process 101,122 99,402
Finished products 158,088 157,446
- -----------------------------------------------------
$390,654 $368,842
=====================================================
</TABLE>
6. Fixed Assets
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1999:
Land $ 12,385 $ -- $ 12,385
Plant 143,508 50,479 93,029
Machinery and equipment 431,743 216,112 215,631
Construction in progress 29,856 -- 29,856
- ------------------------------------------------------------------------------
$617,492 $266,591 $350,901
==============================================================================
December 31, 1998:
Land $ 11,215 $ -- $ 11,215
Plant 129,267 46,485 82,782
Machinery and equipment 394,222 184,320 209,902
Construction in progress 13,954 -- 13,954
- ------------------------------------------------------------------------------
$548,658 $230,805 $317,853
==============================================================================
</TABLE>
36 United Dominion Industries
<PAGE> 15
7. Debt
SHORT-TERM
At December 31, 1999 and 1998, the company's notes payable to banks totaled
$103,544 and $53,672, respectively, with weighted-average interest rates of 6.7%
and 4.9%, respectively. At December 31, 1999, the company had available
approximately $105,000 of unused short-term borrowing facilities.
LONG-TERM
The company's long-term debt at December 31, 1999 and 1998 is summarized as
follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Revolving credit bank notes $101,192 $ 35,958
Senior notes due 2002 - 6.80% 70,200 93,600
Senior notes due 2002 - 8.25% 37,500 50,000
Senior notes due 2007 - 7.67% 50,000 50,000
Senior notes due 2008 - 6.64% 110,000 110,000
Commercial paper 172,470 162,556
Multi-currency revolving notes 36,375 39,718
Other notes payable in installments
through 2020 at interest rates
varying from 2.9% to 10.0% 59,851 54,604
- --------------------------------------------------------------------------
637,588 596,436
Less current portion of long-term debt 46,082 51,665
- --------------------------------------------------------------------------
$591,506 $544,771
==========================================================================
</TABLE>
The company has a revolving credit agreement (revolver) with a group of
banks. This agreement gives the company the ability to borrow up to $450,000
through July 2002. Borrowings under the revolver are available in U.S. dollars
and Deutsche Marks (DM) at the U.S. prime interest rate or LIBOR plus a margin.
The margin ranges from 0.170% to 0.325% and is determined by a leverage ratio
and the amount of utilization under the credit facility. The weighted-average
interest rates on the borrowings under this agreement were 4.6% and 4.9% during
1999 and 1998, respectively. At December 31, 1999, $41,192 of the revolver
borrowings were denominated in DM. The DM borrowings are designated as a hedge
of the company's net investment in German subsidiaries and foreign exchange
gains and losses on these borrowings are reflected in "Equity adjustment from
foreign currency translation" in the Consolidated Statements of Financial
Position. The company also pays an annual facility fee on the amount of this
facility ranging from 0.08% to 0.125%, depending upon a leverage ratio. The
company further pays an annual utilization fee on the amount of loans
outstanding of up to 0.05%, depending on leverage and amount of utilization. At
December 31, 1999, the margin, facility fee and utilization fee were 0.25%, 0.1%
and 0%, respectively.
The 6.80% senior notes are currently payable in annual installments of
$23,400. The 8.25% senior notes are currently payable in annual installments of
$12,500. The 7.67% senior notes are payable in annual installments of $10,000
beginning in 2003. The 6.64% senior notes are payable in full in 2008.
During 1998, the company entered into an open-ended program whereby up to
Cdn $250,000 of commercial paper can be issued. While the commercial paper is
typically due in 30 - 60 days, with a maximum maturity of one year, it is the
company's intention to continually refinance these borrowings. The company
maintains unutilized long-term committed credit facilities sufficient to
refinance the commercial paper outstanding. Therefore, the amounts outstanding
at December 31, 1999 and 1998 (U.S. $172,470 and U.S. $162,556, respectively)
are included in long-term debt in the Consolidated Statements of Financial
Position. Interest rates on the commercial paper ranged from 5.1% to 5.7% and
4.7% to 6.1% with a weighted average of 5.3% and 5.2% in 1999 and 1998,
respectively.
The company has a $40,000 multi-currency revolving credit agreement with a
bank which expires in June 2000. The agreement allows the company to designate
subsidiaries to borrow under the facility at LIBOR interest rates plus margin
and facility fees in total ranging from 0.7% to 1.0%. At December 31, 1999,
$36,375 had been borrowed under this facility. This amount is included in
long-term debt since the company has the capacity and intention to refinance
this facility and extend its term prior to the expiration of the agreement.
At December 31, 1999, the company had available approximately $150,000 of
unused long-term revolving credit commitments.
Various loan agreements contain covenants with respect to net worth,
indebtedness and other items. The company has complied with all provisions of
these agreements at December 31, 1999.
Future principal payments on long-term debt are as follows:
<TABLE>
<S> <C>
2000 $ 46,082
2001 87,061
2002 315,375
2003 14,636
2004 10,927
Thereafter 163,507
- ------------------------------------------------------
$637,588
======================================================
</TABLE>
United Dominion Industries 37
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
8. Business Segments
The company operates in the following industry segments:
- - Flow Technology - air dehydration and filtration equipment and related
parts and services for compressed air systems; valves, strainers and
back flow prevention products; water system and submersible petroleum
pumps; leak detection equipment; rotary positive displacement pumps and
related fluid handling equipment for sanitary and industrial markets;
ice cream equipment; high precision metering pumps, analyzing equipment
and integrated blending systems for process industries; water cooling
towers and related components; fiberglass panels and pultruded products
and cast-iron boilers.
- - Machinery - light and heavy duty soil, sanitary landfill and asphalt
compaction equipment; asphalt recyclers and pavers; light construction
equipment; tillage equipment; foraging wagons; and grain drills and
augers.
- - Specialty Engineered Products - steel doors and frames; electric
resistance heating products; air circulation equipment;
machined critical parts for aerospace markets; metal forming equipment;
loading dock equipment; powered roller conveyor systems; and vertical
lifting equipment.
- - Test Instrumentation - air supply houses; heat process and
environmental conditioning equipment; electrical test and measurement
equipment; refrigerant leak detection and recovery systems; vibration
test systems; portable pipe and cable locators; and integrated assembly
systems used in automobile and other manufacturing applications.
The significant accounting policies of the above segments are the same as
those described in note 1. Inter-segment sales are recorded at current market
prices. The company does not include income taxes or net interest expense in the
determination of segment profit. Information about the company's segments,
certain geographic information and a reconciliation of segment profit to net
income is shown below.
INDUSTRY SEGMENT
<TABLE>
<CAPTION>
Flow Technology Machinery Specialty Engineered Products
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets(1) $1,041,831 $ 943,703 $ 904,442 $274,544 $272,115 $234,249 $322,892 $259,387 $183,184
Sales
Gross 992,466 945,828 845,716 456,348 454,460 363,690 387,748 349,070 310,340
Intersegment -- 16 -- -- -- -- -- 30 --
Net 992,466 945,812 845,716 456,348 454,460 363,690 387,748 349,040 310,340
Segment profit(2) 94,016 96,594 79,443 50,685 51,000 42,460 42,000 38,887 41,618
Capital expenditures(3) 22,404 21,145 26,383 13,952 12,270 8,200 14,988 10,537 10,202
Depreciation and amortization(3) 42,499 38,161 32,573 8,802 7,287 5,246 12,814 10,595 9,034
</TABLE>
<TABLE>
<CAPTION>
Test Instrumentation Subtotal
- -------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C>
Assets(1) $319,978 $305,383 $183,842 $1,959,245 $1,780,588 $1,505,717
Sales
Gross 311,776 271,062 123,508 2,148,338 2,020,420 1,643,254
Intersegment -- -- -- -- 46 --
Net 311,776 271,062 123,508 2,148,338 2,020,374 1,643,254
Segment profit(2) 18,344 20,893 11,509 205,045 207,374 175,030
Capital expenditures(3) 9,618 4,482 1,708 60,962 48,434 46,493
Depreciation and amortization(3) 9,269 7,691 2,700 73,384 63,734 49,553
</TABLE>
<TABLE>
<CAPTION>
Divested Business Total
- -------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets(1) $ -- $ -- $ 4,536 $1,959,245 $1,780,588 $1,510,253
Sales
Gross -- -- 11,425 2,148,338 2,020,420 1,654,679
Intersegment -- -- -- -- 46 --
Net -- -- 11,425 2,148,338 2,020,374 1,654,679
Segment profit(2) -- -- (353) 205,045 207,374 174,677
Capital expenditures(3) -- -- 203 60,962 48,434 46,696
Depreciation and amortization(3) -- -- 307 73,384 63,734 49,860
</TABLE>
38 United Dominion Industries
<PAGE> 17
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
United States Europe Other Countries
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long-lived assets(4) $ 948,198 $ 930,577 $ 880,844 $241,577 $151,292 $ 75,315 $ 41,170 $ 10,804 $ 9,279
Net sales(5) 1,441,068 1,380,155 1,125,060 424,559 371,469 266,086 282,711 268,750 252,108
Segment profit(6) 132,299 154,122 133,427 49,051 29,596 21,219 23,695 23,656 20,384
</TABLE>
<TABLE>
<CAPTION>
Divested Businesses Total
- ---------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C>
Long-lived assets(4) $ -- $ -- $ 4,536 $1,230,945 $1,092,673 $ 969,974
Net sales(5) -- -- 11,425 2,148,338 2,020,374 1,654,679
Segment profit(6) -- -- (353) 205,045 207,374 174,677
</TABLE>
RECONCILIATION OF SEGMENT PROFIT TO NET INCOME
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Segment profit $ 205,045 $ 207,374 $ 174,677
Corporate expenses (23,673) (30,231) (29,485)
Corporate restructuring charges -- (6,788) --
Interest - net (40,178) (35,750) (18,544)
Other income (expense) - net (6,555) (12,048) 7,080
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes(7) 134,639 122,557 133,728
Income tax provision(7) (45,729) (22,869) (48,838)
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations 88,910 99,688 84,890
Income from discontinued operations -- -- 56,174
- -------------------------------------------------------------------------------------------------------------------
Net income $ 88,910 $ 99,688 $ 141,064
===================================================================================================================
</TABLE>
(1) Assets exclude $282,330, $310,069, and 238,568 of corporate amounts in
1999, 1998, and 1997, respectively,.
(2) Includes restructuring costs of $7,712, $0, $5,402, and $9,084 in 1999
and $7,786, $275, $443, and $1,044 in 1998 for the Flow Technology,
Machinery, Specialty Engineered Products and Test Instrumentation
segments, respectively (note 3). In 1998, Flow Technology also includes
an $11,285 gain on sale of business (note 3) while Specialty Engineered
Products includes a $6,000 charge related to settlement of litigation.
(3) Capital expenditures and depreciation and amortization exclude $316 and
$1,333, $3,307 and $1,131, and $13,900 and $977 of corporate amounts in
1999, 1998 and 1997, respectively.
(4) Long-lived assets consist of fixed assets, goodwill and other intangible
assets.
(5) Attributed to countries based on location of customer.
(6) Attributed to countries based on location of customer. Includes
restructuring costs of $21,661, $273, and $264 in 1999 and $6,614,
$2,346, and $588 in 1998 in the United States, Europe, and other
countries, respectively (note 3).
(7) In the Consolidated Statements of Income, goodwill charges, net of tax,
are shown separately while for segment reporting purposes the goodwill
charges are included in segment profit and the realted tax benefit is
included in the income tax provision.
United Dominion Industries 39
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
9. Capital Stock
The company is incorporated under the Canada Business Corporations Act and
is authorized to issue an unlimited number of common and preferred shares of no
par value.
The company has a stock option and restricted stock plan under which
options for a term not exceeding 10 years may be granted to key employees and
directors to purchase common shares of the company at a price not less than 100%
of their fair market value at the date of grant. Common shares reserved for
exercise of these options or the issuance of restricted stock may not at any
time exceed 10% of the number of common shares then outstanding. Transactions
involving the plan are summarized below.
<TABLE>
<CAPTION>
Options
--------------------------
Available for Option Price Weighted-Average
Future Grant Granted Per Share (Cdn.) Exercise Price (Cdn.)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1996 1,546,622 1,776,575 $ 9.375-$33.125 $ 25.34
Exercised -- (110,255) 9.375-33.00 21.98
Granted (463,400) 463,400 36.65-38.87 36.83
- ------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997 1,083,222 2,129,720 9.375-38.87 28.02
Exercised -- (445,422) 9.375-36.65 23.60
Granted (435,250) 435,250 28.95-40.00 35.26
Expired 21,100 (21,100) 26.375-36.65 29.76
- ------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998 669,072 2,098,448 9.375-40.00 30.44
Exercised -- (103,400) 12.75-26.625 22.26
Granted (589,625) 589,625 29.80-32.775 30.03
Restricted stock issued (113,190) --
Additional shares authorized 1,196,993 --
- ------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1999 1,163,250 2,584,673 $9.375-$40.00 $ 30.67
========================================================================================================================
EXERCISABLE AT DECEMBER 31, 1999 1,736,724 $9.375-$40.00 $ 29.97
========================================================================================================================
</TABLE>
The following table provides certain information with respect to stock
options outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Weighted-
Weighted- average
Stock options average remaining
Range of exercise price outstanding exercise price contractual life
- -------------------------------------------------------------------------
(Cdn.) (years)
<S> <C> <C> <C>
Under $28.00 (Cdn.) 802,011 $ 24.31 4.3
Over $28.00 (Cdn.) 1,782,662 33.54 7.9
- -------------------------------------------------------------------------
2,584,673 $ 30.67 6.8
=========================================================================
</TABLE>
The following table provides certain information with respect to stock
options exercisable at December 31, 1999.
<TABLE>
<CAPTION>
Weighted-
Stock options average
Range of exercise price exercisable exercise price
- ----------------------------------------------------------------
(Cdn.)
<S> <C> <C>
Under $28.00 (Cdn.) 802,011 $24.31
Over $28.00 (Cdn.) 934,713 34.84
- ----------------------------------------------------------------
1,736,724 $29.97
================================================================
</TABLE>
The restricted stock issued during 1999 had a fair value at the date of
grant of $2,263 or U.S. $19.99 per share. The sale of this stock is restricted
for six years from the date of grant. Restricted stock was also issued during
1996 which is restricted for periods up to five years from the date of the
grant. Compensation expense related to all restricted shares is recorded over
the applicable restriction period and amounted to $1,204, $1,984 and $1,406 in
1999, 1998 and 1997, respectively.
The company's management incentive plans contain a feature that allows
participants the opportunity to elect to receive restricted common shares in
lieu of a portion of their cash bonuses. The number of shares issued is
increased by a multiple in order to provide participants an incentive to elect
to receive shares. A total of 55,365 and 43,845 shares were issued in 1999 and
1998, respectively, to participants who made such share elections.
10. Interest Expense - Net
Net interest expense is composed of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Interest on long-term debt $ 38,217 $ 35,749 $ 22,441
Other interest expense 5,319 3,117 3,757
Interest income (3,358) (3,116) (7,654)
- ----------------------------------------------------------------------
$ 40,178 $ 35,750 $ 18,544
=========================================================================
</TABLE>
Net interest paid totaled $43,018, $33,082 and $20,104 for 1999, 1998 and
1997, respectively.
11. Benefit Plans
The company and its subsidiaries have defined benefit pension plans covering
approximately one half of all employees. Plans covering eligible salaried
employees call for benefits to be paid at retirement based primarily upon years
of service and their compensation rates near retirement. Plans covering hourly
employees generally provide benefits of stated amounts for each year of service.
Contributions to the plans reflect benefits attributed to employees' services
40 United Dominion Industries
<PAGE> 19
to date and also for benefits expected to be earned in the future. Assets of the
plans consist primarily of cash and cash equivalents, common and preferred
stocks, government bonds, investment-grade corporate bonds and other fixed
income investments. The company also provides, through non-qualified plans,
supplemental pension payments in excess of the qualified plan limits imposed by
income tax regulations. These non-qualified plans are unfunded.
The following tables set forth the change in projected benefit obligation,
change in plan assets and the funded status of the company's North American
benefit plans as of December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 178,733 $ 167,993 $(33,659 $ 26,883
Service cost 3,988 3,917 690 729
Interest cost 14,947 14,162 2,617 2,216
Plan participants' contributions 5 17 -- --
Plan amendment -- -- 799 1,446
Actuarial (gain) loss (1,750) 2,403 1,045 3,588
Benefits paid (10,550) (9,759) (1,256) (1,203)
- -------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 185,373 178,733 37,554 33,659
- -------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 212,175 205,953
Return on plan assets 27,541 12,894
Employer contribution 1,754 3,070
Plan participants' contributions 5 17
Benefits paid (10,550) (9,759)
- -------------------------------------------------------------------------------
Fair value of plan assets at end of year 230,925 212,175
- -------------------------------------------------------------------------------
Funded status 45,552 33,442 (37,554) (33,659)
Unrecognized net actuarial (gain) loss (33,668) (23,933) 9,617 7,551
Unrecognized prior service cost 3,220 3,327 3,733 5,476
Unrecognized net transition obligation 18 27 1,335 1,502
- -------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost on the
consolidated statements of financial position $ 15,122 $ 12,863 $(22,869) $(19,130)
==============================================================================================================
</TABLE>
The weighted-average discount rate used to measure the projected benefit
obligation is 8.5%, the average rate of increase in future compensation levels
is approximately 5% and the expected long-term rate of return on assets is 8.5%.
The company amortizes prior service cost and unrecognized gains and losses using
the straight-line method over the average future service life of active
participants.
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3,988 $ 3,917 $ 4,557 $ 690 $ 729 $ 738
Interest cost 14,947 14,162 13,233 2,617 2,216 1,777
Expected return on plan assets (17,416) (16,067) (13,858) -- -- --
Amortization (1,543) (879) (682) 1,688 1,680 1,509
- ---------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (24) $ 1,133 $ 3,250 $4,995 $4,625 $4,024
===============================================================================================================
</TABLE>
A number of the company's operating units have defined contribution plans
pursuant to Section 401(k) of the U.S. Internal Revenue Code. The total expense
of these plans was $5,522, $5,475 and $3,893 for the years ended December 31,
1999, 1998 and 1997, respectively.
The company's German operations have pension plans, which in accordance
with applicable laws, are unfunded. The weighted average discount rate used to
measure the projected benefit obligation of the German plans is 6% - 7% and the
rate of increase in future compensation levels is 3% - 3.5% for 1999 and 1998.
The status of the German plans at December 31, 1999 and 1998 as reflected
in the Consolidated Statements of Financial Position is as follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Benefit obligation at beginning of year $ 17,992 $ 16,421
Service cost 433 376
Interest cost 1,291 1,126
Actuarial loss 1,138 265
Acquisition 7,330 --
Settlements (56) --
Benefits paid (687) (726)
Foreign exchange rate changes (2,475) 530
- --------------------------------------------------------------------
Benefit obligation at end of year $ 24,966 $ 17,992
====================================================================
</TABLE>
United Dominion Industries 41
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 433 $ 376 $ 875
Interest cost 1,291 1,126 1,089
Amortization of prior
service cost 128 134 136
- -------------------------------------------------------------
Net periodic benefit cost $1,852 $1,636 $2,100
=============================================================
</TABLE>
The company provides certain postretirement health care and life insurance
benefits to a limited number of employees. The costs associated with these
benefits are not significant and are recorded on a "pay-as-you-go" or cash
basis.
12. Commitments and Contingencies
A number of claims and lawsuits seeking unspecified damages and other relief are
pending against the company. It is impossible at this time for the company to
predict with any certainty the outcome of such litigation. However, management
is of the opinion, based upon information presently available, that it is
unlikely that any liability, to the extent not provided for through insurance or
otherwise, would be material in relation to the company's consolidated financial
position.
The company has been named along with several other parties in a number of
administrative proceedings maintained by federal and state agencies arising out
of alleged releases or contributions of hazardous substances into the
environment. None of the proceedings is, in the opinion of management, either
individually or viewed in connection with all the proceedings, material to the
company's liquidity, consolidated operating results, or consolidated financial
position. While the company has participated and in the future will participate
in the funding of clean up costs in connection with certain of the proceedings,
it does not believe that material monetary sanctions will be imposed against it
as a result of any of the proceedings.
The company has an agreement to sell certain qualifying accounts receivable
to a financial institution on a revolving basis. The amount sold as of December
31, 1999 and 1998 was $62,900 and $62,000, respectively. The amount sold at any
time must be supported by available credit under the revolver. Certain of the
company's operations have entered into agreements with third party finance
companies to provide wholesale financing of their product to distributors. The
company is responsible for the repurchase of new product in the event it is
acquired by the finance companies through repossession. At December 31, 1999,
the total amount of new product financed under these agreements is approximately
$12,000. At December 31, 1999, the company also has sold approximately $8,000 of
receivables under recourse agreements. Reserves have been provided for any
anticipated losses under these agreements.
In the normal course of business, letters of credit and bank guarantees are
issued by banks for account of the company, which in the opinion of management,
have no material effect on the company's financial position. At December 31,
1999, the company was contingently liable for $84,000 under these arrangements.
The company does not trade in financial instruments and does not engage in
speculation. However, it does enter into a limited range and number of
derivative financial instrument contracts. The company has a program in place to
manage foreign currency risk. As part of that program, the company has entered
into a limited number of foreign currency forward exchange contracts to hedge
foreign currency transactions or intercompany loan payments. The company's
foreign exchange contracts do not subject the company to risk due to exchange
rate movements because gains and losses on these contracts offset losses and
gains on the transactions being hedged. As of December 31, 1999, the company's
German operations had approximately DM 183 million ($93,000) of forward exchange
contracts outstanding which are designed to convert the receipt of foreign
currencies from sales outside of Germany into DM. The forward exchange contracts
generally have maturities which do not exceed one year and exchange rates are
agreed to at the inception of the contracts.
The company has operating leases covering machinery, equipment, office,
warehouse and manufacturing facilities. Future minimum lease payments under
operating leases at December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $14,505
2001 13,025
2002 8,633
2003 5,003
2004 3,648
Thereafter 7,091
- ------------------------------------------------------
$51,905
======================================================
</TABLE>
13. Year 2000
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. Although the change in date has occurred, it is
not possible to conclude that all aspects of the Year 2000 Issue that may affect
the company, including those related to customers, suppliers, or other third
parties, have been fully resolved.
14. Differences Between Canadian and United States Accounting Principles
Generally accepted accounting principles (GAAP) in Canada allow for the
reduction of stated capital of outstanding common shares with a corresponding
offset to deficit. This reclassification, which the company made in 1990, is not
permitted by United States GAAP and would result in an increase in capital stock
and a reduction in retained earnings at December 31, 1999 and 1998 of
42 United Dominion Industries
<PAGE> 21
$128,093. Canadian GAAP also permits expenses related to the issue of capital
stock, net of income taxes, to be deducted from retained earnings while United
States GAAP requires such expenses to be deducted from the proceeds of stock
issuances credited to capital stock. This reclassification would reduce
capital stock and increase retained earnings by $20,905 at December 31, 1999 and
1998.
The CICA recently adopted a new standard for recognizing the cost of
pensions and other postretirement benefits (Handbook Section 3461). The new
standard, effective for fiscal years beginning after January 1, 2000,
essentially harmonizes Canadian rules with United States GAAP and requires
accruing the cost of providing postretirement health care benefits during the
years that the employee renders the necessary service. The company currently
records health care benefits on a "pay-as-you-go" basis for benefits paid on
behalf of active and retired employees. The healthcare benefit obligations not
recorded by the company for active and retired employees due to use of the
"pay-as-you-go" basis versus accrual accounting totaled approximately $12,000 at
December 31, 1999. Additionally, CICA Handbook Section 3461 requires that for
purposes of determining the pension liability, the discount rate must be based
on current bond market yields rather than management's best estimate of the
plan's long-term returns. This change in the discount rate will increase the
volatility of pension expense in the future and create an additional pension
liability of approximately $16,000 which will need to be recorded upon adoption
of this new accounting standard. The company intends to retroactively adopt CICA
Handbook Section 3461 in the first quarter of 2000. After tax effecting the
above amounts, these changes will result in increases to other assets of
approximately $3,000 and accrued liabilities of approximately $7,000 and
decreases to other (non-current) assets of approximately $16,000, other
(non-current) liabilities of approximately $3,000 and retained earnings of
approximately $17,000.
Canadian GAAP allows for the capitalization and subsequent amortization of
start-up costs for new facilities and joint ventures. Effective January 1, 1999,
United States GAAP requires the expensing of these costs as incurred as well as
the expensing of any previously capitalized costs. As of December 31, 1999,
United States GAAP would require the company to expense approximately $729, net
of tax, of unamortized costs that had been capitalized in prior years.
The income statement format adopted in 1999 by the company as permitted by
CICA Handbook Section 1580, Business Combinations (note 2) is not allowed under
United States GAAP. Presentation under United States GAAP requires that the
gross goodwill charges be included as a component of operating income and the
associated income tax benefit be included as a component of the income tax
provision. This reclassification does not affect reported net income.
United States GAAP requires the dual presentation of basic and diluted
earnings per share. Diluted earnings per share reflects the assumed exercise of
dilutive securities such as the company's stock options.
The following table reflects the impact on net income, weighted-average
shares outstanding and net earnings per share of complying with United States
GAAP as it pertains to the items noted above.
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net income under
Canadian GAAP $88,910 $99,688 $141,064
Increased (decreased) by:
Pension expense (1,990) (1,483) (1,470)
Postretirement benefits (594) (588) (753)
Start-up costs (729) -- --
Other 31 (321) 76
- ----------------------------------------------------------------------------
Net income under
United States GAAP $85,628 $97,296 $138,917
============================================================================
Weighted-average shares
outstanding (000s)
Canadian GAAP 39,642 40,755 44,439
Less restricted stock
outstanding (177) (123) (269)
- ----------------------------------------------------------------------------
United States GAAP - Basic 39,465 40,632 44,170
Effect of dilutive securities:
Restricted stock 177 123 269
Employee stock options 176 281 303
- ----------------------------------------------------------------------------
United States GAAP - Diluted 39,818 41,036 44,742
============================================================================
Net earnings per share
Canadian GAAP
Continuing operations $ 2.24 $ 2.45 $ 1.91
Discontinued operations -- -- 1.26
- ----------------------------------------------------------------------------
Net earnings $ 2.24 $ 2.45 $ 3.17
============================================================================
United States GAAP - Basic
Continuing operations $ 2.17 $ 2.39 $ 1.87
Discontinued operations -- -- 1.28
- ----------------------------------------------------------------------------
Net earnings $ 2.17 $ 2.39 $ 3.15
============================================================================
United States GAAP - Diluted
Continuing operations $ 2.15 $ 2.37 $ 1.84
Discontinued operations -- -- 1.26
- ----------------------------------------------------------------------------
Net earnings $ 2.15 $ 2.37 $ 3.10
============================================================================
</TABLE>
United States GAAP requires reporting on comprehensive income. For the
years ended December 31, 1999, 1998 and 1997, comprehensive income, as defined
under United States GAAP, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net income under
United States GAAP $ 85,628 $ 97,296 $ 138,917
Foreign currency translation
adjustments, net of tax (4,298) (576) (6,055)
- -------------------------------------------------------------------------
Comprehensive income under
United States GAAP $ 81,330 $ 96,720 $ 132,862
=========================================================================
</TABLE>
United Dominion Industries 43
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, RESTATED (note 2)
United Dominion Industries
December 31, 1999, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
The application of United States GAAP previously discussed would result in
increases in other (non-current) liabilities of approximately $5,000 and common
shares of approximately $107,000 and decreases in goodwill of approximately
$2,000, other (non-current) assets of approximately $6,000, accrued liabilities
of approximately $1,000, and retained earnings of approximately $119,000 as of
December 31, 1999. At December 31, 1998, the application of United States GAAP
would result in increases in accrued liabilities of approximately $2,000, other
(non-current) liabilities of approximately $5,000 and common shares of
approximately $107,000 and decreases in goodwill of approximately $2,000 and
retained earnings of approximately $116,000.
The company's accounting for stock options is essentially the same as the
intrinsic value method prescribed by existing accounting pronouncements
effective in the United States. United States GAAP encourages, but does not
require companies to record compensation cost for stock option plans at fair
value and requires the disclosure of pro forma net income and earnings per
share information as if the company had accounted for its employee stock
options issued beginning in 1995 under the fair value method. Accordingly, the
fair value of the options issued have been estimated at the date of grant using
a Black-Scholes option pricing model with the following assumptions for 1999,
1998 and 1997, respectively: risk-free interest rates of 5.2%, 5.1% and 6.2%;
dividend yields of 1.8%, 1.6% and 1.0%; volatility factors of the expected
market price of the company's common stock of .37, .39 and .33; and a
weighted-average expected life of the options of eight years. The
weighted-average grant-date fair values of options issued in 1999, 1998 and
1997 was $8.28, $12.60 and $12.43, respectively. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period that ranges from six months to three years.
Retroactive application of the fair value method to prior years is not
permitted, therefore the full effect of the fair value method will not be
reflected in the pro forma disclosures until it has been applied to all
non-vested options. Assuming the company had accounted for its stock options
issued under the fair value method, United States GAAP pro forma net income and
basic and diluted earnings per share for the years ended December 31, 1999,
1998 and 1997 would have been $82,556, $2.09 and $2.07; $94,134, $2.32 and
$2.29; and $136,508, $3.09 and $3.05, respectively.
United States GAAP requires disclosure of changes during the year in
non-cash working capital balances pertaining to operating activities. The
following table reflects such changes for the years ended December 31, 1999,
1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Decrease (increase) in
current assets
Accounts and
notes receivable $ 19,677 $(39,063) $ (7,582)
Inventories (16,677) (21,184) (15,124)
Other current assets 23,249 (9,359) (4,937)
Increase (decrease) in
current liabilities
Accounts payable and
accrued liabilities (6,267) 27,148 5,140
Customer advances (8,829) 6,200 (831)
- -----------------------------------------------------------------------------
$ 11,153 $(36,258) $(23,334)
=============================================================================
</TABLE>
United States GAAP requires disclosure of the effect of a one-percentage
point increase or decrease in the assumed health care cost trend rates on the
aggregate of the service and interest cost components of net periodic
postretirement health care benefit cost and the accumulated post-retirement
benefit obligation for health care benefits. The following table reflects such
effects. Since the company is on a pay-as-you-go basis, this disclosure relates
to the pro forma disclosures contained in the reconciliation of net income
previously discussed.
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Increase Point Decrease
- -----------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and
interest cost components $ 84 $ (76)
Effect on postretirement
benefit obligation 916 (848)
</TABLE>
15. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Earnings
Sales Gross Profit* Net Income Per Share
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $ 478,404 $ 444,135 $141,667 $129,872 $13,986 $14,327 $0.35 $0.35
Second Quarter 549,272 523,692 166,518 161,329 27,348 26,608 0.69 0.65
Third Quarter 546,998 524,755 170,946 159,691 27,956 21,378 0.71 0.52
Fourth Quarter 573,664 527,792 183,188 167,680 19,620 37,375 0.50 0.92
- ----------------------------------------------------------------------------------------------------
Full year $2,148,338 $2,020,374 $662,319 $618,572 $88,910 $99,688 $2.24 $2.45
=========================================================================================================================
</TABLE>
* Represents sales less cost of sales
44 United Dominion Industries
<PAGE> 23
AUDITOR'S REPORT
To the Shareholders of United Dominion Industries Limited
We have audited the consolidated statements of financial position of United
Dominion Industries Limited as at December 31, 1999 and 1998 and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the years in the three-year period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1999 and 1998 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1999 in accordance with
Canadian generally accepted accounting principles.
/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
January 28, 2000
MANAGEMENT'S RESPONSIBILITY
Management is responsible for the preparation and integrity of the Consolidated
Financial Statements and other information appearing in this annual report. The
Consolidated Financial Statements were prepared in conformity with generally
accepted accounting principles appropriate in the circumstances and,
accordingly, include some amounts based on management's best judgments and
estimates. Financial information in this annual report is consistent with that
in the Consolidated Financial Statements.
In fulfilling our responsibilities, management has developed and continues
to maintain systems of internal accounting controls including written policies
and procedures and segregation of duties and responsibilities. Although no
cost-effective system of internal controls will prevent or detect all errors
and irregularities, these systems are designed to provide reasonable assurance
that assets are safeguarded from loss or unauthorized use, transactions are
properly recorded and the financial records are reliable for preparing the
financial statements.
Our independent auditors conduct an audit of the company's Consolidated
Financial Statements in accordance with generally accepted auditing standards.
Their audit includes a review of internal accounting controls to the extent
they deem necessary for the purposes of their audit. Their report appears on
this page.
The Board of Directors carries out its responsibility for the Consolidated
Financial Statements in this annual report principally through its Audit
Committee, consisting solely of outside directors. The Audit Committee meets
periodically with the independent auditors to discuss specific accounting,
reporting and internal control matters. The independent auditors have full and
free access to the Audit Committee.
/s/ William R. Holland /s/ William Dries
William R. Holland William Dries
Chairman and Senior Vice President and
Chief Executive Officer Chief Financial Officer
January 28, 2000
United Dominion Industries 45
<PAGE> 24
SIX-YEAR STATISTICAL SUMMARY
United Dominion Industries
Years Ended December 31
(U.S. $ Millions, Except Per Share Data)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
- ------------------------------------------------------------------------------------------------
Sales 2,148 2,020 1,655 1,433 1,329 1,083
Income from continuing operations
before goodwill charges 111 117 97 80 73 53
Income from continuing operations 89 100 85 69 65 47
Income from discontinued operations - - 56 17 14 15
Net income 89 100 141 87 79 62
FINANCIAL CONDITION AND RATIOS
- ------------------------------------------------------------------------------------------------
Working capital 375 427 259 358 281 260
Current ratio 1.7 1.9 1.6 1.9 1.7 1.6
Total assets 2,242 2,091 1,749 1,587 1,475 1,334
Net fixed assets 351 318 301 289 270 228
Depreciation 46 42 34 30 27 24
Additions to fixed assets 61 52 61 51 39 24
Long-term debt (including current portion) 638 596 339 302 392 311
Shareholders' equity 919 886 873 807 607 565
Return on average common shareholders' equity(%) 9.9 11.9 16.4 12.9 13.5 13.0
PER COMMON SHARE DATA
- ------------------------------------------------------------------------------------------------
Continuing operations before goodwill charges 2.79 2.88 2.19 1.79 1.77 1.31
Continuing operations 2.24 2.45 1.91 1.56 1.56 1.15
Discontinued operations - - 1.26 0.39 0.35 0.40
Net earnings 2.24 2.45 3.17 1.95 1.91 1.55
Common dividends 0.36 0.36 0.28 0.20 0.20 0.20
Book value 23.54 21.86 20.16 17.83 15.33 13.10
SHAREHOLDERS AND EMPLOYEES
- ------------------------------------------------------------------------------------------------
Number of common shareholders 1,363 1,372 1,512 1,764 1,925 2,051
Number of employees 13,615 12,135 11,123 11,252 10,666 12,282
Number of common shares outstanding (thousands) 39,048 40,521 43,282 45,239 39,620 39,443
================================================================================================
</TABLE>
The Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in Canada. If accounting principles
generally accepted in the United States were applied, the net income and the
related basic and diluted earnings per share amounts for 1999, 1998, 1997,
1996, 1995, and 1994 would amount to approximately $86 million, $97 million,
$139 million, $84 million, $76 million and $60 million, or $2.17 and $2.15;
$2.39 and $2.37; $3.15 and $3.10; $1.90 and $1.88; $1.84 and $1.83; and $1.48
and $1.48 per share, respectively. In addition, in 1994, $49 million of
preferred shares would not be classified in the shareholders' equity caption
but would be shown separately. See note 14 to the Consolidated Financial
Statements.
46 United Dominion Industries
<PAGE> 25
DIRECTORS AND OFFICERS
United Dominion Industries
<TABLE>
<CAPTION>
DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DONALD N. BOYCE (1997)(2) JERE A. DRUMMOND (1999)(3) DR. HARRY A. NURKIN (1999)(4)
Chairman, IDEX Corporation President and Chief Executive Officer, President and Chief Executive Officer,
(Diversified manufacturer) BellSouth Communications Group Carolinas Healthcare System
(Telecommunications company) (Integrated healthcare services system)
HERMANN BUERGER (1997)(3)
Executive Vice President, Commerzbank THE HON. JAMES A. GRANT PC, QC DALTON D. RUFFIN (1974)(1,2)
(International bank) (1989)(1,4) Corporate Director
Partner, Stikeman, Elliot Chairman of the Compensation and Human
JAMES E. COURTNEY (1989)(2,4) (Law firm) Resources Committee and Lead Director
Corporate Director Chairman of the Nominating and
Corporate Governance Committee WILLIAM W. STINSON(1986)(1)
PETER A. CROSSGROVE (1993)(2) Corporate Director
Chairman, Premdor Inc. WILLIAM R. HOLLAND (1985)(1) Chairman of the Executive Committee
(International door manufacturing company) Chairman and Chief Executive Officer,
United Dominion Industries Limited GEORGE S. TAYLOR (1995)(3)
R. STUART DICKSON (1990)(1,3) Corporate Director
Chairman of the Executive Committee, RUSSELL C. KING, JR. (1992)(4)
Ruddick Corporation Corporate Director Committees of the Board of Directors
(International thread and regional (1) Executive Committee
supermarket company) JOHN T. MAYBERRY (1999)(3) (2) Compensation and Human
Chairman of the Audit and Risk President and Chief Executive Officer, Resources Committee
Management Committee Dofasco Inc. (3) Audit and Risk Management Committee
(Steel producer) (4) Nominating and Corporate
Governance Committee
CORPORATE OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM R. HOLLAND JAMES M. GIBBS JUNE P. HASSETT
Chairman and Chief Executive Officer Senior Vice President; Vice President, Taxes
President, Flow Technology Segment
GLENN A. EISENBERG C. THEODORE LEINBACH III
President and Chief Operating Officer TIMOTHY J. VERHAGEN Vice President and Controller
Senior Vice President;
B. BERNARD BURNS, JR. President, Test Instrumentation Segment RICHARD L. MAGEE
Executive Vice President and Vice President, General Counsel and Secretary
Chief Administrative Officer LOTHAR WAHL
Senior Vice President; B. J. SMITH
WILLIAM DRIES President, Machinery Segment Vice President, Human Resources
Senior Vice President and
Chief Financial Officer J. MILTON CHILDRESS II THOMAS J. SNYDER
Senior Vice President, Vice President, Treasurer
RICHARD F. BRADBURY Planning and Development
Senior Vice President; NANCY H. SPURLOCK
President, Specialty Engineered Products Vice President, Corporate Communications
OPERATING MANAGEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
FLOW TECHNOLOGY MACHINERY TEST INSTRUMENTATION
JOHN L. BREWER GERALD H. MEIER MICHAEL J. GRAUSAM
President, CMB President, Agricultural Equipment President, Lunaire/LDS
Division
JAMES P. DOHERTY LOTHAR WAHL THOMAS L. HAMMOND
President, Flair President, Compaction Division President, Advanced Industrial Technologies
Specially Engineered Products
JOHN W. GLEDHILL SPECIALTY ENGINEERED PRODUCTS ANDREW G. HOARE
President, Mueller Steam Specialty BEN E. FELLOWS President, Test Measurement Division
President, Door Products Division
WILLIAM C. GRIFFITHS DENNIS K. PORZIO
President, Fluid Systems Division DAVID B. PALMER President, Atmospheric Air Division
President, C&M
RICHARD D. LANDON
President, Marley Cooling Tower Company DENNIS K. PORZIO
President, Marley Electric Heating
IVAN G. LARSH
President, Waukesha Cherry-Burrell VINCENT P. SULLIVAN
President, Dock Products Division
THOMAS O. MAY
President, Weil-McLain GARY M. WOLFF
President, Fenn Manufacturing
ROBERT J. MOORE
President, Marley Pump
</TABLE>
United Dominion Industries 47
<PAGE> 26
SHAREHOLDER INFORMATION
United Dominion Industries
UNITED DOMINION INDUSTRIES LIMITED
The company was incorporated as Dominion Bridge Company, Limited in 1882,
reincorporated under the Companies Act of Canada on July 30, 1912 and continued
under the Canada Business Corporations Act effective May 8, 1980.
ANNUAL MEETING
The annual meeting of shareholders will be held in The Upper Canada Room of The
Royal York Hotel, 100 Front Street West, Toronto, Ontario, Canada on Tuesday,
April 25, 2000 at 2 p.m.
STOCK LISTINGS
Toronto, New York
Ticker Symbol: UDI
TRANSFER AGENT & REGISTRAR
Canada - Montreal Trust Company, Montreal, Toronto, Winnipeg, Regina, Calgary,
Vancouver
United States - The Bank of Nova Scotia Trust Co.
DIVIDEND INFORMATION
United Dominion's dividend policy is to pay prudent and sustainable common
share dividends. Cash dividends of U.S. $0.36 per common share were paid in
1999.
TAXATION OF U.S. SHAREHOLDERS
Under the terms of the Income Tax Act (Canada) and the United States-Canada tax
convention, taxable dividends paid to United States resident shareholders
(other than tax exempt organizations and qualified trusts) of United Dominion
Industries Limited are, with limited exceptions, subject to a Canadian
withholding tax of 15 percent. Generally, capital gains on the disposition by
U.S. residents of securities issued by United Dominion Industries Limited are
exempt from Canadian tax unless the securities were either held in the conduct
of a Canadian business or held by a former long-term resident of Canada.
COMPANY INFORMATION
Information about United Dominion Industries is available from the following
company sources:
Shareholders should contact Richard L. Magee, Vice President,
General Counsel and Secretary. Telephone 704/347-6909.
Institutional investors, brokers and securities analysts should
contact Thomas J. Snyder, Vice President and Treasurer. Telephone
704/347-6874. Or, Michael P. Morgan, Jr., Senior Manager, Investor
Relations. Telephone 704/347-6529.
For general information, including the company's 1999 Form 10-K without
exhibits, previous annual reports, quarterly reports and company profile
literature, contact Corporate Communications. Telephone 704/347-6916.
North American shareholders may call the toll-free Shareholder Information
Line - 1-800-956-4509.
Current information about the company is available on-line at
www.uniteddominion.com.
All correspondence should be addressed to:
United Dominion Industries
2300 One First Union Center
301 South College Street
Charlotte, NC 28202 USA
Telephone: 704/347-6800
Telefax: 704/347-6900
NONDISCRIMINATION POLICY
No United Dominion employee or applicant for employment shall be discriminated
against on account of race, color, religion, sex, national origin, disability
or age.
SAFE HARBOR STATEMENT
This annual report may contain certain "forward-looking statements" within the
meaning of Section 27A of the Securities Exchange Act of 1934, as amended, that
represent the company's current expectations or beliefs concerning future
events. Such forward-looking statements are about matters that are inherently
subject to risks and uncertainties. Factors that could influence the matters
discussed in such forward-looking statements include (i) global economic
conditions; (ii) the current business environment, both in North America and
abroad, including interest rates and consumer and capital spending, (iii)
competitive factors; (iv) new product development and introduction; (v) changes
in laws and regulations, including those affecting taxes and environmental
matters; (vi) technological developments and technological issues; (vii) the
introduction of the Euro; and (viii) continuation of the favorable environment
in which to make acquisitions, in North America and internationally, including
regulatory requirements and the availability of acquisition candidates at
affordable prices. Such factors, and other factors, could cause actual results
or events to differ materially from expectations. This provision is intended to
comply with the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
ENVIRONMENTAL POLICY AND PRINCIPLES
It is United Dominion's policy to protect air, water, and land resources; to
provide a safe work environment for employees; and to be a responsible
corporate citizen. The company is committed to the following principles: to
preserve health, safety and a sound environment; to continue efforts to reduce,
reuse or recycle, minimizing releases to the environment; to operate its
facilities in compliance with applicable regulatory requirements; to work
constructively with government bodies and the public to preserve precious
environmental resources; to monitor the performance of its operations to ensure
proper environmental performance and a safe workplace; to devote resources
toward minimizing the impact of its processes and products on the environment;
to conduct educational and instructional programs to ensure its employees know,
understand and comply with environmental and health/safety laws and
regulations; to provide information to the public regarding its operations and
their relationship to the community; and to encourage conservation of resources
and energy and promote recycling in its business practices in plants and
offices around the world.
48 United Dominion Industries
<PAGE> 27
TOTAL SHAREHOLDER RETURN
The following graph compares cumulative total return (assuming reinvestment of
dividends) for the company's common shares against The Toronto Stock Exchange
Composite 300 (TSE 300) for the five-year period ended December 31, 1999,
assuming $100 (Cdn.) invested on December 31, 1994.
UNITED DOMINION VS. TSE 300/S&P*
(Canadian Dollars)
[GRAPH]
COMMON SHARE MARKET PRICES
<TABLE>
<CAPTION>
Toronto Stock Exchange New York Stock Exchange
(Canadian Dollars) (U.S. Dollars)
Quarter 1999 1998 1999 1998
- ---------------------------------------------------------------
High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First 35.95 28.40 46.00 34.00 24.19 18.94 33.50 24.50
Second 40.00 29.50 50.00 43.00 27.19 19.69 35.00 30.38
Third 37.15 33.05 49.00 25.50 24.94 22.56 33.44 16.88
Fourth 35.20 28.50 34.00 25.00 23.88 18.94 22.13 16.13
Year 40.00 28.40 50.00 25.00 27.19 18.94 35.00 16.13
- ---------------------------------------------------------------
</TABLE>
At December 31, 1999, the closing price was Cdn. $28.40 on The Toronto Stock
Exchange and $19.94 on the New York Stock Exchange.
[RECYCLE LOGO] Portions of this annual report printed on recycled paper.
Designed and produced by Corporate Reports Inc./Atlanta
<PAGE> 1
EXHIBIT 21
Subsidiaries of United Dominion Industries Limited
Set forth below are the names of all subsidiaries of United Dominion
Industries Limited ("UDIL"). The "level" of a company indicates its direct
relationship to UDIL; i.e., a level 1 company is a direct subsidiary of UDIL; a
level 2 company is a subsidiary of a level 1 company, and so on.
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
1 AMCA International Canada Corporation............. Canada 100
1 177090 Canada Inc................................. Canada 100
1 Fenn Limited............ ......................... England 100
1 Flair-Japan Kabushiki Kaisha...................... Japan 50
1 Jemaco-Flair Corporation ......................... Korea 50
1 Marley Cooling Tower International Limited........ Canada 100
2 Beijing Marley Xingye Cooling Tower
Company Ltd..................................... China 51
1 Pacific Investment Limited........................ B.W.I 50
2 Flair-Japan Kabushiki Kaisha.................... Japan 50
1 WCB Mexico, S.A. de C.V........................... Mexico 100
1 Serco Systems Limited ............................ Canada 100
1 UD-RD Holding Company Limited..................... England 81.25
2 Bicotest Limited................................ England 100
2 Ling Dynamic Systems Limited.................... England 100
3 SRE Electronics Limited...................... England 100
4 British Electronic Control Limited......... England 100
5 LDS Limited.............................. England 100
5 Vibration Sales and Service Limited...... England 100
3 Ling Dynamic Systems GmbH.................... Germany 100
3 Ling Dynamic Systems, Inc.................... Connecticut 100
3 Ling Dynamic Systems SARL.................... France 99
2 Radiodetection Holdings Limited.................. England 100
3 Radiodetection Limited........................ England 100
4 Electrolocation Limited.................... England 100
5 Radiodetection Corporation............... New Jersey 100
4 Direct Calibration Services Limited........ England 100
4 Meltrace Limited........................... England 100
4 Radiodetection Overseas Limited............ England 100
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
4 Radiodetection GmbH......................... Germany 100
4 Radiodetection China........................ China 100
4 Radiodetection Japan ....................... Japan 100
4 Radiodetection B.V.......................... Netherlands 100
4 Radiodetection SARL......................... France 100
4 Radiodetection Srl.................... ..... Italy 100
4 Radiodetection (Canada) Limited............. Canada 100
4 Radiodetection S.R.O........................ Czech Republic 100
4 Radiodetection Pty Limited.................. S. Africa 100
4 Radiodetection Sp z.o.o..................... Poland 100
4 Radiodetection S.L.......................... Spain 100
4 Radiodetection SRL (Rom).................... Romania 100
4 Radiodetection Megamma Kft.................. Hungary 51
4 Radiodetection Ukraine Limited.............. Ukraine 100
1 U.D.I. Finance Limited............................. Ireland 100
2 U.D.I. SRL....................................... Barbados 100
1 U.D.I. Mauritius Limited........................... Mauritius 100
2 PuriFlair India Private Limited.................. India 76
2 Varun Flair Filtration Private Limited........... India 76
1 FCD (Canada) Inc................................... Canada 100
1 United Dominion Holdings, Inc...................... Delaware 100
2 Core Industries Inc.............................. Nevada 100
3 Advanced Industrial Technologies, Inc......... Michigan 100
3 Air Gage Company.............................. Michigan 100
3 CII Tustin, Inc. ............................. California 100
4 Dynamic Acquisition Corporation............. California 100
3 CMB Industries, Inc. ..... ................... Michigan 100
3 United Dominiion Pte. Ltd..................... Singapore 100
3 Mueller Flow Technology, Inc.................. Michigan 100
4 Blakeshall Mill Limited..................... England 100
4 FCD Europe Limited.......................... England 100
3 Pasar, Inc.................................... Colorado 100
3 Poly Craft, Inc............................... Ohio 100
3 Robcar Corporation............................ Indiana 100
3 Sunflower Manufacturing Company, Inc.......... Kansas 100
3 TIF Instruments, Inc.......................... Florida 100
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
3 Universal Industrial Products Company........ Michigan 100
3 Core ESI, Inc................................ Michigan 100
3 Core Real Estate Holdings, Inc............... Michigan 100
3 Dynamic Instruments Acquisition Corp......... Michigan 100
3 Eglinton Co.................................. Michigan 100
3 Feterl Manufacturing Company................. South Dakota 100
3 Flexstar, Inc................................ California 100
3 Great Lakes Gauge Company.................... Michigan 100
2 Marley Cooling Tower (Holdings) Limited......... England 100
3 Marley Davenport Limited............... ..... England 98.4
4 Marley Cooling Tower Company UK Limited.... England 100
5 Marley Cooling Tower Company
(France) SNC............................. France 2
3 United Dominion Industries (Italy) Srl....... Italy 100
4 Scam Cooling Towers SRL.................... Italy 100
4 Cofimco SPA................................ Italy 100
4 BON.FIN. SRL............................... Italy 100
5 Acquindustriali SRL...................... Italy 100
4 SPIG International SPA..................... Italy 100
4 WCB Ice Cream Italy SRL.................... Italy 100
2 United Dominion Industries, Inc................. Delaware 100
3 Kelley Company, Inc. ........................ Wisconsin 100
4 Kelley Atlantic Limited.................... Canada 100
4 Kelley Company FSC, Inc. .................. Barbados 100
3 Bran+Luebbe, (US) Inc........................ USA 100
4 Bran+Luebbe Inc............................ USA 100
4 Kelley (International) Limited............. Gilbralter 100
3 Maltex S.A. de CV............................ Mexico 100
3 AMCA International Corporation............... Delaware 100
3 AMCA/Koehring Company........................ Delaware 100
4 AMCA Brookfield International
Sales Corporation.......................... Delaware 100
5 AMCA International Finance
Corporation.............................. Delaware 100
6 AMCA International Finance
Corporation of Georgia.................. Delaware 100
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
6 AMCA International Finance
Corporation of Texas...................... Delaware 100
5 Arrendadora Korco, S.A. de C.V.............. Mexico 49
5 BOMAG Holding, Inc.......................... Delaware 100
6 Amprobe Test Measurement GmbH............. Germany 100
6 BOMAG ULM GmbH............................ Germany 100
7 BOMAG Unternehmensverwaltung GmbH ...... Germany 100
8 Bran+Luebbe AG........................ Frankfurt 100
9 Bran+Luebbe GmbH.................... Germany 49.84
10 Bran+Luebbe Int'l GmbH............ Germany 100
11 Bran+Luebbe SARL................ France 100
11 Bran+Luebbe S.L................. Spain 100
11 Bran+Luebbe KK.................. Japan 100
11 Bran+Luebbe Pty. Ltd............ Australia 100
11 Bran+Luebbe B.V................. Netherlands 100
11 Bran+Luebbe S.p.A............... Italy 100
11 Bran+Luebbe Ltd................. Singapore 100
11 Tomal AB........................ Sweden 100
10 Bran+Luebbe SA ................... Brazil 100
10 Bran+ Luebbe ..................... Austria 100
10 Bran+Luebbe Anglo
American GmbH..................... Germany 100
11 Bran+Luebbe Ltd................. England 100
10 Bran+Luebbe Electronics
Verwaltungs GmbH.................. Germany 100
11 Bran+Luebbe Electronics
GmbH & Co. Kg................... Germany 100
11 Bran+Luebbe GmbH................ Germany 50.16
8 BOMAG GmbH & Co. OHG.................. Germany 99
9 BOMAG (Canada) Inc.................. Canada 46
9 BOMAG Finance UK Limited............ England 100
10 UD-RD Holding Company Ltd......... England 18.75
9 BOMAG S.A.F......................... France 100
9 Nippon BOMAG Co., Ltd............... Japan 10
6 BOMAG (Canada), Inc....................... Canada 54
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
6 BOMAG (Great Britain) Limited........... England 100
7 BOMAG Kent (UK) Limited............... UK 100
6 BOMAG Maschinenhandelsgesellschaft ..... Austria 100
6 Compaction America, Inc................. Delaware 100
6 Flair Filter-und Trocknertechnik
GmbH.................................... Germany 100
6 GSE Scale System GmbH................... Germany 100
6 Marley Kuhlturm GmbH.................... Germany 100
5 BOMAG GmbH................................ Germany 1
4 BOMAG UDI GmbH ............................. Germany 100
5 BOMAG UDI GmbH & CO....................... Germany 1
3 AMCA/Monroe Holdings Corp..................... Delaware 100
4 The Litwin Corporation...................... Kansas 100
4 Litwin Engineers & Constructors, Inc........ Rhode Island 100
3 Amtel, Inc.................................... Rhode Island 100
3 Cofimco USA, Inc.............................. Virginia 100
3 Desa Industries Inc........................... Delaware 100
3 Flair Corporation............................. Delaware 100
4 The C.M. Kemp Manufacturing Company......... Delaware 100
4 Flair-New Castle, Inc....................... Delaware 100
5 Deltech B.V............................... Netherlands 100
6 Flair Filtration & Drying B.V........... Netherlands 100
6 Delair B.V. ............................ Netherlands 100
5 Flair Limited............................. United Kingdom 33.3
4 Dollinger Corporation....................... North Carolina 100
5 Dollinger World Limited................... Ireland 100
5 Flair Filtration Products Inc............. Canada 1
6 Dollinger Ireland Limited............... Ireland 100
4 The King Company............................ Minnesota 100
4 Pneumatic Products Corporation.............. Delaware 100
5 Flair Filtration Products Inc............. Canada 99
5 PPC Distribution Midwest, Inc.. .......... Florida 100
5 PPC Distribution Northeast, Inc........... Florida 100
5 Flair Limited.. .......................... United Kingdom 66.6
6 Pneumatic Products Limited.............. England 100
6 Deltech Engineering Ltd................. United Kingdom 100
4 Tom Miller, Inc............................. Michigan 100
3 Lee Engineering Company, Inc.................. Rhode Island 100
3 Lunaire Limited............................... Pennsylvania 100
3 LitSubs, Inc.................................. Delaware 100
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
3 The Marley Company.. .......................... Delaware 100
4 PEL Inc. (formerly Engineers and
Fabricators Co.)............................. Delaware 100
4 The Marley Cooling Tower Company............. Delaware 100
5 Marley Canadian Inc........................ Canada 100
5 Marley Cooling Tower Asia Pacific
Pte. Ltd................... .............. Singapore 100
5 Marley Davenport .......................... 1.6
5 PT Jaya Marley Indonesia................... Indonesia 40
6 Marley Water-Line SDN. BHD............... Malaysia 51
6 Marley Cooling Tower Asia Pacific
SDN. BHD. (formerly Peaceage)............ Malaysia 100
5 Marley Cooling Tower Company (Europe)
Limited.................................... England 100
5 Marley Cooling Tower Company (France)
SNC........................................ France 98
5 Marley Do Brazil Participacoes Ltda........ Brazil 100
5 Marley Mexicana S.A. de C.V.... ........... Mexico 100
5 Marley Pan American Cooling Tower
Corporation................................ Delaware 100
5 Marley Pellux Holdings Ltd................. British
Virgin Isles 67
6 Marley-Sinro Cooling Tower Company,
Ltd...................................... China 74.25
5 Marley TEMCEL Australia Pty. Limited....... Australia 100
5 Recold, Inc................................ California 100
5 XCEL Erectors, Inc......................... Delaware 100
4 Marley Pump Asia Pte Ltd..................... Singapore 100
4 Marley Pump Australia Pty. Ltd............... Australia 100
4 Marley Pump Europe B.V....................... Holland 100
5 AIA Comercial, S.A......................... Spain 67
4 The Marley-Wylain Company.................... Delaware 100
5 Cormac Trustee Corp........................ Indiana 100
3 PST, Inc....................................... Delaware 100
3 Dominion Building Products, Inc................ Texas 100
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Percentage
Owned by
Jurisdiction Immediate
Level Subsidiary of Incorporation Parent
- ----- ---------- ---------------- ----------
<S> <C> <C> <C>
3 Quantum Erectors, Inc......................... North Carolina 100
3 ROSS Holding, Inc............................. Delaware 100
3 RPM Constructors, Inc......................... North Carolina 100
3 Span International Limited.................... Bahamas 100
3 TAPS, LLC..................................... North Carolina 25
3 U.D.I. Foreign Sales Corporation.............. Barbados 100
3 Varco Pruden Realty, Inc...................... Georgia 100
2 Marley Japan Kabushiki Kaisha ................... Japan 100
2 United Dominion Industries Spain, S.L............ Spain 100
3 Torraval, S.A................................. Spain 100
1 WCB Ice Cream A/S.................................. Denmark 100
</TABLE>
7
<PAGE> 1
EXHIBIT 24(a)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ D. N. Boyce
- ------------------------------------
D. N. Boyce, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ H. Buerger
- -----------------------------------
H. Buerger, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(c)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ J. E. Courtney
- --------------------------------------
J. E. Courtney, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ P. A. Crossgrove
- -----------------------------------------
P. A. Crossgrove, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(e)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ R. S. Dickson
- -----------------------------------
R. S. Dickson, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(f)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ J. A. Drummond
- -----------------------------------
J. A. Drummond, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(g)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ J. A. Grant
- -----------------------------------
J. A. Grant, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(h)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ R. C. King, Jr.
- ------------------------------------
R. C. King, Jr. Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(i)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ J. T. Mayberry
- --------------------------------------
J. T. Mayberry, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(j)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ H. A. Nurkin
- -------------------------------------
H. A. Nurkin, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(k)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ D. D. Ruffin
- -----------------------------------
D. D. Ruffin, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(l)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ W. W. Stinson
- -------------------------------------
W. W. Stinson, Director
February 11, 2000
<PAGE> 1
EXHIBIT 24(m)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of United
Dominion Industries Limited hereby constitutes and appoints Richard L. Magee and
William Dries and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of United Dominion Industries Limited for the year ended December 31,
1999, and any or all amendments and supplements thereto, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, the New York Stock Exchange, the Toronto
Stock Exchange and any Canadian securities commissions, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
/s/ G. S. Taylor
- --------------------------------------
G. S. Taylor, Director
February 11, 2000
<PAGE> 1
EXHIBIT 99
[LOGO]
UNITED DOMINION INDUSTRIES LIMITED
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of United Dominion Industries Limited (the "Corporation") will be
held in the Upper Canada Room of the Royal York Hotel, 100 Front Street West,
Toronto, Ontario, Canada on Tuesday, April 25, 2000 at 2:00 p.m. (Toronto time),
for the following purposes:
(1) to receive the consolidated financial statements of the Corporation for
the year ended December 31, 1999, together with the auditors' report
thereon, and the annual report of the directors;
(2) to elect directors;
(3) to reappoint KPMG LLP to serve as independent auditors of the
Corporation until the close of the next annual meeting of shareholders
and to authorize the Board of Directors to fix KPMG's remuneration; and
(4) to transact such other business, if any, as may properly come before
the Meeting or any adjournment or postponement thereof.
By order of the Board of Directors,
/s/ Richard L. Magee
R. L. Magee
Secretary
Toronto, Ontario
March 22, 2000
If you are unable to be present in person at the Meeting, please date, sign and
return the enclosed form of proxy to the Corporation, care of Montreal Trust
Company of Canada, Place Montreal Trust, 1800 McGill College Avenue, Montreal,
Quebec, H3A 3K9, in the envelope provided for that purpose. For U.S.
shareholders, please date, sign and return the enclosed form of proxy to The
Bank of Nova Scotia Trust Company of New York, One Liberty Plaza, 23rd Floor,
New York, New York, 10006, in the envelope provided for that purpose. To be
effective, a form of proxy must be duly executed and deposited with the
Corporation's registrar and transfer agent, Montreal Trust Company of Canada or
The Bank of Nova Scotia Trust Company of New York, as the case may be, at the
applicable address above, not less than 48 hours, Saturdays and holidays
excepted, preceding the Meeting, or any adjournment or postponement thereof.
<PAGE> 2
[LOGO]
UNITED DOMINION INDUSTRIES LIMITED
---------------
MANAGEMENT PROXY CIRCULAR/PROXY STATEMENT
SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR/PROXY STATEMENT (THE "PROXY CIRCULAR") IS
FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE BOARD OF
DIRECTORS AND THE MANAGEMENT OF UNITED DOMINION INDUSTRIES LIMITED (THE
"CORPORATION") FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE CORPORATION
TO BE HELD ON APRIL 25, 2000 AT THE TIME, PLACE AND FOR THE PURPOSES SET FORTH
IN THE FOREGOING NOTICE OF MEETING, AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF
(THE "MEETING"). The Corporation will pay the cost of such solicitation. The
Corporation will reimburse brokers and other intermediaries for costs incurred
by them in mailing proxy materials to non-registered shareholders in accordance
with National Policy No. 41 of the Canadian Securities Administrators. This
Proxy Circular is being initially sent to shareholders on or about March 22,
2000.
The principal executive offices of the Corporation are located at 2300 One
First Union Center, 301 South College Street, Charlotte, North Carolina,
28202-6039, U.S.A. The Corporation's registered office is located at Suite 5300,
Commerce Court West, Post Office Box 85, Toronto, Ontario, Canada, M5L 1B9.
APPOINTMENT AND REVOCATION OF PROXIES
The persons designated in the accompanying form of proxy are officers of
the Corporation. A SHAREHOLDER ENTITLED TO VOTE AT THE MEETING HAS THE RIGHT TO
APPOINT ANOTHER PERSON (WHO NEED NOT BE A SHAREHOLDER), OTHER THAN A PERSON
DESIGNATED IN THE FORM OF PROXY, AS PROXYHOLDER TO REPRESENT SUCH SHAREHOLDER
AND VOTE ON SUCH SHAREHOLDER'S BEHALF AT THE MEETING BY EXECUTING (OR CAUSING AN
ATTORNEY DULY AUTHORIZED IN WRITING TO EXECUTE) THE ACCOMPANYING FORM OF PROXY
OR ANOTHER LEGAL FORM OF PROXY AND APPOINTING THEREON SUCH OTHER PERSON AS
PROXY. Execution of the form of proxy will not affect a shareholder's right to
attend the Meeting and vote in person if such shareholder revokes a proxy as
described below. Any shareholder giving a proxy has the right to revoke it at
any time before it is acted upon (a) by depositing an instrument in writing
executed by such shareholder or by an attorney authorized in writing, or, if the
shareholder is a corporation, by a duly authorized officer or attorney thereof,
(i) at the Corporation's registered office, Suite 5300, Commerce Court West,
Post Office Box 85, Toronto, Ontario, M5L 1B9, at any time up to and including
the last business day preceding the day of the Meeting, or any adjournment or
postponement thereof at which the proxy is to be used, or (ii) with the Chairman
of the Meeting on the day of the Meeting or an adjournment or postponement
thereof; or (b) in any other manner permitted by law.
RECORD DATE
Only holders of record of the Corporation's common shares ("Common Shares")
at the close of business on March 14, 2000 (the "Record Date") are entitled to
notice of and to attend and vote at the Meeting, except that a transferee who
acquires Common Shares after such date shall be entitled to vote at the Meeting
if such transferee produces properly endorsed share certificates for such shares
or otherwise establishes ownership of such shares and requests, not later than
10 days before the Meeting, that such transferee's name be included in the list
of shareholders entitled to receive notice of and to vote at the Meeting, such
list having been prepared as of the Record Date.
1
<PAGE> 3
ACTION TO BE TAKEN UNDER PROXIES
Shares represented by properly executed proxies in the accompanying form of
proxy will be voted or withheld from voting in accordance with instructions
indicated thereon.
IF NO CONTRARY INSTRUCTION IS INDICATED, SHARES REPRESENTED BY SUCH PROXIES
WILL BE VOTED BY THE PERSONS DESIGNATED IN THE PRINTED PORTION THEREOF:
- FOR THE ELECTION OF THE NOMINEES NAMED HEREIN TO SERVE AS DIRECTORS UNTIL
THE NEXT ANNUAL MEETING;
- FOR THE REAPPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF THE
CORPORATION TO SERVE UNTIL THE NEXT ANNUAL MEETING AT A REMUNERATION TO
BE APPROVED BY THE BOARD OF DIRECTORS; AND
- AT THE DISCRETION OF THE PROXYHOLDERS WITH RESPECT TO ANY AMENDMENTS TO
MATTERS IDENTIFIED IN THE NOTICE OF MEETING OR OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
The Board of Directors and Management of the Corporation know of no such
amendments or other business to be presented at the Meeting.
The election of directors and the reappointment of KPMG LLP to serve as
independent auditors of the Corporation must be approved by the affirmative vote
of a majority of the votes cast by the holders of outstanding Common Shares who
vote in respect of those actions. Abstentions and broker non-votes, which will
not be counted "for" or "against" proposals, have no effect on the vote for the
election of directors or the reappointment of KPMG LLP.
REPORTING CURRENCY
Unless otherwise indicated, all dollar amounts referred to herein are
expressed in United States dollars.
ELECTION OF DIRECTORS
Management and the Board of Directors propose for nomination twelve (12)
persons for election as directors at the Meeting. The Nominating & Corporate
Governance Committee recommended to the Board that the number of directors of
the Corporation be decreased by two, to twelve. The increase to fourteen in 1999
was intended to be temporary to prepare for the retirement in 2000 of two
long-service directors. Messrs. Dalton D. Ruffin and R. Stuart Dickson will
retire from the Board of Directors effective at the Meeting, having served since
1974 and 1990, respectively. The Board of Directors approved the committee's
recommendation; the twelve remaining incumbents are nominated for re-election.
Each director elected will hold office until the next annual meeting of
shareholders, unless prior thereto such director resigns or such director's
office becomes vacant by death, removal or other cause. Management does not
expect that any of the nominees will be unable to serve as a director, but if a
nominee should become unable to act as a director for any reason prior to the
Meeting, the persons named in the accompanying form of proxy will have the right
to vote for another nominee in their discretion unless the shareholder has
specified in the proxy that shares are to be voted for another nominee or are to
be withheld from voting on the election of directors. Set forth below are the
names and ages of each person to be nominated for election as director, such
person's present principal occupation or employment, the period during which
such person has served as director of the Corporation, and additional
biographical information. The number of equity securities of the Corporation
beneficially owned, directly or indirectly (or over which control or direction
is exercised) by each director is set forth under
2
<PAGE> 4
the heading "Voting Shares and Principal Holders Thereof: Security Ownership of
Directors and Management."
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS WITH THE CORPORATION AND SIGNIFICANT AFFILIATES, DIRECTOR OF THE
PRINCIPAL OCCUPATIONS, AND RECENT BUSINESS EXPERIENCE CORPORATION SINCE
--------------------------------------------------------------------- -----------------
<C> <S> <C>
DONALD N. BOYCE (1) (61). Chairman of the Board of IDEX Corporation 1997
(a diversified manufacturing company), 1988 to present. President and
[PHOTOGRAPH] Chief Executive Officer of IDEX Corporation, 1988 to 1998. Director
of IDEX Corporation and Walter Industries, Inc.
HERMANN BUERGER (2) (56). Executive Vice President of Commerzbank AG 1997
[PHOTOGRAPH] (international bank), 1989 to present. Director of Security Capital
Group Incorporated and Paging Network, Inc.
JAMES E. COURTNEY (1) (3) (68). Chairman of the Board of First 1989
Community Bank of Southwest Florida (commercial bank), 1998 to
[PHOTOGRAPH] present. Chairman of the Board, First Independence Bank of Fort Myers
(commercial bank), 1996- 1997. President of The Mariner Group, Inc.
(real estate management and development company), 1992-1995.
PETER A. CROSSGROVE (1) (63). Chairman of Premdor Inc. (international 1993
door manufacturing company), 1998 to present. President and Chief
Executive Officer of Southern Africa Minerals Corporation (diamond
exploration company), 1994 to present. Chairman and Chief Executive
Officer of Brush Creek Corporation (investment holding company), 1993
[PHOTOGRAPH] to present. Director of Premdor Inc., Dundee Realty, Inc., Acadia
Minerals Corp., Quadra Logic Technologies Inc., Southern Africa
Minerals Corporation, Barrick Gold Corporation, Band-Ore Resources
Inc., A.M.T. International Mining Corporation, QLT Photo Therapeutics
Inc. and Philex Gold, Inc.
JERE A. DRUMMOND (2) (60). Vice Chairman of BellSouth Communications 1999
Group (telecommunications company), January 1, 2000 to present. Group
[PHOTOGRAPH] President and Chief Executive Officer, BellSouth Communications
Group, 1998 to 1999. President and Chief Executive Officer, BellSouth
TeleCommunications, Inc., 1995-1997. Director of Borg Warner
Automotive, Inc.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS WITH THE CORPORATION AND SIGNIFICANT AFFILIATES, DIRECTOR OF THE
PRINCIPAL OCCUPATIONS, AND RECENT BUSINESS EXPERIENCE CORPORATION SINCE
--------------------------------------------------------------------- -----------------
<C> <S> <C>
THE HONORABLE JAMES A. GRANT, P.C., Q.C. (3) (4) (62). Partner of 1989
Stikeman Elliott (law firm), 1970 to present. Chairman of Executive
[PHOTOGRAPH] Committee of Stikeman Elliott, 1988 to 1999. Director of BioChem
Pharma Inc., CAE Industries Ltd. and Canadian Imperial Bank of
Commerce.
WILLIAM R. HOLLAND (4)(5) (61). Chairman of the Corporation and 1985
United Dominion Industries, Inc., 1987 to present. Chief Executive
[PHOTOGRAPH] Officer of the Corporation and United Dominion Industries, Inc., 1986
to present. Director of The BFGoodrich Company and Lance, Inc.
RUSSELL C. KING, JR. (2) (65). Retired as of May 20, 1994. President 1992
and Chief Operating Officer of Sonoco Products Company (international
[PHOTOGRAPH] manufacturer of packaging products), 1990-1994. Director of
Integrated Business Systems and Services, Inc.
JOHN T. MAYBERRY (2) (55). President and Chief Executive Officer of 1999
[PHOTOGRAPH] Dofasco Inc. (steel producer), 1993 to present. Director of Dofasco
Inc., Decoma International Inc. and The Bank of Nova Scotia.
DR. HARRY A. NURKIN (3) (56). President and Chief Executive Officer 1999
[PHOTOGRAPH] of Carolinas Healthcare System (integrated healthcare services
system), 1983 to present.
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS WITH THE CORPORATION AND SIGNIFICANT AFFILIATES, DIRECTOR OF THE
PRINCIPAL OCCUPATIONS, AND RECENT BUSINESS EXPERIENCE CORPORATION SINCE
--------------------------------------------------------------------- -----------------
<C> <S> <C>
WILLIAM W. STINSON (4)(5) (66). Retired as of May 1, 1996. Chairman 1986
of Canadian Pacific Limited (transportation, energy and hotel
company), 1989-1996. President and Chief Executive Officer of
[PHOTOGRAPH] Canadian Pacific Limited, 1985-1996. Director of PanCanadian
Petroleum Limited, Western Star Ltd., Westshore Investment Trust, Sun
Life Assurance Company of Canada and Massachusetts Financial Services
Company.
GEORGE S. TAYLOR (2) (59). Retired as of December 31, 1995. President 1995
[PHOTOGRAPH] and Chief Executive Officer of John Labatt Limited, 1992-1995.
Director of Great Lakes Power Inc., EdperBrascan Limited, Acanthus
Real Estate Corporation and Teknion Corporation.
</TABLE>
- ---------------
(1) Member of Compensation & Human Resources Committee.
(2) Member of Audit & Risk Management Committee.
(3) Member of Nominating & Corporate Governance Committee.
(4) Member of Executive Committee.
(5) Also a member of the board of directors of United Dominion Holdings, Inc.
and United Dominion Industries, Inc., wholly owned subsidiaries of the
Corporation.
5
<PAGE> 7
COMPENSATION OF DIRECTORS
The following table shows the fees payable to directors of the Corporation.
Directors who also serve as executive officers of the Corporation are not
separately compensated for serving as directors. Directors are also paid their
out-of-pocket expenses for attending each meeting of the Board of Directors of
the Corporation and its committees.
SCHEDULE OF BOARD AND COMMITTEE FEES
<TABLE>
<S> <C>
Board of Directors
Annual Retainer........................................ $30,000
Fee per Meeting........................................ 1,200
Executive Committee
Annual Retainer........................................ 4,500
Compensation & Human Resources Committee
Annual Retainer........................................ 4,000
Fee per Meeting........................................ 1,200
Audit & Risk Management Committee
Annual Retainer........................................ 4,000
Fee per Meeting........................................ 1,200
Nominating & Corporate Governance Committee
Annual Retainer........................................ 4,000
Fee per Meeting........................................ 1,200
</TABLE>
In the most recently completed financial year, the Corporation paid fees in
the aggregate amount of U.S. $642,775 to thirteen directors. In 1999, ten
directors were each granted options to purchase 2,000 Common Shares pursuant to
the Corporation's non-qualified Stock Option and Restricted Stock Plan.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 1999, the Corporation's Board of Directors met in person six times
and held three telephonic meetings. The Board of Directors has standing
Executive, Audit & Risk Management, Compensation & Human Resources, and
Nominating & Corporate Governance committees.
The Executive Committee is empowered to exercise the full powers of the
Board of Directors when the Board is not in session, except those powers which,
under the Canada Business Corporations Act (the "CBCA") or the Corporation's
By-Laws, a committee of the Board of Directors has no authority to exercise. The
Executive Committee did not meet during 1999; however, it took unanimous action
in lieu of meeting three times.
The Audit & Risk Management Committee (the "Audit Committee"), which met
three times during 1999, reviews the audit plan developed by the Corporation's
auditors in connection with their annual audit of the Corporation's books and
records, the consolidated financial statements and results of the annual audit
performed by the Corporation's auditors, the auditors' fees submitted to the
Corporation, the response of Management to management letters issued by the
auditors, current accounting rules and changes therein, the financial reviews
performed by members of the Corporation's internal audit staff, and the
financial control mechanisms and risk management procedures adopted by the
Corporation. The Audit Committee also recommends the selection of auditors to
the Board of Directors each year. The Board of Directors is required to have an
audit committee by applicable statutory and regulatory requirements.
The Compensation & Human Resources Committee (the "Comp Committee"), which
met in person five times and by telephone two times during 1999, reviews the
appropriateness and cost of the Corporation's compensation and benefit programs,
including the salaries, incentive compensation and benefits of all executive
officers and certain other key employees; assesses the effectiveness of the
Corporation's chief executive officer; and monitors management development and
succession planning programs.
6
<PAGE> 8
The Nominating & Corporate Governance Committee was added in 1999 and met
twice during the year. It is the Corporation's nominating committee, proposing a
slate of directors and committee members each year. It also monitors corporate
governance matters and prepares the Corporation's report on its status with the
governance guidelines of The Toronto Stock Exchange ("TSE") for this Proxy
Circular.
Shares in the Corporation owned by directors are reported under the heading
"Voting Shares and Principal Holders Thereof: Security Ownership of Directors
and Management."
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
As of the Record Date, the Corporation had outstanding 39,122,355 Common
Shares, each such share being entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The directors and officers of the Corporation believe that, as of the
Record Date, the following persons beneficially owned, directly or indirectly,
or exercised control or direction over, Common Shares carrying more than 5% of
the votes attached to the Common Shares:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF COMMON SHARES OUTSTANDING
------------------------------------ ----------------------- -----------
<S> <C> <C>
Ontario Teachers' Pension Plan Board (1)......... 4,679,031 12.0%
5650 Yonge Street, 5th Floor
Toronto, Ontario M2M 4H5
TAL Global Asset Management Inc. (2)............. 3,475,016 8.9%
1000 de la Gauchetiere West, Suite 3100
Montreal, Quebec H3B 4W5
Mackenzie Financial Corporation (3).............. 3,067,400 7.8%
150 Bloor Street West, Suite M111
Toronto, Ontario M5S 3B5
The Prudential Insurance Company of America
(4)............................................ 2,058,500 5.3%
751 Broad Street
Newark, New Jersey 07102-3777
</TABLE>
- ---------------
(1) Ontario Teachers' Pension Plan Board ("Ontario Teachers") provides pension
services to active and retired teachers and is the largest single invested
pension plan in Canada. As of March 14, 2000, according to a Schedule 13D/A
filed with the Corporation and the United States Securities and Exchange
Commission on March 15, 2000, Ontario Teachers had sole dispositive and
voting power in respect of the number of Common Shares shown.
(2) On February 12, 2000, TAL Global Asset Management Inc. ("TAL"), filed a
report on Schedule 13G indicating that, in its capacity as a registered
investment advisor and in the ordinary course of its business, it has sole
dispositive power over the referenced number of Common Shares and sole
voting power over 181,497 Common Shares. TAL manages common stock and bond
portfolios for mutual funds and institutional and private investors.
According to T.A.L., none of the several accounts that it manages has an
interest in more than 5% of the Common Shares.
(3) On February 14, 2000, Mackenzie Financial Corporation filed a report on
Schedule 13G in its capacity as an investment advisor indicating that
several accounts it manages have the right to receive dividends and proceeds
from the sale of the referenced number of Common Shares. Mackenzie, a
registered investment adviser, indicated that none of these accounts
individually owns more than 5% of the Common Shares.
(4) The Prudential Insurance Company of America informed the Corporation in
March 2000 that, at the end of February 2000, it had direct or indirect
voting and/or investment discretion over the referenced number of Common
Shares, which are held for the benefit of its clients. Prudential is a
Newark, New Jersey based insurance company and a registered investment
adviser.
7
<PAGE> 9
The directors and officers of the Corporation are not aware of any other
person who beneficially owns, directly or indirectly, or exercises control or
direction over, 5% or more of the Common Shares.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table presents the number of equity securities of the
Corporation beneficially owned, directly or indirectly, or controlled or
directed by, its directors, nominees and executive officers (with sole voting
and investment power, except as otherwise indicated) as of March 14, 2000.
Beneficial ownership has been determined in accordance with subsection 2(1) of
the CBCA and Rule 13d-3 under the United States Securities Exchange Act of 1934,
as amended.
<TABLE>
<CAPTION>
TOTAL SHARES
NUMBER OF OPTIONS PRESENTLY BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(A) EXERCISABLE OWNED CLASS
------------------------ ---------- ----------------- ------------ ----------
<S> <C> <C> <C> <C>
Donald N. Boyce.................. 1,000 7,000 8,000 (b)
Hermann Buerger.................. 2,000 7,000 9,000 (b)
James E. Courtney................ 1,535 13,000 14,535 (b)
Peter A. Crossgrove.............. 5,000 12,000 17,000 (b)
R. Stuart Dickson................ 1,790 14,000 15,790 (b)
Jere A. Drummond................. 0 0 0 (b)
James A. Grant................... 1,000 14,000 15,000 (b)
William R. Holland............... 253,041(c)(d) 332,750 585,791 1.5%
Russell C. King, Jr.............. 5,000 9,000 14,000 (b)
John T. Mayberry................. 1,000 0 1,000 (b)
Harry A. Nurkin.................. 1,000 0 1,000 (b)
Dalton D. Ruffin................. 6,757 14,000 20,757 (b)
William W. Stinson............... 15,042 19,000 34,042 (b)
George S. Taylor................. 11,000 10,000 21,000 (b)
All directors and executive
officers as a group (28
persons)....................... 424,901(c)(d) 993,422 1,418,323 3.5%
</TABLE>
- ---------------
(a) Shares listed are Common Shares actually owned beneficially, not including
presently exercisable options.
(b) Less than 1% of the outstanding Common Shares.
(c) Includes, for Mr. Holland, 88,626 restricted Common Shares, and for all
directors and executive officers as a group, 154,691 restricted Common
Shares.
(d) Does not include Common Shares held in United Dominion Industries, Inc.'s
Compass Plan, a qualified defined contribution plan designed to satisfy the
provisions of Section 401(k) of the United States Internal Revenue Code,
which permits investment of employee accounts in a pooled fund invested
principally in Common Shares and maintained for the plan by its plan
administrator.
CORPORATE GOVERNANCE PRACTICES
The TSE requires that each company whose shares are listed and posted for
trading on the TSE disclose, on an annual basis, such company's approach to
corporate governance with reference to specified guidelines (the "TSE
Guidelines") for effective corporate governance. These guidelines deal with the
constitution of boards of directors and board committees, their functions, their
independence from management, and other means of ensuring sound corporate
governance. In light of the TSE requirements, a summary of the status of the
Corporation with respect to the TSE Guidelines is set forth in Appendix "A" to
this Proxy Circular.
8
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation
The following table, presented in accordance with the CBCA and the
applicable provincial securities legislation in Canada, sets forth information
concerning compensation paid to the Chief Executive Officer, and each of the
other four most highly compensated executive officers of the Corporation (the
"Named Executive Officers"), for services rendered to the Corporation and its
subsidiaries during the financial years ended December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ----------------------- -----------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
SALARY(1) BONUS(2) SATION(3) AWARDS(4) OPTIONS(5) PAYOUTS(6) SATION(7)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ---- --------- -------- --------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. R. Holland................ 1999 850,000 615,825 126,808 894,160 72,750 536,831 4,322
Chairman & CEO 1998 850,000 603,202 85,942 38,097 70,000 571,954 4,843
1997 805,000 681,040 80,615 85,377 -- 656,860 4,250
G. A. Eisenberg.............. 1999 315,000 117,731 48,810 243,698 15,000 124,168 333
President & COO 1998 293,750 144,749 28,981 30,652 58,000 100,209 302
1997 257,000 100,230 28,285 64,764 20,000 95,468 24,687
B. B. Burns, Jr.............. 1999 292,000 159,505 36,059 177,699 15,000 103,148 631
Executive VP 1998 292,000 162,346 28,295 21,646 7,000 109,267 46,616
1997 286,000 130,425 25,422 69,191 22,500 88,745 99,780
J. M. Gibbs.................. 1999 275,000 118,594 29,758 215,062 15,000 76,812 --
Senior VP and 1998 227,333 109,709 18,998 70,088 35,000 94,887 --
Segment President 1997 209,000 24,210 6,927 6,948 9,000 103,800 --
L. Wahl...................... 1999 348,600 325,419 8,328 -- 31,875 145,161 --
Senior VP and 1998 303,477 210,234 7,661 -- 47,500 151,182 --
Segment President 1997 289,353 162,761 7,510 65,104 12,000 283,067 --
</TABLE>
- ---------------
(1) Includes amounts voluntarily deferred pursuant to United Dominion
Industries, Inc.'s Compass Plan (the "401(k) Plan"), a qualified defined
contribution plan designed to satisfy the provisions of Section 401(k) of
the United States Internal Revenue Code, and United Dominion Industries,
Inc.'s Excess Deferred Compensation Plan (the "Excess Plan"), a
non-qualified deferred compensation plan.
(2) Bonuses were approved by the Comp Committee and were paid in February of the
following year. See "Report of the Compensation & Human Resources Committee
on Executive Compensation." Amounts shown include amounts deferred pursuant
to the 401(k) Plan and the Excess Plan. Amounts shown include only the cash
portion of annual bonuses; Common Shares received pursuant to elections to
receive shares in lieu of cash for a portion of the annual bonus are
included in the column headed "Restricted Stock Awards." See Note (4) below.
(3) Includes personal use of company airplane, gross-up of taxable use of
company airplane, insurance on personal automobiles, automobile allowance,
membership dues, executive tax service, health care benefits and credits,
parking and matching contributions by the Corporation under the 401(k) Plan.
(4) Includes the value of Common Shares issued in lieu of cash compensation
under the Annual Management Incentive Plan of the Corporation (the "Annual
Plan") and the Long-Term Management Performance Incentive Plan of the
Corporation (the "Long-Term Plan"). These plans allow participants to elect
to receive shares in lieu of a portion of cash bonuses, subject to the
decision of the Comp Committee as to award multiple and eligible bonus
percentage. The Comp Committee determines the maximum percentage of a
participant's award that will be eligible for payment in Common Shares and
an award multiple not to exceed 1.25. Participants in each of these plans
may elect to receive Common Shares instead of cash, subject to the
limitations established in the
9
<PAGE> 11
respective plans and by the Comp Committee. For awards each year, the Comp
Committee approved an award multiple of 1.20 and allowed participants to
elect to receive up to 35% of their incentive awards in Common Shares.
Amounts shown in the "Bonus" column under "Annual Compensation" reflect the
actual cash bonus received. Amounts shown in the "Restricted Stock Awards"
column reflect the value of shares issued in lieu of the cash bonus award
otherwise payable under the Annual Plan (taking into account the award
multiple). Amounts shown in the column "LTIP Payouts" include the cash award
and the value of any Common Shares issued under the Long-Term Plan (taking
into account the award multiple). Also includes for Mr. Holland, Mr.
Eisenberg, Mr. Burns and Mr. Gibbs, the value of restricted share awards
received in February 1999.
(5) Stock options with respect to the indicated number of Common Shares were
granted by the Comp Committee in February of each year indicated, except
1998, when options were awarded in February and October, and 1999 for Mr.
Wahl, when options were also awarded in April.
(6) Payments were approved by the Comp Committee and made pursuant to the
Corporation's Long-Term Plan in February of each year based on performance
units granted for the three-year period ended December 31 of the prior year.
Amounts stated include the value of shares received pursuant to the plan as
a result of elections by participants to receive shares in lieu of a portion
of the cash bonus due.
(7) Includes the following: for Mr. Burns (1997 and 1998), relocation
reimbursements; for Mr. Eisenberg (1997), membership fees and related tax
gross-up. Also includes imputed income on split dollar life insurance
policies. Does not include amounts realized upon the exercise of stock
options (see "Aggregated Option Exercises During the Most Recently Completed
Financial Year and Financial Year-End Option Values").
STOCK OPTIONS
The following table shows the stock options granted to the Named Executive
Officers in February and April 1999. These non-qualified stock options become
exercisable in thirds, one-third one year after date of grant, another one-third
two years after date of grant, and the final one-third three years after date of
grant. Options held by persons (including Mr. Holland) who are eligible to
retire under United Dominion Industries, Inc.'s Revised Retirement Plan (age 55
plus not less than five years' service), become exercisable six months after
grant.
OPTION GRANTS IN MOST RECENT FINANCIAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
------------------------------------- AT ASSUMED
MARKET VALUE ANNUAL RATES OF
% OF TOTAL OF SECURITIES SHARE PRICE
NUMBER OF OPTIONS UNDERLYING APPRECIATION FOR
UNDERLYING GRANTED TO OPTIONS OPTION TERM
OPTIONS EMPLOYEES EXERCISE ON THE ---------------------
GRANTED IN FINANCIAL PRICE(1) DATE OF GRANT EXPIRATION 5% 10%
NAME (#) YEAR ($CDN/SH) ($CDN) DATE(2) ($CDN) ($CDN)
- ---- ---------- ------------ --------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
W. R. Holland........ 72,750 12.3% 29.80 2,167,950 02/11/09 1,363,000 3,455,000
G. A. Eisenberg...... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
B. B. Burns, Jr...... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
J. M. Gibbs.......... 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
L. Wahl.............. 15,000 2.5% 29.80 447,000 02/11/09 281,000 712,000
L. Wahl.............. 16,875 2.9% 32.775 553,078 04/26/09 348,000 881,000
</TABLE>
- ---------------
(1) The Exercise Price is the fair market value of the Common Shares on the
grant date, defined to be the average of the previous day's high and low
board-lot trading prices on the TSE.
(2) Options expire 10 years after the date of the grant. If an officer retires,
the 10-year period continues.
10
<PAGE> 12
The following table provides information as to options exercised by the
Named Executive Officers in 1999 and the value of options held by such
executives at year-end.
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES AGGREGATED OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
- ---- ----------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. R. Holland........ 48,000 267,008 332,750 100,000 251,644 --
G. A. Eisenberg...... -- -- 103,200 112,000 72,057 --
B. B. Burns, Jr...... -- -- 106,333 64,667 242,935 --
J. M. Gibbs.......... -- -- 35,333 56,667 4,219 --
L. Wahl.............. -- -- 56,366 82,709 10,224 --
</TABLE>
- ---------------
(1) The values represent the difference between the exercise price of the
options and the market price of Common Shares on the date of exercise (with
respect to exercised options) and at year-end (with respect to unexercised
options).
(2) Exercisability was determined as of March 14, 2000.
LONG-TERM INCENTIVE AWARDS
The following table contains information regarding Performance Units
awarded to the Named Executive Officers under the Long-Term Plan during the
financial year ended December 31, 1999. The Long-Term Plan is described in this
Proxy Circular in the "Report of the Compensation & Human Resources Committee on
Executive Compensation."
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FINANCIAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OTHER PERIOD NON-STOCK PRICE-BASED PLANS($)
PERFORMANCE UNTIL MATURATION --------------------------------
NAME UNITS OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ----------- ---------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
W. R. Holland......................... 5,950 1999-2001 301,070 595,000 N/A
G. A. Eisenberg....................... 1,260 1999-2001 63,756 126,000 N/A
B. B. Burns, Jr....................... 1,168 1999-2001 59,100 116,800 N/A
J. M. Gibbs........................... 1,100 1999-2001 55,660 110,000 N/A
L. Wahl............................... 1,394 1999-2001 70,536 139,400 N/A
</TABLE>
REPORT OF THE COMPENSATION & HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
Composition of the Committee
The Compensation & Human Resources Committee of the Board of Directors (the
"Committee"), is composed of four non-employee directors, none of whom is
considered by the Corporation to be a "related director" under the TSE
Guidelines and all of whom are "outside directors" under Section 162(m) of the
United States Internal Revenue Code.
Background
The Committee establishes and administers the executive compensation
program for the Corporation's key executives. The executive compensation program
is a well-defined management tool that reinforces the Corporation's culture and
commitment to shareholders. It is designed to attract and retain high-quality
executives, to encourage them to make career commitments to the Corporation, and
to accomplish the Corporation's short and long-term objectives of continuously
improving shareholder return. The Committee reviews and acts on any proposed
changes to current compensation and benefit programs, and on proposed changes in
salary and incentive levels for key executives. The Committee
11
<PAGE> 13
fundamentally believes that a sound compensation program motivates and rewards
executives for the accomplishment of the Corporation's stated financial
objectives by linking a material portion of executive pay to those objectives.
Principles of the Executive Compensation Program
The Corporation has historically viewed executive compensation as a total
package that includes base salary and variable short- and long-term
performance-based compensation. The total program is structured to deliver a
significant percentage of pay through variable at-risk pay programs, which
reward executives if the performance of the Corporation warrants such
recognition. The Executive Compensation Program is built on the following basic
principles:
- Maximize shareholder value.
- Develop an entrepreneurial spirit among key executives.
- Retain, reward and motivate key executives.
- Compensate for performance rather than create a sense of
entitlement.
- Reward team results.
- Build executive equity ownership in the Corporation.
Components of Executive Compensation
To determine the competitive level of total compensation, the Committee
sets the total pay target in a competitive compensation range as benchmarked
against published survey data and data derived through special studies of
comparable industries. The Corporation's base salary program is designed to pay
an experienced executive at or near the median or 50th percentile of the
prevailing pay range in the industry for comparable positions. Base salaries are
customarily increased annually, based on a combination of market conditions,
individual performance and corporate performance. Generally, annual increases
are no greater than industry median increases, except in instances of promotion
or significant change in job responsibilities. Incentive compensation is
variable and contingent upon the Corporation's financial performance against
stated and pre-determined objectives. The Committee has the right to make
discretionary payments outside the provisions of the Corporation's variable
incentive compensation programs in very limited circumstances, for example, if
an executive or group of executives has provided exceptional service to the
benefit of shareholders and the Committee believes some recognition is due.
Annual Management Incentive Compensation: The Corporation maintains a
Corporate Annual Management Incentive Compensation Plan (the "Annual Plan") for
a number of its key employees, including the Named Executive Officers.
Shareholders of the Corporation approved the Annual Plan on April 27, 1999. The
Committee determines the Chief Executive Officer's eligibility to participate in
the Annual Plan, reviews the Chief Executive Officer's recommendations of other
Annual Plan participants, and, with such changes as the Committee may determine,
if any, approves the annual awards. Participants are classified into groups,
with each group having an annual incentive opportunity of 10% to 80% of base
salary. Annual cash incentive is paid only if the Corporation's performance
meets or exceeds pre-established annual financial targets that are important to
the Corporation and its shareholders. The relative importance of each target is
determined each year by the Committee, and may vary depending upon the
Corporation's financial objectives for that year. All incentive awards under the
Annual Plan are subject to the Committee's approval, and are paid in February
following the year with respect to which amounts are calculated. 1999
performance targets were based on sales growth and return on equity ("ROE"). In
1999, the Corporation achieved sales growth of 6.3% and ROE of 9.9%, resulting
in an award equal to 66.8% of each participant's target award. Excluding
restructuring charges, ROE was 11.5%. As a reward for management's aggressive
actions to improve operations, including restructuring activities, the Committee
provided ex gratia awards totaling $1.016 million to certain corporate officers,
including the Named Executive Officers.
Annual incentive compensation plans are also maintained on behalf of the
Corporation's operating units for their key employees. During 1999, participants
were able to earn cash incentives based on pre-
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<PAGE> 14
determined sales growth and return on investment goals derived from segment and
operating unit business plans. The amount of annual incentive compensation is
determined by the participant's position and base salary, with target awards
ranging from 10% to 50% of base salary.
Long-Term Incentive Compensation: The Corporation maintains a Long-Term
Management Incentive Compensation Plan (the "Long-Term Plan") which provides
long-term cash incentive to focus corporate executives on achieving longer-term
shareholder value. Shareholders of the Corporation approved the Long-Term Plan
on April 27, 1999. Under the Long-Term Plan, participants receive annual grants
of participation units that are payable after the end of three-year performance
cycles. The Committee establishes performance goals, such as earnings growth,
sales growth, return on capital employed or other such measures, as it deems
appropriate, given the Corporation's objectives. Participants earn from 0% to
150% of the value of their participation units based on the extent to which
pre-established performance goals are achieved.
Long-Term Incentive plans are also maintained on behalf of the
Corporation's operating units for their key employees. During the 1997-99 plan
cycle, participants were able to earn cash incentives based on pre-determined
goals derived from operating unit business plans. The amount of annual incentive
paid is determined by the participant's position and base salary, with target
awards ranging from 10% to 35% of base salary.
Under terms of the Annual Plan, the Long-Term Plan, and unit annual and
long-term plans, the Committee may grant Plan participants an opportunity to
receive a multiple of a portion of their annual incentive in the Corporation's
Common Shares to further encourage equity ownership among management. With
respect to incentives earned in 1999, the Committee approved an award multiple
of 1.2 and allowed participants to receive up to 35% of their annual incentive
in Common Shares.
Stock Option Plan: Like cash incentives, stock options and restricted
stock are important parts of the total compensation packages of key executives
and are specifically focused on the Corporation's longer-term objectives. The
Corporation maintains a non-qualified stock option and restricted stock plan
(the "Option Plan") for key employees, officers and directors, including the
Named Executive Officers. Shareholders of the Corporation approved the Option
Plan on April 27, 1999. Stock option awards are vested one-third each year.
Options are granted at 100% of the fair market value of the Corporation's common
stock on the date of grant and expire ten years from the date of grant. The use
of restricted stock is designed primarily to retain executive officers and other
key employees of the Corporation while building stock ownership and long-term
equity, and linking pay directly with shareholder return. Option Plan
participation and the size of awards are determined by the individual's
potential to make significant contributions to the Corporation's financial
results, level of management responsibility and individual performance and
potential. Under the Option Plan, the Committee recommends to the Board of
Directors those employees, officers and directors to whom restricted stock or
options to purchase Common Shares should be granted, and the number of shares to
be placed under option. The Board of Directors may accept, modify or return for
further consideration the Committee's recommendations. In no instance may the
exercise price of options be less than 100% of the fair market value of the
Common Shares at the time the option is granted. As of December 31, 1999,
options to purchase 2,787,458 Common Shares were outstanding and remained
unexercised under the Option Plan and 1,163,750 shares remained available for
purposes of future grants.
In February 1999, the Corporation's directors, officers and other employees
received restricted stock and option grants in respect of 666,565 Common Shares,
which was 1.64% of the Common Shares outstanding as of the date of grant. This
total grant percentage compares to an industry median among comparable companies
of approximately 1.76% of common shares outstanding, on an annual basis, based
on data supplied by the Corporation's compensation consultants.
The Corporation's incentive compensation programs are designed to reward
executives for achievement of the Corporation's performance objectives. The
plans, as approved by shareholders, are designed to comply with Internal Revenue
Code Section 162(m) to ensure tax deductibility. However, the Committee
considers it important to retain the flexibility to design compensation programs
that are in the best interest of the Corporation and the shareholders and is
therefore not necessarily constrained by that provision.
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<PAGE> 15
CEO Compensation
In making its decisions late in 1998 regarding Mr. Holland and his
management team's compensation for 1999, and in establishing incentive goals for
1999, the Committee considered the Corporation's continuing successful
performance during 1998 and the steps Mr. Holland had taken to position the
Corporation for future growth. 1998 sales grew to $2 billion. Segment operating
income totaled $207 million, up 19% from 1997. Net income of $99.7 million
produced earnings per share of $2.45, a year-over-year gain of 17% in income
from continuing operations:
Key achievements included:
- Sales growth of 22% year-over-year, driven largely by acquisitions.
31% of total sales came from outside the United States.
- The gain on the sale of the Marley Pump motor business and an
international tax refund more than offset the non-recurring charges
related to cost reduction initiatives and previously divested
businesses. Excluding one-time gains and charges, net income would
have totaled $87 million, or $2.15 per share.
- The balance sheet remained strong, ending 1998 at 37% net debt to
capital. In addition, the Corporation generated $41 million in free
cash flow after capital expenditures totaling $52 million and $15
million in dividends.
- Success of the Company's growth programs, including 11 product-line
acquisitions for a total investment of $172 million with annualized
sales of $150 million.
- The Corporation repurchased 3.3 million Common Shares for $84 million.
The Committee also recognized the continuing value of Mr. Holland's
management expertise; his key role in the successful transition of the
Corporation to manufacturing; his global expansion of the business; and his
continuing efforts to take the Corporation to world-class manufacturer status.
In addition, for the past three years Mr. Holland has worked closely with the
Board of Directors to develop a transition plan to the next generation of senior
management. In December 1999, as a result of this effort, Glenn A. Eisenberg was
named President and Chief Operating Officer, B. Bernard Burns was named
Executive Vice President and Chief Administrative Officer, and William Dries was
named Chief Financial Officer. These steps, and the continued development of
United Dominion's management under Mr. Holland's guidance, position the
Corporation for continued success. The committee reviews Mr. Holland's
performance at its December meeting pursuant to a written report from him,
which, among other things, is used to assess the appropriateness of his
compensation.
For fiscal year 1999, Mr. Holland received a base salary of $850,000 and
was awarded an incentive bonus of $397,758 under the Annual Plan based on the
Corporation's achievement of $88.9 million in earnings and $128.3 million in
sales growth, 66.8% of his targets. He also received a bonus under the Long-Term
Plan for the 1997-1999 cycle of $479,313 as a result of the achievement by the
Corporation of cumulative return on equity of 12.6% and cumulative net earnings
of $326.6 million, 85.1% of the three-year targets set in 1996. In addition, the
Committee recommended and the Board approved the payment to Mr. Holland of an ex
gratia bonus in the amount of $286,492 in recognition of the significant
restructuring activities led by Mr. Holland during the year to improve future
operating performance.
During 1999, Mr. Holland was awarded stock options in respect of 76,750
Common Shares and 27,250 restricted Common Shares under the Option Plan. He was
also awarded 5,950 units for the 1999-2001 cycle under the Long-Term Plan. The
value of the long-term award, if the Corporation's long-term target results are
satisfied, is $595,000, equal to 70% of Mr. Holland's 1999 base salary.
The Committee carefully reviewed Mr. Holland's executive compensation
package. Given Mr. Holland's long-time service to the Corporation, the
Corporation's continued solid financial performance in 1999, and the
accomplishments described above, the Committee believes the package is
appropriate and that the amount and nature of each component of the package is
consistent with competitive pay practices among comparable United States
companies, based on data supplied by the Corporation's compensation consultants.
In conformity with its past practice, the Committee will
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<PAGE> 16
periodically review the compensation and benefits of Mr. Holland and the
Corporation's other key executives and will from time to time make such changes,
as it deems appropriate under the circumstances.
Compensation & Human Resources Committee:
D. N. Boyce
J. E. Courtney, Vice Chairman
P. A. Crossgrove
D. D. Ruffin, Chairman
UNITED DOMINION INDUSTRIES, INC. RETIREMENT PLAN
The executive officers of the Corporation (other than Mr. Wahl) participate
in the United Dominion Industries, Inc. Revised Retirement Plan (the "United
Dominion Plan"), a qualified defined benefit plan available to all salaried
employees of United Dominion Industries, Inc. The amount payable at age 65 is
0.8% of participant's final average earnings ("FAE"), defined as the annualized
average of the highest consecutive five years of compensation out of the last
ten years of employment, plus 0.6% of the participant's FAE in excess of the
covered compensation (the average of the thirty-five social security wage bases
in effect or projected to be in effect during the thirty-five years prior to the
year during which the participant will reach age 65) multiplied by up to a
maximum of 35 years of service. For each year of service over 35 years, the
retirement benefit is increased by 0.5% of FAE. Compensation covered by the
United Dominion Plan is total cash compensation paid during the plan year,
including bonuses and awards made under the Annual Plan and Long-Term Plan
described above, but excluding directors' fees and non-service related
compensation.
The following table shows estimated annual gross benefits payable from the
United Dominion Plan as a single life annuity upon retirement at age 65 in 1999
for employees in the salary classifications and with the years of service
specified. The amount shown for each category is the total benefit payable under
the United Dominion Plan benefit formula without regard to United States
regulations which limit both the maximum benefit that can be paid from a
qualified defined benefit plan and the amount of salary that can be included in
a qualified plan's salary-based benefit formula. The Corporation pays the full
amount due pursuant to the United Dominion Plan's benefit formula through a
combination of the qualified defined benefit plan and either a non-qualified
pension restoration plan or the Supplemental Plan described below. The
Supplemental Plan provides additional retirement benefits to certain executives.
See "Other Plans and Agreements."
<TABLE>
<CAPTION>
AVERAGE
CONTINUOUS BEST YEARS OF SERVICE
FIVE YEARS OF ----------------------------------------------------
COMPENSATION 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C>
$ 100,000 .................. $ 18,030 $ 24,040 $ 30,050 $ 36,060 $ 42,070
200,000 .................. 39,030 52,040 65,050 78,060 91,070
300,000 .................. 60,030 80,040 100,050 120,060 140,070
400,000 .................. 81,030 108,040 135,050 162,060 189,070
500,000 .................. 102,030 136,040 170,050 204,060 238,070
600,000 .................. 123,030 164,040 205,050 246,060 287,070
800,000 .................. 165,030 220,040 275,050 330,060 385,070
1,000,000 .................. 207,030 276,040 345,050 414,060 483,070
1,200,000 .................. 249,030 332,040 415,050 498,060 581,070
1,400,000 .................. 291,030 388,040 485,050 582,060 679,070
1,600,000 .................. 333,030 444,040 555,050 666,060 777,070
1,800,000 .................. 375,030 500,040 625,050 750,060 875,070
2,000,000 .................. 417,030 556,040 695,050 834,060 973,070
</TABLE>
The Named Executive Officers (other than Mr. Wahl) have the credited years
of service indicated beside each of their names: Mr. Holland -- 27, Mr. Burns --
10, Mr. Eisenberg -- 10, Mr. Gibbs -- 22.
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<PAGE> 17
Mr. Wahl does not participate in the United Dominion Plan; instead, he is
covered by a German pension plan for BOMAG management. The plan is based on his
salary, taking into account social security pension payments and years of
service. The maximum annual amount payable under the BOMAG management plan is
approximately 55% of Mr. Wahl's final salary.
OTHER PLANS AND AGREEMENTS
The Corporation provides a Supplemental Executive Retirement Plan (the
"Supplemental Plan") to 12 of its key executives, including the Named Executive
Officers except Mr. Wahl. Under the Supplemental Plan, a fully vested
participant is eligible to receive a target annual benefit at age 62 equal to
60% of Final Average Earnings, reduced by retirement income from the United
Dominion Plan described in the preceding section and Social Security. "Final
Average Earnings" is defined for purposes of the Supplemental Plan as the
average of the highest three years of "Eligible Income" out of the ten years
immediately preceding retirement; Eligible Income includes salary and all
incentive earnings under the Corporation's established incentive plans. To
become fully vested under the Supplemental Plan a participant must accumulate,
or be granted by the Comp Committee (as in the case of Messrs. Eisenberg and
Burns), fifteen years of service. For purposes of the Supplemental Plan, Mr.
Gibbs has been granted twelve years credit, five for his period of service with
United Dominion and seven for his service with United Dominion's Serco business
prior to its acquisition by United Dominion. Benefit accruals begin after five
full years of service, with one-tenth of the target benefit vesting each year
thereafter. All of the benefits under the Supplemental Plan are paid in a 50%
joint and survivorship annuity for the life of the participant. A participant
may elect to retire at any time after age 55 and receive a benefit, actuarially
reduced, for life.
Pursuant to an agreement between Mr. Holland and the Corporation dated
April 28, 1999, Mr. Holland will be entitled to receive his Supplemental Plan
benefit in a lump sum upon his retirement or other separation from the
Corporation. Also pursuant to the agreement, the discount computation rate that
will be used to compute the lump sum benefit has been fixed at 5.25% (the 1999
GATT cash lump sum discount rate used in the United Dominion Plan).
United Dominion Industries, Inc. has established a "grantor trust" (the
"Trust") for the purpose of providing certain executives (including all of the
Named Executive Officers other than Mr. Wahl) with greater assurances that the
supplemental pension benefits to which such executives may be entitled under the
Supplemental Plan and the change in control agreements described under the
heading "Change in Control Agreements" would be satisfied in the event of a
"change in control" as defined in the Trust (collectively, the "Covered
Benefits"). The Trust is intended to constitute an "unfunded" arrangement.
However, United Dominion Industries, Inc. has deposited into the Trust a letter
of credit in the face amount of approximately $32.8 million, which is equal to
120% of the estimated value of the Covered Benefits that would be payable
assuming a change in control had occurred on January 1, 1999 and all of the
covered executives had terminated employment on that date. The Covered Benefits
are redetermined annually as of January 1 of each year. To the extent the
aggregate value of the Covered Benefits increases, additional contributions (in
the form of letters of credit or otherwise) are required to be made to maintain
the assets of the Trust at a level equal to 120% of the estimated benefit
values. Upon the occurrence of a change in control, United Dominion Industries,
Inc. is required to make additional contributions to the Trust in cash so that
the aggregate amount of the assets held by the Trust equals 120% of the Covered
Benefits determined as of the date such change occurs. The letter(s) of credit
would be drawn upon to the extent any supplemental pension benefits which become
payable under the Supplemental Plan or the change in control agreements are not
otherwise paid by United Dominion Industries, Inc. The assets of the Trust are
subject to the claims of the creditors of United Dominion Industries, Inc. in
the event United Dominion Industries, Inc. becomes "Insolvent" as defined in the
Trust.
The Corporation also provides several other supplemental executive benefit
plans to the Named Executive Officers, including split-dollar life insurance and
long-term disability insurance. The life insurance plan provides participants a
death benefit equal to one hundred percent of their current salary and prior
year's incentive bonus. The supplemental long-term disability plan provides a
make-up benefit to ensure that participants receive a disability benefit at
least equal to 60% of eligible total compensation when combined with the
Corporation's group long-term disability benefit plan.
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<PAGE> 18
PERFORMANCE GRAPH
The following graph compares cumulative total return (assuming reinvestment
of dividends) for the Corporation's Common Shares against the TSE Composite 300
(TSE 300) for the five-year period ended December 31, 1999, assuming $100
invested on December 31, 1994.
<TABLE>
<CAPTION>
Measurement Period United
(Fiscal Year Covered) Dominion TSE 300
<S> <C> <C>
1994 100 100
1995 110 112
1996 122 141
1997 137 159
1998 122 154
1999 112 200
</TABLE>
CHANGE IN CONTROL AGREEMENTS
United Dominion Industries, Inc. has agreements with fifteen of its key
employees, including each of the Named Executive Officers except Mr. Wahl,
providing for protection in the event of a change in control of the Corporation.
In general, the agreements provide for (a) a lump-sum severance payment by
United Dominion Industries, Inc. to the employee equal to the amount of base
salary that the employee would have earned had he continued to be employed until
the earlier of (i) the end of the thirty-six month period following the date of
termination or (ii) the attainment of normal retirement age, assuming the
employee's salary rate would be equal to his highest monthly rate during the
thirty-six month period preceding termination, (b) amounts in lieu of continued
participation in incentive compensation and stock option plans based on
assumptions concerning the Corporation's results for the thirty-six month period
following termination and the employee's continued participation for the period,
(c) insurance and other benefits for the thirty-six month period after
termination (to the extent the employee does not receive comparable benefits
during the period), and (d) supplemental pension benefits, if the Corporation
experiences a change in control and the employee is terminated for reasons other
than death, disability, retirement or cause, or terminates his employment for
reasons relating to a change in, among other things, his compensation, duties,
benefits or location. These agreements are designed to provide the benefits the
employee would have received had he continued working for United Dominion
Industries, Inc. for three additional years.
The amount to be paid is not subject to reduction for compensation earned
from subsequent employment or from subsequent pension benefits. The agreements
provide for a "gross-up" of the awards to reimburse participants for any excise
tax payable on account of any "excess parachute payment" under United States
Internal Revenue Code Section 280(G).
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<PAGE> 19
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation and its directors and officers are covered under a
directors' and officers' liability insurance policy maintained by the
Corporation that has aggregate coverage limits of $100,000,000. This policy
includes a per-loss deductible of $250,000 with regard to claims against the
Corporation, but no deductible with regard to claims against individual
directors and officers. The premium paid by the Corporation in 1999 was $273,750
in respect of its officers and directors as a group. The Corporation paid all of
the premiums.
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
The Honorable James A. Grant, P.C., Q.C., a director of the Corporation
(and a nominee for re-election), is a partner in the law firm Stikeman Elliott,
which provides certain legal services to the Corporation.
Mr. William W. Stinson, a director of the Corporation (and a nominee for
re-election) entered into a management consulting agreement with the Corporation
effective January 1, 1998. That agreement was renewed for successive additional
one-year terms effective January 1, 1999 and January 1, 2000. Mr. Stinson was
paid $150,000 during 1999 and will be paid $150,000 during 2000 pursuant to the
agreement.
REAPPOINTMENT OF AUDITORS
KPMG LLP has been the auditor of the Corporation since 1992. If no contrary
instruction is indicated in the proxy, the persons named in the enclosed form of
proxy intend to vote such proxy in favor of the reappointment of KPMG LLP as
auditor of the Corporation to serve until the close of the next annual meeting
of shareholders, at a remuneration to be approved by the Board of Directors.
Arrangements have been made for one or more representatives of KPMG LLP to
attend the Meeting. Representatives of KPMG LLP will be allowed to make a
statement at the Meeting if they desire to do so, and will be available to
respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR 2001 ANNUAL MEETING
Under the CBCA, proposals by shareholders for any matter intended to be
raised at the 2001 Annual Meeting of Shareholders of the Corporation must be
received by the Secretary of the Corporation no later than January 25, 2001 in
order to be included in the 2001 management proxy circular and on the proxy card
that will be solicited by the Board of Directors in connection with that
meeting. The inclusion of any proposal will be subject to applicable
requirements of the CBCA. Written notice must be received by the Secretary of
the Corporation at its principal executive office, 2300 One First Union Center,
301 South College Street, Charlotte, North Carolina 28202-6039, U.S.A.
AVAILABILITY OF DOCUMENTS
In accordance with National Policy No. 47 of the Canadian Securities
Administrators, the Corporation shall provide to any person or company, upon
request to the Secretary of the Corporation:
(a) when the securities of the Corporation are in the course of a
distribution pursuant to a short form prospectus or a preliminary
short-form prospectus which has been filed in respect of a distribution of
its securities,
(i) one copy of the Corporation's annual report on Form 10-K
together with one copy of any document, or the pertinent pages of any
document, incorporated therein by reference;
(ii) one copy of the comparative financial statements of the
Corporation filed under applicable provincial securities legislation in
Canada for the Corporation's most recently completed financial year in
respect of which such financial statements have been issued,
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<PAGE> 20
together with the report of the auditor thereon, Management's discussion
and analysis of financial condition and results of operations, and any
interim financial statements of the Corporation filed under the said Act
subsequent to the filing of the annual financial statements;
(iii) one copy of the proxy circular of the Corporation filed under
such Act in respect of the most recent annual meeting of shareholders of
the Corporation which involved the election of directors; and
(iv) one copy of any reports filed by the Corporation pursuant to
such Act which are incorporated by reference into the preliminary
short-form prospectus or the short-form prospectus; or
(b) at any other time, the documents referred to in Clauses (a)(i),
(ii) and (iii) above, provided that the Corporation may require the payment
of a reasonable charge from such person or company who is not a security
holder of the Corporation where the documents are furnished under this
Clause (b).
The Board of Directors of the Corporation has approved the contents and
sending of this Proxy Circular.
/s/ Richard L. Magee
R. L. Magee,
Secretary
Toronto, Ontario
March 22, 2000
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<PAGE> 21
APPENDIX "A"
STATEMENT OF
CORPORATE GOVERNANCE PRACTICES
Set forth below are summaries of guidelines on corporate governance issued
by The Toronto Stock Exchange and the Corporation's approach with respect to
each guideline.
1. As stewards of the corporation, each board of directors should assume
responsibility for the following:
(i) adoption of a strategic planning process;
Status: The Board of Directors (the "Board") of the Corporation follows
a process whereby it reviews and approves a strategic plan
presented to it by management annually. The Board also discusses
developments impacting corporate strategy at every Board meeting
and through periodic discussions with management. The Board has
responsibility for monitoring management's success in
implementing the strategic plan.
(ii) identification of the principal risks of the corporation's business
and ensuring the implementation of appropriate systems to manage these
risks;
Status: The Board, through its Audit & Risk Management Committee, and
through periodic reports presented to it by the Corporation's
insurance and management pension committees, and by various
members of management, continually identifies principal risks
facing the Corporation. Any material issues relating to the
appropriateness or effectiveness of the Corporation's systems
utilized to contain, manage or eliminate such risks are
addressed by the Board and referred to management for
resolution.
(iii) succession planning, including appointing, training and monitoring
senior management;
Status: The Corporation utilizes a formal management development and
succession planning program. Periodic reports relating to this
program are provided to the Board of Directors and to the
Compensation and Human Resources Committee.
(iv) implementation of a policy of effective communication with
shareholders and the general public;
Status: The Corporation maintains a formal communications policy which
requires, in part, that the Corporation be responsive and
consistent in matters of external and internal communication
about the Corporation's affairs. Through corporate
communications and investor relations staff functions,
shareholders, members of the investment community, stock
exchanges and regulatory bodies are provided with information in
a timely and continuous manner, using regular quarterly and
annual reports, special mailings and the media.
(v) ensuring the integrity of the corporation's internal control and
management information systems.
Status: The Board monitors the Corporation's internal control and
management information systems through its Audit & Risk
Management Committee, which reviews periodic reports and
conducts discussions with senior management and regularly with
internal audit personnel, in some cases without the presence of
members of management.
2. A majority of the directors should qualify as unrelated directors, i.e.
independent of management and free from any interest and any business or
other relationship which could or could reasonably be perceived to
materially interfere with the director's ability to act with a view to the
best interests of the corporation, other than interests and relationships
arising from shareholding.
A-1
<PAGE> 22
Status: The Corporation's Board Composition Philosophy requires that the
Board be composed of a majority of directors who qualify as
unrelated directors and no more than three inside directors. In
addition, Committees should generally be composed of outside
directors, majorities of whom are unrelated, although the
Executive Committee may include one or more inside directors.
The Board currently has one inside director and one outside
director who is a related director.
3. The board should disclose on an annual basis whether the board has a
majority of "unrelated directors".
Status: The Corporation's annual Management Proxy Circular/Proxy
Statement discloses any relationship between a director and the
Corporation.
4. A committee of outside directors, a majority of whom are "unrelated", should
be responsible for proposing new nominees to the board.
Status: In 1999 the Board added a Nominating & Corporate Governance
Committee. One of its responsibilities is to identify and select
individuals as candidates for election to the Board of
Directors. The Nominating & Corporate Governance Committee
currently is comprised of four members, none of whom is an
inside director or a related director.
5. The board should implement a process to be carried out by an appropriate
committee for assessing the effectiveness of the board and of its committees
and for assessing the contribution of each individual director.
Status: The Board has assigned the Nominating & Corporate Governance
Committee responsibility for assessing the effectiveness of the
Board and of its committees and for assessing the Board's
ability to conduct effective decision-making. This is
accomplished through periodic Board and management discussions
and by means of a detailed questionnaire completed biannually by
each member of the Board of Directors. Use of this questionnaire
also enables each individual director to assess his or her
contribution as a member of the Board of Directors. The
Corporation has a system in place whereby a Board member whose
employment or vocation is materially changed is required to
submit his resignation to the Chairman of the Board for
consideration and action by the full Board.
6. An orientation and education program should be provided for new recruits to
the board.
Status: Each new director is provided with recent literature and reports
relating to the Corporation and a handbook containing relevant
information on issues or topics such as the Corporation's
by-laws, directors, committees, officers, meetings,
compensation, stock options, liability insurance, subsidiaries,
and the Corporation's Code of Business Conduct.
7. The board should examine its size and undertake where appropriate a program
to reduce the number of directors to a number which facilitates more
effective decision-making.
Status: Based on the Corporation's current composition and size, the
Corporation and the Board believe that the size of the Board
proposed for nomination at the 2000 Annual Meeting of
Shareholders - 12 members, is appropriate in light of current
circumstances. The Board will re-examine this issue
periodically.
8. The board should review the adequacy and form of the compensation of
directors and ensure the compensation realistically reflects the
responsibilities and risk involved in being an effective director.
Status: The adequacy and form of director compensation is currently
reviewed on an annual basis, utilizing various types of survey
data. The Board has assigned the Compensation & Human Resources
Committee responsibility on an annual basis for determining the
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<PAGE> 23
adequacy and form of Board compensation. Stock ownership in the
Corporation by directors is encouraged; a minimum number of
shares (presently, 1,000 Common Shares) is required to be owned
by each director. Stock options as a portion of director
compensation are also currently utilized to increase share
ownership by members of the Board.
9. Committees should generally be composed of outside directors, a majority of
whom are "unrelated", although some committees, such as the executive
committee, may include one or more inside directors.
Status: The Audit & Risk Management Committee, the Compensation & Human
Resources Committee and the Nominating & Corporate Governance
Committee are currently composed of outside and unrelated
directors. The Executive Committee currently includes one inside
and related director, one outside and related director and three
unrelated directors.
10. The board should assume responsibility for, or assign to a committee, the
general responsibility for developing the corporation's approach to
governance issues.
Status: Previously, the Compensation & Human Resources Committee had
responsibility for corporate governance issues. The Board in
1999 added the Nominating & Corporate Governance Committee, in
part to give more attention to governance matters. One of the
new committee's responsibilities is to develop the Corporation's
approach to corporate governance issues.
11. The board, together with the CEO, should develop position descriptions for
the board and for the CEO, involving the definition of the limits to
management's responsibilities. The board should approve or develop the
corporate objectives, which the CEO is responsible for meeting.
Status: The Compensation & Human Resources Committee, with the
assistance of senior management, developed position descriptions
for the Board and for the Chief Executive Officer which allocate
responsibilities and define the limits of management's
responsibilities. The Nominating & Corporate Governance
Committee reviews annually the guidelines for each Board
committee, which are then approved by the Board. In addition,
the board approves, or develops with the Chief Executive
Officer, the corporate objectives that the Chief Executive
Officer is responsible for meeting. The Nominating & Corporate
Governance Committee monitors the Board position descriptions
and the Committee guidelines. The Compensation & Human Resources
Committee monitors the performance of the Chief Executive
Officer.
12. The board should have in place appropriate structures and procedures to
ensure that the board can function independently of management. These
structures and procedures may involve the board meeting on a regular basis
without management present. The board should either (i) appoint a chair of
the board who is not a member of management or (ii) adopt alternate means
so that the board is able to function independently of management -- this
could include assigning the responsibility to a committee or to a lead
director.
Status: The Board elects from its membership on an annual basis a lead
director who is entitled, pursuant to the Corporation's by-laws,
to call meetings of the Board to be held without management
present. In addition, to the extent the Corporation's Chief
Executive Officer or Chief Operating Officer is unavailable or
is not the appropriate person to undertake such action, the lead
director has the right to speak on behalf of the Corporation.
Currently, Mr. Ruffin serves as lead director. A new lead
director will be elected upon Mr. Ruffin's retirement in April
2000. The Board and each of its committees conduct regular in
camera sessions outside the presence of members of management,
including management directors.
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13. The audit committee should be composed only of outside directors. The role
and responsibilities of the audit committee should be specifically defined.
The audit committee should have direct communication channels with the
internal and external auditors and should ensure management's design and
implementation of an effective system of internal control.
Status: The Audit & Risk Management Committee is composed solely of
outside directors. The role and responsibilities of the Audit &
Risk Management Committee are defined in the Corporation's
by-laws and detailed in the Committee's guidelines. These
guidelines are currently being reviewed and revised and will be
converted into a charter for the Committee, which will be
adopted by the Board in April. The Audit & Risk Management
Committee periodically meets privately with the Corporation's
internal and external auditors after or during regularly
scheduled committee meetings.
14. The board should implement a system that enables an individual director to
engage an outside adviser at the expense of the corporation in appropriate
circumstances, subject to the approval of an appropriate committee.
Status: The Board has adopted a resolution, which allows individual
directors to engage outside advisors (such as lawyers or
accountants) at the expense of the Corporation, in appropriate
circumstances. The resolution requires that each request to
engage outside advisors have the approval of the Compensation &
Human Resources Committee and that management must be fully
advised. The Nominating & Corporate Governance Committee will
succeed the Compensation & Human Resources Committee as the
committee that must approve any such engagement.
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