<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995.
Commission file number 1-4003
DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-0813641
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
POST OFFICE BOX 718 75221 (P.O. Box)
2001 ROSS AVENUE, DALLAS, TEXAS 75201
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (214) 740-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, Par Value 25 CENTS Per Share New York Stock Exchange, Inc.
Pacific Stock Exchange Incorporated
Baroid Corporation 8% Guaranteed Senior New York Stock Exchange, Inc.
Notes due 2003
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Pacific Stock Exchange Incorporated
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No X
--- ---
The aggregate market value of the voting stock (based on the closing price on
the New York Stock Exchange as of January 4, 1996) held by non-affiliates of the
registrant was approximately $4,384 million.
As of January 4, 1996, there were 181,595,187 shares of Dresser Industries, Inc.
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Sections of Registrant's Notice of 1996 Annual Meeting of Shareholders and Proxy
Statement (Part III).
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PART I
ITEM 1. BUSINESS OF DRESSER.
Dresser Industries, Inc., together with its subsidiaries (hereinafter
"Dresser" or "Registrant" or the "Company") is a supplier of highly engineered
products, technical services and project management for hydrocarbon energy-
related activities that are primarily utilized in oil and gas drilling,
production and transmission; gas distribution; power generation; gas processing;
petroleum refining and marketing; and petrochemical production. Demand for
Dresser's products and services is generally determined by global demand for
energy and oil and gas by-products. Dresser was incorporated under the laws of
Delaware in 1956 as a successor to a Pennsylvania corporation organized in 1938
by the consolidation of S. R. Dresser Manufacturing Company and Clark Bros.
Company. Both were carrying on businesses founded in 1880. Dresser's executive
offices are located at 2001 Ross Avenue, Dallas, Texas 75201 (telephone number
214/740-6000).
For the fiscal year ended October 31, 1995, consolidated revenues of
Registrant amounted to $ 5,628.7 million. A majority of such revenues was
derived from the sale of products and services to energy-oriented industries,
including oil and gas exploration, drilling and production, gas transmission and
distribution; petroleum and chemical processing; production of electricity; and
marketing of petroleum products.
Registrant's operations are divided into three industry segments:
Petroleum Products and Services; Engineering Services and Energy Equipment.
Effective May 31, 1995, Registrant acquired through a wholly owned
subsidiary, Grove S.p.A. and subsidiaries from Banca Commerciale Italiana,
Euroknights 2000, Ltd., Investitori Associati S.A. and Unione Fiduciaria.
Grove manufactures and distributes a wide variety of oilfield valves and
regulators for the worldwide energy and petroleum markets. Grove operations
are included in the Energy Equipment segment.
Effective May 1, 1995, Registrant acquired the assets of Wellstream
Company, L.P. which is engaged in the production of high pressure flexible
pipe and riser systems. On May 2, 1995, Registrant acquired the stock of
North Sea Assets P.L.C., the remotely operated vehicle business of NSA/HMB
Group. On May 5, 1995, Registrant acquired the assets of Energy Coatings
Company which provides pipe coating services. On July 1, 1995, Registrant
acquired the assets of Pipeline Coating, Inc. which also performs pipe
coating services. All of these operations are included in the Petroleum
Products and Services segment.
The Information by Industry Segment is included in Note N to
Consolidated Financial Statements on page 59 and in Management's Discussion
and Analysis on pages 24-28. This information includes sales and service
revenues, operating profit or loss and identifiable assets attributable to
each of Registrant's business segments for each of the past three fiscal
years. This information should be read in conjunction with the consolidated
financial statements, notes and accountant's report appearing in Item 8 of
this report.
PETROLEUM PRODUCTS AND SERVICES SEGMENT (FORMERLY OILFIELD SERVICES)
Dresser's Petroleum Products and Services segment supplies products,
services and project management for oil and gas exploration, drilling,
production and transmission activities both onshore and offshore. Its products
and services include project management and integrated well services, drilling
fluids systems, drill bits, measurement-while-drilling services, directional
drilling services, completion and production tools, production valves and pumps,
meters and measuring equipment, engineering, procurement, installation and
construction contractor services for subsea and onshore projects, remotely
operated vehicles, seabed equipment, flexible flowlines, riser systems and pipe
coating, laying and burying services. Demand for these products and services is
directly affected by energy prices and drilling activity.
DRILLING AND PRODUCTION OPERATIONS
DRILLING FLUIDS
Baroid Drilling Fluids provides oil and gas producers specially
formulated fluids used in the drilling process to lubricate and cool the drill
bit, seal porous well formations, remove rock cuttings and control downhole
pressure. It also provides completion fluids and wellsite services. Total
revenues for Drilling Fluids were $532.0 in 1995, $554.0 in 1994 and $777.8
million in 1993. Revenues include $147.0 million in 1994, and $401.2 million
in 1993 for M-I Drilling Fluids Company which was sold effective February 28,
1994.
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DRILLING SERVICES AND PRODUCTS
Sperry-Sun Drilling Services supplies oil and gas producers with
directional and measurement-while-drilling (MWD) services and directional
drilling equipment including mud motors, downhole steering and surveying
instruments, and geological and drilling data monitoring.
DRILL BITS
Security DBS produces and markets to oil and gas producers a complete
line of roller cone, polycrystalline diamond cutter (PDC) and natural diamond
drill bits for use in drilling oil and gas wells and provides coring and hole
enlargement services. Security DBS also makes a variety of downhole oilfield
drilling tools and certain types of blasthole and pilot bits for the mining
market.
COMPLETION AND PRODUCTION TOOLS
Dresser Oil Tools consists of Axelson surface safety equipment,
downhole rod pumps and sucker rods as well as a broad range of Guiberson/AVA's
completion and production products, including sub-surface safety valves, gravel
pack, downhole hydraulic pumps, tubing converged perforating equipment,
production packers and swab cups. These products are used in the production of
oil and gas.
Dresser Wheatley Division manufactures and sells a line of oil and gas
production products, including Wheatley valves, Wheatley Gaso plunger and piston
pumps, Omega well-servicing pumps, and Clif Mock meters, measurement and
sampling equipment.
PROJECT MANAGEMENT
Dresser Drilling and Production Services was formed to provide oil and
gas producers with project management capabilities and the integrated services
and products required to drill and complete wells more efficiently. It's
activities include well planning, project management and the procurement of
wellsite drilling, completion and production services and equipment.
KELLOGG OIL & GAS SERVICES
Kellogg Oil & Gas Services was formed in 1995 to provide subsea field design and
development, underwater engineering, repair and construction services, including
remotely operated vehicles, diving services and pipe laying and pipe coating
services as well as to act as an engineering, procurement, installation and
construction contractor for all aspects of subsea and onshore oil and gas
projects. It offers products and services through the following operations.
PIPE COATING PRODUCTS AND SERVICES
Bredero Price provides a broad range of speciality pipe coating,
insulation and related services to protect pipelines above ground, below ground
and offshore in major oil and gas producing areas of the world.
UNDERWATER EQUIPMENT AND SERVICES
Sub Sea International provides production companies and offshore rig
operators with diving and underwater engineering services. Sub Sea equipment is
used to inspect, construct, maintain and repair offshore
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drilling rigs and platforms, underwater pipelines and other offshore oil and gas
facilities. Sub Sea designs, manufactures and deploys remotely operated
vehicles (ROVs) which are often used to perform these services. Wellstream
designs, manufactures and markets non-bonded flexible pipe for the oil and gas
industry. Products include flowlines, jumpers, service lines, and static and
dynamic risers for both subsea and topside applications.
ENERGY EQUIPMENT SEGMENT (FORMERLY HYDROCARBON PROCESSING INDUSTRY)
Dresser's Energy Equipment segment designs, manufactures and markets
highly engineered products and systems for oil and gas producers, transporters,
processors, distributors and users throughout the world. Products and systems
of this segment include compressors, turbines, generators, electric motors,
pumps, engines and power systems, valves and controls, instruments, meters and
pipe couplings, blowers and gasoline dispensing systems. Demand for these
products is directly affected by global economic activity, which influences
demand for transportation fuels, petrochemicals, plastics, fertilizers,
chemicals and by-products of oil and gas.
COMPRESSION AND PUMPING
Dresser-Rand Company, a New York partnership in which Dresser has 51%
interest, manufactures turbines, compressors, electric motors, generators and
turbine-generator sets utilized in gas processing, refining and petrochemical
activities. Dresser-Rand also is a producer of gas injection compression systems
that enhance oil production and manufacturer of powerful pipeline boosters for
the transmission of natural gas.
The Consolidated Statements of Earnings for 1995, 1994 and 1993
include $1,138.3 million, $1,234.5 million and $1,118.1 million,
respectively, of Dresser-Rand's revenues.
Ingersoll-Dresser Pump Company, a partnership in which Dresser has 49%
interest, develops, manufactures and markets a broad range of pump products and
services on a global basis through local facilities in more than 40 countries.
The company's pumps are used for critical and non-critical service in a wide
variety of applications associated with power generation, chemical and
petrochemical processing, oil and gas production, water distribution and water
and waste water treatment. The product line includes heavy-duty process,
submersible, vertical turbine, standard end-suction, horizontal split-case,
centrifugal and multi-stage pumps.
Dresser's wholly owned Mono Pump operations produce progressing cavity
pumps for handling viscous fluids. These pumps have hydrocarbon energy-related
applications and are also utilized by the waste water, mining, paper, food and
chemical industries.
MEASUREMENT SYSTEMS
Dresser's Wayne Division manufactures and markets fully integrated
vehicle fueling systems for the global retail petroleum industry. Wayne's
technology systems include gasoline pumps and dispensers, management control
devices and point-of-sale credit and debit card machines.
Dresser's Instrument Division designs and manufactures mechanical and
electronic instruments for pressure and temperature measurement and control.
These products are utilized by the oil, gas and power industries and a variety
of customers in industrial, commercial, automotive and medical markets.
DMD products include gas meters, pipe fittings, couplings and repair
devices utilized by the gas and water utilities and other industrial markets.
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FLOW CONTROL
Energy Valve Division designs, manufactures and markets valves (ball,
gate, check, butterfly, plug and specialty valves such as rising stem, top
entry, retractable seat ball valves or full port metal seated plug valves),
actuators, chemical injection pumps, regulators and surge relievers of its
Grove, TK, Tom Wheatley, Texsteam, Ledeen and Wheatley Gaso operations. This
comprehensive product range is primarily used in oil and gas exploration and
transmission, onshore and offshore, in power generation, in water desalination
and transmission and in segments of the oil and gas process industry.
The Valve and Controls Division includes Dresser's Masoneilan and
Industrial Valve operations. Masoneilan produces automated process control
valves, instruments, level instruments and regulators. Industrial Valve
manufactures Consolidated, Dewrance and Hancock safety, safety relief and line
valves. Both the Masoneilan and Industrial Valve operations primarily serve
process and power markets.
POWER SYSTEMS
Dresser's Waukesha Engine Division produces spark-ignited, gas and
diesel fueled engines and power systems. The division's products are used
throughout the world in the gathering and storage of natural gas and as drivers
for crude oil pumping and prime movers for electrical power generation and
cogeneration.
Dresser's Roots Division offers a full line of low to medium pressure
air and gas handling blowers along with vacuum pumps. These include rotary lobe
and screw-type positive displacement products and several turbo machinery
(centrifugal) lines. Roots products are used in natural gas processing plants,
refineries, chemical plants, flue gas desulphurization facilities, vacuum swing
absorption applications, waste water treatment plants and many other industrial
applications.
ENGINEERING SERVICES SEGMENT
The M.W. Kellogg Company, provides engineering, construction and
related services primarily to the hydrocarbon process industries. M.W. Kellogg
provides its own proprietary technologies and the advanced technologies of
others to facilitate the environmentally acceptable conversion of raw
hydrocarbon and other chemicals into value-added end products. Kellogg's
services include the development of processes, engineering design, construction
and procurement for energy-related complexes in the U.S. and international
regions. Kellogg participates in projects involving liquefied natural gas (LNG)
plants and receiving terminals, refining and petrochemical activities,
ammonia/fertilizer facilities and the retrofitting of all kinds of energy-
related complexes for environmental purposes. Revenues for The M.W. Kellogg
Company were $1,457.6 million, $1,265.2 million and $1,215.3 million for 1995,
1994 and 1993, respectively.
BACKLOG
The backlog of unfilled orders at October 31, 1995, 1994 and 1993 is
included in Management's Discussion and Analysis on page 23.
SALES AND DISTRIBUTION
Registrant's products and services are marketed through various
channels. In the United States, sales are generally made through a group or
division sales organization or through independent distributors. Sales in
Canada are usually effected through a division of Canadian subsidiaries. Sales
in other countries are made
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directly by a United States division or subsidiary, through foreign subsidiaries
or affiliates, and through distributor arrangements or with the assistance of
independent sales agents.
COMPETITION AND ECONOMIC CONDITIONS
Dresser's products are sold in highly competitive markets, and its
sales and earnings can be affected by changes in competitive prices,
fluctuations in the level of activity in major markets, or general economic
conditions.
FOREIGN OPERATIONS
Registrant maintains manufacturing, marketing or service facilities
serving more than 80 foreign countries. Global distribution of products and
services is accomplished through more than 449 subsidiary and affiliated
companies engaged in various production, manufacturing, service, and marketing
functions, and through foreign representatives serving the principal market
areas of the world.
The Information by Geographic Area is included in Note N to
Consolidated Financial Statements on page 59 and in Management's Discussion
and Analysis on pages 28-29.
Registrant's foreign operations are subject to the usual risks which
may affect such operations. Such risks include unsettled political conditions
in certain areas, exposure to possible expropriation or other governmental
actions, operating in highly inflationary environments, and exchange control and
currency problems.
RESEARCH, DEVELOPMENT AND PATENTS
Registrant's divisions, subsidiaries and affiliates conduct research
and development activities in laboratories and test facilities within their
particular fields for the purposes of improving existing products and developing
new ones to meet the needs of their customers. In addition, research and
development programs are directed toward development of new products and
services for diversification or expansion. For the fiscal years ended October
31, 1995, 1994 and 1993, Registrant spent $96.5 million, $102.5 million and
$98.5 million, respectively, for research and development activities.
At December 1, 1995, Registrant and its subsidiaries and affiliates
owned 1,871 patents and had pending 958 patent applications, covering various
products and processes. They also were licensed under patents owned by others.
Registrant does not consider that any patent or group of patents relating to a
particular product or process is of material importance when judged from the
standpoint of Registrant's total business.
EMPLOYEES
As of October 31, 1995, Registrant had approximately 18,800 employees
in the United States (an increase of approximately 7% from October 31, 1994), of
whom approximately 5,900 were members of 12 unions represented by 22 bargaining
units. As of the same date, Registrant had approximately 12,700 employees at
foreign locations of whom approximately 2,700 were members of unions. During
fiscal 1995, Registrant experienced no contract negotiation strikes in the
United States. Relations between Registrant and its employees are generally
considered to be satisfactory.
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EXECUTIVE OFFICERS OF REGISTRANT
The names and ages of all executive officers of Registrant, all
positions and offices with Registrant presently held by each person named and
their business experience during the last five years are stated below:
PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION PAST FIVE YEARS
---------------------- ---------------------------
John J. Murphy (64) Chairman of the Board since August
Chairman of the Board and Director 1983; Chief Executive Officer of
Registrant, August 1983 - November
1995; President of Registrant,
August 1982 - March 1992.
B. D. St. John (64) Vice Chairman of Registrant since
Vice Chairman and Director March 1992; Executive Vice
President - Administration of
Registrant, November 1982 - March
1992.
William E. Bradford (61) President since March 1992; Chief
President, Chief Executive Officer Executive Officer of Registrant
and Director since November, 1995; Chief
Operating Officer of Registrant,
March 1992- November, 1995;
President and Chief Executive
Officer of Dresser-Rand Company,
February 1988 - March 1992; Senior
Vice President - Operations of
Registrant, March 1984 - March
1992.
Donald C. Vaughn (59) Executive Vice President of
Executive Vice President Registrant since November 1995;
Senior Vice President - Operations
of Registrant, January 1992 to
November 1995; Chairman, President
and Chief Executive Officer of M.
W. Kellogg, Inc. since June 1995;
Chairman of the Board, Chief
Executive Officer of The M.W.
Kellogg Company since March 1983;
President of The M. W. Kellogg
Company, March 1983 to June 1995.
James L. Bryan (59) Senior Vice President - Operations
Senior Vice President - Operations since January 1994; Vice
President - Operations of
Registrant, May 1990 - January
1994.
Clint E. Ables (56) Vice President and General Counsel
Vice President and General Counsel of Registrant since October 1993;
Vice President - Corporate
Development of Registrant, November
1992 - October 1993; Senior
Counsel - Corporate Ventures of
Registrant, July 1986 - November
1992.
Paul M. Bryant (49) Vice President - Human Resources of
Vice President - Human Resources Registrant since May 1993; Vice
President - Human Resources of
Dresser-Rand Company, January
1987 - May 1993.
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PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION PAST FIVE YEARS
---------------------- ---------------------------
George A. Helland (58) Vice President of Registrant since
Vice President March 1993; Deputy Assistant
Secretary for Export Assistance,
United States Department of Energy,
September 1990 - January 1993;
Principal, Innova Partners, Inc.,
January 1988 - September 1990.
Ardon B. Judd, Jr. (59) Vice President - Washington Counsel
Vice President - Washington of Registrant since September 1986.
Counsel
George H. Juetten (48) Vice President - Controller of
Vice President - Controller Registrant since May 1993; Audit
Partner, Price Waterhouse LLP,
independent public accountants,
July 1980 - May 1993.
Rebecca R. Morris (50) Vice President - Corporate Counsel
Vice President - Corporate Counsel of Registrant since January 1994;
and Secretary Secretary of Registrant since
November 1990; Corporate Counsel of
Registrant June 1987 - January
1994.
David R. Smith (49) Vice President - Tax of Registrant
Vice President - Tax since January 1994; Director of Tax
of Registrant, October 1987 -
January 1994.
Paul W. Willey (58) Treasurer of Registrant since May
Treasurer 1984.
OFFICER EMPLOYED BY JOINT VENTURE COMPANY
PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION PAST FIVE YEARS
---------------------- ---------------------------
Ben R. Stuart (61) President and Chief Executive
Senior Vice President - Operations Officer of Dresser-Rand Company
since March 1992; Senior Vice
President - Operations of
Registrant since March 1992; Vice
President - Operations of
Registrant, August 1988 - March
1992.
All officers are elected annually by the Board of Directors at a
meeting following the Annual Meeting of Shareholders. The officers serve at the
pleasure of the Board of Directors and can be removed at any time by the Board.
ITEM 2. PROPERTIES
Registrant, together with its subsidiaries and affiliates, has more
than 65 manufacturing plants, ranging in size from approximately 3,000 square
feet to in excess of 1,500,000 square feet and totaling more than 16
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million square feet, located in the United States, Canada, and various other
foreign countries. The majority of the manufacturing sites are owned in fee.
In addition, sales offices, warehouses, service centers and stock points are
maintained, almost all in leased space, in the United States, Canada and certain
other foreign countries. The properties are believed to be generally well
maintained, adequate for the purposes for which they are used, and capable of
supporting a higher level of market demand.
During fiscal 1995 Baroid Drilling Fluids, Inc. had 21 grinding and/or
other facilities for beneficiating mineral ores, containing approximately 3,400
acres in plant site property.
The following are the locations of the principal facilities of
Registrant and its majority owned joint ventures for each industry segment as of
October 31, 1995:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
INDUSTRY SEGMENT AND LOCATION PRODUCT AREA (SQUARE FEET)
- ----------------------------- ------------ -------------
<S> <C> <C>
Petroleum Products and Services
Aberdeen, Scotland (Underwater Services) 118,000
Belle Chasse, Louisiana (Underwater Services) 86,000
Dallas, Texas (Drill Bits) 294,000
Dallas, Texas (Completion & Production Tools) 278,500
Houston, Texas (Completion & Production Tools) 45,000 (1)
Longview, Texas (Completion & Production Tools) 235,000
Colorado Springs, Colorado (Completion & Production Tools) 97,000
Tulsa, Oklahoma (Completion & Production Tools) 64,000
Kuantan, Malaysia (Pipe Coatings) 882,669 (1)
Zhanjiang, China (Pipe Coatings) 116,251 (1)
Layyah, Sharjah, U.A.E. (Pipe Coatings) 1,233,070 (1)
Warri, Nigeria (Pipe Coatings) 1,568,173 (1)
Harvoy, Louisiana (Pipe Coatings) 96,750 (1)
Pearland, Texas (Pipe Coatings) 157,262 (1)
Fontane, California (Pipe Coatings) 65,000
Fort Collins, Colorado (Pipe Coatings) 67,173
Morrisville, Pennsylvania (Pipe Coatings) 83,748
Energy Equipment
Manchester, England (Mono Pumps) 242,000
Victoria, Australia (Mono Pumps) 145,000
Connersville, Indiana (Power Systems) 376.790
Huddersfield, England (Power Systems) 159,561
Waukesha, Wisconsin (Power Systems) 764,457
Appingedam, Netherlands (Power Systems) 136,935
Painted Post, New York (Compressors) 982,000
Broken Arrow, Oklahoma (Compressors) 129,000
Wythenshawe, England (Compressors) 306,000
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Energy Equipment (cont.)
Olean, New York (Compressors) 896,000
LeHavre, France (Compressors) 538,000
Kongsberg, Norway (Compressors) 140,000 (1)
Wellsville, New York (Steam Turbines) 404,000
Minneapolis, Minnesota (Motors and Generators) 350,000
Skelmersdale, England (Control Products) 177,000 (1)
Avon, Massachusetts (Control Products) 121,000
Canton, Massachusetts (Control Products) 40,590
Montebello, California (Control Products) 82,856
Alliance, Ohio (Control Products) 62,000 (1)
Bradford, Pennsylvania (Control Products) 450,000
Jacarei, Brazil (Control Products) 80,699
Conde, France (Control Products) 187,244
Barcelona, Spain (Control Products) 56,400
Burlington, Ontario, Canada (Control Products) 53,000
Naples, Italy (Control Products) 87,791
Alexandria, Louisiana (Control Products) 308,640
Dumfermline, Scotland (Pitreavie) (Control Products) 170,801
Dumfermline, Scotland (Halbeath) (Control Products) 95,806
Houston, Texas (Control Products) 156,000
Stafford, Texas (Control Products) 110,000
Voghera, Italy (Control Products) 1,245,300
Stratford, Connecticut (Measurement Systems) 335,000
Berea, Kentucky (Measurement Systems) 105,000
Salisbury, Maryland (Measurement Systems) 341,166 (1)
Austin, Texas (Measurement Systems) 103,491
Malmo, Sweden (Measurement Systems) 233,533
Einbeck, Germany (Measurement Systems) 80,505
Rio de Janeiro, Brazil (Measurement Systems) 129,166
Bonnyrigg, Scotland (Measurement Systems) 63,000
Markham, Ontario, Canada (Measurement Systems) 55,631 (1)
Engineering Services
Houston, Texas (Engineering & Construction) 390,394 (1)
Wembley, England (Engineering & Construction) 92,524 (1)
</TABLE>
- ----------
(1) all or a portion of these facilities are leased.
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Baroid Drilling Fluids, Inc. has mineral rights to proven and
prospective reserves of barite and bentonite. Such rights included leaseholds
and mining claims and property owned in fee either directly by Baroid Drilling
Fluids, Inc. or by its wholly owned subsidiary Bentonite Corporation. The
principal deposit of barite is located in Nevada, with deposits also located in
Missouri and Georgia. Reserves of bentonite are located in Wyoming, Montana and
South Dakota. Based on the number of tons of each of the above minerals
consumed in fiscal 1995, Baroid Drilling Fluids, Inc. estimates its reserves,
which it considers to be proven, to be sufficient for operation for a period of
10 years or more.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings. Information
called for by this Item is included in Note J to Consolidated Financial
Statements on pages 50-52.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the quarter ended October 31, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Registrant is listed on the New York and Pacific Stock Exchanges. The
stock symbol is DI. The quarterly market prices for Registrant's Common Stock,
traded principally on the New York Stock Exchange, were as follows for the two
most recent fiscal years:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 High. . . . . $ 21.875 22.125 24.00 25.125 25.125
1995 Low . . . . . $ 18.50 19.375 21.625 19.125 18.50
1994 High. . . . . $ 22.75 24.875 23.875 22.25 24.875
1994 Low . . . . . $ 18.625 20.50 20.375 19.00 18.625
</TABLE>
Dividends on Registrant's Common Stock are declared by the Board of
Directors and normally paid to shareholders as of the record date during the
third week of March, June, September and December.
The cash dividends paid per share of common stock for the 1995 and
1994 fiscal years were:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-----------------------------------------
<S> <C> <C> <C> <C> <C>
1995 . . . . . . . $ .17 .17 .17 .17 .68
1994 . . . . . . . $ .15 .17 .17 .17 .66
</TABLE>
As of January 4, 1996, there were approximately 21,240
shareholders of record of the Registrant's Common Stock.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and notes thereto included in this
report.
1995 1994 1993 1992 1991
-------- -------- -------- --------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenues $5,628.7 $5,330.7 $5,202.3 $4,723.3 $4,860.0
Earnings from continuing
operations before
extraordinary items and
accounting changes:
Earnings 213.1 361.8* 133.6 97.7 143.5
Per share 1.17 1.98* .74 .55 .81
Earning per share
before special items 1.17 1.09 1.17 .83 .95
Total assets 4,707.4 4,323.6 4,445.6 3,901.9 3,784.9
Long-term debt 459.3 460.6 492.2 148.5 259.6
Cash dividends
declared 124.3 116.5 100.2 96.3 96.8
Per share** .68 .66 .60 .60 .60
*Includes $146.5 million or $.80 per share from sale of interest in Western
Atlas International, Inc.
**Dresser historical dividends.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MERGERS
On January 21, 1994, Dresser merged with Baroid Corporation (Baroid). On
August 5, 1994, Dresser merged with Wheatley TXT Corp. (Wheatley). The
"Company" as used in this discussion refers to Dresser and its subsidiaries
including Baroid and Wheatley. The mergers have been accounted for as
poolings of interests. Financial data, statistical data, financial statements
and discussion of financial information included in this report have been
restated to reflect the financial position and results of operations as if
the mergers had occurred as of the beginning of the first year presented.
RESULTS OF OPERATIONS
Results of operations for the three years ended October 31, 1995 are
summarized as follows (in millions except per share amounts):
1995 1994 1993
------- -------- -------
Earnings before special items $ 213.1 $ 197.8 $ 211.4
Special items - 17.5 (77.8)
------- -------- -------
Earnings from operations 213.1 215.3 133.6
Gain on sale of interest
in Western Atlas - 146.5 -
------- -------- -------
Earnings before accounting change 213.1 361.8 133.6
Accounting change for
postemployment benefits (16.0) - -
------- -------- -------
Net earnings $ 197.1 $ 361.8 $ 133.6
------- -------- -------
------- -------- -------
Earnings per share
Earnings before special items $ 1.17 $ 1.09 $ 1.17
Special items - .09 (.43)
------- -------- -------
Earnings from operations 1.17 1.18 .74
Gain on sale of interest in
Western Atlas - .80 -
------- -------- -------
Earnings before accounting change 1.17 1.98 .74
Accounting change for postemployment
benefits (.09) - -
------- -------- -------
Net earnings $ 1.08 $ 1.98 $ .74
------- -------- -------
------- -------- -------
ACCOUNTING CHANGE
The Company recorded a charge of $16.0 million (net of tax of $9.0 million)
or $.09 per share in the first quarter of 1995 for the cumulative effect of
changing its accounting for postemployment benefits as required by Statement
of Financial Accounting Standards No. 112, EMPLOYERS' ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS. See Note A to Consolidated Financial Statements for
more information.
14
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
SPECIAL ITEMS
During 1994 and 1993, the Company entered into a number of unusual or
nonrecurring transactions, including mergers, divestitures and restructuring
of existing operations. The impact of these transactions is described below.
The discussions of results of operations will focus on earnings excluding
these transactions.
NET OF TAX (IN MILLIONS) 1994 1993
------- -------
Parker & Parsley litigation - insurance
recovery/settlement $ 11.6 $ (41.6)
Merger expenses - Wheatley/Baroid (7.9) (30.6)
Restructuring and other special charges (10.0) (5.6)
Earnings of M-I Drilling Fluids 6.3 -
Tax benefits from sale of affiliate 17.5 -
------- -------
Total $ 17.5 $ (77.8)
------- -------
------- -------
PER SHARE 1994 1993
------- -------
Parker & Parsley litigation - insurance
recovery/settlement $ .06 $ (.23)
Merger expenses - Wheatley/Baroid (.04) (.17)
Restructuring and other special charges (.05) (.03)
Earnings of M-I Drilling Fluids .03 -
Tax benefits from sale of affiliate .09 -
------- -------
Total $ .09 $ (.43)
------- -------
------- -------
The Company sold its 29.5% interest in Western Atlas International in January
1994 and recognized a pre-tax gain of $275.7 million. (See Note B to
Consolidated Financial Statements.)
The Company recorded pre-tax charges of $65.0 million in 1993 for settlement
of the Parker & Parsley litigation. In April 1994, the Company recognized an
$18.4 million pre-tax gain from the settlement of a coverage dispute with
certain insurance carriers regarding the Parker & Parsley litigation. (See
Note L to Consolidated Financial Statements.)
The Company recorded pre-tax expenses of $10.7 million in August 1994 related
to the Wheatley merger and $31.0 million in October 1993 related to the
Baroid merger. (See Notes A and L to Consolidated Financial Statements.)
The Company recorded pre-tax expenses of $15.7 million in 1994 and $9.1
million in 1993 for restructuring costs and other special items. (See Note L
to Consolidated Financial Statements.)
The Company sold its investment in M-I Drilling Fluids Company effective
February 28, 1994. (See Note B to Consolidated Financial Statements.)
The Company sold its interest in IRI International, Inc., an unconsolidated
affiliate, in September 1994 and was able to recognize $17.5 million of tax
benefits applicable to previously unrecognized losses. (See Note B to
Consolidated Financial Statements.)
15
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
GENERAL OPERATING ENVIRONMENT
Dresser is a fully integrated manufacturer and supplier of products and
services to customers in the oil and gas industry. The Company produces a
broad range of highly engineered products for hydrocarbon exploration,
drilling, production, transmission and processing activities. Dresser also
provides engineering, procurement and project management services for all
aspects of the energy business. Operations are organized into three
segments: Petroleum Products and Services, Engineering Services and Energy
Equipment. Descriptions of the segments are contained in Note N to
Consolidated Financial Statements.
The business environment for Petroleum Products and Services is directly
effected by prices for oil and natural gas, drilling activity and exploration
and production spending by oil and natural gas producers. In 1995, the
average posted price of West Texas Intermediate crude oil rose approximately
6 percent to $17.50 per barrel while the average spot price of natural gas
declined 15 percent to $1.50 per million BTUs.
Overall, the rig count declined 2.7 percent in fiscal 1995. The rig count in
North America was down 5.7 percent reflecting a decline in wells drilled for
natural gas, while the rig count in international markets increased 1.5
percent reflecting higher activity levels in major producing regions like
South America, Africa and the North Sea.
The business environment for Engineering Services and Energy Equipment is
affected by numerous factors, including global and regional economic growth
rates, the prices of oil and natural gas, the supply and demand for products
created from hydrocarbons including gasoline, jet fuel, ethylene,
petrochemicals, chemicals, fertilizers and power. These factors determine
the capital spending budgets, both upstream and downstream, of integrated oil
and gas companies around the world.
According to published sources, economic growth is expected to continue at an
average of 6 percent or better for developing countries and 2 percent or
better for developed countries. Developing country growth expectations are
due largely to steadily increasing population and greater industrialization
that also will generate sharply rising per capita energy demand.
Increasingly, consumption of oil and natural gas is expected to be driven by
rising demand for refined products, petrochemicals, fertilizers and power.
Capital and maintenance spending for downstream hydrocarbon processing
projects is expected to increase to $67.0 billion in 1996, up from a
projected $62.6 billion in 1995. Recent project award activity has increased
for ethylene and fertilizer projects. Global project activity in 1995 hit
its highest level (2,942 projects) since 1991. Internationally, project
activity is currently at its highest level since 1982.
CONSOLIDATED RESULTS
1995 COMPARED TO 1994
Net earnings in 1995 before the accounting change were $213.1 million ($1.17
per share) compared to $197.8 million ($1.09 per share) in 1994 excluding the
effect of the special items discussed above. This represents a 7% earnings
per share increase.
16
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
1995 COMPARED TO 1994 (continued)
Revenues of $5.6 billion were up $298.0 million or 6% over 1994. The
Petroleum Products and Services Segment revenues increased $85.1 million or
5%. The Engineering Services Segment revenues increased $192.4 million or
15%. The Energy Equipment Segment revenues increased $50.2 million or 2%.
Segment operating profit of $473.1 million increased $12.9 million or 3% from
1994. The Petroleum Products and Services Segment and the Energy Equipment
Segment were up while the Engineering Services Segment was down versus 1994.
See the Industry Segment Analysis for discussion of changes in revenues and
operating profit.
General corporate expenses of $75.2 million were $6.1 million higher than in
1994. The increase was primarily due to 1994 gains on sales of interests in
M-I Drilling Fluids Company and IRI International, Inc. Net interest expense
increased $7.6 million to $25.8 million primarily because of lower interest
income due to a lower level of short-term investments.
The effective income tax rate for 1995 was 32% compared to an overall rate of
36% in 1994. In 1994, a lower tax basis on the investment in Western Atlas
International, Inc., compared to the book basis, resulted in a tax charge of
$129.3 million or 47% on the book gain on sale. The additional taxes on the
gain on sale of Western Atlas were somewhat offset by the $17.5 million of
special tax benefits recognized upon sale of investment in IRI International,
Inc. Excluding these two transactions, the effective rate for 1994 was 33%.
Minority interest provision was $19.8 million, down $13.1 million from 1994.
The decrease was primarily attributable to the 49% share in lower earnings of
Dresser-Rand.
1994 COMPARED TO 1993
Revenues were $5.3 billion in 1994 compared to $5.2 billion in 1993.
Petroleum Products and Services revenues were lower primarily due to the
inclusion of both M-I Drilling Fluids and Baroid Drilling Fluids in 1993,
while 1994 included M-I Drilling Fluids for only four months. That decrease
was more than offset by higher revenues by the other two segments. Revenues
include the Company's share of earnings of unconsolidated affiliates, which
was down $53 million in 1994 mostly attributable to $39 million in 1993 for
Western Atlas.
Excluding the special items described earlier, net earnings decreased $14
million to $198 million. Segment operating profit for 1994 was $40 million
lower compared to 1993. However, 1993 included the results of Western Atlas
($39 million), the impact of a full year of M-I Drilling Fluids earnings ($16
million) and the favorable impact of a LIFO inventory adjustment ($21
million) at Ingersoll-Dresser Pump (IDP). Accordingly, comparable 1994
segment operating profit increased $36 million, reflecting high levels of
drilling activity in North America and strong levels of demand for certain of
the Company's Energy Equipment products. See the Industry Segment Analysis
for a discussion of the results of each segment.
17
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
1994 COMPARED TO 1993 (continued)
General Corporate Expenses declined $19 million to $69 million, reflecting
lower self-insurance costs and lower ongoing expenses associated with
previously divested businesses. Net interest expense declined $10 million
primarily due to the investment of the proceeds from the sale of Western
Atlas and M-I Drilling Fluids. Other items impacting comparability of 1994
to 1993 include a non-recurring gain of $12.8 million in 1993 resulting from
a change in the Company's Retiree Medical Benefit Plan and an increase in
goodwill amortization of $5.6 million in 1994 associated with the Bredero
Price, TK Valve and Axelson acquisitions.
The overall effective income tax rate was 36% in both 1994 and 1993.
Excluding the impact of the Western Atlas and IRI International, Inc.
transactions described earlier and the impact of the other special items in
both years, the effective rate was 33% for 1994 and 1993.
Minority interest expense was $11 million lower in 1994 primarily due to the
sale of M-I Drilling Fluids Company, which had a 36% minority owner.
INDUSTRY SEGMENT ANALYSIS
See details of financial information by Industry Segment and Geographic Area
on pages 24 through 29.
PETROLEUM PRODUCTS AND SERVICES
DRILLING AND PRODUCTION OPERATIONS
Revenues of $1.28 billion in 1995 were $99.6 million or 8 percent higher than
1994 levels. Excluding the revenues of M-I Drilling Fluids, which was sold
in February 1994, revenues increased $246.6 million or 24%. Operating profit
of $143.9 million was $46.8 million higher than 1994. Excluding the impact
of M-I Drilling Fluids, operating profit increased $56.7 million or 65% over
1994. The operating margin improved to 11.3 percent of sales from 8.2
percent in 1994, or 8.4 percent excluding M-I. All geographic sectors
improved in 1995, in particular Latin America and the North Sea where
drilling activity was greater than in the prior fiscal year.
Although each operating division improved, the majority of the gains in sales
and operating profit were attributable to Baroid Drilling Fluids and
Sperry-Sun Drilling Services. Baroid revenues increased 31 percent due to
higher activity in major producing regions including the North Sea, Latin
America and the Gulf of Mexico. In addition, new market penetration of
products developed within the last five years, including PETROFREE and DRIL-N
drilling systems, contributed to the performance. Sperry-Sun's revenues
improved 29 percent reflecting increasing demand, coupled with higher system
capacity and utilization rates, for measurement-while-drilling and
directional drilling services in most major markets. In addition, new
products including Slim Phase 4, Lateral Tie Back System (LTBS) and
Underbalanced Drilling contributed to the improvement.
18
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
PETROLEUM PRODUCTS AND SERVICES (CONTINUED)
DRILLING AND PRODUCTION OPERATIONS (CONTINUED)
Revenues for Security DBS rose 4 percent, reflecting an increase in
international sales of roller-cone drill bits. Operating profit improved
significantly reflecting successful restructuring and manufacturing
cycle-time reductions. Dresser Oil Tools benefited from strong sales in
Canada and international markets as well as cost savings from the
consolidation of manufacturing and sales and distribution operations. New
product introductions also contributed to the improvement. Despite a weak
Canadian market, the Dresser Wheatley Division benefited from the marketing
of additional Dresser products.
Revenues of $1.18 billion in 1994 were down $122.5 million compared to 1993.
Excluding the revenues of M-I Drilling Fluids, revenues increased $131.7
million or 15%. The increase in 1994 revenues was due to the acquisition of
Axelson in December 1993 and an 11% increase in North American drilling
activity in 1994 versus 1993. Revenues from North American markets increased
27% in 1994, reflecting strength in the Gulf of Mexico and Canada.
Operating profit of $97.1 million in 1994 was $6.9 million higher than 1993.
Excluding the impact of M-I Drilling Fluids, 1994 operating profit was up
$22.2 million or 34% over 1993. The strong performance in North American
drilling markets led to substantial increases in operating profit for
Sperry-Sun and Baroid Drilling Fluids. The acquisition of Axelson as well as
a $9 million reduction in overhead costs resulting from the Baroid merger
also contributed to the increase. These improvements more than offset the
decline in operating profit from international markets and lower earnings
attributable to costs associated with the combination of Guiberson AVA with
Axelson and Security with DBS.
KELLOGG OIL AND GAS SERVICES
Revenues and operating profit declined $14.5 million and $36.2 million,
respectively, in 1995 compared to 1994. A cyclical downturn in the Bredero
Price pipecoating business in the North Sea and the Far East resulted in
significantly lower revenues and operating profit in 1995. However, Bredero
Price's backlog of $403.1 million at October 31, 1995 is up substantially
from the $77.9 million level at October 31, 1994 primarily due to a $300
million project in the North Sea which will be performed over the next four
years. Bredero Price has also entered key markets in the Western Hemisphere,
particularly the United States and Latin America. Prior to 1995, Bredero
Price had no activity in these markets. The combination of higher backlogs
plus new positions in previously unserved markets are expected to result in
significantly improved performance for Bredero Price over the next three to
five years.
The Sub Sea underwater engineering operations had higher revenues and
operating profits in 1995 as the result of improvements in both the North Sea
and Gulf of Mexico, combined with the impact of three business acquisitions
made during 1995. These acquisitions, which include North Sea Assets, Subtec
International and Wellstream (a manufacturer of flexible pipe and riser
systems), are expected to generate revenues of approximately $100 million
during 1996.
19
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
PETROLEUM PRODUCTS AND SERVICES (CONTINUED)
KELLOGG OIL AND GAS SERVICES (CONTINUED)
Revenues of $371.1 million in 1994 were 19% higher than 1993 levels, with
1994 operating profit up 6% over 1993. The increase in revenues resulted
from the inclusion of Bredero Price for a full year in 1994 versus nine
months in 1993 and higher Sub Sea project activity in the Pacific region.
The increase in operating profit was negatively impacted by (i) a Bredero
Price high margin equipment sale in 1993 that did not recur in 1994 and (ii)
Sub Sea's increased engineering and operational staff expenses in both the
United States and the North Sea combined with higher than anticipated job
costs on a project in Australia.
ENGINEERING SERVICES
M. W. Kellogg revenues of $1.46 billion in 1995 rose 15 percent from $1.27
billion in 1994. Major improvement in activity occurred in North America,
Latin America and Europe. These gains were partially offset by lower
activity in the Far East reflecting the wind-down of projects in Malaysia,
Africa and the Middle East. Petrochemicals and gas processing activity
accounted for much of the pick up in activity in the United States and Europe.
M. W. Kellogg operating profit in 1995 declined 7 percent due principally to
lower equity income of $9.7 million from M.W. Kellogg's investment in Bufete
Industriale, S.A. de C.V., a major Mexican engineering and construction firm.
Operating profit for 1995 also included a gain of $7.5 million from the sale
of one-third of its investment in Bufete, and the 1994 results included a
gain of $11.0 million associated with an initial public offering of Bufete.
Excluding the impact of Bufete, operating profit in 1995 increased 10 percent.
Revenues of $1.27 billion in 1994 were 4% higher than in 1993, but operating
profit was down 21% compared to 1993 excluding Bufete. The decrease in
operating profit was primarily the result of achieving significant milestones
on several large contracts in 1993 that were substantially completed that
year.
Although backlog of $1.40 billion at October 31, 1995 was down 14% from the
year-ago level, Kellogg's backlog at December 31, 1995 had increased to
approximately $1.8 billion, reflecting major project bookings that occurred
after fiscal year-end.
ENERGY EQUIPMENT
COMPRESSION AND PUMPING
Revenues and operating profit from Compression and Pumping operations both
fell approximately 6 percent in 1995 compared to 1994. Dresser-Rand revenues
declined $96.2 million or 8% to $1.14 billion as a cyclical downturn in the
compression industry resulted in lower volumes of complete units and repair
parts during the first half of the year and from the impact of a major
multi-year gas compression project in Venezuela that was completed early in
fiscal 1995. In 1995, 60% of Dresser-
20
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
ENERGY EQUIPMENT (CONTINUED)
COMPRESSION AND PUMPING (CONTINUED)
Rand's revenues were from markets outside of North America. An increase in
revenues in the United States and the Far East were more than offset by
declines attributable to the factors noted above.
Dresser-Rand operating profit of $62.8 million was down $8.6 million from
1994. All markets were affected by margin pressure on complete-unit sales,
especially the Far East. Cost reduction programs and the benefits associated
with higher levels of production during the year partially offset the decline
in margin.
Dresser-Rand set a record for booking new orders during 1995 at $1.3 billion.
Bookings exceeded the prior year in virtually all product groups. Major
orders for pipeline compressors, oil and gas production, ethylene,
petrochemicals and refining bolstered backlogs of turbo products, compression
service packages and steam turbine units. Overall, backlog of $883.8 million
at October 31, 1995 reflected a 34% increase over 1994.
Dresser-Rand revenues of $1.2 billion in 1994 increased 10% from a year
earlier due primarily to a 20% increase in revenues from markets outside
North America, particularly in the Eastern Hemisphere. This primarily
reflected the shipment of prior-year backlog of centrifugal products and
compression services. Operating profit continued strong at $71.9 million but
was down from $87.6 million in 1993 due to restructuring and early retirement
costs as well as margin pressure on complete-unit sales.
Dresser-Rand revenues from outside of North American markets were 61% in 1994
compared to 56% in 1993. Operating profit from North America was essentially
unchanged, with strong results from the field gas market offsetting a decline
in the centrifugal products market. Internationally, significant
improvements in operating profit in Venezuela and the North Sea only
partially offset declines in continental Europe and the Middle East resulting
from margin pressure on complete-unit sales.
Earnings from the 49% owned Ingersoll-Dresser Pump (IDP) joint venture were
$13.2 million in 1995, $8.8 million in 1994 and $17.1 million in 1993. The
improvement in 1995 compared to 1994 was primarily related to a continuing
decline of costs associated with the formation of the joint venture. The
1993 results included $21.0 million of earnings from the release of LIFO
inventory reserves related to inventory contributed to IDP by the Company and
sold by IDP to third parties.
MEASUREMENT
Measurement operation revenues of $618.7 million in 1995 were $52.2 million
or 9% higher than 1994 levels. However, operating profit was essentially
unchanged at $71.4 million compared to $72.0 million in 1994. Although the
Wayne (fuel dispensing) Division enjoyed improved sales in Europe and South
America, margins were negatively impacted by cost and pricing pressures in the
21
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
MEASUREMENT (CONTINUED)
U.S. market, resulting in lower overall operating profit in 1995. The
Instrument Division reported a 13% revenue increase and a slight improvement
in operating profit. Earnings from higher activity in South America and new
product introductions were offset by a decline in Europe and the effect of
increased spending in the marketing and research and development areas.
Sales and operating profit in 1994 improved 12% and 41%, respectively, over
1993. The Wayne Division contributed the majority of the improvement in 1994
with very strong performances in the U.S. and Scandinavia. The Instrument
Division also saw improved results in 1994 from higher sales volumes and the
impact of a small acquisition in Germany in early fiscal 1994.
FLOW CONTROL
Flow Control 1995 revenues of $458.4 million were $53.4 million or 13% higher
than 1994. Operating profit of $41.8 million was $12.5 million or 43% higher
than 1994. The acquisition of Grove S.p.A. in June 1995 was the major reason
for the year-to-year increase in revenues and operating profit. The Valve and
Controls Division performed ahead of 1994 as a result of increased project
related orders in 1995 and the cost savings realized from the 1994
restructuring in Europe.
Revenues and operating profit declined 3% and 39%, respectively, in 1994
compared to 1993. The Valve and Controls Division accounted for the majority
of this decrease, as the lingering impact of an economic recession in Europe
ultimately resulted in a significant downsizing of its European operations.
POWER SYSTEMS
Power Systems operations operating profit improved 5% in 1995 on a 12%
revenue increase. Waukesha Division revenues of $205.3 million increased
$24.4 million or 14%, with a slight improvement in operating profit. The
sales improvement was primarily in the lower margin power generation market,
and higher new product development costs also impacted operating profit in
1995. The Roots Division saw operating profit improve $1.8 million on
essentially flat sales of $82.6 million. The earnings improvement was
primarily the result of a major reengineering effort to improve its
manufacturing cost structure during the year.
Revenues and operating profit improved 5% and 17%, respectively, in 1994 as
compared to 1993. These improvements primarily came from the Waukesha
Division where significant volume increases were realized in the higher
margin gas compression market. North American markets accounted for 69% of
Power Systems revenues in 1995 and 74% in 1994 and 1993.
22
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
BACKLOG OF UNFILLED ORDERS
October 31,
------------------------------
1995 1994 1993
--------- -------- ---------
(IN MILLIONS)
CONSOLIDATED BACKLOG
Petroleum Products and Services
Drilling and Production Operations $ 19.7 $ 15.2 $ 11.6
Kellogg Oil and Gas Services 508.1 142.9 157.8
--------- -------- ---------
527.8 158.1 169.4
--------- -------- ---------
Engineering Services
M. W. Kellogg Operations 1,400.0 1,626.1 2,478.1
--------- -------- ---------
Energy Equipment
Compression and Pumping 889.4 667.8 877.9
Measurement 115.9 103.1 93.8
Flow Control 234.0 114.4 107.5
Power Systems 91.2 81.3 74.1
--------- -------- ---------
1,330.5 966.6 1,153.3
--------- -------- ---------
Eliminations (9.1) (2.1) (3.2)
--------- -------- ---------
Total consolidated $3,249.2 $2,748.7 $3,797.6
--------- -------- ---------
--------- -------- ---------
SHARE OF BACKLOG OF
Ingersoll-Dresser Pump Company (49%) $ 187.0 $ 188.3 $ 178.9
--------- -------- ---------
--------- -------- ---------
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's liquidity and overall financial condition remained strong at
October 31, 1995. Cash and cash equivalents totaled $248.7 million. As
shown on the Statement of Cash Flows, Operations provided $434.5 million of
cash while Investing Activities and Financing Activities used $569.7 million
and $129.7 million, respectively. The result was a $266.3 million net
decrease in cash and cash equivalents. Cash provided by Operations exceeded
capital expenditures and dividends by $22.0 million. Management does not
expect capital expenditures, which were $288.2 million in 1995, to change
significantly in 1996. Net cash provided by Operations in 1995 was $80.4
million higher than in 1994 primarily because less cash was required to
finance working capital. Cash used by Investing Activities included $325.7
million for business acquisitions which was essentially responsible for the
overall net decrease in cash and cash equivalents.
Shareholders' equity increased $24.5 million as earnings more than offset
charges for dividends, stock repurchases and translation adjustments. The
Company's ratio of total debt to total debt and shareholders' equity was
26/74 at October 31, 1995 compared to 23/77 at October 31, 1994.
Management believes that the cash on hand of $248.7 million and $231.8
million of existing unused lines of credit, combined with cash that will be
provided by future operations, will be adequate to finance known
requirements. The Company's long-term debt is rated A by Standard and Poors, A1
23
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION (CONTINUED)
by Moody's and A+ by Duff and Phelps. The three agencies give their highest
ratings to the Company's commercial paper. Management believes that the
Company's strong financial condition and favorable credit ratings will allow
the Company to borrow additional funds should the need arise.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is currently involved in a number of lawsuits. See Note J to
Consolidated Financial Statements for information on these lawsuits and
evaluation of the Company's exposure. The Company has been identified as a
potentially responsible party in a number of Superfund sites. Note J to
Consolidated Financial Statements includes a review and evaluation of the
claims.
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
The following financial information by Industry Segment and Geographic Area
for the years ended October 31, 1995, 1994 and 1993 is an integral part of
Note N to Consolidated Financial Statements.
Total revenues include sales and services to unaffiliated customers.
Intersegment and intergeographic area sales and services are accounted for at
prices which approximate arm's length market prices. The intersegment and
intergeographic area revenues are eliminated. Revenues also include
royalties and share of earnings or losses of unconsolidated affiliates.
Operating profit consists of total revenues less total operating expenses and
includes the Company's share of earnings or losses from unconsolidated
affiliates. General corporate expenses, amortization of acquisition
intangibles, interest income and expense, and other income and expenses not
identifiable with a segment have been excluded in determining operating
profit. Identifiable assets are those assets that are identified with
particular segments. Corporate assets are principally cash and cash
equivalents and deferred income tax benefits.
INDUSTRY SEGMENT FINANCIAL INFORMATION
(IN MILLIONS) 1995 1994 1993
--------- --------- --------
REVENUES
Petroleum Products and Services
Drilling and Production Operations $1,279.0 $1,179.4 $1,301.9
Kellogg Oil and Gas Services 356.6 371.1 312.2
Western Atlas Equity Earnings - - 39.2
--------- --------- --------
1,635.6 1,550.5 1,653.3
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 1,457.6 1,265.2 1,215.3
--------- --------- --------
24
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)
INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)
(IN MILLIONS) 1995 1994 1993
--------- --------- --------
Energy Equipment
Compression and Pumping 1,220.4 1,304.5 1,187.3
Measurement 618.7 566.5 505.8
Flow Control 458.4 405.0 417.3
Power Systems 276.9 248.2 236.1
--------- --------- --------
2,574.4 2,524.2 2,346.5
--------- --------- --------
Eliminations (38.9) (9.2) (12.8)
--------- --------- --------
Total revenues $5,628.7 $5,330.7 $5,202.3
--------- --------- --------
--------- --------- --------
Share of revenues of
Ingersoll-Dresser Pump (49%) $ 389.5 $ 368.6 $ 372.9
--------- --------- --------
--------- --------- --------
OPERATING PROFIT AND EARNINGS BEFORE TAXES
Petroleum Products and Services
Drilling and Production Operations $ 143.9 $ 97.1 $ 90.2
Kellogg Oil and Gas Services 18.1 54.3 51.4
Western Atlas Equity Earnings - - 39.2
--------- --------- --------
162.0 151.4 180.8
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 79.3 74.5 85.7
Gain on Mexican affiliate's
public offering - 11.0 -
--------- --------- --------
79.3 85.5 85.7
--------- --------- --------
Energy Equipment
Compression and Pumping 82.7 87.9 105.6
Measurement 71.4 72.0 50.9
Flow Control 41.8 29.3 47.8
Power Systems 35.9 34.1 29.2
--------- --------- --------
231.8 223.3 233.5
--------- --------- --------
Total operating profit 473.1 460.2 500.0
Amortization of acquisition intangibles (29.9) (27.4) (21.8)
General corporate expenses (75.2) (69.1) (88.3)
Special charges - (1.8) (98.2)
Gain on sale of interest in Western Atlas - 275.7 -
Retiree benefit curtailment gain - - 12.8
Interest expense, net (25.8) (18.2) (27.8)
--------- --------- --------
Earnings before taxes $ 342.2 $ 619.4 $ 276.7
--------- --------- --------
--------- --------- --------
25
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)
INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)
(IN MILLIONS) 1995 1994 1993
--------- --------- --------
AMORTIZATION OF ACQUISITION
INTANGIBLES BY SEGMENT
Petroleum Products and Services
Drilling and Production Operations $ 8.1 $ 7.1 $ 3.6
Kellogg Oil and Gas Services 4.4 3.2 3.0
--------- --------- --------
12.5 10.3 6.6
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 10.2 10.3 9.7
--------- --------- --------
Energy Equipment
Compression and Pumping 1.9 3.1 3.0
Measurement 1.3 1.3 1.1
Flow Control 3.8 2.2 1.3
Power Systems .2 .2 .1
--------- --------- --------
7.2 6.8 5.5
--------- --------- --------
Total amortization of
acquisition intangibles $ 29.9 $ 27.4 $ 21.8
--------- --------- --------
--------- --------- --------
IDENTIFIABLE ASSETS
Petroleum Products and Services
Drilling and Production Operations $ 923.2 $ 843.0 $ 939.6
Kellogg Oil and Gas Services 441.0 283.3 278.1
Western Atlas investment - - 278.2
--------- --------- --------
1,364.2 1,126.3 1,495.9
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 212.8 204.8 273.8
--------- --------- --------
Energy Equipment
Compression and Pumping 954.7 924.5 939.0
Measurement 248.0 227.0 190.6
Flow Control 409.6 296.1 284.4
Power Systems 160.6 153.6 113.2
--------- --------- --------
1,772.9 1,601.2 1,527.2
--------- --------- --------
Eliminations (37.7) (44.2) (21.9)
--------- --------- --------
Total identifiable assets 3,312.2 2,888.1 3,275.0
Acquisition intangible assets 852.1 668.4 626.7
Corporate assets 543.1 767.1 543.9
--------- --------- --------
Total assets $4,707.4 $4,323.6 $4,445.6
--------- --------- --------
--------- --------- --------
26
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)
INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)
(IN MILLIONS) 1995 1994 1993
--------- --------- --------
ACQUISITION INTANGIBLE ASSETS BY SEGMENT
Petroleum Products and Services
Drilling and Production Operations 147.7 155.7 106.0
Kellogg Oil and Gas Services 198.2 120.2 119.2
--------- --------- --------
345.9 275.9 225.2
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 210.5 217.3 223.6
--------- --------- --------
Energy Equipment
Compression and Pumping 65.4 58.5 61.6
Measurement 19.1 20.9 17.9
Flow Control 204.4 88.8 91.2
Power Systems 6.8 7.0 7.2
--------- --------- --------
295.7 175.2 177.9
--------- --------- --------
Total acquisition intangibles $ 852.1 $ 668.4 $ 626.7
--------- --------- --------
--------- --------- --------
CAPITAL EXPENDITURES
Petroleum Products and Services
Drilling and Production Operations $ 101.7 $ 73.9 $ 41.9
Kellogg Oil and Gas Services 55.6 32.3 39.2
--------- --------- --------
157.3 106.2 81.1
Engineering Services
M. W. Kellogg Operations 7.1 2.1 2.8
--------- --------- --------
Energy Equipment
Compression and Pumping 85.4 43.4 59.6
Measurement 15.3 12.8 12.3
Flow Control 11.3 9.4 9.1
Power Systems 10.0 10.9 11.1
--------- --------- --------
122.0 76.5 92.1
--------- --------- --------
Corporate 1.8 2.3 17.0
--------- --------- --------
Total capital expenditures $ 288.2 $ 187.1 $ 193.0
--------- --------- --------
--------- --------- --------
DEPRECIATION AND AMORTIZATION
Petroleum Products and Services
Drilling and Production Operations 64.3 62.8 61.3
Kellogg Oil and Gas Services 26.1 18.1 13.5
--------- --------- --------
90.4 80.9 74.8
--------- --------- --------
Engineering Services
M. W. Kellogg Operations 17.6 18.8 20.8
--------- --------- --------
27
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)
1995 1994 1993
--------- --------- --------
Energy Equipment
Compression and Pumping 44.7 69.9 69.2
Measurement 13.9 12.9 12.0
Flow Control 20.2 14.8 13.1
Power Systems 10.3 9.7 8.7
--------- --------- --------
89.1 107.3 103.0
--------- --------- --------
Corporate 9.5 9.3 13.2
--------- --------- --------
Total depreciation and amortization $ 206.6 $ 216.3 $211.8
--------- --------- --------
--------- --------- --------
GEOGRAPHIC AREA FINANCIAL INFORMATION
The financial information by Geographic Area is as follows (in millions):
1995 1994 1993
--------- --------- --------
REVENUES BY POINT OF ORIGIN
United States $3,288.0 $3,061.8 $2,917.8
Canada 192.9 242.5 180.5
Latin America 560.4 409.8 252.1
Europe 1,558.8 1,399.7 1,316.4
Mid East, Far East and Africa 558.5 753.4 895.3
Eliminations (529.9) (536.5) (359.8)
--------- --------- --------
Total revenues $5,628.7 $5,330.7 $5,202.3
--------- --------- --------
--------- --------- --------
REVENUES BY POINT OF DESTINATION
United States $2,058.8 $1,801.4 $2,044.0
Canada 215.3 261.9 210.4
Latin America 811.9 722.3 439.7
Europe 1,342.1 1,069.2 1,075.1
Mid East, Far East and Africa 1,200.6 1,475.9 1,433.1
--------- --------- --------
Total revenues $5,628.7 $5,330.7 $5,202.3
--------- --------- --------
--------- --------- --------
UNITED STATES EXPORT SALES
Canada $ 63.2 $ 52.5 $ 41.4
Latin America 333.5 291.1 184.4
Europe 98.8 82.5 51.0
Mid East, Far East and Africa 472.6 512.6 388.6
--------- --------- --------
Total United States export sales $ 968.1 $ 938.7 $ 665.4
--------- --------- --------
--------- --------- --------
OPERATING PROFIT
United States $ 173.7 $ 170.8 $ 152.9
Canada 37.8 31.2 26.2
Latin America 74.1 53.4 32.6
Europe 70.0 58.0 103.1
Mid East, Far East and Africa 117.5 146.8 185.2
--------- --------- --------
Total operating profit $ 473.1 $ 460.2 $ 500.0
--------- --------- --------
--------- --------- --------
28
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
GEOGRAPHIC AREA FINANCIAL INFORMATION (CONTINUED)
1995 1994 1993
--------- --------- --------
Identifiable assets
United States $1,906.4 $1,656.3 $1,817.4
Canada 90.0 85.6 100.4
Latin America 246.6 182.0 196.2
Europe 996.7 832.0 904.2
Mid East, Far East and Africa 303.5 260.9 412.3
Adjustments and eliminations (231.0) (128.7) (155.5)
--------- --------- --------
Total identifiable assets $3,312.2 $2,888.1 $3,275.0
--------- --------- --------
--------- --------- --------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management
Report of Independent Accountants - Price Waterhouse LLP
Consolidated Statements of Earnings - Years Ended
October 31, 1995, 1994 and 1993
Consolidated Balance Sheets - October 31, 1995 and 1994
Consolidated Statements of Shareholders' Equity -
October 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years Ended
October 31, 1995, 1994 and 1993
Note A - Accounting Change, Basis of Presentation and Summary
of Significant Accounting Policies
Note B - Acquisitions and Divestitures
Note C - Unconsolidated Affiliated Companies
Note D - Cash Flow Data
Note E - Income Taxes
Note F - Short-Term Debt
Note G - Long-Term Debt
Note H - Employee Incentive Plans
Note I - Capital Shares
Note J - Commitments and Contingencies
Note K - Postretirement Benefits
Note L - Supplementary Information and Special Charges
Note M - Financial Instruments
Note N - Information by Industry Segment and Geographic Area
(Information is included in Item 7. of this report.)
Note O - Baroid Financial Information
Note P - Quarterly Financial Data (Unaudited)
29
<PAGE>
REPORT OF MANAGEMENT
The consolidated financial statements of Dresser Industries, Inc. and
subsidiaries have been prepared by management and have been audited by
independent accountants. The management of the Company is responsible for
the financial information and representations contained in the financial
statements and other sections of this report. Management believes that the
financial statements have been prepared in conformity with generally accepted
accounting principles appropriate under the circumstances to reflect, in all
material respects, the substance of events and transactions that should be
included. In preparing the consolidated financial statements, it is
necessary that management make informed estimates and judgments based on
currently available information of the effects of certain events and
transactions.
In meeting its responsibility for the reliability of the consolidated
financial statements, management depends on the Company's internal control
structure. This internal control structure is designed to provide reasonable
assurance that assets are safeguarded and transactions are executed in
accordance with management's authorization and are properly recorded. In
designing control procedures, management recognizes that errors or
irregularities may occur. Also, estimates and judgments are required to
assess and balance the relative cost and expected benefits of the controls.
Management believes that the Company's internal control structure provides
reasonable assurance that errors or irregularities that could be material to
the consolidated financial statements are prevented or would be detected
within a timely period by employees in the normal course of performing their
assigned functions.
The Board of Directors pursues its oversight role for the accompanying
consolidated financial statements through its Audit and Finance Committee,
which is composed solely of directors who are not officers or employees of
the Company. The Committee meets with management, the independent
accountants and the internal auditors to review the work of each and to
monitor the discharge by each of its responsibilities. The Committee also
meets with the independent accountants and internal auditors, without
management present, to discuss internal control structure, auditing and
financial reporting matters.
B. D. St. John, Vice Chairman and G. H. Juetten, Vice President - Controller
Chief Financial Officer
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Dresser Industries, Inc.
In our opinion, the consolidated financial statements and financial statement
schedule listed in the index appearing under Item 14 (A) (1) and (2) and 14
(D) on page F-2 present fairly, in all material respects, the financial
position of Dresser Industries, Inc. and its subsidiaries at October 31, 1995
and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1995, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note A to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 112, EMPLOYERS'
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS, effective as of November 1, 1994.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Dallas, Texas
November 30, 1995
31
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED OCTOBER 31,
-------------------------------------
IN MILLIONS 1995 1994 1993
--------- ----------- ----------
Sales $3,538.9 $3,562.3 $3,494.3
Service revenues 2,073.7 1,745.0 1,631.9
Share of earnings of unconsolidated
affiliates 16.1 23.4 76.1
--------- ----------- ----------
Total revenues 5,628.7 5,330.7 5,202.3
--------- ----------- ----------
Cost of sales 2,526.0 2,538.2 2,386.2
Cost of services 1,831.9 1,533.5 1,452.0
--------- ----------- ----------
Total costs of sales and services 4,357.9 4,071.7 3,838.2
--------- ----------- ----------
Gross earnings 1,270.8 1,259.0 1,364.1
Selling, engineering, administrative
and general expenses (909.1) (896.7) (973.8)
Special charges - (8.0) (105.1)
Other income (deductions)
Interest expense (47.4) (49.3) (44.5)
Interest earned 21.6 31.1 16.7
Gain on sale of interest in Western Atlas - 275.7 -
Gain on affiliate's public offering - 11.0 -
Other, net 6.3 (3.4) 19.3
--------- ----------- ----------
Earnings before income taxes and
other items below 342.2 619.4 276.7
Income taxes (109.3) (224.7) (98.8)
Minority interest (19.8) (32.9) (44.3)
--------- ----------- ----------
Earnings before accounting change 213.1 361.8 133.6
Cumulative effect of accounting change (16.0) - -
--------- ----------- ----------
Net earnings $ 197.1 $ 361.8 $ 133.6
--------- ----------- ----------
--------- ----------- ----------
Earnings per common share
Earnings before accounting change $ 1.17 $ 1.98 $ .74
Cumulative effect of accounting change (.09) - -
--------- ----------- ----------
Net earnings $ 1.08 $ 1.98 $ .74
--------- ----------- ----------
--------- ----------- ----------
Average common shares outstanding 182.8 182.8 180.4
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
32
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31,
-----------------------
IN MILLIONS 1995 1994
--------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 248.7 $ 515.0
Notes and accounts receivable 988.3 896.2
Less allowance for doubtful receivables 24.6 30.4
--------- --------
963.7 865.8
Inventories
Finished products and work in process 617.7 529.9
Raw materials and supplies 191.7 143.2
--------- --------
809.4 673.1
Deferred income taxes 84.8 74.9
Prepaid expenses 94.6 68.2
--------- --------
Total Current Assets 2,201.2 2,197.0
--------- --------
Investments in and receivables from
unconsolidated affiliates 201.9 240.4
Goodwill less accumulated amortization
of $115.5 in 1995 and $94.7 in 1994 845.2 657.4
Deferred income taxes 188.9 193.2
Other assets 143.1 106.0
Property, Plant and Equipment, at cost
Land and land improvements 98.9 90.5
Buildings 429.7 376.2
Machinery and equipment 2,044.3 1,778.3
--------- --------
2,572.9 2,245.0
Less accumulated depreciation 1,445.8 1,315.4
--------- --------
Total Properties, net 1,127.1 929.6
--------- --------
Total Assets $4,707.4 $4,323.6
--------- --------
--------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
33
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31,
-----------------------
IN MILLIONS 1995 1994
--------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt and current portion of
long-term debt $ 131.6 $ 36.6
Accounts payable 520.4 361.6
Contract advances 324.4 265.4
Accrued compensation and benefits 237.7 230.7
Accrued warranty costs 53.0 59.6
Income taxes 113.2 92.7
Other accrued liabilities 332.1 320.2
--------- ----------
Total Current Liabilities 1,712.4 1,366.8
--------- ----------
Employee Retirement Benefit Obligations 689.2 668.2
Long-Term Debt 459.3 460.6
Deferred Compensation, Insurance Reserves
and Other Liabilities 110.7 112.1
Minority Interest 79.0 83.6
Commitments and Contingencies
Shareholders' Equity -
Preferred shares, 10 million authorized - -
Common shares, $0.25 par value
Authorized: 400 million
Issued: 184.5 million 46.1 46.0
Capital in excess of par value 451.6 448.6
Retained earnings 1,285.4 1,212.6
Cumulative translation adjustment (76.7) (63.1)
Pension liability adjustment (7.0) (7.6)
--------- ----------
1,699.4 1,636.5
Less treasury shares, at cost 42.6 4.2
--------- ----------
Total Shareholders' Equity, net 1,656.8 1,632.3
--------- ----------
Total Liabilities and Shareholders' Equity $4,707.4 $4,323.6
--------- ----------
--------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
34
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31,
-------------------------------------
IN MILLIONS, EXCEPT PER SHARE DATA 1995 1994 1993
--------- ----------- ----------
COMMON SHARES, PAR VALUE
Beginning of year $ 46.0 $ 45.2 $ 45.2
Sale of common shares - .5 -
Shares issued under benefit and
dividend reinvestment plans .1 .3 -
--------- ----------- ----------
End of year $ 46.1 $ 46.0 $ 45.2
--------- ----------- ----------
--------- ----------- ----------
CAPITAL IN EXCESS OF PAR VALUE
Beginning of year $ 448.6 $ 407.3 $ 410.2
Sale of common shares - 29.5 -
Shares issued under benefit and
dividend reinvestment plans 3.0 11.8 (2.9)
--------- ----------- ----------
End of year $ 451.6 $ 448.6 $ 407.3
--------- ----------- ----------
--------- ----------- ----------
RETAINED EARNINGS
Beginning of year $1,212.6 $ 967.3 $ 935.3
Net earnings 197.1 361.8 133.6
Dividends on common shares* (124.3) (116.5) (100.2)
Other - - (1.4)
--------- ----------- ----------
End of year $1,285.4 $1,212.6 $ 967.3
--------- ----------- ----------
--------- ----------- ----------
CUMULATIVE TRANSLATION ADJUSTMENTS
Beginning of year $ (63.1) $ (130.2) $ (68.2)
Translation rate changes (13.6) 67.1 (62.0)
--------- ----------- ----------
End of year $ (76.7) $ (63.1) $ (130.2)
--------- ----------- ----------
--------- ----------- ----------
PENSION LIABILITY ADJUSTMENT
Beginning of year $ (7.6) $ (13.8) $ (4.0)
Current year adjustment .6 6.2 (9.8)
End of year $ (7.0) $ (7.6) $ (13.8)
TREASURY SHARES, AT COST
Beginning of year $ (4.2) $ (3.6) $ (15.8)
Shares purchased (46.8) - -
Shares issued (redeemed) under benefit
and dividend reinvestment plans 8.4 (.6) 12.2
End of year $ (42.6) $ (4.2) $ (3.6)
--------- ----------- ----------
--------- ----------- ----------
TOTAL SHAREHOLDERS' EQUITY, END OF YEAR $ 1,656.8 $1,632.3 $1,272.2
--------- ----------- ----------
--------- ----------- ----------
* Dresser $.68 per share in 1995, Dresser $.66 per share in 1994 and Dresser
$.60 per share, Baroid $.20 per share and Wheatley $.04 per share in 1993.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
35
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31,
-------------------------------------
IN MILLIONS 1995 1994 1993
--------- ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 197.1 $ 361.8 $ 133.6
Adjustments to reconcile net earnings
to cash flow:
Depreciation and amortization 206.6 216.3 211.8
Cumulative effect of accounting change 16.0 - -
Earnings from unconsolidated affiliates (16.1) (23.4) (76.1)
Dividends and advances from
unconsolidated affiliates 23.0 28.6 23.2
Minority interest provision 19.8 32.9 44.3
Special charges - 8.0 31.0
Gain on sale of interest in Western
Atlas, net of tax - (146.5) -
Changes in working capital (27.3) (130.0) (192.9)
Other, net 15.4 6.4 3.7
--------- ----------- ----------
Total adjustments 237.4 (7.7) 45.0
--------- ----------- ----------
Net cash provided by
operating activities 434.5 354.1 178.6
--------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (288.2) (187.1) (193.0)
Business acquisitions (325.7) (85.5) (337.5)
Proceeds from disposal of assets 35.6 6.0 20.9
Cash of acquired businesses 8.6 - 38.3
Proceeds of sales of interests in -
Western Atlas - net of taxes paid - 451.8 -
M-I Drilling Fluids - 160.0 -
--------- ----------- ----------
Net cash provided (used) by
investing activities (569.7) 345.2 (471.3)
--------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (124.3) (116.5) (100.2)
Increase (decrease) in short-term debt 58.2 (256.9) 217.2
Decrease in long-term debt (16.8) (46.4) (301.3)
Purchase of common shares for Treasury (46.8) - -
Sale of common shares - 30.0 -
Issuance of long-term debt - - 538.4
--------- ----------- ----------
Net cash provided (used) by
financing activities (129.7) (389.8) 354.1
--------- ----------- ----------
EFFECT OF TRANSLATION ADJUSTMENTS ON CASH (1.4) 5.4 (12.2)
--------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (266.3) 314.9 49.2
CASH AND CASH EQUIVALENTS:
Beginning of year 515.0 200.1 150.9
--------- ----------- ----------
End of year $ 248.7 $ 515.0 $ 200.1
--------- ----------- ----------
--------- ----------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
36
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ACCOUNTING CHANGE
Effective November 1, 1994, the Company changed its accounting for
postemployment benefits as required by Statement of Financial Accounting
Standards No. 112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS (SFAS
112). Postemployment benefits include salary continuation, disability and
health care for former or inactive employees who are not retired. Medical
benefits for employees on long-term disability are the most significant of
the benefits. SFAS 112 requires accrual of the cost of these benefits
currently. The Company had previously accrued the liability for salary
continuation but had expensed the other benefits as paid. Annual expense
under SFAS 112 for 1995 was not significantly different from the actual cash
payments. The Consolidated Statement of Earnings for 1995 includes a charge
of $16.0 million (net of tax of $9.0 million) or $0.09 per share for the
cumulative effect of the accounting change.
BAROID AND WHEATLEY MERGERS
Dresser Industries, Inc. (Dresser) merged with Baroid Corporation (Baroid) on
January 21, 1994 and with Wheatley TXT Corp. (Wheatley) on August 5, 1994.
The "Company" as used in these consolidated financial statements refers to
Dresser and its subsidiaries including Baroid and Wheatley. The mergers have
been accounted for as poolings of interests. These consolidated financial
statements reflect the financial position, results of operations and cash
flows of the combined companies as if the mergers had occurred on November 1,
1992.
CONSOLIDATION
All majority-owned subsidiaries are consolidated and all material
intercompany accounts and transactions are eliminated. Investments in 20% to
50% owned partnerships and affiliates are accounted for on the equity method
and investments in less than 20% owned affiliates are accounted for on the
cost method.
REVENUE RECOGNITION
Revenues and earnings from long-term engineering and construction contracts
are recognized on the percentage-of-completion method, measured generally on
the cost incurred basis. Estimated contract costs include allowances for
completion risks, process and schedule guarantees and warranties that
generally are not finally determinable until the latter stages of a contract.
Estimated contract earnings are reviewed and revised periodically as the
work progresses. Estimated losses are charged against earnings in the period
in which such losses are identified. Revenues from sale of products and
services other than from long-term construction contracts are recorded when
the products are shipped or the services performed.
37
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
LONG-TERM CONTRACTS
Consistent with industry practice, service revenues and cost of services
include the value of materials, equipment and labor contracts furnished by
customers and for which the Company is responsible for the ultimate
acceptability of performance of the project based on such material, equipment
and labor. The value of such items was $138.3 million, $138.7 million and
$112.4 million for the years ended October 31, 1995, 1994 and 1993,
respectively.
Amounts billed in excess of revenues recognized or costs incurred are
included in current liabilities under contract advances.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of most
inventories is determined using either the first-in, first-out (FIFO) method
or the average cost method. The cost of certain U.S. inventories is
determined using the last-in, first-out (LIFO) method.
Inventories on the LIFO method were $112.0 million and $107.2 million at
October 31, 1995 and 1994, respectively. Under the average cost method,
inventories would have increased by $100.0 million and $97.1 million at
October 31, 1995 and 1994, respectively.
Inventories are stated net of progress payments received on contracts of
$94.5 million and $126.1 million at October 31, 1995 and 1994, respectively.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets are stated at cost. Depreciation is computed principally by the
straight-line method over the estimated useful lives of 10 to 40 years for
buildings and 3 to 20 years for machinery and equipment. Certain assets with
service lives of more than 10 years are depreciated on accelerated methods.
Accelerated depreciation methods are also used for tax purposes, wherever
permitted. Maintenance and repairs are expensed as incurred. Major
improvements are capitalized.
INTANGIBLES
The difference between purchase price and the fair values of net assets at
date of acquisition of businesses acquired is amortized on a straight-line
basis over the estimated periods benefited, not exceeding 40 years.
In the event facts and circumstances indicate the carrying amount of goodwill
associated with an acquisition is impaired, the carrying amount will be
reduced to an amount representing the estimated undiscounted future cash
flows before interest to be generated by the operation.
38
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES
Financial statements of foreign subsidiaries are translated into U.S. dollars
based on the functional currency of each business unit. For units whose
local currency is the functional currency, asset and liability accounts are
translated at rates in effect at the balance sheet date, and revenue and
expense accounts are translated at rates approximating the actual rates on
the dates of the transactions. Translation adjustments are included as a
separate component of shareholders' equity. For units which have the U.S.
dollar as the functional currency, inventories, cost of sales, property,
plant and equipment and related depreciation are translated at historical
rates. Other asset and liability accounts are translated at rates in effect
at the balance sheet date, and revenues and expenses (excluding cost of sales
and depreciation) are translated at rates approximating the actual rates on
the dates of the transactions. Translation adjustments are reflected in the
statement of earnings.
RECLASSIFICATION OF PRIOR YEARS
Prior year financial statements have been reclassified to conform to 1995
presentations.
FUTURE REPORTING REQUIREMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) and Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123).
The Company must adopt the provisions of SFAS 121 and SFAS 123 beginning in
fiscal year 1997. SFAS 121 requires the write-down to market value of certain
long-lived assets. SFAS 123 requires the recording of or disclosure of the
value of stock options or other equity instruments issued to employees. The
Company has not determined the effect that the adoption of either SFAS 121 or
SFAS 123 will have on its financial position or results of operations.
NOTE B - ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
On November 15, 1994, the Company acquired Subtec Asia Ltd., a Sharjah,
United Arab Emirates company, which provides underwater technology services
primarily to the offshore oil and gas industry, for $37.6 million in cash
including repayment of debt. On May 2, 1995, the Company acquired North Sea
Assets P.L.C., the remotely operated vehicle business of NSA/HMB Group for
approximately $30.4 million in cash. On May 1, 1995, the Company acquired
the assets of Wellstream Company L.P., which was engaged in the production
of high pressure flexible pipe and riser systems for $62.4 million in cash
including repayment of debt. Also, the Company acquired the assets of
Energy Coatings Company on May 5, 1995 and Pipeline Coating, Inc. on July 1,
1995 for a total of approximately $13.6 million in cash. These last two
companies perform pipe coating services.
39
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - ACQUISITIONS AND DIVESTITURES (CONTINUED)
ACQUISITIONS (CONTINUED)
Effective May 31, 1995, the Company acquired all the outstanding shares of
Grove S.p.A. (Grove), an Italian corporation, for $162.7 million in cash
including repayment of debt. Grove is a multinational company engaged in the
production of oilfield valves and regulators.
The above acquisitions were accounted for as purchases, and their results of
operations are included in the Consolidated Statement of Earnings from the
acquisition dates. The purchase prices exceeded the value of the net assets
acquired by $199.5 million. The excess is included in goodwill in the
Consolidated Balance Sheet and is being amortized on a straight-line basis
over 40 years. The pro forma effect of these acquisitions is not material.
In December 1993, Wheatley acquired Axelson, Inc. and Tom Wheatley Valve
Company for $85.5 million cash, a $1.7 million promissory note and
liabilities assumed of $2.0 million. Axelson is a manufacturer of downhole
rod pumps and safety equipment used in the production of oil and Tom Wheatley
Valve Company produces valves for the oil and gas industry. These
acquisitions were accounted for as purchases, and their results of operations
are included in the Consolidated Statement of Earnings from the acquisition
dates.
Effective February 1, 1993, Dresser acquired all the outstanding stock of
Bredero Price Holding B.V., a Netherlands corporation, from Koninklijke
Begemann Groep N.V. for $161.5 million in cash. Bredero Price is a
multinational company that provides pipe coating for both onshore and
offshore markets.
Effective April 1, 1993, Dresser acquired TK Valve & Manufacturing, Inc. from
Sooner Pipe & Supply Corporation, Tulsa, Oklahoma, for approximately $143.5
million in cash. TK Valve supplies ball valves for the oil and gas
production and transmission industry.
The purchase price exceeded the fair value of the net assets acquired by
$122.0 million for Bredero Price and $92.0 million for TK Valve. Both
acquisitions were accounted for as purchases. The resulting goodwill is
being amortized on a straight-line basis over 40 years. The Consolidated
Statement of Earnings includes the results of operations from the acquisition
dates.
On January 29, 1993 Baroid issued 17.7 million shares of its common stock,
equivalent to 7.1 million of Dresser's shares, in exchange for all of the
outstanding common stock of Sub Sea International Inc. Sub Sea provides
diving services, engineering and remotely operated underwater vehicles to
inspect, construct, maintain and repair offshore drilling rigs and platforms,
underwater pipelines and other offshore oil and gas facilities.
The acquisition of Sub Sea was accounted for as a pooling of interests, and
the financial statements for periods prior to the Sub Sea merger have been
restated to reflect the financial position and results of operations of the
combined companies as if they had merged on November 1, 1992.
40
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE B - ACQUISITIONS AND DIVESTITURES (CONTINUED)
ACQUISITIONS (CONTINUED)
In 1993, Baroid acquired three small businesses and Wheatley acquired one
small business for cash totaling $32.5 million. These acquisitions were
accounted for as purchases, and their results of operations are included in
the Consolidated Statement of Earnings from the acquisition dates.
DIVESTITURES
On January 28, 1994, the Company sold its 29.5% interest in Western Atlas
International, Inc. to a wholly-owned subsidiary of Litton Industries for
$558.0 million. The Company recognized a gain of $275.7 million ($146.5
million net of tax) on the sale.
Following the Baroid merger (See Note A) and in accordance with an agreement
reached with the Antitrust Division of United States Department of Justice,
the Company sold its 64% interest in M-I Drilling Fluids Company to Smith
International, Inc. for $160.0 million in cash effective February 28, 1994.
The Company recognized a $2.6 million pre-tax gain on the sale.
In September 1994, the Company sold its 50% interest in IRI International
Corporation and recognized a pre-tax gain of $4.6 million. Due to the sale,
the Company was able to recognize $17.5 million of tax benefits applicable to
previously unrecognized losses associated with IRI.
NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES
The Company has several investments in less than majority owned affiliates
and the nature and extent of these investments change over time. A summary
of the impact of these investments on the consolidated financial statements
follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
<S> <C> <C> <C>
Share of earnings of unconsolidated affiliates
Ingersoll-Dresser Pump Company $ 13.2 $ 8.8 $ 17.1
Western Atlas International, Inc. (See Note B) - - 39.2
Bufete Industriale, S.A. de C.V. (5.2) 4.5 3.3
Other affiliates 8.1 10.1 16.5
----- ----- -----
$ 16.1 $ 23.4 $ 76.1
----- ----- -----
----- ----- -----
Dividends received $ 7.4 $ 13.1 $ 13.5
----- ----- -----
----- ----- -----
Advances received $ 15.6 $ 15.5 $ 9.7
----- ----- -----
----- ----- -----
</TABLE>
41
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1995 1994
---------- -------
<S> <C> <C>
Investments in and receivables from
unconsolidated affiliates
Ingersoll-Dresser Pump Company $ 143.0 $ 155.1
Other affiliates 58.9 85.3
------ ------
$ 201.9 $ 240.4
------ ------
------ ------
</TABLE>
The Company's share of earnings for Ingersoll-Dresser Pump Company is before
income taxes and includes adjustments made by the Company for differences in
the timing of adoption of an accounting change and for expenses retained by
the Company. The 1993 pre-tax earnings includes $21.3 million from the
release of LIFO inventory valuation reserves related to inventory contributed
to the joint venture by the Company and sold by Ingersoll-Dresser Pump
Company to third parties.
In connection with the Ingersoll-Dresser Pump Company joint venture agreement
and a subsequent amendment, the Company granted to Ingersoll-Rand Company an
option to purchase 51% of the stock of Mono Group Limited for a price equal
to 51% of its book value, including unamortized goodwill, at the exercise
date. The option price will be the amount at January 31, 1995 or at the end
of the month during which Ingersoll-Rand gives notice of its intention to
exercise the option, whichever amount is lower. The option will expire on
April 30, 1997. If the option to purchase is exercised by Ingersoll-Rand
Company, both Ingersoll-Rand and the Company have agreed to contribute their
respective Mono Group Limited shares to the Ingersoll-Dresser Pump Company as
a contribution of capital to the partnership.
Summarized financial information of Ingersoll-Dresser Pump Company is as
follows (in millions):
<TABLE>
<CAPTION>
OCTOBER 31,
----------------
1995 1994
------ ------
<S> <C> <C>
Current assets $ 427.6 $ 354.4
Noncurrent assets 145.5 180.9
------ ------
Total assets $ 573.1 $ 535.3
------ ------
------ ------
Current liabilities $ 174.6 $ 170.8
Noncurrent liabilities 45.4 47.2
Partners' equity -
Contributed capital and retained earnings 371.7 344.7
Cumulative translation adjustment (18.6) (27.4)
------ ------
353.1 317.3
------ ------
Total liabilities and partners' equity $ 573.1 $ 535.3
------ ------
------ ------
</TABLE>
42
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Net sales $ 794.8 $ 752.2 $ 761.0
------ ------ ------
------ ------ ------
Gross profit $ 191.2 $ 170.9 $ 159.1
------ ------ ------
------ ------ ------
Net income $ 27.0 $ 30.3 $ 3.3
------ ------ ------
------ ------ ------
</TABLE>
In the fourth quarter of 1995, The M. W. Kellogg Company (a wholly-owned
subsidiary) sold a portion of its interest in its Mexican affiliate, Bufete
Industriale, S.A. de C.V., and recognized a gain of $7.5 million (See Note
L). As result of the sale, Kellogg's ownership interest fell below 20%. In
the future, Kellogg will account for its investment on the cost method rather
than the equity method used before the sale. Separately, Kellogg entered
into a derivative transaction with the purchasers of the Bufete shares. The
derivative agreement is based on the $20.4 million price of the shares sold.
On the settlement date of October 30, 1998, the Company will receive or make
a cash payment equal to the increase or decrease, respectively, in the value
of the shares sold. The estimated effect of the agreement will be accrued
during the term of the agreement. As of October 31, 1995, the carrying value
of the derivative was not significant and the fair value approximated the
carrying value. The counterparties to the derivative are high quality
institutions, and the Company believes that they are not significant credit
risks. Kellogg has the right of first refusal should the purchasers want to
sell the shares.
NOTE D - CASH FLOW DATA
Cash and cash equivalents include cash on hand and investments with
maturities of three months or less at time of original purchase.
Supplemental information about cash payments and significant noncash
investing and financing activities is as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Cash payments for income taxes $ 82.6 $ 210.3 $ 116.7
------- ------- -------
------- ------- -------
Cash payments for interest on debt $ 46.1 $ 46.3 $ 40.2
------- ------- -------
------- ------- -------
Cash payments for interest on tax
settlements $ .3 $ 1.3 $ 14.0
------- ------- -------
------- ------- -------
</TABLE>
The increase in cash payments for income taxes in 1994 is due to a $106.2
million payment for the gain on sale of the 29.5% interest in the Western
Atlas joint venture.
43
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE D - CASH FLOW DATA (CONTINUED)
Working capital changes on the Consolidated Statements of Cash Flows were as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- -------
<S> <C> <C> <C>
(Increase) decrease in receivables $ (71.2) $(111.9) $ (71.1)
(Increase) decrease in inventories (89.2) 15.3 (85.4)
(Increase) decrease in deferred taxes and
prepaid expenses (33.3) 84.6 (78.1)
Increase (decrease) in accrued
liabilities and accounts payable 95.0 (81.9) 20.1
Increase (decrease) in contract advances 56.3 (24.4) 55.1
Increase (decrease) in income taxes payable 15.1 (11.7) (33.5)
------ ------ ------
$ (27.3) $(130.0) $ (192.9)
------ ------ ------
------ ------ ------
</TABLE>
NOTE E - INCOME TAXES
The domestic and foreign components of earnings before income taxes consist of
the following (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Domestic $ 177.8 $ 494.2 $ 135.7
Foreign 164.4 125.2 141.0
------ ------ ------
Total earnings before income taxes $ 342.2 $ 619.4 $ 276.7
------ ------ ------
------ ------ ------
</TABLE>
The components of the provision for income taxes are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Current
U.S. Federal $ 52.1 $ 129.5 $ 49.6
State 3.7 5.1 3.2
Foreign 48.3 60.1 59.9
------ ------ ------
104.1 194.7 112.7
------ ------ ------
Deferred
U.S. Federal (5.7) 33.7 (19.1)
Foreign 10.9 (3.7) 5.2
------ ------ ------
5.2 30.0 (13.9)
------ ------ ------
Total income tax provision $ 109.3 $ 224.7 $ 98.8
------ ------ ------
------ ------ ------
</TABLE>
44
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE E - INCOME TAXES (CONTINUED)
Since the Company plans to continue to finance foreign operations and
expansion through reinvestment of undistributed earnings of its foreign
subsidiaries (approximately $680.0 million at October 31, 1995), no
provisions are generally made for U.S. or additional foreign taxes on such
earnings. When the Company identifies exceptions to the general reinvestment
policy, additional taxes are provided.
The following is a reconciliation of income taxes at the U.S. Federal income
tax rate (35% for 1995, 35% for 1994 and 34.8% for 1993) to the effective
provision for income taxes reflected in the Consolidated Statements of
Earnings (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Provision for income taxes at statutory rates $ 119.8 $ 216.8 $ 96.3
Minority interest's share of domestic
partnership earnings - (3.8) (7.9)
Enacted tax rate change - - (8.7)
Net tax benefits of foreign dividends
and foreign tax credit carryforwards (5.3) (4.2) (9.0)
Foreign losses not benefited 5.6 10.4 8.8
Foreign taxes in excess of/less than U.S.
rate on foreign earnings (6.9) (.5) 3.0
Additional taxes for repatriation of foreign
earnings - - 4.1
Nondeductible goodwill amortization 7.1 6.9 6.3
Nondeductible merger expenses - - 7.9
Book/tax basis differential of acquired property - 4.7 -
Alternative minimum tax credit - (7.3) -
Book/tax basis differences on Western Atlas
divestiture - 27.5 -
Change in valuation allowance
attributable to:
IRI divestiture - (17.5) -
Baroid domestic operations - (17.3) -
Utilization of foreign net operating losses (6.3) - -
Utilization of capital losses (2.8) - -
State and local income taxes, net of
U.S. Federal income tax benefit 2.4 3.3 2.1
Other (4.3) 5.7 (4.1)
------ ------ -----
Provision for income taxes $ 109.3 $ 224.7 $ 98.8
------ ------ -----
------ ------ -----
</TABLE>
Deferred income tax benefits result from the recognition of temporary
differences. Temporary differences are differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements
that will result in differences between income for tax purposes and income
for financial statement purposes in future years.
45
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE E - INCOME TAXES (CONTINUED)
The deferred income tax provisions (credits) relate to the following (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ----- ------
<S> <C> <C> <C>
Postretirement benefits $ 4.6 $ 9.8 $ 5.8
Reserve for litigation settlements (2.3) 22.4 (24.3)
Restructuring costs (.7) 12.3 6.1
Enacted tax rate change - - (8.7)
Bad debt .2 20.2 .7
Decrease in valuation allowance on prior year's
temporary differences (9.1) (34.8) -
Other items including warranty, insurance and
similar accruals 12.5 .1 6.5
------- ----- ------
Total deferred taxes $ 5.2 $ 30.0 $ (13.9)
------- ----- ------
------- ----- ------
</TABLE>
The components of the net deferred tax asset as of October 31, were as follows
(in millions):
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Deferred tax asset:
Postretirement and postemployment benefits $ 205.4 $ 201.0
Long-term contracts 26.0 9.6
Warranty reserves 9.6 10.4
Inventory 24.0 22.5
Insurance reserves 34.7 29.3
Deferred compensation 19.0 16.9
Net operating loss carryforwards 14.7 22.6
Other items 3.6 37.2
Valuation allowance (12.8) (21.9)
------- ------
Total deferred tax asset 324.2 327.6
------- ------
Deferred tax liability:
Depreciation and amortization (43.5) (55.5)
Other items (6.9) (4.0)
------- ------
Total deferred tax liability (50.4) (59.5)
------- ------
Net deferred tax asset $ 273.8 $ 268.1
------- ------
------- ------
</TABLE>
At October 31, 1995, the Company had foreign operating loss carryforwards of
approximately $60.0 million that had not been benefited. The tax benefit of
these losses is recorded as a deferred tax asset and offset with a
corresponding valuation allowance. These losses are available to reduce the
future tax liabilities of their respective foreign entity. Approximately
$30.0 million of these losses will carryforward indefinitely while the
remaining amounts expire at various dates from 1996 to 2003.
The net change of $9.1 million in 1995 in the valuation allowance for
deferred tax assets relates to reductions in the valuation allowance for
foreign loss and capital loss carryforwards.
46
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE F - SHORT-TERM DEBT
Short-term debt at October 31, 1995 consists of $59.0 million of U.S.
commercial paper at interest rates of 5.8% and $70.3 million of foreign bank
loans including amounts drawn against overdraft facilities. The foreign bank
loans are mostly in foreign currencies and are at negotiated interest rates.
The Company had short-term committed U.S. bank lines of credit totaling
$125.0 million as of October 31, 1995. Such lines provide for borrowings at
negotiated interest rates for a high quality industrial company. As of
October 31, 1995, $59.0 million of the lines were used to backup commercial
paper. The lines of credit may be terminated at the option of the banks or
the Company.
As of October 31, 1995, loan arrangements had been established
with banks outside the United States, under which the Company's foreign
subsidiaries may borrow on an overdraft and short-term note basis. At
October 31, 1995, the amount unused and available under these arrangements
aggregated $165.8 million.
NOTE G - LONG-TERM DEBT
Long-term debt is summarized as follows (in millions):
<TABLE>
<CAPTION>
OCTOBER 31,
---------------
1995 1994
------ ------
<S> <C> <C>
Notes, 6.25%, due 2000 $ 300.0 $ 300.0
Senior notes, 8%, due 2003 149.2 149.1
Other loan agreements 12.4 15.0
------ ------
461.6 464.1
Less portion due within one year 2.3 3.5
------ ------
$ 459.3 $ 460.6
------ ------
------ ------
</TABLE>
The Company's 6.25% Notes due 2000 were sold in June 1993 via a public
offering. The interest is payable semi-annually on May 15 and November 15.
The Company's 8% Senior Notes are notes which Baroid sold in April 1993 via a
public offering. The Company completed a consent solicitation in 1994
whereby the holders of the Notes consented to certain amendments to the
Indenture which conformed various restrictive covenants to the Company's
6.25% Notes. In return, Dresser has fully and unconditionally guaranteed
payment of principal and interest on the Notes.
NOTE H - EMPLOYEE INCENTIVE PLANS
STOCK COMPENSATION PLAN
Dresser's 1992 Stock Compensation Plan includes a Stock Option Program, a
Restricted Incentive Stock Program and a Performance Stock Unit Program.
47
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE H - EMPLOYEE INCENTIVE PLANS (CONTINUED)
STOCK COMPENSATION PLAN (CONTINUED)
The Stock Option Program provides for the granting of options to officers and
key employees for purchase of the Company's common shares. The Plan is
administered by the Executive Compensation Committee of the Board of
Directors, whose members are not eligible for grants under the Plan. No
option can be for a term of more than ten years from date of grant. The
option price is recommended by the committee, but cannot be less than 100% of
the average of the high and low prices of the shares on the New York Stock
Exchange on the day the options are granted. The option price for 1,323,246
shares granted in 1993, 1994 and 1995 and still outstanding include prices
that increase on the annual anniversary dates of grants.
Changes in outstanding options during the three years ended October 31, 1995
and options exercisable at October 31, 1995 are as follows:
<TABLE>
<S> <C>
Outstanding at October 31, 1992 1,991,918
Adjustment for year-end change 56,000
Granted at $14.375 to $21.00 1,692,850
Exercised at $4.475 to $21.25 (348,630)
Canceled or expired (106,373)
---------
Outstanding at October 31, 1993 3,285,765
Granted at $17.375 to $21.00 662,263
Exercised at $5.583 to $21.98 (419,445)
Canceled or expired (475,631)
---------
Outstanding at October 31, 1994 3,052,952
Granted at $19.313 to $23.00 474,737
Exercised at $9.313 to $23.04 (414,082)
Canceled or expired (29,470)
---------
Outstanding at October 31, 1995 3,084,137
---------
---------
Exercisable at October 31, 1995 at $9.125 to $25.17 1,911,518
---------
---------
</TABLE>
At October 31, 1995, a total of 8.0 million Dresser common shares were
reserved for granting of future options under the 1992 plan.
NOTE I - CAPITAL SHARES
Changes in issued common shares during the three years ended October 31, 1995
are as follows (in thousands):
<TABLE>
<S> <C>
Shares at October 31, 1992 180,810
Issued under benefit and dividend reinvestment plans 152
-------
Shares at October 31, 1993 180,962
Sold in a public offering by Wheatley 2,100
Issued under benefit and dividend reinvestment plans 986
-------
Shares at October 31, 1994 184,048
Issued under benefit and dividend reinvestment plans 418
-------
Shares at October 31, 1995 184,466
-------
-------
</TABLE>
48
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE I - CAPITAL SHARES (CONTINUED)
Changes in common shares held in treasury during the three years ended
October 31, 1995 are as follows (in thousands):
<TABLE>
<S> <C>
Treasury shares at October 31, 1992 876
Issued under benefit and dividend reinvestment plans (686)
------
Treasury shares at October 31, 1993 190
Exchanged under benefit and dividend reinvestment plans 6
------
Treasury shares at October 31, 1994 196
Shares purchased 2,327
Issued under benefit and dividend reinvestment plans (413)
------
Treasury shares at October 31, 1995 2,110
------
------
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS PLAN
The Company has a plan under which it issues one Preferred Stock Purchase
Right for each outstanding share of the Company's Common Stock. The Rights
expire in 2000 unless they are redeemed earlier.
The Rights will generally not be exercisable until after 10 days (or such
later time as the Board of Directors may determine) from the earlier of a
public announcement that a person or group has, without Board approval,
acquired beneficial ownership of 15% or more of the Company's Common Stock or
the commencement of, or public announcement of an intent to commence, a
tender or exchange offer which, if successful, would result in the offeror
acquiring 30% or more of the Company's Common Stock. Once exercisable, each
Right would entitle its holder to purchase 1/100 of a share of the Company's
Series A Junior Preferred Stock at an exercise price of $90, subject to
adjustment in certain circumstances.
If the Company is acquired in a merger or other business combination not
previously approved by the Company's Continuing Directors, each Right then
exercisable would entitle its holder to purchase, at the exercise price, that
number of shares of the surviving company's common stock which has a market
value equal to twice the Right's exercise price. In addition, if any person
or group (with certain exceptions) were to acquire beneficial ownership of
15% or more of the Company's Common Stock (unless pursuant to a transaction
approved by the Company's Continuing Directors), each Right would entitle all
rightholders, other than the 15% stockholder or group, to purchase that
number of Series A Junior Preferred Stock having a market value equal to
twice the Right's price.
The Rights may be redeemed by the Company for $.01 per Right until the tenth
day after a person or group has obtained beneficial ownership of 15% or more
of the Company's Common Stock (or such later date as the Continuing Directors
may determine).
The Rights are not considered to be common stock equivalents because there is
no indication that any event will occur which would cause them to become
exercisable.
49
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE J - COMMITMENTS AND CONTINGENCIES
GENERAL LITIGATION
The Company continues to be involved in a lawsuit brought by parties who
purchased a construction equipment dealership from a third party in 1988. In
April 1994, the plaintiffs were awarded judgment of $6.5 million for
compensatory damages and $4.0 million for punitive damages. The Company
appealed the case. Appeal brief was filed in March 1995 and oral arguments
were heard in October 1995. A decision is not expected for several months.
The purchasers of the Company's former hand tool division sued the Company
for fraud in connection with the October 1983 transaction. In May 1994, the
jury returned a verdict awarding the plaintiffs $4.0 million in compensatory
damages and $50.0 million in punitive damages. On October 13, 1994, the
Court ordered a reduction of damages from $54.0 million to $12.0 million.
The case has been appealed.
Based on a review of the current facts and circumstances, management has
provided for what is believed to be a reasonable estimate of the exposure to
loss associated with these matters. While acknowledging the uncertainties of
litigation, management believes that these matters will be resolved without a
material effect on the Company's financial position or results of operations.
ASBESTOSIS LITIGATION
The Company has approximately 69,000 pending claims, including approximately
36,000 new claims filed in fiscal 1995, in which it is alleged that third
parties sustained injuries and damages resulting from the inhalation of
asbestos fibers in products manufactured by the Company. The Company
believes that the increase in pending asbestos claims from October 31, 1994,
reflects more an acceleration of filings rather than an absolute increase in
the number of claims for which the Company may be responsible. The Company
believes that this acceleration was caused by the perception that federal or
state tort reform initiatives pending during 1995 could adversely affect the
remedies of potential plaintiffs. Of the pending claims, approximately
17,000 allege injury as a result of exposure to asbestos contained in
refractory products. The Company has entered into an agreement with its
insurance carriers on these claims that currently covers 80% of its fees,
expenses and indemnity payments. A lawsuit has been filed against certain of
the Company's excess carriers, which, if successful, would raise that amount
to 84%. Since 1976, the Company has tried, settled or summarily disposed of
approximately 16,000 such claims for a gross cost of $36.7 million, including
legal fees, expenses and indemnity payments. Management has no reason to
believe the carriers will not be able to meet their share of the obligations
under the agreement. The Company has provided for the estimated exposure,
based upon past experience, of the open claims. Refractory product claims
subsequent to July 31, 1992, are the responsibility of Harbison-Walker
Refractories Company (formerly INDRESCO Inc.) pursuant to an agreement
entered into at the time of the spin-off of INDRESCO by the Company.
Of the approximately 52,000 non-refractory product claims, approximately half
are covered, in whole or in part, by a separate agreement with insurance
carriers. Because the agreement for these claims is governed by exposure
dates, the covered amount varies by individual claim, but currently averages
69% of fees, expenses and indemnity payments. Since 1976, the Company has
tried, settled or summarily disposed of approximately 9,000 such claims for a
gross cost of $6.1 million, including
50
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ASBESTOSIS LITIGATION (CONTINUED)
legal fees, expenses and indemnity payments. Management has no reason to
believe the carriers will not be able to meet their obligations under the
agreement.
Regarding the claims that are not currently covered by any agreement with
carriers, the Company has tried, settled or summarily disposed of
approximately 16,000 such claims since 1976 for a total cost of $4.8 million,
including fees, expense and indemnity payments. A lawsuit has been filed
against a separate group of insurers seeking to recover the defense and
indemnity costs for these claims, and the Company is in negotiation with
those carriers. There is no guarantee that the amount covered by insurance
under any future agreements will be similar to prior agreements. The Company
has provided for the estimated exposure of the open non-refractory claims
based upon recent per claim settlement costs.
In 1993, the Company sustained an adverse judgment in cases filed by
employees of Ingalls Shipyard in Pascagoula, Mississippi. The Company's
share of damages awarded in six cases amounted to $3.8 million plus 10% add
on for punitive damages. In August 1995, an agreement was reached with
plaintiff's counsel to settle these claims, along with 16,542 additional
claims for which the Company is responsible. Individual plaintiffs have the
right to opt out of the settlement. The Company expects that the settlement
will be implemented in its entirety, and has fully provided for its
liability. This settlement, in conjunction with additional settlements
subsequent to October 31, 1995, also fully provided for, should reduce the
number of pending claims against the Company by about 25%.
In December 1994, a jury in Baltimore, Maryland returned a verdict on the
liability portion of a consolidated asbestos case and awarded compensatory
damages for five trial plaintiffs, including two against the Company's former
Refractory Division. On February 9, 1995, the jury returned its verdict in
the punitive damages portion of the case, applying a 200% punitive damage
multiplier.
During 1995, the Baltimore Court overturned the jury's verdict both as to any
Company responsibility for the asbestos illnesses of the two individual trial
plaintiffs and the punitive damage multiplier for the two plaintiffs and
future claimants. Plaintiffs have appealed the Court's ruling. The Court
did sustain the jury's findings that the Company was negligent in using
asbestos in its products and in addition is responsible for any injury caused
by exposure to those products on a strict liability basis. These findings,
which the Company has appealed, would apply to additional claimants, each of
whom would have to establish in a future mini-trial both the existence of an
asbestos-related disease and that the Company's products were a substantial
cause of that disease.
Management recognizes the uncertainties of litigation and the possibility
that a series of adverse rulings could materially impact operating results.
However, based upon the Company's historical experience with similar claims,
the time elapsed since the Company discontinued sale of products containing
asbestos, and management's understanding of the facts and circumstances which
gave rise to such claims, management believes that the pending asbestos
claims will be resolved without material effect on the Company's financial
position or results of operations.
51
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)
QUANTUM CHEMICAL LITIGATION
In October 1992, Quantum Chemical Corporation ("Quantum") brought suit
against the Company's wholly owned subsidiary, The M. W. Kellogg Company
("Kellogg"), alleging that Kellogg negligently failed to provide an adequate
design for an ethylene facility which Kellogg designed and constructed for
Quantum and fraudulently misrepresented the state of development of its
Millisecond Furnace technology to be used in the facility. Quantum sought
$200 million in actual damages and twice that amount in punitive damages.
Kellogg answered denying the claim and filed a counterclaim against Quantum
alleging libel, slander, breach of contract and fraud. The case was tried
during 1995. On November 30, 1995, the jury returned a verdict finding that
there was no fraud on the part of Kellogg, that Quantum's claim was barred by
the statute of limitations, that Quantum is liable for $4.3 million in breach
of contract damages, that Quantum is liable for $4.1 million in damages for
theft of trade secrets, and that Quantum is liable for $3.0 million of
Kellogg's legal fees. The Company believes that Quantum will make various
post trial motions and probably will appeal the judgement. The Company has
not recognized any income related to the jury verdict.
ENVIRONMENTAL MATTERS
The Company has been preliminarily identified as a potentially responsible
party in 89 Superfund sites. Primary responsibility for nine of these sites
was assumed by Harbison-Walker Refractories Company (formerly INDRESCO Inc.).
The Company has entered into settlements at 26 sites at a total cost of $1.3
million. Upon evaluation of the information concerning various sites, the
Company determined that it is not a responsible party and has no liability at
29 sites. Based on the Company's historical experience with similar claims
and management's understanding of the facts and circumstances, management
believes that the resolution of liability at the 25 remaining sites will be
reached without material effect on the Company's financial position or
results of operations.
OTHER LITIGATION
The Company is involved in certain other legal actions and claims arising in
the ordinary course of business. Management recognizes the uncertainties of
litigation and the possibility that one or more adverse rulings could
materially impact operating results. However, based upon the nature of and
management's understanding of the facts and circumstances which gave rise to
such actions and claims, management believes that such litigation and claims
will be resolved without material effect on the Company's financial position
or results of operations.
OTHER COMMITMENTS
Total rental and lease expense charged to earnings was $103.4 million in
1995, $99.0 million in 1994 and $100.4 million in 1993. At October 31, 1995,
the aggregate minimum annual obligations under noncancelable leases were:
$54.3 million for 1996; $33.8 million for 1997; $23.8 million for 1998; $18.6
million for 1999; $10.5 million for 2000; and $43.8 million for all
subsequent years. The lease obligations related primarily to general and
sales office space and warehouses.
52
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE K - POSTRETIREMENT BENEFITS
HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company has health care and life insurance plans for eligible retired
U.S. union and non-union employees. Although certain plans are contributory,
the Company generally absorbs the majority of the costs. The Company funds
the benefit plans as claims and premiums are paid.
During 1993, the Company adopted amendments to certain postretirement medical
benefit plans, primarily the non-union plans. The major amendments
eliminated benefits for younger employees and established limits on the
Company's future cost increases. These amendments resulted in a curtailment
gain of $12.8 million in 1993 and unrecognized gains of $208.3 million which
are being recognized as a reduction in benefit expense on a straight-line
basis over periods of 12 years to 18 years.
The net periodic postretirement benefit expense and the actual benefits paid
were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Service cost for benefits earned $ 4.2 $ 4.5 $ 7.6
Interest cost on accumulated postretirement
benefit obligation 29.7 27.1 40.4
Net amortization of unrecognized gain (18.5) (15.7) (9.8)
------ ------ ------
Net periodic postretirement
benefit expense $ 15.4 $ 15.9 $ 38.2
------ ------ ------
------ ------ ------
Actual benefits paid $ 25.3 $ 24.8 $ 22.1
------ ------ ------
------ ------ ------
</TABLE>
The liability of the plans at October 31 was as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ 268.9 $ 268.9
Fully eligible active plan participants 47.4 43.8
Other active plan participants 69.1 62.1
------- -------
Total accumulated postretirement benefit obligation 385.4 374.8
Unamortized gains from plan amendments 173.6 188.7
Unrecognized net gain 75.0 80.5
------- -------
Accrued postretirement benefit liability $ 634.0 $ 644.0
------- -------
------- -------
</TABLE>
Accrued compensation and benefits on the Consolidated Balance Sheet include the
current portion of the accrued liability.
53
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)
HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED)
Assumptions used to calculate the Accumulated Postretirement Benefit
Obligation as of October 31 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
Discount rate 8.25% 8.25% 7.0%
Health care trend rate (weighted based on participant count) -
1995 - 10.0% for 1995 declining to 5.5% in 2002 and level thereafter.
1994 - 12.0% for 1994 declining to 5.5% in 2003 and level thereafter.
1993 - 13.0% for 1993 declining to 5.5% in 2003 and level thereafter.
</TABLE>
A one percentage-point increase in the assumed health care cost trend rate
for each year would increase the net postretirement benefit expense for 1995
by approximately $3.6 million and would increase the accumulated
postretirement benefit obligation as of October 31, 1995 by approximately
$31.6 million.
PENSION PLANS AND RETIREMENT SAVINGS PLANS
The Company has numerous defined benefit pension plans covering certain
employees in the United States. The benefits under the U.S. plans are based
primarily on years of service and employees' qualifying compensation during
the final years of employment for salaried employees and are based primarily
on years of service for hourly employees. The U.S. plans are funded in
accordance with the requirements of applicable laws and regulations. The
U.S. plan assets are invested in cash, short-term investments, equities,
fixed-income instruments and real estate at October 31, 1995.
The Company has additional defined benefit pension plans for employees
outside the United States. The benefits under these plans are based
primarily on years of service and compensation levels. The Company funds
these plans in amounts sufficient to meet the minimum funding requirements
under governmental regulations, plus such additional amounts as the Company
may deem appropriate.
The Company has defined contribution 401(K) plans for most of its U.S.
salaried employees and certain U.S. union hourly employees. Under these
plans, eligible employees may contribute amounts through payroll deductions.
The employee contributions and employer contributions are invested in funds
available under the plans.
During 1995, the Company amended the primary defined benefit pension plans
for its U.S. salaried employees and froze the benefits as of May 31, 1995.
In addition, effective June 1, 1995, the Company implemented a new 401(K)
retirement savings plan that replaced the previous defined contribution
401(K) plan for most of its U.S. salaried employees. Under the new plan, the
Company makes an equalizing contribution for employees covered by the frozen
defined benefit pension plan designed to provide employees with benefits
comparable to what they would have had if the plan had not been frozen. The
May 31, 1995 change to the defined benefit pension plan resulted in a gain of
$35.0 million that is being recognized over 10 years as an offset to the
expenses of the equalizer contribution under the new retirement savings plan.
54
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)
PENSION PLANS AND RETIREMENT SAVINGS PLANS (CONTINUED)
Expense for all defined contribution plans was $24.4 million, $18.6 million
and $17.5 million in 1995, 1994 and 1993, respectively. The 1995 expense
increase resulted from the new retirement savings plan and is essentially
offset by lower defined benefit plan expenses.
Expense for all defined benefit plans and cash contributions to the plans
were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ -------
<S> <C> <C> <C>
Service cost for benefits earned $ 17.4 $ 22.8 $ 19.4
Interest cost on projected benefit obligation 41.0 38.2 36.9
Actual return on plan assets (44.6) (42.0) (36.0)
Net amortization and deferral (1.2) 2.5 .7
------- ------ ------
Net pension expense $ 12.6 $ 21.5 $ 21.0
------- ------ ------
------- ------ ------
Cash contributions $ 23.5 $ 28.8 $ 38.7
------- ------ ------
------- ------ ------
</TABLE>
The funded status of the defined benefit plans on the measurement dates of
October 31 was as follows (in millions):
Plans with Assets Exceeding Projected Benefits
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 238.6 $ 136.2
------- -------
------- -------
Accumulated benefit obligation $ 243.3 $ 138.1
------- -------
------- -------
Projected benefit obligation $ 262.9 $ 158.3
Plan assets at fair value 348.6 236.9
------- -------
Plan assets over projected benefit obligation 85.7 78.6
Unrecognized net loss (gain) 13.3 (10.3)
Prior service cost not yet recognized in net periodic
pension expense (29.5) 2.1
Unrecognized transition net asset (19.6) (20.3)
------- -------
Prepaid pension costs $ 49.9 $ 50.1
------- -------
------- -------
</TABLE>
55
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)
PENSION PLANS AND RETIREMENT SAVINGS PLANS (CONTINUED)
Plans with Projected Benefits Exceeding Assets
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 206.9 $ 271.4
------- ------
------- ------
Accumulated benefit obligation $ 222.5 $ 288.2
------- ------
------- ------
Projected benefit obligation $ 253.5 $ 371.6
Plan assets at fair value 181.8 230.8
------- ------
Projected benefit obligation over plan assets (71.7) (140.8)
Unrecognized net loss .8 48.6
Prior service cost not yet recognized in net periodic
pension expense 20.8 26.7
Unrecognized transition obligation 8.9 6.9
Adjustment required to recognize minimum liability (28.3) (34.5)
------- ------
Pension liability $ (69.5) $ (93.1)
------- ------
------- ------
</TABLE>
On the Consolidated Balance Sheet, "Other assets" include prepaid pension
costs and "Accrued compensation and benefits" include the current portion of
the pension liabilities.
The Company recognized an additional minimum pension liability for
underfunded defined benefit plans. The additional minimum liability is equal
to the excess of the accumulated benefit obligation over plan assets and
accrued liabilities. A corresponding amount is recognized as either an
intangible asset or a reduction of shareholders' equity. As of October 31,
1995 and 1994, the Company had recorded additional liabilities of $28.3
million and $34.5 million, intangible assets of $16.3 million and $21.6
million, and adjustments to shareholders' equity, (net of income taxes and
minority interest) of $7.0 million and $7.6 million, respectively.
The actuarial assumptions used in determining funded status of the plans were as
follows:
<TABLE>
<CAPTION>
U.S. Plans 1995 1994
------------ ------------
<S> <C> <C>
Discount rate 8.25% 8.25%
Expected long-term rate of return on assets 8.5% to 9.0% 8.5% to 9.0%
Rate of increase in compensation levels 4.0% to 5.5% 3.5% to 5.5%
Foreign Plans
<S> <C> <C>
Discount rate 7.0% to 12.5% 6.5% to 12.5%
Expected long-term rate of return on assets 7.0% to 13.5% 6.0% to 13.5%
Rate of increase in compensation levels 4.0% to 11.0% 4.5% to 11.0%
</TABLE>
56
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE L - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES
Depreciation of property, plant and equipment charged to earnings amounted to
$174.4 million in 1995, $187.0 million in 1994 and $185.9 million in 1993.
Amortization of intangibles was $32.2 million in 1995, $29.3 million in 1994 and
$25.9 million in 1993 and is included in selling, engineering, administrative
and general expenses.
Research and development costs charged to earnings were $96.5 million in 1995,
$102.5 million in 1994 and $98.5 million in 1993.
The components of other income (deductions), net on the Consolidated Statements
of Earnings are as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Gain on business disposals $ - $ 7.1 $ -
Retiree medical benefit plan changes - - 12.8
Gains on sales of assets 7.5 3.1 4.8
Foreign exchange gain (loss) (1.2) (13.6) 1.7
----- ----- -----
$ 6.3 $ (3.4) $ 19.3
----- ----- -----
----- ----- -----
</TABLE>
Special charges consist of the following (in millions):
<TABLE>
<CAPTION>
1994 1993
------ -------
<S> <C> <C>
Parker & Parsley - insurance
recovery/litigation settlement $ 18.4 $ (65.0)
Merger expenses (10.7) (31.0)
Drill bit pricing litigation (9.5) -
Restructuring charges (6.2) (13.2)
Retiree medical plan curtailment gain - 4.1
------ ------
$ (8.0) $(105.1)
------ ------
------ ------
</TABLE>
In 1993, the Company recorded expenses of $65.0 million to cover settlement,
legal fees and expenses of the Parker & Parsley and related litigation. In
April 1994, the Company entered into settlement agreements with certain
insurance carriers relating to the $65.0 million Parker & Parsley settlement.
The Company had previously received approximately $13.5 million from other
insurance carriers in connection with the litigation. Pursuant to the
settlement agreements, the Company received approximately $33.8 million,
which, after legal fees and a provision for other potential litigation
settlements, resulted in a gain of $18.4 million.
In 1994, the Company recorded expenses associated with the Wheatley merger
(See Note A) totaling $10.7 million, including professional fees and costs
related to eliminating duplicate facilities.
The Company paid $9.5 million in February 1994 for the settlement of drill
bit pricing litigation.
In 1994, the Company accrued expenses of $6.2 million primarily for personnel
reduction costs associated with restructuring its Valve and Controls
operations. Of the costs, $2.5 million was paid in 1994 and $3.7 million was
paid in 1995.
57
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE L - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES (CONTINUED)
The 1993 Special Charges included expenses associated with the Baroid merger
(See Note A) totaling $31.0 million for employee severance costs, foreign
taxes associated with change of ownership, professional fees, write-off of
debt issuance cost and advisory fees paid to Baroid officers. Baroid's Board
of Directors concluded that the advisory fee of $3.0 million was warranted in
view of the time and service required of certain officers to negotiate and
bring about the Merger and the fact that, as a result of their time and
service, no investment banker was needed or hired by Baroid to represent
Baroid in negotiating the Merger. Such amounts were determined to be
reasonable in relation to avoided costs of investment banking fees.
The 1993 Special Charges also included expenses of $13.2 million for
restructuring and termination costs partially offset by a $4.1 million gain
from curtailment of retiree medical benefits. The curtailments resulted from
employee terminations associated with plant closings. These special charges
reduced segment operating profit by $6.9 million and the remaining $2.2
million was reflected as nonsegment expenses.
NOTE M - FINANCIAL INSTRUMENTS
The Company does not hold or issue financial instruments for purposes of
trading. The carrying amounts of cash and short-term investments, accounts
receivable, accounts payable and short-term debt approximate fair value
because of the short maturity of these instruments. The carrying amounts of
long-term debt, including the current portion, were approximately $4.8
million lower than fair value at October 31, 1995 and approximately $33.4
million higher than fair value at October 31, 1994. Fair values of the debt
were determined by reference to market interest rates.
The Company has cash and cash equivalents, receivables and payables
denominated in currencies other than functional currencies. These financial
assets and liabilities create exposure to potential foreign exchange gains
and losses arising on future changes in currency exchange rates. The Company
hedges such risks by entering into forward exchange contracts. A forward
exchange contract is an agreement to exchange different currencies at a
specified future date and forward rate. The Company does not enter into
forward contracts to engage in speculation nor does the Company hedge
investments in foreign entities. The Company had $394.0 million and $248.0
million, notional amounts, of forward exchange contracts outstanding at
October 31, 1995 and 1994, respectively. The notional amounts are used to
express the volume of these transactions and do not represent exposure to
loss. At October 31, 1995, 83% of these contracts were in European
currencies, 15% in Japanese Yen and 2% in other currencies. The carrying
value of the contracts was not significant. The fair value of the contracts,
based on year-end quoted rates for purchasing contracts with similar terms
and maturity dates, approximated carrying value and was also not significant.
See Note C for information about a derivative financial instrument that the
Company entered into with the purchasers of part of the Company's investment
in an unconsolidated affiliate.
The Company's financial instruments do not represent significant credit risks
at October 31, 1995 because they are either with high quality financial
institutions or widely dispersed across many customers and financial
institutions.
58
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE N - INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
To provide more informative segment data, the Company has adopted a new
segment reporting structure for 1995. The segment titles have been changed
for clarity, and sub-segment categories have been expanded. The Energy Valve
Division, which was included in the Oilfield Services Segment, is now
included in the Energy Equipment Segment in the Flow Control Products
category. Prior years have been reclassified to conform to the new reporting
structure.
The industry segments are as follows:
PETROLEUM PRODUCTS AND SERVICES (FORMERLY OILFIELD SERVICES)
This segment provides services and project management for oil and
gas exploration, drilling, completion, production and transmission
activities. Principal products and services of the Drilling and
Production Operations include integrated well services and project
management, drilling fluids systems, drill bits,
measurement-while-drilling services, directional drilling services,
completion and production tools, production valves and pumps,
meters and measuring equipment. Kellogg Oil & Gas Services is an
EPIC contractor (engineering, procurement, installation and
construction) for subsea and onshore projects, and it supplies ROVs
(remotely operated vehicles), seabed equipment, flexible flowlines,
riser systems and pipe coating, pipe laying and pipe burying
services.
ENGINEERING SERVICES
This segment consists of the M. W. Kellogg Company, which provides
engineering, construction and related services primarily for the
oil and natural gas processing industries. M. W. Kellogg has its
own proprietary technologies and utilizes the advanced technologies
of others to facilitate the environmentally acceptable conversion
of raw hydrocarbons and their chemicals into value-added end
products. The company participates in projects involving liquefied
natural gas (LNG) plants and receiving terminals, refining and
petrochemical activities and ammonia/fertilizer facilities. This
includes grassroots activity as well as the modernizing and
retrofitting of energy-related complexes for efficiency and
environmental control purposes.
ENERGY EQUIPMENT (FORMERLY HYDROCARBON PROCESSING INDUSTRY)
This segment designs, manufactures and markets engineered products
for oil and gas producers, transporters and processors, petroleum
marketers and the power industry. Compression and Pumping
Operations include the Dresser-Rand joint venture, which produces
compressors, turbines, generators and electric motors, as well as
the Ingersoll-Dresser Pump unconsolidated joint venture and the
Mono Pumps unit. Measurement Operations supply gasoline dispensing
systems, instruments, meters and piping specialities. Flow Control
Operations manufacture a broad range of valves (including control,
safety, safety relief, ball, check, gate/plug, butterfly and
industrial valves) as well as fluid-powered, linear and electric
actuators. Power Systems Operations produce engines, generators
and blowers.
The Financial Information by Industry Segment and Geographic Area for the
years ended October 31, 1995, 1994 and 1993 is included on pages 24 through
29 of Management's Discussion and Analysis included elsewhere in this report
and is an integral part of this Note to Consolidated Financial Statements.
59
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE O- BAROID FINANCIAL INFORMATION
Baroid has ceased filing periodic reports with the Securities and Exchange
Commission. Baroid's 8% Senior Notes remain outstanding, and the Notes are
fully guaranteed by Dresser (See Note G). Because the Notes remain
outstanding, summarized financial information of Baroid is presented as
follows (in millions):
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
BAROID CORPORATION 1995 1994
-------- --------
<S> <C> <C>
Current assets $ 680.0 $ 468.9
Noncurrent assets 532.8 362.0
-------- -------
Total $1,212.8 $ 830.9
-------- -------
-------- -------
Current liabilities 345.1 $ 229.5
Noncurrent liabilities 408.2 281.7
Shareholders' equity 459.5 319.7
-------- -------
Total $1,212.8 $ 830.9
-------- -------
-------- -------
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Revenues $1,323.3 $ 923.2 $ 832.3
------- ------- ------
------- ------- ------
Gross earnings $ 358.8 $ 245.8 $ 206.3
------- ------- ------
------- ------- ------
Earnings from operations $ 133.1 $ 78.2 $ 56.9
Other income (deductions) (18.5) (17.8) (40.1)*
------- ------- ------
Earnings before taxes
and minority interests 114.6 60.4 16.8
Income taxes (37.8) (19.8) (13.8)
Minority interest .4 1.9 (1.5)
------- ------- -------
Net earnings $ 77.2 42.5 $ 1.5
------- ------- -------
------- ------- -------
</TABLE>
*Includes $30 million for merger expenses.
60
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
NOTE P - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------
IN MILLIONS, EXCEPT PER SHARE DATA JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
1995
Net revenues $1,300.3 $1,261.2 $1,437.4 $1,629.8
Gross earnings 281.5 295.7 322.1 371.5
------- ------ ------- -------
------- ------ ------- -------
Earnings before accounting change $ 38.6 $ 45.1 $ 45.0 $ 84.4
Cumulative effect of accounting change (16.0) - - -
------- ------ ------- -------
Net earnings $ 22.6 $ 45.1 $ 45.0 $ 84.4
------- ------ ------- -------
------- ------ ------- -------
Earnings per common share
Earnings before accounting change $ .21 $ .25 $ .25 $ .46
Cumulative effect of accounting change (.09) - - -
------- ------ ------- -------
Net earnings $ .12 $ .25 $ .25 $ .46
------- ------ ------- -------
------- ------ ------- -------
1994
Net revenues $1,396.2 $1,324.5 $1,193.4 $1,416.6
Gross earnings 335.8 314.6 278.0 330.6
Net earnings 195.3(1) 54.6 37.9 74.0(2)
------- ------ ------- -------
------- ------ ------- -------
Earnings per common share $ 1.08 $ .29 $ .21 $ .40
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
(1) Includes gain on sale of interest in Western Atlas joint venture of $146.5
million.
(2) Includes gain on sale of interest in IRI International of $22.1 million and
Wheatley merger expense of $7.9 million.
61
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Certain information required by this Item is incorporated by reference
to Dresser's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this report (the "Dresser Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) List of Financial Statements, Financial Statement Schedules and
Exhibits.
(1) and (2) - Response to this portion of Item 14 is submitted as
a separate section of this report.
(3) Response to this portion of Item 14 is submitted as a
separate section of this report.
(b) Reports on Form 8-K.
None.
(c) Exhibits - Response to this portion of Item 14 is submitted as a
separate section to this report. Management contracts or
compensatory plans or arrangements in which Directors or
executive officers participate are included in Exhibits 10.1 -
10.24.
62
<PAGE>
(d) Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate section of this report.
UNDERTAKINGS
For the purpose of complying with the rules governing registration
statements on Form S-8 under the Securities Act of 1933 (as amended effective
July 31, 1990), the undersigned Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's registration
statements on Form S-8 Nos. 2-76847 (filed April 5, 1982), 2-81536 (filed
January 28, 1983), 33-26099 (filed December 21, 1988), 33-30821 (filed August
28, 1989), 33-48165 (filed May 27, 1992), 33-52067 (filed January 28, 1994) and
33-52989 (filed April 6, 1994), and to the Post-Effective Amendments on Form S-8
to Registration Statement on Form S-4 Nos. 33-50563 (filed January 28, 1994) and
33-54099 (filed August 31, 1994):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the provisions of the Company's Restated
Certificate of Incorporation, as amended, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
63
<PAGE>
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 January 26, 1996.
DRESSER INDUSTRIES, INC.
By: /s/ George H. Juetten
---------------------
George H. Juetten,
Vice President - Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on January 26, 1996.
SIGNATURETITLE
*WILLIAM E. BRADFORD Chief Executive Officer and
- ----------------------------------- Director (Principal Executive
(William E. Bradford, Director) Officer)
/s/ George H. Juetten Vice President - Controller
- ----------------------------------- (Principal Accounting Officer)
(George H. Juetten)
*B. D. ST. JOHN Vice Chairman of the Board and
- ----------------------------------- Director (Principal Financial
(B. D. St. John, Director) Officer)
*SAMUEL B. CASEY, JR. *J. LANDIS MARTIN
- ----------------------------------- -----------------------------------
(Samuel B. Casey, Jr., Director) (J. Landis Martin, Director)
*LAWRENCE S. EAGLEBURGER *JOHN J. MURPHY
- ----------------------------------- -----------------------------------
(Lawrence S. Eagleburger, Director) (John J. Murphy, Chairman of the
Board and Director)
*SYLVIA A. EARLE, PH.D. *LIONEL H. OLMER
- ----------------------------------- -----------------------------------
(Sylvia A. Earle, Ph.D., Director) (Lionel H. Olmer, Director)
*RAWLES FULGHAM *JAY A. PRECOURT
- ----------------------------------- -----------------------------------
(Rawles Fulgham, Director) (Jay A. Precourt, Director)
*JOHN A. GAVIN *RICHARD W. VIESER
- ----------------------------------- -----------------------------------
(John A. Gavin, Director) (Richard W. Vieser, Director)
*RAY L. HUNT
- -----------------------------------
(Ray L. Hunt, Director)
*By:/s/Alice A. Hinds
-------------------------------
Alice A. Hinds
(Attorney-In-Fact)
<PAGE>
FORM 10-K
ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED OCTOBER 31, 1995
DRESSER INDUSTRIES, INC.
DALLAS, TEXAS
F-1
<PAGE>
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
accountants are included in Item 8:
Page
Number
------
Report of Independent Accountants 31
Consolidated Statements of Earnings--
Years ended October 31, 1995, 1994, and 1993 32
Consolidated Balance Sheets--
October 31, 1995 and 1994 33
Consolidated Statements of Shareholders' Equity--
Years ended October 31, 1995, 1994 and 1993 35
Consolidated Statements of Cash Flows--
Years ended October 31, 1995, 1994, and 1993 36
Notes to Consolidated Financial Statements 37
The following consolidated financial statement schedule of Dresser Industries,
Inc. is included herein:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
Separate financial statements are not presented for any of the unconsolidated
affiliates because none constitutes a significant subsidiary.
Summarized financial statement information for Ingersoll-Dresser Pump Company
(49% owned) is presented in Note C to Consolidated Financial Statements included
in Item 8.
F-2
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Col. C
---------------------------
Col. A Col. B Additions Col. D Col. E
------ ------------ --------------------------- ------------ -----------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
DESCRIPTIONS of Period Expenses Accounts Deductions Period
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE DEDUCTED FROM ASSETS
TO WHICH THEY APPLY
Year ended October 31, 1995
For doubtful receivables classified as current assets $ 30.4 $ 3.7 $ .7 $ 10.2(B) $ 24.6
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
For deferred tax asset valuation
allowance classified as noncurrent assets $ 21.9 $ - $ - $ 6.9 $ 15.0
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
Year ended October 31, 1994
For doubtful receivables classified as current assets $ 33.3 $ 6.4 $ 1.1 $ 10.4(B) $ 30.4
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
For deferred tax asset valuation
allowance classified as noncurrent assets $ 54.3 $ - $ - $ 32.4 $ 21.9
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
Year ended October 31, 1993
For doubtful receivables classified as current assets $ 27.0 $ 7.5 $ 5.2(A) $ 6.4(B) $ 33.3
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
For deferred tax asset valuation
allowance classified as noncurrent assets $ 42.9 $ 11.4 $ - $ - $ 54.3
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
</TABLE>
Notes:
(A) Primarily reclassification from other accrued liabilities, and addition of
accounts due to acquisition.
(B) Receivable write-offs and reclassifications, net of recoveries.
F-3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation of Registrant and amendments
thereto. (Incorporated by reference to Exhibit 3(a) to
Registrant's Form 10-K for the year ended October 31, 1991).
*3.2 By-Laws, as amended, of Registrant.
4.1 Rights Agreement dated August 16, 1990, between Registrant and
Harris Trust Company of New York as Rights Agent. (Incorporated by
reference to Exhibit 1 to Registration Statement on Form 8-A filed
on August 30, 1990, as amended by Amendment No.1 on Form 8 filed on
October 3, 1990).
4.2 Form of Indenture, between Dresser Industries, Inc. and NationsBank
of Texas, N.A., as Trustee, for unsecured debentures, notes and
other evidences of indebtedness. (Incorporated by reference to
Exhibit 4.1 to Registrant's Registration Statement on Form S-3,
Registration No. 33-59562).
4.3 Form of Indenture, between Baroid Corporation and Texas Commerce
Bank National Association, as Trustee, for 8% Senior Notes due
2003. (Incorporated by reference to Exhibit 4.01 to the
Registration Statement on Form S-3, Registration No. 33-60174).
4.4 Form of Supplemental Indenture, between Dresser Industries, Inc.,
Baroid Corporation and Texas Commerce Bank N.A. as Trustee, for 8%
Guaranteed Senior Notes due 2003. (Incorporated by reference to
Exhibit 4.3 to Registration Statement on Form S-4 filed by Baroid
Corporation, Registration No. 33-53077).
10.1 Dresser Industries, Inc. Deferred Compensation Plan. (Incorporated
by reference to Exhibit A to Registrant's Proxy Statement dated
February 11, 1966, filed pursuant to Regulation 14A, File No. 1-
4003).
10.2 Dresser Industries, Inc. Short-Term Deferred Compensation Plan.
(Incorporated by reference to Exhibit 10(b) to Registrant's Form
10-K for the year ended October 31, 1992).
10.3 Dresser Industries, Inc. Retirement Income Plan under ERISA, as
amended effective May 1, 1984, and Amendments No. 1, 2 and 3
thereto. (Incorporated by reference to Exhibit 10(d) to
Registrant's Form 10-K for the year ended October 31, 1986).
- ----------------
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
------- -----------
10.4 Dresser Industries, Inc. Consolidated Salaried Retirement Plan, as
amended by restatement effective May 1, 1994. (Incorporated by
reference to Exhibit 10.4 to Registrant's Form 10-K for the year
ended October 31, 1994).
*10.5 Amendments No. 1 and 2 to the Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as amended and restated effective May 1,
1994.
10.6 Dresser Industries, Inc. 1982 Stock Option Plan. (Incorporated by
reference to Exhibit A to Registrant's Proxy Statement dated
February 12, 1982, filed pursuant to Regulation 14A, File No. 1-
4003).
*10.7 ERISA Excess Benefit Plan for Dresser Industries, Inc. as amended
and restated effective June 1, 1995.
*10.8 ERISA Compensation Limit Benefit Plan for Dresser Industries, Inc.,
as amended and restated effective June 1, 1995.
*10.9 Supplemental Executive Retirement Plan of Dresser Industries, Inc.,
as amended and restated effective June 1, 1995.
10.10 Dresser Industries, Inc., Performance Stock Unit Plan.
(Incorporated by reference to Exhibit 10(l) to Registrant's Form
10-K for the year ended October 31, 1985).
10.11 Dresser Industries, Inc. Deferred Compensation Plan for Non-
employee Directors, as amended. (Incorporated by reference for
Exhibit 10(n) to Registrant's Form 10-K/A for the year ended
October 31, 1992).
10.12 Dresser Industries, Inc. 1989 Restricted Incentive Stock Plan.
(Incorporated by reference to Exhibit A to Registrant's Proxy
Statement dated February 10, 1989, filed pursuant to Regulation
14A, File No. 1-4003).
- ----------------
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
------- -----------
10.13 Dresser Industries, Inc. 1989 Director Retirement Plan, as amended
by restatement effective July 15, 1993. (Incorporated by reference
to Exhibit 10.16 to Registrant's Form 10-K for the year ended
October 31, 1993).
10.14 Form of Election for Deferral of Awards pursuant to the Dresser
Industries, Inc. 1989 Director Retirement Plan. (Incorporated by
reference to Exhibit 10.17 to Registrant's Form 10-K for the year
ended October 31, 1993).
*10.15 The M. W. Kellogg Company Retirement Plan, as amended and
restated effective January 1, 1989.
10.16 Long Term Performance Plan for Selected Employees of The M. W.
Kellogg Company. (Incorporated by reference to Exhibit 10(r) to
Registrant's Form 10-K for the year ended October 31, 1991).
10.17 Annual Incentive Plan for Selected Employees of The M. W. Kellogg
Company. (Incorporated by reference to Exhibit 10(s) to
Registrant's Form 10-K for the year ended October 31, 1991).
10.18 Dresser Industries, Inc. 1992 Stock Compensation Plan.
(Incorporated by reference to Exhibit A to Registrant's Proxy
Statement dated February 7, 1992, filed pursuant to Regulation 14A,
File No. 1-4003).
10.19 Amendments No.1 and 2 to Dresser Industries, Inc. 1992 Stock
Compensation Plan. (Incorporated by reference to Exhibit A to
Registrant's Proxy Statement dated February 6, 1995, filed pursuant
to Regulation 14A, File No. 1-4003).
- ----------------
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
------- -----------
10.20 Dresser-Rand Company Pension Plan. (Incorporated by reference to
Exhibit 10(y) to Registrant's Form 10-K for the year ended October
31, 1992).
10.21 Dresser Industries, Inc. Deferred Savings Plan. (Incorporated by
reference to Exhibit 10(z) to Registrant's Form 10-K for the year
ended October 31, 1992).
10.22 The M. W. Kellogg Company Executive Benefits Program.
(Incorporated by reference to Exhibit 10.26 to Registrant's Form
10-K for the year ended October 31, 1994).
10.23 The 1995 Executive Incentive Compensation Plan. (Incorporated by
reference to Exhibit B to Registrant's Proxy Statement dated
February 6, 1995, filed pursuant to Regulation 14A, File No. 1-
4003).
*10.24 Dresser Industries, Inc. Retirement Savings Plan - A, as adopted
effective June 1, 1995.
*21 Subsidiaries of Registrant at October 31, 1995.
*23 Consent of Price Waterhouse LLP.
*24 Powers of Attorney.
*27 Financial Data Schedule.
- ----------------
* Filed Herewith
<PAGE>
Exhibit 3.2
BY-LAWS As amended 1/10/96
OF
DRESSER INDUSTRIES, INC.
ARTICLE I
SECTION 1. PRINCIPAL OFFICE IN DELAWARE.
The principal office shall be in the City of Wilmington, County of New
Castle, and the name of the resident agent in charge thereof is the Corporation
Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
SECTION 2. OTHER OFFICES.
The Company may also have offices at such other places, either within or
without the State of Delaware, as the Board of Directors may from time to time
appoint or as the business of the Company may require.
ARTICLE II
SECTION 1. ANNUAL MEETING OF SHAREHOLDERS.
The Annual Meeting of Shareholders of the Company shall be held at the
principal office of the Company, Dallas, Texas, or at such other place within or
without the State of Texas at such time and on such date in the months of March,
April or May of each year as the Directors may determine. In the absence of a
determination by the Directors, the Annual Meeting of Shareholders shall be held
at the principal office of the Company, Dallas, Texas at 10:00 a.m. on the third
Thursday in March of each year, if not a legal holiday or, if a legal holiday,
then on the next succeeding business day. The Directors shall be elected at the
Annual Meeting and such other business transacted as may properly be brought
before the meeting.
SECTION 2. SPECIAL MEETINGS OF SHAREHOLDERS.
Special meetings of the shareholders for any purpose or purposes may be
called at any time by the Chairman of the Board, the Vice Chairman or the
President or a majority of the Board of Directors, and each such special meeting
unless another place is designated by a resolution of the Board of Directors,
shall be held at the office of the Company in Dallas, Texas. At any time, upon
written request of any person entitled to call a special
1
<PAGE>
meeting, it shall be the duty of the Secretary to call such special meeting of
the shareholders to be held at such time as the Secretary may fix. The call of
said special meeting shall state the time and place of said meeting if said
meeting is to be held at some place other than the office of the Company, and
the purpose or purposes of the proposed meeting.
SECTION 3. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written or printed notice of the time, place and purpose or purposes of the
Annual Meetings and of each special meeting of the shareholders shall be given
by or at the direction of the person authorized to call the meeting to each
shareholder of record entitled to vote at the meeting, at his last known address
as the same appears upon the books of the Company, not more than sixty (60) days
prior to the date of the meeting. It shall also be the duty of the Secretary to
provide for any further or additional notice that may be required by law. When
a meeting is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned meeting
other than by announcement at the meeting at which such adjournment is taken.
SECTION 4. QUORUM.
At any meeting of the shareholders, the presence in person or by proxy
of the holders of a majority of the outstanding shares entitled to vote at
such meeting shall constitute a quorum for all purposes, unless otherwise
provided by these By-Laws, the Certificate of Incorporation or by law. The
shareholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to
leave less than a quorum. If a meeting cannot be organized because a quorum
has not attended, those present may, except as otherwise provided by law,
adjourn the meeting to such time and place, without further notice, as they
may determine, but in the case of any meeting called for the election of
Directors, those who attend the second of such adjourned meetings, although
less than a quorum as fixed in this section of the By-Laws or in the
Certificate of Incorporation, shall nevertheless constitute a quorum for the
purpose of electing Directors.
SECTION 5. ORGANIZATION.
Meetings of the shareholders shall be called to order by the Chairman of
the Board or in his absence by the Vice Chairman or in the absence of both by
the President of the Company. Such person shall act as Chairman of the meeting
or, in the absence of the Chairman of the Board, the Vice Chairman and the
President or with the consent of each of them if present in person, the meeting
may elect any shareholder present or the duly authorized proxy of any
shareholder to act as Chairman of the meeting.
The Secretary of the Company or, in his absence, any Assistant Secretary in
attendance, shall act as Secretary of all meetings of shareholders, but if
neither the Secretary nor any
2
<PAGE>
Assistant Secretary be present thereat the presiding officer may appoint any
person to act as Secretary of the meeting and to keep the record of the
proceedings.
SECTION 6. INSPECTORS OF ELECTION.
Three Inspectors of Election may be appointed by the Board of Directors
before or at each meeting of the shareholders of the Company at which an
election of Directors shall take place. If no such appointment shall have been
made, or if the Inspectors appointed by the Board of Directors shall refuse to
act or fail to attend, then the appointment shall be made by the presiding
officer at the meeting. The Inspectors shall receive and take in charge all
proxies and ballots, and shall decide all questions concerning the
qualification of voters, the validity of proxies, the acceptance and rejection
of votes, and shall count the votes cast and shall make a report of the results
thereof to the meeting and make such reports to the presiding officer with
respect to the foregoing as he may request.
SECTION 7. ORDER OF BUSINESS.
The order of business at all meetings of shareholders, unless otherwise
determined by a vote of the holders of a majority of the shares entitled to vote
at said meeting present in person or represented by proxy, shall be determined
by the presiding officer.
SECTION 8. VOTING.
Except as otherwise provided in the Certificate of Incorporation, every
shareholder of record shall have the right at every shareholders' meeting to one
(1) vote for every share standing in his name on the books of the Company.
Every shareholder may vote either in person or by proxy. Every proxy shall be
executed in writing by the shareholder or by his duly authorized
attorney-in-fact and filed with the Secretary of the Company. The proxy, unless
coupled with an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the revocation of
the proxy shall not be effective until written notice thereof has been given to
the Secretary of the Company. No unrevoked proxy may be voted on after three
(3) years from the date of its execution unless the proxy provides for a longer
period. A proxy shall not be revoked by the death or incapacity of the maker
unless before the vote is counted or the authority is exercised, written notice
of such death or incapacity is given to the Secretary of the Company. A
shareholder shall not sell his vote or execute a proxy to any person for any sum
of money or anything of value.
The stock transfer books of the Company shall be the evidence of the
ownership of the shares of stock for the purpose of voting. All elections shall
be held and all questions shall be decided by a plurality vote, except as
otherwise required by these By-Laws, the Certificate of Incorporation or by law.
3
<PAGE>
SECTION 9. VOTING LISTS.
The agent having charge of the transfer books for the shares of this
Company shall make, at least ten (10) days before each election of Directors, a
complete list of the shareholders entitled to vote at said election, arranged in
alphabetical order, with the address of, and the number of shares held by each,
which list shall be open at the place where said election is to be held for ten
(10) days and shall be subject to inspection by any shareholder of the Company
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the Meeting. The original share ledger or
transfer book or duplicates thereof shall be the only evidence as to who are
shareholders entitled to examine such list or share ledger or transfer book or
to vote in person or by proxy at any meeting of the shareholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE.
The business and affairs of the Company shall be managed by or under the
direction of a Board of Directors, twelve (12) [effective 1/21/94 "fourteen
(14)" and effective 3/17/94 "thirteen (13)"] in number, which number may be
altered from time to time by amendment of these By-Laws, but the said number
shall never be less than three (3). Said Directors need not be shareholders.
SECTION 2. ELECTION OF DIRECTORS.
The Directors shall be elected by the shareholders at the annual meeting
of said shareholders and shall hold their offices until their successors are
elected and qualified in their stead. Vacancies in the Board of Directors, from
any cause whatsoever, including any increase in the number of Directors, shall
be filled by a majority of the remaining members of the Board, though less than
a quorum, and each person so elected shall be a Director until his successor is
elected by the shareholders, who may make such selection at the next annual
meeting of the shareholders or at any special meeting called for that purpose
and held prior thereto. All elections of Directors shall be by ballot.
SECTION 3. PLACE OF MEETINGS.
The meetings of the Board of Directors shall be at such place, within or
without the State of Delaware, as the majority of the Directors may from time to
time appoint or as may be designated in the notice calling the meeting.
4
<PAGE>
SECTION 4. ORGANIZATION MEETING OF THE BOARD.
After each annual election of Directors, the newly elected Directors shall
meet for the purpose of organization, the election and appointment of officers,
and the transaction of such other business at such time and place as shall be
fixed by the written consent of a majority of the Directors or as shall be
specified in the notice given hereinafter provided for special
meetings of the Board of Directors.
SECTION 5. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such times and
places as the Board of Directors shall from time to time designate, and the
Board in fixing the time and place of such meetings may provide that no notice
thereof shall be necessary.
SECTION 6. SPECIAL MEETINGS.
Special meetings of the Board of Directors shall be held whenever called by
the Chairman of the Board or the Vice Chairman or the President or by a majority
of the Directors or a majority of the Executive Committee for the time being in
office. Special meetings of the Board of Directors shall be held at such times
and places as shall be set forth in the call of the meeting.
SECTION 7. NOTICE OF DIRECTORS' MEETINGS.
The Secretary of the Company shall give notice to each Director of each
regular or special meeting by mailing the same at least two (2) days before the
meeting to his last known address, or by telegraphing or telephoning the same
not less than one (1) day before the meeting, which notice shall state the time
and place and general purpose or purposes of the meeting. No notice of any
meeting shall be necessary if every Director shall be either present or shall
have consented thereto by letter, cablegram, radiogram or telegram.
If at any meeting there is less than a quorum, a majority of those present
at such meeting may adjourn the same.
When a meeting is adjourned, it shall not be necessary to give any notice
of the adjourned meeting or of the business to be transacted at an adjourned
meeting other than by an announcement at the meeting at which such adjournment
is taken.
SECTION 8. QUORUM.
One-Third (1/3) of the Directors in office shall constitute a quorum for
the transaction of business, and the acts of a majority of the Directors present
at a meeting at which a quorum is present shall be the acts of the Board of
Directors.
5
<PAGE>
SECTION 9. ORDER OF BUSINESS.
The order of business at all meetings of the Board of Directors, unless
otherwise determined by the affirmative vote of a majority of the members
present at any meeting, shall be determined by the presiding officer.
SECTION 10. COMPENSATION OF THE DIRECTORS.
The Directors may receive a stated compensation for their services as
Directors, and by resolution of the Board a fixed fee and the expenses incident
to attendance at each meeting of the Board or any Committee thereof may be
determined. Nothing herein contained shall be construed to preclude any
Director from serving the Company in any other capacity as an officer, agent or
otherwise and receiving compensation therefor.
SECTION 11. ACTION WITHOUT A MEETING.
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any Committee thereof may be taken without a meeting,
if prior to such action a written consent thereto is signed by all members of
the Board or of such Committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or Committee.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. NUMBER.
The Company may have an Executive Committee appointed by the Board of
Directors which shall consist of at least three (3) members and shall be made up
of members of the Board of Directors. The Board of Directors may designate one
of the members thereof as Chairman of the Executive Committee.
SECTION 2. VACANCIES.
Vacancies occurring in the Executive Committee for any cause may be filled
at any meeting of the Board of Directors.
SECTION 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD.
All actions by the Executive Committee shall be reported to the Board at
its meeting next succeeding such action and shall be subject to revision or
alteration by the Board; provided, however, that rights of third parties shall
not be affected by any revision or alteration.
6
<PAGE>
SECTION 4. PROCEDURE.
The Executive Committee shall fix its own rules of procedure and shall meet
where and as provided by such rules or by resolution of the Board. The presence
of a majority shall be necessary to constitute a quorum for the transaction of
business and in every case an affirmative vote by a majority of all of the
members of the Committee present shall be necessary.
SECTION 5. POWERS.
During the intervals between the meetings of the Board of Directors, the
Executive Committee shall possess and may exercise the power and authority to
declare dividends and all other powers of the Board in the management and
direction of the business and the conduct of the affairs of the Company in such
manner as the Executive Committee shall deem for the best interests of the
Company in all cases where specific direction shall not have been given by the
Board, and shall have power to authorize the seal of the Company to be affixed
to all instruments and documents which may require it.
ARTICLE V
OTHER COMMITTEES
From time to time the Board of Directors may appoint any other committee or
committees for any lawful purposes whatsoever, which shall have such powers as
shall be specified in the resolution of appointment.
ARTICLE VI
OFFICERS
SECTION 1. EXECUTIVE AND OTHER OFFICERS.
The officers of the Company shall include a Chairman of the Board, a
President, a Treasurer and a Secretary, all of whom shall be elected by the
Board of Directors. The Board may also elect a Vice Chairman. Other than the
Chairman of the Board, the Vice Chairman and the President, it shall not be
necessary for officers of the Company to be Directors. The Board of Directors
shall have authority from time to time to elect or appoint one or more Vice
Presidents, any one or more of whom may be designated Executive Vice Presidents
or Senior Vice Presidents, a General Counsel, one or more Assistant Secretaries
and one or more Assistant Treasurers. Any person may fill one or more offices,
except the offices of President and Secretary. The Board of Directors may
appoint such other agents of the Company as it may deem necessary for the
transaction of the business of the Company and prescribe their several duties,
or may by resolution authorize the Chairman of the Board or the President or
7
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any Vice President to appoint agents of the Company and to prescribe the
duties of agents so appointed by them. All agents appointed pursuant to such
authorization may be removed by any of the persons so designated. All
officers and agents elected or appointed by the Board of Directors shall be
subject to removal by the Board at any time, with or without cause. The
Board of Directors shall fix the compensation to be paid to the officers and
agents of the Company elected or appointed by the Board and take from them
such bonds with security for the discharge of their duties and
responsibilities as the Directors may see fit. All vacancies among the
officers from any cause whatsoever shall be filled by the Board of Directors.
SECTION 2. ELECTION OF OFFICERS.
A Chairman of the Board of Directors, a President, a Secretary and a
Treasurer shall be elected by the Directors of the Company at their first
meeting after the annual meeting of the Shareholders.
SECTION 3. THE CHAIRMAN OF THE BOARD.
The Chairman of the Board shall be the Chief Executive Officer of the
Company. He shall preside at all meetings of the shareholders and of the Board
of Directors. He shall also preside at all meetings of the Executive Committee
if the position of Chairman of the Committee shall be vacant or at any such
meetings from which the Chairman of the Executive Committee is absent. Subject
to the direction of the Board of Directors and the Executive Committee, the
Chairman of the Board shall have general charge of the business and affairs of
the Company. He shall also do and perform such other duties as from time to
time may be assigned to him by the Board of Directors or by the Executive
Committee.
SECTION 4. THE VICE CHAIRMAN OF THE BOARD.
The Vice Chairman of the Board, if there be one, shall preside at meetings
of shareholders and of the Board of Directors from which the Chairman of the
Board is absent. He shall also do and perform such other duties as from time to
time may be assigned to him by the Board of Directors, by the Executive
Committee or by the Chairman of the Board.
SECTION 5. THE PRESIDENT.
The President shall preside at all meetings of the Board of Directors
and of the shareholders if the offices of Chairman of the Board and Vice
Chairman shall be vacant or at any such meetings from which the Chairman of
the Board and the Vice Chairman are absent. Subject to the direction of the
Board of Directors, the Executive Committee and the Chairman of the Board, he
shall have general charge of those operations of the Company as assigned by
the Chairman of the Board. He shall also do and perform such other duties as
from time to time may be assigned to him by the Board of Directors, the
Executive Committee or the Chairman of the Board.
8
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SECTION 6. VICE PRESIDENT.
The Vice President or Vice Presidents, in the event there is more than one,
shall do and perform such duties as from time to time may be assigned to him or
them by the Board of Directors, the Executive Committee, the Chairman of the
Board or the Vice Chairman or the President.
SECTION 7. SECRETARY.
The Secretary shall keep minutes of all proceedings of the Board and of the
Executive Committee and the minutes of all meetings of shareholders in books
provided for that purpose. He shall attend to the giving and serving of all
notices for the Company; he shall have charge of such books and papers as the
Board may direct; he shall have custody of the seal of the Company and shall
affix the same to any instrument or document which requires the seal of the
Company, and he shall in general perform all duties incident to the office of
Secretary, subject to the control of the Board. He shall also perform such
other duties as may be assigned to him by the Board.
SECTION 8. TREASURER.
Subject to the direction of the Vice President - Finance, the Treasurer
shall have custody and control of all of the funds and securities of the
Company, shall be responsible for all moneys and other property of the Company
in his custody and shall perform all duties incident to the office of Treasurer.
He shall do and perform such other duties as may from time to time be assigned
to him by the Vice President - Finance. If required by the Board, he shall give
a bond for the faithful discharge of his duties in such sum as the Board may
require.
SECTION 9. GENERAL COUNSEL.
The General Counsel shall do and perform such duties as from time to time
may be assigned to him by the Board of Directors, the Executive Committee, the
Chairman of the Board, the Vice Chairman or the President.
ARTICLE VII
CAPITAL STOCK
SECTION 1. SHARE CERTIFICATES.
Every holder of stock of this Company shall be entitled to have a
certificate signed by or in the name of the Company by the Chairman or Vice
Chairman of the Board of Directors or the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company and sealed with the corporate seal, which seal may
9
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be facsimile engraved or printed, certifying the number of shares owned by
such holder in the Company. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Company with the same effect
as if he or she were such officer, transfer agent, or registrar at the date
of issue.
The certificates of stock of the Company shall be in such form as shall be
approved by the Board. Such certificates shall be successive in number and the
names and addresses of all persons owning shares of capital stock of the Company
with the number of shares owned by each and the date or dates of issue of the
shares of stock held by each, shall be entered on the books kept for that
purpose by the proper agents of the Company.
The Company shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it has actual or other
notice thereof.
SECTION 2. OLD CERTIFICATES TO BE CANCELLED.
Except in case of lost, stolen or destroyed certificates, and in that case
only after conforming to the requirements hereinafter provided, no new
certificates shall be issued until the former certificate for the shares
represented thereby shall have been surrendered and cancelled.
Any person claiming a certificate of stock to be lost, stolen or destroyed
shall make an affidavit of that fact and shall furnish to the Company and/or its
Transfer Agent or Agents, Registrar or Registrars, a Bond of Indemnity with one
(1) or more sureties in an amount satisfactory to the Board of Directors. The
affidavit and Bond of Indemnity shall be in such form and said Bond shall have
such surety or sureties as the Board of Directors may require; provided,
however, that the Board of Directors may authorize officers of the Company to
approve the form of the affidavit and Bond of Indemnity and the sufficiency of
the surety or sureties thereon. Upon the furnishing and approval of said
affidavit and Bond of Indemnity, a new certificate may be issued of the same
tenor and for the same number of shares as the one alleged to be lost, stolen or
destroyed. In the event such lost, stolen or destroyed certificate shall
represent five (5) or less shares of the Common Stock of the Company, the Board
of Directors may, in its discretion, accept a personal indemnity bond in a form
satisfactory to the Board of Directors, in lieu of the Bond of Indemnity
hereinabove referred to. If required by the Board, a final order or decree of a
court of competent jurisdiction of the right of any such person to receive a new
certificate shall be procured.
10
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SECTION 3. TRANSFER OF SHARES OF STOCK.
Shares of stock shall be transferred only on the books of the Company by
the holder thereof or by his attorney thereunto duly authorized upon the
surrender and cancellation of certificates for a like number of shares, subject,
however, to all payments due or to become due thereon.
SECTION 4. REGULATIONS.
The Board of Directors may make such regulations as it may deem expedient
concerning the issue, transfer and registration of stock.
SECTION 5. TRANSFER AGENT AND REGISTRAR.
The Board of Directors may appoint a Transfer Agent or Transfer Agents to
make, and a Registrar or Registrars to record transfers of shares.
SECTION 6. FIXING CLOSING DATES.
The Board of Directors may fix in advance a date not exceeding sixty
(60) days preceding the date of any meeting of shareholders, or the date
fixed for the payment of any dividend or distribution, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares will be made or go into effect, as a record date for the determination
of the shareholders entitled to notice of, and to vote at, any such meeting,
or any adjournment thereof, or entitled to receive payment of any such
dividend or distribution, or to receive any such allotment of rights, or to
exercise the rights in respect to any such change, conversion, or exchange of
shares, or in connection with the obtaining of the count of the shareholders
for any purpose. In such case, only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to notice of,
and to vote at, such meeting, or any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to
exercise such rights or give such consents, as the case may be,
notwithstanding any transfer of any shares on the books of the Company after
any record date fixed, as aforesaid. The Board of Directors may close the
books of the Company against transfer of shares during the whole or any part
of such period, and, in such case, written or printed notice thereof shall be
mailed at least ten (10) days before the closing thereof to each shareholder
of record at the address appearing on the records of the Company or supplied
by him to the Company for the purpose of notice. While the stock transfer
books of the Company are closed, no transfer of shares shall be made thereon.
In the event that the Board of Directors shall not in advance of a meeting
of shareholders have closed the transfer books, or have fixed a record date
for the determination of the shareholders entitled to notice of or to vote at
any meeting of the shareholders, no shares of stock, which have been
transferred on the books of the Company within twenty (20) days next
preceding such meeting, shall be entitled to notice or shall be voted at any
such meeting.
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ARTICLE VIII
BOARD TO DECLARE DIVIDENDS
Subject to the provisions of the Certificate of Incorporation and of the
laws of the State of Delaware, the Board of Directors, in its discretion, from
time to time may declare stock dividends and cash dividends out of any fund
legally available therefor as shall appear advisable to the Directors. Such
dividends shall be paid at such time after the declaration as the Directors may
fix.
ARTICLE IX
EXECUTION AND SIGNING OF DOCUMENTS
Except as otherwise provided by the Board of Directors, deeds, contracts,
leases, agreements and other documents shall be signed by the Chairman of the
Board, or the Vice Chairman, or the President, or any Vice President and, when a
seal is required, sealed with the Company's seal and attested by the Secretary,
or any Assistant Secretary, or the Treasurer, or any Assistant Treasurer.
Except as otherwise provided by the Board of Directors, promissory notes,
debentures and bonds shall be signed by the Chairman of the Board, or the Vice
Chairman, or the President, or any Vice President, together with the Treasurer,
or any Assistant Treasurer, or Secretary, or any Assistant Secretary. Checks on
the Company's bank accounts may be signed by such officer or officers or other
agents as the Board of Directors may from time to time authorize or designate,
or the Board of Directors may by resolution authorize officers of the Company to
designate the agents who may sign checks on the Company's bank accounts. In any
case where the signatures of two officers are required on any document or other
instrument executed on behalf of the Company, such signatures must be those of
two different persons.
ARTICLE X
MISCELLANEOUS
SECTION 1. SEAL.
The corporate seal of this Company shall be circular in form and shall bear
the name of the corporation and the words "Corporate Seal, Delaware".
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SECTION 2. INSPECTION OF BOOKS.
The Board of Directors shall determine from time to time whether the
accounts and books of the Company, or any of them shall be open to the
inspection of shareholders, and if permitted, when and under what conditions and
regulations the accounts and books of the Company or any of them shall be open
to the inspection of shareholders, and the shareholders' rights in this respect
shall be restricted and limited accordingly.
SECTION 3. NOTICES.
Whenever the provisions of the law, the Certificate of Incorporation or
these By-Laws require notice to be given to any Director, officer or
shareholder, such provision shall not be construed as requiring personal notice,
and such notice may be given in writing by depositing the same in a post office
or letter box in a post-paid, sealed wrapper addressed to such Director, officer
or shareholder at his or her address as the same appears in the books of the
Company, and the time when the same shall be mailed shall be deemed to be the
time of the giving of such notice.
A waiver of any notice in writing signed by a shareholder, Director or
officer, whether before or after the time stated in said waiver, shall be deemed
equivalent to such notice.
ARTICLE XI
AMENDMENT
The Board of Directors is expressly authorized to make, alter or repeal
By-Laws of the corporation, provided, however, that alterations, amendments or
repeals of the By-Laws may be made by the holders of a majority of the shares
outstanding and entitled to vote at any meeting, if the notice of such meeting
contains a statement of the proposed alteration, amendment or repeal.
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Exhibit 10.5
AMENDMENT NO. 1
TO THE DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED RETIREMENT PLAN,
AS AMENDED AND RESTATED EFFECTIVE MAY 1, 1994
The Dresser Industries, Inc. Consolidated Salaried Retirement Plan, (May 1,
1994 restatement), is amended, effective as of May 31, 1995, by adding the
following new paragraph to the end of the Preamble:
This Plan is frozen effective as of May 31, 1995. The Accrued
Benefit of any Participant is limited to the Accrued Benefit earned as
of May 31, 1995. Without limiting the generality of the preceding two
sentences, this means, among other things, that increases in
remuneration after May 31, 1995 will not be recognized in computing
benefits under the Plan, and that Credited Service will not be earned
for any peroids of employment after May 31, 1995. In addition, no one
may become a Participant after May 31, 1995. This paragraph freezing
the Plan supersedes and overrides any and all Plan provisions to the
contrary.
<PAGE>
AMENDMENT NO. 2
TO THE DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED RETIREMENT PLAN,
AS AMENDED AND RESTATED EFFECTIVE MAY 1, 1994
The Dresser Industries, Inc. Consolidated Salaried Retirement Plan, as amended
and restated effective May 1, 1994, is further amended, effective May 31, 1995,
by adding the following to the end of Section 4.04:
Effective on May 31, 1995, benefit accruals under the Plan ceased.
Notwithstanding this general cessation of benefit accruals, a Participant who
was Totally Disabled as of May 31, 1995, and, as of such date, was accruing a
benefit under the Plan in accordance with this Section 4.04, shall continue to
accrue benefits hereunder until the earlier of: (i) the date benefit accruals
ordinarily would have ceased under the provisions of Section 4.04, or (ii)
December 31, 1996.
As of any date occurring after May 31, 1995, the Accrued Benefit of a
Totally Disabled Participant shall be equal to the sum of:
(a) the Participant's Accrued Benefit as of May 31, 1995; and
(b) an amount determined under the following formula:
{ (PB-AB) / PCS } x VCS
where:
PB equals the calculation (as if made on May 31, 1995) of the Participant's
Accrued Benefit, projected to Age 65;
AB equals the calculation (as if made on May 31, 1995) of the Participant's
Accrued Benefit through May 31, 1995 only (i.e., not projected to Age 65);
PCS equals the calculation (as if made on May 31, 1995) of the
Participant's projected Credited Service between May 31, 1995 and
Age 65; and
VCS equals the calculation of the Participant's Credited Service between
May 31, 1995 and the earlier of (i) the date determination under this
formula is being made or (ii) December 31, 1996.
<PAGE>
Exhibit 10.7
ERISA EXCESS BENEFIT PLAN
FOR DRESSER INDUSTRIES, INC.
Dresser Industries, Inc. hereby amends by restatement the ERISA Excess
Benefit Plan for Dresser Industries, Inc., effective June 1, 1995, upon the
following terms and conditions:
ARTICLE I
DEFINITIONS
SECTION 1.1. ACT. The Employee Retirement Income Security Act of 1974, as
amended.
SECTION 1.2. BOARD. The Board of Directors of Dresser Industries, Inc.
SECTION 1.3. CODE. The Internal Revenue Code of 1986, as Amended.
SECTION 1.4. COMMITTEE. The Employee Benefits Committee of Dresser
Industries, Inc.
SECTION 1.5. COMPANY. Dresser Industries, Inc. and any subsidiary which
adopts the Plan.
SECTION 1.6. DB PLANS. The Pension Plan defined in Section
1.9 and the Related Plans defined in Section 1.11.
SECTION 1.7. DC PLAN. The Dresser Industries, Inc. Retirement Savings
Plan-A, or the Dresser Industries, Inc. Retirement Savings Plan-B.
SECTION 1.8. EMPLOYEE. An employee of the Company, who is not represented
by a union and who is a participant in the Pension Plan, a Related Plan, or the
DC Plan. This term shall include any individual who has terminated employment
with the Company but has not yet received his entire vested benefits under the
Pension Plan, a Related Plan, or the DC Plan.
SECTION 1.9. PENSION PLAN. The Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as frozen May 31, 1995.
SECTION 1.10. PLAN. The "ERISA Excess Benefit Plan for Dresser
Industries, Inc.", as set forth herein.
SECTION 1.11. RELATED PLAN. Any defined benefit pension plan for nonunion
salaried employees other than the Pension Plan, maintained by the Company.
ARTICLE II
PURPOSE OF PLAN
SECTION 2.1. PURPOSE. This Plan is designed to pay retirement benefits
out of the general assets of the Company, under circumstances in which such
benefits cannot be paid from the Pension Plan, a Related Plan, or the DC Plan,
because of the
<PAGE>
application of code section 415. The Plan is an unfunded excess benefit plan
as defined in sections 3(36) and 4(b)(5) of the Act.
ARTICLE III
ELIGIBILITY
SECTION 3.1. ELIGIBILITY. Any Employee is eligible to participate in the
Plan if his benefit under the Pension Plan or a Related Plan is limited by a
provision under such plan, which implements the requirements of section 415 of
the Code. In addition, an Employee shall participate if allocations to his
Account in the DC Plan are limited by section 415 of the Code.
Furthermore, any person who has been employed by a company in which Dresser
Industries, Inc. has an ownership interest and who during such period, has
remained a participant in the Pension Plan, and the surviving spouse of such a
participant, shall be eligible to receive benefits under this Plan, if and to
the extent that benefits cannot be provided fully by the Pension Plan because of
provisions thereof implementing Code section 415.
Notwithstanding any other provision of this Plan, no employee of the M.W.
Kellogg Company, or any surviving spouse of such an employee, shall be eligible
to receive benefits under this Plan.
ARTICLE IV
BENEFITS
SECTION 4.1. AMOUNT OF BENEFITS RELATED TO DB PLANS. The amount of the
benefit payable under this Plan related to the DB Plans shall be the excess (if
any) of the benefit payable under the benefit formula of the Pension Plan (or
Related Plan, if applicable) without taking into account the provisions dealing
with limits imposed by Code section 415, over the benefit payable after taking
into account such provisions limiting benefits.
SECTION 4.2. FORM OF BENEFITS RELATED TO DB PLANS.
(a) Regarding Employees who die while employed, the form of benefit shall
be the Spouse's Death Benefit as provided in the Pension Plan or the comparable
benefit, if any, provided in a Related Plan (whichever is applicable). If a
Related Plan is applicable and there is no comparable benefit under the Related
Plan, no benefit will be payable under this Plan.
(b) For Employees who retire when eligible for benefits hereunder, the
form of benefit shall be the Standard Benefit Form as provided in Section 5.01
of the Pension Plan or the comparable benefit provided in a Related Plan
(whichever is applicable). Provided, however, an Employee may request payment in
a form of benefit provided in the Pension Plan or a comparable option in a
Related Plan that is other than the form in which he will receive
<PAGE>
benefits under the Pension Plan or a Related Plan. In the case of a request
by an Employee who is an elected officer of the Company, it shall be in the
sole discretion of the Executive Compensation Committee of the Board of
Dresser Industries, Inc. to grant or deny such request. In the case of a
request by all other Employees, the Committee shall in its sole discretion
grant or deny such request. All forms of benefit shall be calculated using
the same factors as those used in determining such form of benefit under the
Pension Plan or comparable benefit provided under a Related Plan.
SECTION 4.3. AMOUNT OF BENEFIT RELATED TO THE DC PLAN. The Company shall
establish a bookkeeping account for each Employee, that is tied to the
respective Employee's subaccounts under Section 4.1 of the DC Plan. The Company
shall allocate amounts to the respective bookkeeping accounts of employees, that
cannot be allocated to their Accounts under the DC Plan, because of the limits
imposed by Code section 401(a)(17) The Company further shall subdivide the
Employee accounts under the Plan into subaccounts that are tied to respective
Employees' Matching Contributions, Basic Contributions, Pension Equalizer
Contributions, and Medisave Contributions under the DC Plan. The Company
further shall accrue the same rate of investment return to these subaccounts as
earned on the respective subaccounts in the DC Plan during the relevant period.
Notional earnings shall be credited under this Plan at the same time as actual
earnings are credited under the DC Plan.
SECTION 4.4. FORM OF BENEFIT RELATED TO THE DC PLAN. Benefits under
this Plan that are tied to the DC Plan shall be payable in a lump sum to the
Employee, or to the Employee's DC Plan Beneficiary in the event of the
Employee's death. Provided, however, an Employee may request payment in a
form of benefit provided in the DC Plan that is other than the form in which
he will receive benefits under the DC Plan. In the case of a request by an
Employee who is an elected officer of the Company, it shall be in the sole
discretion of the Executive Compensation Committee of the Board of Dresser
Industries, Inc. to grant or deny such request. In the case of a request by
all other Employees, the committee shall in its sole discretion grant or deny
such request. All forms of benefit shall be calculated using the same
factors as those used in determining such form of benefit under the Pension
Plan or comparable benefit provided under a Related Plan.
SECTION 4.5. TIME OF BENEFIT PAYMENTS. Benefits due under this Plan shall
be paid at such time or times following the Employee's termination of employment
or death as the Committee in its discretion determines. However, benefits tied
to the Pension Plan or a Related Plan shall be paid no earlier than the earliest
<PAGE>
date Pension Plan or Related Plan benefits may be paid to the terminated
Employee, or, in the case of death, to the Employee's spouse, or, if none, to
the Employee's estate.
SECTION 4.6. BENEFITS UNFUNDED. Benefits payable under this Plan shall be
paid by the Company out of its general assets and shall not be funded in any
manner.
ARTICLE V
VESTING AND FORFEITURE
SECTION 5.1. VESTING. No person shall have or vest in any benefits under
this Plan prior to the time such person accrues 5 Years of Service, as used in
Section 4.05 of the Pension Plan. No person (nor the spouse of such person)
whose employment is terminated for cause as determined by the Committee, shall
vest in any benefits under this Plan, and shall be divested if previously
vested, even if such termination is deemed a retirement under provisions of the
Pension Plan, a Related Plan, or the DC Plan.
ARTICLE VI
ADMINISTRATION
SECTION 6.1. DUTIES OF COMMITTEE. This Plan shall be administered by the
Committee in accordance with its terms and purposes. The Committee shall
interpret the provisions of this Plan and determine the amount and manner of
payment of the benefits due to or on behalf of each Employee from this Plan and
shall cause them to be paid accordingly.
SECTION 6.2. FINALITY OF DECISIONS. The decisions made and the actions
taken by the Committee in the administration of this Plan shall be final and
conclusive on all persons, and the members of the Committee shall not be subject
to individual liability with respect to this Plan.
ARTICLE VII
CLAIMS AND APPEAL PROCEDURES
SECTION 7.1. PURPOSE. The purpose of the claims and appeal provisions set
forth in Section 7.1 through 7.10 is to secure the speedy, inexpensive
resolution of all disputes over Plan benefits and rights granted by the Plan.
These provisions shall be liberally construed so as to avoid litigation and its
attendant expenses.
<PAGE>
SECTION 7.2. CLAIMS PROCEDURE. Each person who claims entitlement to any
right or benefit under the Plan ("claimant") may submit a claim with respect to
that benefit or right under the procedure set forth in the Dresser Industries
Inc. Retirement Savings Plan-A or -B, of whichever he is a member.
SECTION 7.3. APPEAL PROCEDURE. When a claim has been or is deemed denied,
the claimant (hereinafter referred to as appellant) shall have the right within
60 days after receipt of written notice thereof or the date the claim is deemed
denied to file an appeal with the Committee and to go through the appeal
procedure herein set forth. All appeals shall be in writing, and shall set
forth the reasons why the appellant believes the decision denying his claim is
erroneous. The Committee shall render a decision on the appeal in writing not
later than 60 days after receipt of the written appeal.
The decision of the Committee shall be final and shall be binding upon the
appellant, his beneficiaries, heirs, and assigns and all other persons claiming
by, through or under him.
A failure to file a claim and an appeal in the manner and within the time
limits set forth herein shall be deemed a failure by the aggrieved party to
exhaust his administrative remedies and shall constitute a waiver of the rights
or benefits sought to be established under the Plan.
SECTION 7.4. EXHAUSTION OF ADMINISTRATIVE REMEDIES. No legal action to
recover Plan benefits or to enforce or to clarify rights under the Plan shall be
commenced under any provision of law, whether or not statutory, unless and until
the claimant first shall have exhausted the claims and appeal procedures
available to him hereunder in Section 7.1-7.3. A claimant must raise all issues
and present all theories relating to his claim to the committee at one time.
Otherwise, the claimant shall be deemed to have abandoned forever all issues and
theories not raised and presented to the Committee.
SECTION 7.5. LIMITATION ON ACTIONS. Any suit brought to contest a
decision of the Committee shall be filed in a court of competent jurisdiction
within 1 year from receipt of written notice of the Committee's final decision
or from the date the appeal is deemed denied, and any suit not filed within this
1-year limitation period shall be dismissed by the court. Service of legal
process shall be made upon the Plan by service upon the Committee.
SECTION 7.6. NO RIGHT TO JURY TRIAL; EVIDENCE. In any suit contesting a
decision of the Committee, all issues of fact shall be tried by the court and
not by a jury. No evidence may be introduced in court which was not previously
presented to the Committee and no evidence may be introduced to modify or
<PAGE>
contradict the terms of the Plan document.
SECTION 7.7. SCOPE OF REVIEW. The Committee shall have full discretionary
authority to interpret and apply the terms of this Plan document and other
relevant documents and relevant provisions of law, and deference shall be
afforded the Committee's decisions. This grant of authority shall be broadly
construed and shall include the authority to find facts, to reach conclusions of
law, to interpret and apply ambiguous terms, and to supply missing terms
reasonably necessary to resolution of claims and appeals. No finding of fact by
the Committee shall be set aside by a court unless the party contesting the
finding shall prove by clear and convincing evidence that the finding is
arbitrary and capricious. No conclusion of law reached by the Committee shall
be reversed by a court unless the party contesting the conclusion shall
demonstrate that the Committee is guilty of manifest disregard of law.
SECTION 7.8. LIMITATION ON DAMAGES. In any suit over Plan benefits or
rights, recovery shall be limited to the amount of benefits found due, without
interest, or to specific enforcement of rights established under the Plan, and
shall not include any other damages whether denominated incidental, special,
consequential, collateral, compensatory, exemplary, punitive or whatever.
SECTION 7.9. PARTICIPANT PLAN DATA. The Committee may issue, or cause to
be issued, from time to time, statements to employees, participants, retirees or
beneficiaries indicating eligibility, service or other data regarding their Plan
benefits. If any such person wishes to challenge the accuracy of such data, the
person shall do so in the manner and within the time limits set forth above in
Sections 7.1-7.8.
SECTION 7.10. FINAL DETERMINATION OF RIGHTS AND BENEFITS. After
termination of the Plan, the Committee may direct a final determination of the
rights and benefits of some of all persons having an interest in the Plan. The
determination with respect to any person may be mailed to that person at his
last known address and that person may be given 90 days within which to
challenge the determination through the claims and appeal procedures set forth
in Sections 7.1-7.9. The mailing of a copy of a determination to a person at his
last known address shall be deemed constructive receipt by that person of a copy
of the determination. Any determination not challenged through the claims and
appeals procedures shall govern a person's rights under the Plan, and the rights
of any person claiming by, through or under him.
ARTICLE VIII
AMENDMENT AND DETERMINATION
<PAGE>
SECTION 8.1. AMENDMENT AND TERMINATION. While the Dresser Industries,
Inc. intends to maintain this Plan in conjunction with the Pension Plan, Related
Plans, and DC Plan for as long as necessary, Dresser Industries, Inc. reserves
the right to amend and/or terminate it (and all rights hereunder) at any time
for whatever reasons it may deem appropriate.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NO EMPLOYMENT RIGHTS. Nothing contained in this Plan shall
be construed as a contract of employment between the Company or any subsidiary
or related company and any Employee, or as a right of any Employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its employees with or without cause.
SECTION 9.2. ASSIGNMENT. The benefits payable under this Plan may not be
assigned or alienated.
SECTION 9.3. LAW APPLICABLE. This Plan shall be governed by the laws of
the State of Texas.
DRESSER INDUSTRIES, INC.
By: P. M. Bryant
-----------------------------------------------------
Title: Vice President-Human Resources
-----------------------------------------------------
<PAGE>
Exhibit 10.8
ERISA COMPENSATION LIMIT BENEFIT PLAN
FOR DRESSER INDUSTRIES, INC.
Dresser Industries, Inc. hereby amends by restatement the ERISA
Compensation Limit Benefit Plan for Dresser Industries, Inc., effective June
1, 1995, upon the following terms and conditions:
ARTICLE I
DEFINITIONS
The words and phrases defined hereinafter shall have the following meaning:
SECTION 1.1. ACT. The Employee Retirement Income Security Act of
1974, as amended.
SECTION 1.2. BOARD. The Board of Directors of Dresser Industries, Inc.
SECTION 1.3. CODE. The Internal Revenue Code of 1986, as Amended.
SECTION 1.4. COMMITTEE. The Employee Benefits Committee of Dresser
Industries, Inc.
SECTION 1.5. COMPANY. Dresser Industries, Inc. and any subsidiary which
adopts the Plan.
SECTION 1.6. DB PLANS. The Pension Plan defined in Section 1.9 and the
Related Plans defined in Section 1.11.
SECTION 1.7. DC PLAN. The Dresser Industries, Inc Retirement Savings
Plan-A.
SECTION 1.8. EMPLOYEE. A participant in the Pension Plan, a Related
Plan, or the DC Plan. This term shall include any individual who has
terminated employment with the Company, but has not yet received his entire
vested benefits under the Pension Plan, a Related Plan, or the DC Plan.
SECTION 1.9. PENSION PLAN. The Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as frozen May 31, 1995.
SECTION 1.10. PLAN. The "ERISA Compensation Limit Benefit Plan for
Dresser Industries, Inc.", as set forth herein,
SECTION 1.11. RELATED PLAN. Any defined benefit pension plan for
nonunion salaried employees other than the Pension Plan, maintained by the
Company.
ARTICLE II
PURPOSE OF PLAN
SECTION 2.1. PURPOSE. The purpose of this Plan is to pay retirement
benefits out of the general assets of the Company, under circumstances in
which such benefits cannot be paid from the Pension Plan, the Related Plans,
or the DC Plan, because of the
<PAGE>
application of Code section 401(a)(17). This Plan is an
unfunded plan described in sections 201(2), 301(a)(3), and 401(a)(1) of the Act.
ARTICLE III
ELIGIBILITY
SECTION 3.1. ELIGIBILITY. Any Employee is eligible to participate in the
Plan if his benefit under the Pension Plan or a Related Plan, or the DC Plan is
limited by a provision under such plan, which implements the requirements of
section 401(a)(17) of the Code.
Furthermore, any person who has been employed by a company in which Dresser
Industries, Inc. has an ownership interest and who, during such period, has
remained a participant in the Pension Plan, and the surviving spouse of such a
participant, shall be eligible to receive benefits under this Plan, if and to
the extent that benefits cannot be provided fully by the Pension Plan because of
provisions thereof implementing Code section 401(a)(17).
Notwithstanding any other provisions of this Plan, no employee of the M.W.
Kellogg Company, or any surviving spouse of such an employee, shall be eligible
to receive benefits under this Plan.
ARTICLE IV
BENEFITS
SECTION 4.1. AMOUNT OF BENEFITS RELATED TO DB PLANS. The amount of
the benefit payable under this Plan related to the DB Plans shall be the
excess (if any) of the benefit payable under the benefit formula of the
Pension Plan (or Related Plan, if applicable) without taking into account the
provisions dealing with limits imposed by Code sections 401(a)(17) and 415,
over the benefits payable under (1) the Pension Plan (or Related Plan) after
taking into account such limiting provisions, and (2) the ERISA Excess
Benefit Plan for Employees of Dresser Industries, Inc., as it relates to the
DB Plans.
SECTION 4.2. FORM OF BENEFITS RELATED TO DB PLANS.
(a) Regarding Employees who die while employed, the form of benefit
shall be the Spouse's Death Benefit as provided in the Pension Plan or the
comparable benefit, if any, provided in a Related Plan (whichever is
applicable). If a Related Plan applies and there is no comparable benefit
under the Related Plan, no benefit will be payable under this Plan. There
shall be no benefit payable under this Plan with regard to unmarried
Employees who die while employed.
(b) For Employees who terminate active employment before their death,
the form of benefit shall be the Standard Benefit
<PAGE>
Form as provided in Section 5.01 of the Pension Plan or the comparable
benefit provided in a Related Plan (whichever is applicable). Provided,
however, an Employee may request payment in a form of benefit provided in the
Pension Plan or a comparable option in a Related Plan that is other than the
form in which he will receive benefits under the Pension Plan or a Related
Plan. In the case of a request by an Employee who is an elected officer of
the Company, it shall be in the sole discretion of the Executive Compensation
Committee of the Board to grant or deny such request. In the case of a
request by all other Employees, the Committee shall, in its sole discretion,
grant or deny such request. All forms of benefit arising under the DB Plans
shall be calculated using the same factors as those used in determining such
form of benefit under the Pension Plan or comparable benefit provided under a
Related Plan, whichever is applicable.
SECTION 4.3. AMOUNT OF BENEFIT RELATED TO THE DC PLAN. The Company shall
establish a bookkeeping account for each Employee, that is tied to the
respective Employee's subaccounts under Section 4.1 of the DC Plan. The Company
shall allocate amounts to the respective bookkeeping accounts of Employees, that
cannot be allocated to their Accounts under the DC Plan, because of the limits
imposed by Code section 401(a)(17). The Company further shall subdivide the
Employee accounts under this Plan into subaccounts that are tied to respective
Employees' Matching Contributions, Basic Contributions, and Pension Equalizer
Contributions. Each Employee hypothetically may invest these subaccounts in an
election separate from his election under the DC Plan. The Company further
shall accrue the same rate of investment return to these subaccounts as earned
on the respective subaccounts in the DC Plan during the relevant period.
Notional earnings shall be credited under this Plan at the same time as actual
earnings are credited under the DC Plan.
SECTION 4.4. FORM OF BENEFIT RELATED TO THE DC PLAN. Benefits under
this Plan that are tied to the DC Plan shall be payable in a lump sum to the
Employee, or to the Employee's DC Plan Beneficiary in the event of the
Employee's death. Provided, however, an Employee may request payment in a
form of benefit provided in the DC Plan that is other than the form in which
he will receive benefits under the DC Plan. In the case of a request by an
Employee who is an elected officer of the Company, it shall be in the sole
discretion of the Executive Compensation Committee of the Board of the
Company to grant or deny such request. In the case of a request by all other
Employees, the Committee shall in its sole discretion grant or deny such
request. All forms of benefit shall be calculated using the same factors as
those used in determining such form of benefit under the Pension Plan or
comparable benefit provided under a Related Plan.
<PAGE>
SECTION 4.5. TIME OF BENEFIT PAYMENTS. Benefits due under this Plan
shall be paid at such time or times following the Employee's termination of
employment or death as the Committee in its discretion determines. However,
benefits tied to the Pension Plan or a Related Plan shall be paid no earlier
than the earliest date Pension Plan or Related Plan benefits may be paid to
the terminated Employee, or, in the case of death, to the Employee's spouse,
or, if none, to the Employee's estate.
SECTION 4.6. BENEFITS UNFUNDED. Benefits payable under this Plan
shall be paid by the Company out of its general assets and shall not be
funded in any manner.
ARTICLE V
VESTING AND FORFEITURE
SECTION 5.1. VESTING. No person shall have or vest in any benefits under
this Plan prior to the time such person accrues 5 Years of Service, as used in
Section 4.05 of the Pension Plan. No person (nor the spouse of such person)
whose employment is terminated for cause as determined by the Committee, shall
vest in any benefits under this Plan, and shall be divested if previously
vested, even if such termination is deemed a retirement under provisions of the
Pension Plan, a Related Plan, or the DC Plan.
ARTICLE VI
ADMINISTRATION
SECTION 6.1. DUTIES OF COMMITTEE. This Plan shall be administered by the
Committee in accordance with its terms and purposes. The Committee shall
interpret the provisions of this Plan and determine the amount and manner of
payment of the benefits due to or on behalf of each Employee from this Plan and
shall cause them to be paid accordingly.
SECTION 6.2. FINALITY OF DECISIONS. The decisions made and the actions
taken by the Committee in the administration of this Plan shall be final and
conclusive on all persons, and the members of the Committee shall not be subject
to individual liability with respect to this Plan.
ARTICLE VII
CLAIMS AND APPEAL PROCEDURES
SECTION 7.1. PURPOSE. The purpose of the claims and appeal provisions set
forth in Section 7.1 through 7.11 is to secure the speedy, inexpensive
resolution of all disputes over Plan benefits
<PAGE>
and rights granted by the Plan. These provisions shall be liberally construed
so as to avoid litigation and its attendant expenses.
SECTION 7.2. CLAIMS-PROCEDURE. Each person who claims entitlement to any
right or benefit under the Plan ("claimant") may submit a claim with respect to
that benefit or right under the procedure set forth in the Dresser Industries,
Inc. Retirement Savings Plan-A.
SECTION 7.3. APPEAL PROCEDURE. When a claim has been or is deemed denied,
the claimant (hereinafter referred to as appellant) shall have the right within
60 days after receipt of written notice thereof or the date the claim is deemed
denied to file an appeal with the Committee and to go through the appeal
procedure herein set forth. All appeals shall be in writing, and shall set
forth the reasons why the appellant believes the decision denying his claim is
erroneous. The Committee shall render a decision on the appeal in writing not
later than 60 days after receipt of the written appeal.
The decision of the Committee shall be final and shall be binding upon the
appellant, his beneficiaries, heirs, and assigns and all other persons claiming
by, through or under him.
A failure to file a claim and an appeal in the manner and within the time
limits set forth herein shall be deemed a failure by the aggrieved party to
exhaust his administrative remedies and shall constitute a waiver of the rights
or benefits sought to be established under the Plan.
SECTION 7.4. EXHAUSTION OF ADMINISTRATIVE REMEDIES. No legal action to
recover Plan benefits or to enforce or to clarify rights under the Plan shall be
commenced under section 502(a)(1)(B) of ERISA, or under any other provisions of
law, whether or not statutory, unless and until the claimant first shall have
exhausted the claims and appeal procedures available to him hereunder in Section
7.1-7.3. A claimant must raise all issues and present all theories relating to
his claim to the Committee at one time. Otherwise, the claimant shall be deemed
to have abandoned forever all issues and theories not raised and presented to
the Committee.
SECTION 7.5. LIMITATION ON ACTIONS. Any suit brought to contest a
decision of the Committee shall be filed in a court of competent jurisdiction
within 1 year from receipt of written notice of the Committee's final decision
or from the date the appeal is deemed denied, and any suit not filed within this
1-year limitation period shall be dismissed by the court. Service of legal
process shall be made upon the Plan by service upon the Committee.
SECTION 7.6. FEDERAL PREEMPTION. All state law causes of
<PAGE>
action that arise out of or relate to this Plan or to entitlement to rights
or benefits under the Plan shall be deemed to have been preempted by Section
514 of ERISA.
SECTION 7.7. NO RIGHT TO JURY TRIAL; EVIDENCE. In any suit contesting a
decision of the Committee, all issues of fact shall be tried by the court and
not by a jury. No evidence may be introduced in court which was not previously
presented to the Committee and no evidence may be introduced to modify or
contradict the terms of the Plan document.
SECTION 7.8. SCOPE OF REVIEW. The Committee shall have full discretionary
authority to interpret and apply the terms of this Plan document and other
relevant documents and relevant provisions of law, and deference shall be
afforded the Committee's decisions. This grant of authority shall be broadly
construed and shall include the authority to find facts, to reach conclusions of
law, to interpret and apply ambiguous terms, and to supply missing terms
reasonably necessary to resolution of claims and appeals. No finding of fact by
the Committee shall be set aside by a court unless the party contesting the
finding shall prove by clear and convincing evidence that the finding is
arbitrary and capricious. No conclusion of law reached by the Committee shall
be reversed by a court unless the party contesting the conclusion shall
demonstrate that the Committee is guilty of manifest disregard of law.
SECTION 7.9. LIMITATION ON DAMAGES. In any suit over Plan benefits or
rights, recovery shall be limited to the amount of benefits found due, without
interest, or to specific enforcement of rights established under the Plan, and
shall not include any other damages whether denominated incidental, special,
consequential, collateral, compensatory, exemplary, punitive or whatever.
SECTION 7.10. PARTICIPANT PLAN DATA. The Committee may issue, or cause to
be issued, from time to time statements to employees, participants, retirees or
beneficiaries indicating eligibility, service or other data regarding their Plan
benefits. If any such person wishes to challenge the accuracy of such data, the
person shall do so in the manner and within the time limits set forth above in
Sections 7.1-7.9.
SECTION 7.11. FINAL DETERMINATION OF RIGHTS AND BENEFITS. After
termination of the Plan, the Committee may direct a final determination of the
rights and benefits of some of all persons having an interest in the Plan. The
determination with respect to any person may be mailed to that person at his
last known address and that person may be given 90 days within which to
challenge the determination through the claims and appeal procedures set forth
<PAGE>
in Sections 7.1-7.9. The mailing of a copy of a determination to a person at his
last known address shall be deemed constructive receipt by that person of a copy
of the determination. Any determination not challenged through the claims and
appeals procedures shall govern a person's rights under the Plan, and the rights
of any person claiming by, through or under him.
ARTICLE VIII
AMENDMENT AND TERMINATION
SECTION 8.1. AMENDMENT AND TERMINATION. While Dresser
Industries, Inc. intends to maintain this Plan in conjunction with the Pension
Plan, Related Plans, and DC Plan for as long as necessary, Dresser Industries,
Inc. reserves the right to amend and/or terminate it (and all rights hereunder)
at any time for whatever reasons it may deem appropriate.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NO EMPLOYMENT RIGHTS. Nothing contained in this Plan shall
be construed as a contract of employment between the Company or any subsidiary
or related company and any Employee, or as a right of any Employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its employees with or without cause.
SECTION 9.2. ASSIGNMENT. The benefits payable under this Plan may not be
assigned or alienated.
DRESSER INDUSTRIES, INC.
By: P. M. Bryant
-------------------------------------
Title: Vice President-Human Resources
<PAGE>
Exhibit 10.9
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
OF DRESSER INDUSTRIES, INC.
EFFECTIVE JUNE 1, 1995
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
OF DRESSER INDUSTRIES, INC.
Dresser Industries, Inc. hereby amends by restatement the Supplemental
Executive Retirement Plan of Dresser Industries, Inc., effective June 1, 1995,
upon the following terms and conditions:
ARTICLE I
DEFINITIONS
The words and phrases defined hereinafter shall have the following meaning:
SECTION 1.1. ACTUARIAL EQUIVALENT. An amount of equal value determined by
using the interest factor and other appropriate actuarial assumptions used in
the latest annual actuarial valuation of the Pension Plan. In the event the
Pension Plan is formally terminated, the actuarial assumptions shall be those
specified in Code section 417(e)(3)(A).
SECTION 1.2. BOARD. The Board of Directors of Dresser Industries, Inc.
SECTION 1.3. CODE. The Internal Revenue Code of 1986, as amended.
SECTION 1.4. COMMITTEE. The Executive Compensation Committee of the
Board.
SECTION 1.6. DB PLANS. The Pension Plan as defined in Section 1.10 and
the Related Plans as defined in Section 1.12.
SECTION 1.7. DC PLAN. The Dresser Industries, Inc. Retirement Savings
Plan-A.
SECTION 1.8. COMPANY. Dresser Industries, Inc.
1
<PAGE>
SECTION 1.9. EXECUTIVE. An individual who is employed by the Company and
has attained the position of Corporate Vice President or any higher position,
Division President, or Group President. The term "Executive" also shall
include any individual found by the Committee to have been employed by the
Company or an entity partially or wholly owned by the Company in an equivalent
position and declared eligible for this Plan.
SECTION 1.10. PENSION PLAN. The Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as frozen May 31, 1995.
SECTION 1.11. PLAN. The "Supplemental Executive Retirement Plan of
Dresser Industries, Inc.", as set forth herein.
SECTION 1.12. RELATED PLAN. Any Company sponsored qualified defined
benefit pension plan (which may or may not be terminated) for nonunion salaried
employees, other than the Pension Plan.
SECTION 1.13. ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
ARTICLE II
PURPOSE OF PLAN
SECTION 2.1. PURPOSE. The purpose of the Plan is to assure that eligible
Executives do not suffer a diminution of retirement benefits (1) as a
consequence of having participated in the Company's Deferred Compensation Plan,
(2) as a consequence of the freezing of the Pension Plan, or (3) as a
consequence of service with a joint venture company. This is an unfunded plan
described in sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.
2
<PAGE>
ARTICLE III
ELIGIBILITY
SECTION 3.1. GENERAL ELIGIBILITY. An Executive shall be covered by this
Plan if he is covered as an active or inactive participant under the Pension
Plan, Related Plan, or DC Plan, and became a participant in the Pension Plan,
Related Plan or DC Plan when he first became eligible to participate in such
plans.
Furthermore, an employee who has been an employee of a Dresser joint
venture company shall be covered for purposes of protecting pension benefits to
the extent provided in Section 4.2.
Notwithstanding any other provision of this Plan, no employee of MWK
Acquisition Company or the M. W. Kellogg Company, or any beneficiary of such
employee, shall be eligible to receive benefits under this Plan.
SECTION 3.2. ELIGIBILITY FOR BASIC BENEFIT. An Executive or former
Executive (or his spouse or beneficiary) shall be eligible for a benefit
determined under Section 4.1, under the following circumstances:
(a) The Executive dies while employed, or becomes disabled under
circumstances that would entitle him to Disability Benefits under the Pension
Plan (or similar provisions of a Related Plan or DC Plan that are applicable to
him); or
(b) The Executive or former Executive meets all the following
requirements:
(1) He has earned five years of service as an Executive during the
ten-year period ending on his retirement date;
(2) His retirement occurs after Age 55; and
(3) If he retires before Age 65, his retirement has been approved by
the Committee.
SECTION 3.3. SPOUSES AND BENEFICIARIES. The extent of a surviving
spouse's or beneficiary's eligibility to receive benefits
3
<PAGE>
after an Executive's death is determined by the eligibility of the Executive for
Plan coverage under Section 3.1 and Section 3.2(a).
ARTICLE IV
BENEFITS
SECTION 4.1. AMOUNT OF BASIC BENEFITS. The amount of the benefit payable
under this Section 4.1, if any, shall be determined as follows:
STEP (1) DETERMINATION OF THE RETIREMENT INCOME AMOUNT. Compute the
Executive's monthly pension benefit in a life-only form under the Normal
Retirement formula of the Pension Plan (assuming there had been no curtailment
of benefits under that plan as of May 31, 1995, and, in the part of the formula
related to Covered Compensation, treating all compensation as if it were in
excess of Covered Compensation rather than treating part of the compensation as
being total and part as in excess of Covered Compensation), excluding (a) the
reduction for Social Security Pension, (b) the reduction for amounts payable
under an annuity purchased upon termination of a prior plan described in Section
4.01(d) of the Pension Plan, (c) the pensionable compensation limitations in the
Pension Plan and (d) the benefit limitations described in Code section 415 and
Code section 401(a)(17). For purposes of the computation, compensation shall
include in the respective years accrued, all amounts deferred under the
Company's Deferred Compensation Plan; provided, however, that if the Executive
at the time of retirement is not serving in an eligible position, only amounts
with respect to periods he was in such a position will be included as
compensation. Compensation also shall include compensation from Dresser
Industries, Inc.
4
<PAGE>
STEP (2) DETERMINATION OF BENEFITS USED IN SATISFYING THE RETIREMENT INCOME
AMOUNT. With respect to the Executive, determine the sum of:
(a) his monthly pension computed under the Pension Plan and any Related
Plan,
(b) the Actuarial Equivalent of his account under the DC Plan,
(c) his monthly pension payable under the ERISA Excess Benefit Plan for
Dresser Industries, Inc. (including the Actuarial Equivalent of benefits related
to the DC Plan),
(d) his monthly pension payable under the ERISA Compensation Limit Benefit
Plan for Dresser Industries, Inc. (including the Actuarial Equivalent of
benefits related to the DC Plan),
(e) the amount of the primary monthly Social Security Pension as defined
in the Pension Plan, which he is entitled to receive, or if not then eligible,
to which he will be entitled at age 65 (reduced proportionately if the Executive
has less than 35 years of Credited Service),
(f) his "monthly pension equivalent annuity credit" (as described below);
and
(g) the Actuarial Equivalent of any benefits related to the DC Plan under
Section 4.3.
STEP (3) DETERMINATION OF THE BENEFIT (IF ANY) PAYABLE UNDER THIS SECTION
4.1. If the amount determined in Step 1 exceeds the amount determined in Step
2, the difference will be paid under this Plan normally as a monthly benefit. If
the amount determined in Step 1 does not exceed the amount determined in Step 2,
no benefit is payable under this Section 4.1.
The Executive's "monthly pension equivalent annuity credit" will be the
amount of monthly pension calculated on an Actuarial
5
<PAGE>
Equivalent basis at the Executive's attained age, from an amount equal to the
sum of:
(a) 1.33 times the dollar amount of all pension equivalent credits to his
account under the Company's Deferred Compensation Plan as of May 31, 1995;
(b) 1.333 times the dollar amount of all dividend equivalents credited to
the Executive's account under the Company's Deferred Compensation Plan, with
respect to Unit Shares credited as a result of such pension equivalents (and
earlier dividend equivalents thereon).
(c) The Basic Contributions and Pension Equalizer Contributions that would
have been made after May 31, 1995, to the Executive's Account under the DC Plan,
the ERISA Excess Benefit Plan for Dresser Industries, Inc., and the ERISA
Compensation Limit Plan for Dresser Industries, Inc., had the Executive not made
deferrals under the Company's Deferred Compensation Plan; and
(d) The earnings that would have been credited on the contributions
described in subparagraph (c) had such contributions been made to the
Executive's account in the Company's Deferred Compensation Plan.
Should the Executive's regular pension be derived in whole or in part from
a Related Plan, or should the Executive have deferred amounts in the Deferred
Compensation Plan of the Company in cash units rather than Unit Shares,
appropriate adjustments in or to the above formula shall be made by the
Committee to carry out the intent inherent in such formula.
If the Executive retires before attaining age 65, and/or receives benefits
in a form other than life-only, appropriate actuarial adjustments will be made
to such benefit in accordance with the actuarial adjustments used in the Pension
Plan for these situations, except that there will be no adjustment to the amount
6
<PAGE>
in paragraph (f) of step 2 and the only adjustment to the amount in paragraph
(e) of step 2 will be in the case of early retirement.
SECTION 4.2. RESTORATION OF DB PLAN BENEFITS LOST DUE TO TRANSFER TO A
JOINT VENTURE COMPANY. For purposes of this Section 4.2 only, all amounts
payable in the form of a defined contribution benefit shall be converted, using
the appropriate actuarial basis as stated herein, to a benefit payable in the
form of a monthly life annuity. After the benefit payable from this Plan in
respect of joint venture service has been determined, the Executive may elect to
receive it in a lump sum that is the Actuarial Equivalent of the monthly
benefit.
If an Executive transfers to a joint venture company, this Plan shall pay
an additional benefit equal to the excess of (1) the benefit that the Executive
would have received from all of the Company's qualified and nonqualified defined
benefit pension plans, if participation under all of those plans had continued
uninterrupted for the period during which the Executive is employed by the
joint venture company, and if such plans had not been curtailed, over (2) the
actual amounts payable from the combination of the Company's qualified and
nonqualified pension plans (including the Actuarial Equivalent amounts from or
related to the DC Plan) plus the joint venture company qualified and
nonqualified pension and capital accumulation plans as described below.
For purposes of this Section 4.2, the joint venture company plans
considered and the bases for imputing pension amounts that are paid in the form
of a monthly life annuity from such plans for purposes of calculating the excess
described in the preceding paragraph shall be as follows:
* Notwithstanding any distribution or any transfer of benefits to a defined
contribution plan, all qualified defined benefit plans, ERISA excess
defined benefit plans, and compensation
7
<PAGE>
limit defined benefit plans, with monthly benefits assumed payable in the
form of a single life annuity commencing at the same time as benefits
commence under this Section 4.2.
* All qualified defined contribution pension plan, ERISA excess defined
contribution pension plan, and compensation limit defined contribution
pension plan accumulations or book accruals resulting from contributions of
the joint venture company along with investment gains or losses on such
accumulations or accruals, excluding any amounts transferred from a defined
benefit plan. For purposes of imputing the pension amount, the account
balance or book accrual at the time benefits under this Section 4.2
commence shall be converted to a single life annuity commencing at the same
time as benefits commence under this Section 4.2 using the mortality and
interest rate assumptions set out in such plan or, if such plan does not
state such assumptions, then using the Actuarial Equivalent basis defined
in Section 1.1 of this Plan.
* All qualified 401(k) plan, ERISA excess 401(k) plan, or compensation limit
401(k) plan accumulations or book accruals resulting from employer basic,
matching, or equalizer contributions (but not employee deferral
contributions) and investment earnings or losses credited to such
contributions or accruals in such plans of the joint venture company. For
purposes of imputing the pension amount, the account balance or book
accrual at the time benefits under this Section 4.2 commence shall be
converted to a single life annuity commencing at the same time as benefits
commence under this Section 4.2, using the Actuarial Equivalent basis
defined in Section 1.1 of this Plan.
SECTION 4.3. AMOUNT OF BENEFIT RELATED TO THE DC PLAN. For purposes of
this Section 4.3, the Company shall establish a
8
<PAGE>
bookkeeping account for each Executive, that is tied to the respective
Executive's Account under Section 4.1 of the DC Plan. The Company shall
allocate amounts to the respective bookkeeping accounts of Executives that are
not allocated to their Accounts under the DC Plan, the ERISA Compensation Limit
Benefit Plan for Dresser Industries, Inc., and the ERISA Excess Benefit Plan for
Dresser Industries, Inc., because the Executive deferred amounts under the
Company's Deferred Compensation Plan or because the Executive transferred to a
joint venture company as provided in Section 4.2. The Company further shall
segregate the Executive accounts under this Plan into subaccounts that are tied
to the respective Executives' Pretax Contributions, Matching Contributions,
Basic Contributions, and Pension Equalizer Contributions under the DC Plan. The
Company further shall accrue the same rate of investment return to these
subaccounts as earned on the Executives' respective subaccounts in the DC Plan.
SECTION 4.4. INDIVIDUAL EXCEPTION. Due to the loss of retirement
benefits experienced because of departure from his prior employer, and as an
incentive to accept employment with the Company, the Company will provide George
Juetten a retirement benefit which is at least the Actuarial Equivalent of a
straight life annuity of $125,000 per year commencing at age 65. To the extent
that the Actuarial Equivalent of this retirement benefit exceeds the Actuarial
Equivalent of the total amount payable to George Juetten from all of the
Company's defined contribution and defined benefit plans (both qualified and
nonqualified), then, notwithstanding the amount of benefits payable to George
Juetten under Sections 4.1-4.3 of this Plan, the balance of the promised benefit
shall be paid from this Plan, in accordance with the terms of Section 4.5.
Notwithstanding the foregoing, no benefit shall be paid under this Section
4.4 if:
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(a) George Juetten terminates employment with the Company before earning
five (5) years of service; or
(b) George Juetten is terminated with cause (including, but not by way of
limitation, termination for unsatisfactory job performance, insubordination, or
failure to adhere to Company policy) after earning five (5) years of service,
but before earning fifteen (15) years of service.
SECTION 4.5. FORM OF BENEFIT RELATED TO DB PLANS.
(a) Regarding married Executives who die while employed, the form of
benefit shall be the Spouse's Death Benefit as provided in the Pension Plan or
the comparable benefit, if any, provided in a Related Plan (whichever is
applicable). If there is no comparable benefit under the Related Plan, no
benefit will be payable under this Plan with respect to service under the
Related Plan.
(b) For Executives who retire, the form of benefit shall be the Standard
Benefit Form as provided in the Pension Plan or the comparable benefit provided
in a Related Plan, whichever is applicable. Provided, however, an Executive may
request payment in another form of benefit provided in the Pension Plan or a
comparable option in a Related Plan, that is different from the form in which he
will receive benefits under the Pension Plan or a Related Plan, in which case
the Committee shall in its sole discretion grant or deny such request. All forms
of benefit shall be calculated using the same factors as those used in
determining such forms of benefit under the Pension Plan or comparable benefit
provided under a Related Plan.
(c) If the benefit is to be paid in a lump-sum form of payment, the basic
principle is eligibility for payment in this form and the calculation of the
benefit from this Plan shall be determined using the criteria from the Pension
Plan or the Related Plan from which the lump sum under this Plan emanates.
Furthermore, the lump sum payable from this Plan shall restore the amount of
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lump sum otherwise payable from the Pension Plan, a Related Plan, or any
nonqualified pension plans of the Company, lost because actuarial conversion
factors of the various qualified and nonqualified plans of the joint venture
company are not the same as the Pension Plan.
SECTION 4.6. FORM OF BENEFIT RELATED TO THE DC PLAN. Benefits under this
Plan that are tied to the DC Plan shall be payable in a lump sum to the
Employee, or to the Employee's DC Plan Beneficiary in the event of the
Employee's death. The Employee may elect that Plan benefits be paid to another
person or in a different form authorized under the DC Plan.
SECTION 4.7. TIME OF BENEFIT PAYMENTS. Benefits due under this Plan
shall be determined by the Committee at the time of the Executive's termination
of employment. Except in the case of a lump-sum payment, such benefits shall be
paid by the Company monthly in advance. In the case of a lump-sum payment, such
payment shall be made as closely as practicable to the time such payment would
be made if it were paid from the Pension Plan. Such payments shall be made by
the Company out of its general assets and shall not be funded in any manner.
ARTICLE V
VESTING AND FORFEITURE
SECTION 5.1. VESTING. No person shall have or vest in any benefits under
this Plan prior to the time such person becomes eligible under Section 3.2. No
Executive (nor the spouse of such person) whose employment is terminated for
cause, as determined by the Committee, shall vest in any benefits under this
Plan, even if such termination is deemed a retirement under provisions of the
Pension Plan, a Related Plan or the DC Plan.
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SECTION 5.2. FORFEITURE. The Committee may declare forfeited any or all
future benefits of an Executive (and/or his spouse) if the Committee in its sole
discretion determines that such person has taken or allowed any action that is
inimical to the best interest of the Company, including but not limited to
competing with or assisting others to compete with the Company.
ARTICLE VI
ADMINISTRATION
SECTION 6.1. DUTIES OF COMMITTEE. This Plan shall be administered by the
Committee in accordance with its terms and purposes. The Committee shall have
the sole discretionary duty and authority to interpret the provisions of this
Plan (and any private letter agreement affecting an Executive's benefits under
the Plan) and determine the amount and manner of payments of the benefits due to
or on behalf of each Executive from this Plan and shall cause them to be paid
accordingly.
SECTION 6.2. FINALITY OF DECISIONS. The decisions made and the actions
taken by the Committee in the administration of this Plan shall be final and
conclusive on all persons, and the members of the Committee shall not be subject
to individual liability with respect to this Plan.
ARTICLE VII
CLAIMS AND APPEAL PROCEDURES
SECTION 7.1. PURPOSE. The purpose of the claims and appeal provisions
set forth in Sections 7.1 through 7.11 is to secure the speedy, inexpensive
resolution of all disputes over Plan benefits and rights granted by the Plan.
These provisions shall be
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liberally construed so as to avoid litigation and its attendant expenses.
SECTION 7.2. CLAIMS PROCEDURE. Each person who claims entitlement to any
right or benefit under the Plan ("claimant") may submit a claim with respect to
that benefit or right under the procedure set forth in the Dresser Industries,
Inc. Retirement Savings Plan-A.
SECTION 7.3 APPEAL PROCEDURE. When a claim has been or is deemed
denied, the claimant (hereinafter referred to as appellant) shall have the right
within 60 days after receipt of written notice thereof or the date the claim is
deemed denied to file an appeal with the Committee and to go through the appeal
procedure herein set forth. All appeals shall be in writing, and shall set
forth the reasons why the appellant believes the decision denying his claim is
erroneous. The Committee shall render a decision on the appeal in writing not
later than 60 days after receipt of the written appeal.
The decision of the Committee shall be final and shall be binding upon the
appellant, his beneficiaries, heirs, and assigns and all other persons claiming
by, through or under him.
A failure to file a claim and an appeal in the manner and within the time
limits set forth herein shall be deemed a failure by the aggrieved party to
exhaust his administrative remedies and shall constitute a waiver of the rights
or benefits sought to be established under the Plan.
SECTION 7.4. EXHAUSTION OF ADMINISTRATIVE REMEDIES. No legal action to
recover Plan benefits or to enforce or to clarify rights under the Plan shall be
commenced under section 502(a)(1)(B) of ERISA, or under any other provisions of
law, whether or not statutory, unless and until the claimant first shall have
exhausted the claims and appeal procedures available to him hereunder in
Sections 7.1-7.3. A claimant must raise all issues and present all
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<PAGE>
theories relating to his claim to the Committee at one time. Otherwise, the
claimant shall be deemed to have abandoned forever all issues and theories not
raised and presented to the Committee.
SECTION 7.5. LIMITATION ON ACTIONS. Any suit brought to contest a
decision of the Committee shall be filed in a court of competent jurisdiction
within 1 year from receipt of written notice of the Committee's final decision
or from the date the appeal is deemed denied, and any suit not filed within this
1-year limitation period shall be dismissed by the court. Service of legal
process shall be made upon the Plan by service upon the Committee.
SECTION 7.6. FEDERAL PREEMPTION. All state law causes of action that
arise out of or relate to this Plan or to entitlement to rights or benefits
under the Plan shall be deemed to have been preempted by section 514 of ERISA.
SECTION 7.7. NO RIGHT TO JURY TRIAL; EVIDENCE. In any suit contesting a
decision of the Committee, all issues of fact shall be tried by the court and
not by a jury. No evidence may be introduced in court which was not previously
presented to the Committee and no evidence may be introduced to modify or
contradict the terms of the Plan document.
SECTION 7.8. SCOPE OF REVIEW. The Committee shall have full
discretionary authority to interpret and apply the terms of this Plan document
and other relevant documents and relevant provisions of law, and deference shall
be afforded the Committee's decisions. This grant of authority shall be broadly
construed and shall include the authority to find facts, to reach conclusions of
law, to interpret and apply ambiguous terms, and to supply missing terms
reasonably necessary to resolution of claims and appeals. No finding of fact by
the Committee shall be set aside by a court unless the party contesting the
finding shall prove by clear and convincing evidence that the finding is
arbitrary and capricious. No conclusion of law reached by the Committee shall
be reversed by
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<PAGE>
a court unless the party contesting the conclusion shall demonstrate that the
Committee is guilty of manifest disregard of law.
SECTION 7.9. LIMITATION ON DAMAGES. In any suit over Plan benefits or
rights, recovery shall be limited to the amount of benefits found due, without
interest, or to specific enforcement of rights established under the Plan, and
shall not include any other damages whether denominated incidental, special,
consequential, collateral, compensatory, exemplary, punitive or whatever.
SECTION 7.10. PARTICIPANT PLAN DATA. The Committee may issue, or cause to
be issued, from time to time statements to employees, participants, retirees or
beneficiaries indicating eligibility, service or other data regarding their Plan
benefits. If any such person wishes to challenge the accuracy of such data, the
person shall do so in the manner and within the time limits set forth above in
Sections 7.1-7.9.
SECTION 7.11. FINAL DETERMINATION OF RIGHTS AND BENEFITS. After
termination of the Plan, the Committee may direct a final determination of the
rights and benefits of some or all persons having an interest in the Plan. The
determination with respect to any person may be mailed to that person at his
last known address and that person may be given 90 days within which to
challenge the determination through the claims and appeal procedures set forth
in Sections 7.1-7.10. The mailing of a copy of a determination to a person at
his last known address shall be deemed constructive receipt by that person of a
copy of the determination. Any determination not challenged through the claims
and appeals procedures shall govern a person's rights under the Plan, and the
rights of any person claiming by, through or under him.
15
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ARTICLE VIII
AMENDMENT AND TERMINATION
SECTION 8.1. AMENDMENT AND TERMINATION. The Company intends to maintain
this Plan as long as it is appropriate. However, the Company reserves the right
to amend and/or terminate it at any time.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NO EMPLOYMENT RIGHTS. Nothing contained in this Plan shall
be construed as a contract of employment between the Company or any subsidiary
or joint venture company and any employee, or as a right of any employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its employees with or without cause.
SECTION 9.2. ASSIGNMENT. The benefits payable under this Plan may not be
assigned or alienated.
DRESSER INDUSTRIES, INC.
By: P. M. Bryant
----------------------------------------
Title: V.P. - Human Resources
16
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THE M. W. KELLOGG RETIREMENT PLAN
(Amended and Restated Effective January 1, 1989)
<PAGE>
THE M. W. KELLOGG RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1989)
TABLE OF CONTENTS
Page
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Actuarial Equivalent . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Credited Service . . . . . . . . . . . . . . . . . . . . . . . . 2
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Final Average Annual Earnings. . . . . . . . . . . . . . . . . . 5
Final Average Monthly Earnings . . . . . . . . . . . . . . . . . 5
Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . . 6
Monthly Earnings . . . . . . . . . . . . . . . . . . . . . . . . 6
Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Vesting Service. . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3 Participation. . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4 Participant's Contributions. . . . . . . . . . . . . . . . . . . 11
SECTION 5 Retirement Date. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . 12
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5.2 Early Retirement Date. . . . . . . . . . . . . . . . . . . . . . 12
5.3 Postponed Retirement Date. . . . . . . . . . . . . . . . . . . . 12
5.4 Retirement Date. . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6 Amount of Normal Retirement Income . . . . . . . . . . . . . . . 13
6.1 Computation of Annual Normal Retirement Income Credit
at Normal Retirement Date. . . . . . . . . . . . . . . . . . . 13
6.2 Normal Forms of Retirement Income Payments at
Participant's Retirement Date. . . . . . . . . . . . . . . . . 14
6.3 At Early Retirement Date . . . . . . . . . . . . . . . . . . . . 16
6.4 At Postponed Retirement Date . . . . . . . . . . . . . . . . . . 16
6.5 Former Participants. . . . . . . . . . . . . . . . . . . . . . . 16
6.6 No Duplication of Benefits . . . . . . . . . . . . . . . . . . . 16
6.7 Limitation on Benefits . . . . . . . . . . . . . . . . . . . . . 16
I) Single Defined Benefit Plan . . . . . . . . . . . . . . . . 16
II) Two or More Defined Benefit Plans . . . . . . . . . . . . . 19
III) Defined Contribution Plan and Defined Benefit Plan. . . . . 19
IV) Definitions . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Minimum Amount of Retirement Income. . . . . . . . . . . . . . . 23
6.9 Offset for Benefits Provided Under Prior Plan. . . . . . . . . . 24
6.10 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1 Spouse's Guaranty. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8 Termination of Service . . . . . . . . . . . . . . . . . . . . . 27
8.1 Vesting Requirements . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Benefits Payable on Termination of Service Before Vesting. . . . 27
8.3 Benefits Payable on Termination of Service After Vesting . . . . 27
SECTION 9 Optional Forms of Retirement Income. . . . . . . . . . . . . . . 28
9.1 General Provisions Relative to Options . . . . . . . . . . . . . 28
9.2 Contingent Retirement Income Option. . . . . . . . . . . . . . . 28
9.3 Life-Ten Years Certain Option. . . . . . . . . . . . . . . . . . 29
9.4 Lump-Sum Cash Distribution Option. . . . . . . . . . . . . . . . 30
9.5 Straight Life Annuity Option . . . . . . . . . . . . . . . . . . 33
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SECTION 10 Payment of Retirement Income. . . . . . . . . . . . . . . . . . 34
10.1 Small Benefits. . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . 34
10.3 Certain Suspensions of Payments . . . . . . . . . . . . . . . . 34
10.4 Commencement of Payments. . . . . . . . . . . . . . . . . . . . 35
10.5 Participant's Right to Transfer Eligible Rollover
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 11 Non-Alienation of Benefits. . . . . . . . . . . . . . . . . . . 37
SECTION 12 Administration. . . . . . . . . . . . . . . . . . . . . . . . . 38
12.1 Establishment of the Committee. . . . . . . . . . . . . . . . . 38
12.2 Organization of the Committee . . . . . . . . . . . . . . . . . 38
12.3 Powers of the Committee . . . . . . . . . . . . . . . . . . . . 38
12.4 Duties of the Committee . . . . . . . . . . . . . . . . . . . . 39
12.5 Actions by the Committee. . . . . . . . . . . . . . . . . . . . 39
12.6 Actuarial Tables and Studies. . . . . . . . . . . . . . . . . . 39
12.7 Accounts and Reports. . . . . . . . . . . . . . . . . . . . . . 40
12.8 Discretionary Action. . . . . . . . . . . . . . . . . . . . . . 40
12.9 Action Taken in Good Faith. . . . . . . . . . . . . . . . . . . 40
12.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 40
12.11 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . . . 40
12.12 Claims Review Procedure . . . . . . . . . . . . . . . . . . . . 41
12.13 Disputed Benefits . . . . . . . . . . . . . . . . . . . . . . . 42
12.14 Responsibilities of Named Fiduciaries Other than the Committee. 42
12.15 Allocation of Responsibilities. . . . . . . . . . . . . . . . . 42
12.16 Designation of Persons to Carry Out Responsibilities of
Named Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . 42
12.17 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.1 No Enlargement of Employee Rights . . . . . . . . . . . . . . . 43
13.2 Transfer to Status of Employee. . . . . . . . . . . . . . . . . 43
13.3 Transfer from Status of Employee. . . . . . . . . . . . . . . . 44
13.4 Notice of Address . . . . . . . . . . . . . . . . . . . . . . . 44
13.5 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.6 Merger or Consolidation of Plan . . . . . . . . . . . . . . . . 45
13.7 Unclaimed Benefits. . . . . . . . . . . . . . . . . . . . . . . 45
13.8 Temporary Limitations . . . . . . . . . . . . . . . . . . . . . 45
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SECTION 14 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.1 Trusts and Insurance Contracts. . . . . . . . . . . . . . . . . 47
14.2 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.3 Irrevocability. . . . . . . . . . . . . . . . . . . . . . . . . 47
14.4 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 15 Qualification under Internal Revenue Code . . . . . . . . . . . 49
SECTION 16 Amendment and Termination . . . . . . . . . . . . . . . . . . . 50
16.1 Authority to Amend or Terminate . . . . . . . . . . . . . . . . 50
16.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 50
16.3 Trust Fund Continuation . . . . . . . . . . . . . . . . . . . . 51
SECTION 17 Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . 52
17.1 General Rule. . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.2 Vesting Provisions. . . . . . . . . . . . . . . . . . . . . . . 52
17.3 Minimum Benefit Provisions. . . . . . . . . . . . . . . . . . . 52
17.4 Limitation on Compensation. . . . . . . . . . . . . . . . . . . 53
17.5 Limitation of Benefits. . . . . . . . . . . . . . . . . . . . . 53
17.6 Coordination With Other Plans . . . . . . . . . . . . . . . . . 54
17.7 Distributions to Certain Key Employees . . . . . . . . . . . . 54
17.8 Determination of Top-Heavy Status . . . . . . . . . . . . . . . 54
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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<PAGE>
THE M.W. KELLOGG RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1989)
INTRODUCTION
The M. W. Kellogg Retirement Plan (the "Plan") was established
effective July 1, 1981, following the termination of the Pullman Incorporated
Retirement Plan, for Employees of the M. W. Kellogg division of The M. W.
Kellogg Company (formerly Pullman Incorporated), a wholly-owned subsidiary of
Wheelabrator-Frye, Inc. Effective January 11, 1988, the Company became a
wholly-owned subsidiary of Dresser Industries, Inc.
Effective May 31, 1988, the Plan became a frozen plan.
Effective as of January 1, 1989, the Board of Directors of the Company
authorized the amendment and restatement of The M. W. Kellogg Retirement Plan as
in effect immediately prior to such date in the form of this plan to comply with
the provisions of the Tax Reform Act of 1986 and to make certain other changes
therein.
The Plan and its related Trust, which is intended to form a part of
the Plan, are intended to meet the requirements of Sections 401(a) and 501(a) of
the Internal Revenue Code of 1986, as well as the requirements of the Employee
Retirement Income Security Act of 1974, as either may be amended from time to
time.
NOW, THEREFORE, The M. W. Kellogg Company hereby amends and restates
in its entirety The M. W. Kellogg Retirement Plan, effective as of January 1,
1989:
<PAGE>
SECTION 1
DEFINITIONS
The following words and phrases shall have the respective meanings
stated below unless a different meaning is clearly required by the context:
ACTUARIAL EQUIVALENT means a benefit having the same value, determined
on an actuarial basis, as the benefit which such Actuarial Equivalent replaces.
The determination of an Actuarial Equivalent shall be based on (i) 7.0%
interest, except for lump-sum payments, the value of which shall be arrived at
as provided in Section 9.4, and (ii) the 1971 TPF&C Forecast Mortality Table
Male Rates with a one-year setback for Participants and a five-year setback for
beneficiaries. An Actuarial Equivalent shall be determined by an actuary
appointed by the Company and such determination shall be conclusive. For
purposes of determining the $3,500 threshold on lump-sum payments, the interest
rate shall not exceed the interest rate which would be used (as of the beginning
of the Plan Year) by the Pension Benefit Guaranty Corporation for determining
the present value of a lump-sum distribution on Plan termination if the
Actuarial Equivalent lump sum value of such vested accrued benefit (using such
rate) is not in excess of $25,000.
AFFILIATE means a corporation or other trade or business which is not
an Employer under this Plan but which, together with an Employer, is "under
common control" within the meaning of Code Section 414(b) or (c), as modified by
Code Section 415(h) where applicable; any organization (whether or not
incorporated) which, together with an Employer, is a member of an "affiliated
service group" within the meaning of Code Section 414(m); and any other entity
required to be aggregated with the Employer pursuant to regulations under Code
Section 414(o).
CODE means the Internal Revenue Code of 1986, as amended.
COMMITTEE means the Administrative Committee appointed by the Company
to act as administrator of the Plan and to perform the duties described in
Section 12.
COMPANY means The M. W. Kellogg Company, a Delaware corporation, or
any predecessor or successor corporation.
CREDITED SERVICE means the total number of months (for which he
receives or is entitled to receive compensation) of an Employee's latest period
of uninterrupted employment with the Company. Credited Service shall not
include any period during which an individual is included in a recognized
collective bargaining unit represented by a union with which the Company has
entered into a collective bargaining agreement, or any period during which an
individual is employed for the specific purpose of working on a designated
construction project for the duration of such project. Each Employee who was a
Participant
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in the Prior Plan on June 30, 1981 shall be credited with Credited Service
equal to the Continuous Service credited to him as of June 30, 1981 under the
Prior Plan.
An individual's Credited Service also shall include the following
periods of time regardless of whether he receives compensation therefor from the
Company:
(a) any period of absence from active employment with the
Company prior to his Retirement Date of up to 24 months due to layoff;
(b) any period of absence from active employment with the
Company prior to his Retirement Date due to "Disability."
"Disability" shall constitute a mental or physical condition of such
individual which the Committee, on the basis of evidence satisfactory
to it, finds to be a permanent condition which renders such individual
unfit to perform the duties of an Employee, as such duties shall be
determined by the Committee;
(c) any period of absence from active employment with the
Company prior to his Retirement Date due to service in the United
States Armed Forces provided he is reemployed by the Company in
accordance with applicable statutes following his discharge from
military service;
(d) any period of absence from active employment with the
Company prior to his Retirement Date due to a Company directed leave
of absence, and a period of up to 12 months during which an Employee
is absent from work by reason of the Employee's pregnancy, the birth
of a child of the Employee or the placement of a child with the
Employee in connection with the adoption of such child by the Employee
or for purposes of caring for such child for the period immediately
following such birth or placement, which period shall be considered as
a Company directed leave of absence for the purposes of Section 1
hereof; and/or
(e) any other period of absence from active employment with the
Company if such Employee is again credited with an hour of service
within 12 months of the date such absence began.
In computing the Credited Service of an Employee, an hour for which he
is paid or entitled to payment by the Company during any calendar day within a
calendar month shall be counted as service for the full calendar month. No
Employee shall receive credit for more than 1 month of Credited Service for any
1 calendar month nor shall he receive credit for more than 12 months of Credited
Service during any Plan Year.
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An Employee will incur a break in his Credited Service on the last day
of the calendar month in which his employment is terminated.
When an Employee's Continuous Service is broken as a result of (i) his
failure or refusal to return to work for the Company promptly after a sick leave
or an authorized leave of absence, or after he recovers from disability; or
(ii) his leaving the employ of the Company for service in the Armed Forces of
the United States and fails to make application for reemployment by the Company
in accordance with applicable statutes following his discharge from military
service, such break shall be deemed to have occurred as of the end of the last
calendar month during any part of which there was an hour in which he was paid
or entitled to payment by the Company; provided, however, that if the authorized
leave of absence referred to in (i) above was a Company directed leave of
absence, the break shall be deemed to have occurred on the last day of the
calendar month during which such leave of absence is terminated by the Company.
When an Employee's Continuous Service is broken as a result of any of the other
causes listed above, such break shall be deemed to have occurred on the last day
of the calendar month during which the event which caused such break took place.
If an Employee who has met the requirements for vesting set forth in
Section 8 hereof incurs a break in his Credited Service as a result of any of
the causes listed above and subsequently returns to the employ of the Company,
his participation in the Plan shall be reinstated immediately. He shall retain
his previously accumulated Credited Service and he shall be credited with
additional Credited Service for his continuous employment with the Company after
such return.
If an Employee who has not met the requirements for vesting set forth
in Section 8 hereof incurs a break in his Credited Service and subsequently
returns to the employ of the Company, his participation in the Plan shall be
reinstated immediately. If the total period of time elapsed from the effective
date of such break to the effective date of his reemployment is less than the
greater of (a) 60 consecutive months and (b) the period of his previous
employment, he shall retain his previously accumulated Credited Service and he
shall be credited with additional Credited Service for his continuous employment
during such new period of employment. If the total period of time elapsed from
the effective date of such break to the effective date of his reemployment
equals or exceeds the greater of (a) 60 consecutive months and (b) his months of
previously accumulated Credited Service, he shall forfeit his previously
accumulated Credited Service and shall be credited with Credited Service for his
continuous service during such new period of employment.
No individual shall accrue Credited Service with respect to employment
after May 31, 1988.
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EMPLOYEE means any person employed by the Company other than (a) an
individual whose terms of employment are governed by a collective bargaining
agreement unless such collective bargaining agreement specifically provides
otherwise; (b) an individual compensated on an hourly wage as opposed to salary
basis (except as provided in (a) above); (c) an individual who is a consultant;
(d) an individual hired to work only on a specific project or projects from time
to time; and (e) an individual hired as a non-benefit direct contract Employee.
An Employee shall include (i) any individual who is a United States citizen and
who is (1) employed on a regular, non-temporary basis by a foreign subsidiary of
the Company which has not adopted the Plan (but only if such foreign subsidiary
is covered by an agreement entered into under section 3121(1) of the Code), or
(2) employed by a domestic subsidiary of the Company which has not adopted the
Plan and which is primarily engaged in business outside the United States,
provided in either case, such individual is not covered under a funded deferred
compensation plan maintained by such subsidiary with respect to remuneration
paid to such individual by such subsidiary or (ii) a leased Employee within the
meaning of Section 414(n)(2) of the Code.
EMPLOYER means the Company, and any other Affiliate that may adopt
this Plan in the future and the successors, if any, to such Affiliate.
FINAL AVERAGE ANNUAL EARNINGS means 12 times a Participant's Final
Average Monthly Earnings.
FINAL AVERAGE MONTHLY EARNINGS means:
(i) for a Participant who has accumulated 120 or more months of
Credited Service the higher of (1) the average of his Monthly Earnings
during the last 60 months of his Credited Service or (2) the average
of his Monthly Earnings during that combination of any 5 consecutive
calendar years during the last 120 months of his Credited Service
which produces the highest average Monthly Earnings,
(ii) for a Participant who has accumulated more than 60 but less
than 120 months of Credited Service the higher of (1) the average of
his Monthly Earnings during the last 60 months of his Credited Service
or (2) the average of his Monthly Earnings during that combination of
any 5 consecutive calendar years during the entire period of his
Credited Service which produces the highest average Monthly Earnings,
and
(iii) for a Participant who has accumulated 60 or less months
of Credited Service prior to his Retirement Date the average of his
Monthly Earnings during the entire period of his Credited Service.
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Notwithstanding the foregoing provisions of this paragraph, if a
Participant is totally Disabled on his Retirement Date or if he was on layoff or
on a Company directed leave of absence immediately prior to the date on which
his Credited Service is broken, the calculation of his Final Average Monthly
Earnings shall be made using only the appropriate portion of his Credited
Service which was accumulated prior to the date on which he became disabled, the
date he was placed on layoff or the date on which he commenced such leave of
absence, whichever is applicable, and using only his Monthly Earnings during
such portion of his Credited Service.
The determination of "Final Average Monthly Earnings" shall not
include any compensation paid to or earned by a Participant after May 31, 1988.
HOUR OF SERVICE means
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Company. These hours
shall be credited to the Employee for the computation period in which
the duties are performed; and
(2) Each hour for which an Employee is paid, or entitled to
payment, by the Company on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or
leave of absence. No more than 501 hours of service shall be credited
under this paragraph for any single continuous period (whether or not
such period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; and
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Company. The same
hours of service shall not be credited both under paragraph (1) or
paragraph (2), as the case may be, and under this paragraph (3).
These hours shall be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather than
the computation period in which the award, agreement or payment is
made.
MONTHLY EARNINGS means, for periods prior to July 1, 1981, the total
compensation received by a Participant in any one calendar month including the
salary or wages paid plus such other compensation, if any, paid to the
Participant which is determined to be includable under uniform rules established
by the Company in accordance with Section 12 hereof. Subject to Section 13.2
hereof, for periods after
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June 30, 1981 but prior to January 1, 1984, "Monthly Earnings" means the
compensation paid during a Plan Year (excluding tuition reimbursement, moving
expense allowances, severance payments, vacation payoffs and pay in lieu of
notice) divided by the number of months within that Plan Year for which the
Participant earns Credited Service.
For periods after January 1, 1984, "Monthly Earnings" means
compensation paid a Participant during a Plan Year including base pay, overtime,
management bonuses of up to 50% of base pay, extended work-week and shift
differential payments and interim travel pay, and including amounts deferred by
such Participant pursuant to an option authorized by section 125 and/or
section 401(k) of the Code under a plan adopted by a Company, but excluding
contributions to any other deferred compensation program (including this Plan),
stock options, restricted stock, and any other form of extraordinary
remuneration, including, but not limited to, overseas or cost-of-living
allowances, divided by the number of months within that Plan Year included in
the Participant's Credited Service.
No compensation paid to a Participant after May 31, 1988 shall be
included in "Monthly Earnings" for any purpose under the Plan.
Effective January 1, 1989, in no event shall the Monthly Earnings
taken into account under the Plan for any Employee annually exceed $200,000
prior to January 1, 1994, or $150,000 on or after January 1, 1994, or such other
dollar amount as may be prescribed by the Secretary of the Treasury or his
delegate. For purposes of applying the applicable limit on Monthly Earnings,
the family unit of an Employee who either is a 5% owner or is both a highly
compensated Employee and one of the ten most highly compensated Employees will
be treated as a single Employee with Monthly Earnings, and the $200,000 limit
will be allocated among the members of the family unit in proportion to the
total Monthly Earnings of each member of the family unit. For this purpose, a
family unit consists of the Employee who is a 5% owner or one of the ten most
highly compensated Employees, the Employee's spouse, and the Employee's lineal
descendants who have not attained age 19 before the close of the year.
PARTICIPANT means any Employee who meets the requirements of
Section 3.
PLAN means The M. W. Kellogg Retirement Plan, as established effective
July 1, 1981 and as amended and restated effective January 1, 1989, and as
hereafter amended from time to time.
PLAN YEAR means the twelve-month period commencing May 1 of each
calendar year and ending April 30 of the following calendar year.
PRIOR PLAN means the Pullman Incorporated Retirement Plan as in effect
on June 30, 1981, the date of its termination.
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TRUST means the trust or trusts established for receiving, holding,
investing and disposing of the Trust Fund, as provided in Section 14.
TRUSTEE means the Trustee of a Trust.
TRUST FUND means the money or other property or assets which shall be
held from time to time by the Trustee or Trustees under the Trust.
VESTING SERVICE means the total number of years of Credited Service
for which he receives or is entitled to receive compensation except that if, in
any calendar year, an Employee is credited with at least 1,000 Hours of Service,
he shall be credited with one year of Vesting Service and if he is credited with
at least 500 hours of service, he shall not suffer a break in Vesting Service
for such calendar year. If, in any calendar month, an Employee is credited with
at least one hour of service, he shall be credited with 190 hours of service for
that month.
Whenever used herein, singular words shall include the plural and
masculine words shall include the feminine unless the context clearly indicates
a distinction.
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SECTION 2
EFFECTIVE DATE
The provisions of the Plan are effective as of January 1, 1989 unless
otherwise specified herein.
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SECTION 3
PARTICIPATION
Each Employee who was a Participant in the Prior Plan on June 30, 1981
shall automatically become a Participant in the Plan on July 1, 1981.
Each other Employee who was in the employ of the Company on June 30,
1981 or who is employed by the Company after such date shall automatically
become a Participant in the Plan as of the first day of the calendar month next
following the latest of (i) the date on which he accumulates 12 months of
Credited Service, (ii) the date on which he becomes an Employee, or (iii) the
date on which he attains his 21st birthday, provided he has not attained his
65th birthday. Notwithstanding the foregoing, an Employee who is a leased
Employee with respect to the Employer within the meaning of Code
Section 414(n)(2) is not eligible to participate in the Plan. No Employee shall
become a Participant in the Plan subsequent to June 30, 1985.
If an Employee's employment with the Company and/or Affiliate is
terminated during the twelve-month period commencing on the date of his
employment and he is reemployed by the Company or an Affiliate during the
twelve-month period commencing on the date on which his employment is
terminated, he shall be deemed to have completed 12 months of Credited Service
for the purpose of determining his eligibility to participate in the Plan on the
later of (i) the date on which he would have accumulated 12 months of Credited
Service (counting service with the Affiliate as service with the Company for
this purpose) if his employment had not been so terminated, or (ii) the date of
his reemployment.
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SECTION 4
PARTICIPANT'S CONTRIBUTIONS
No Participant shall be required or permitted to make contributions
under the Plan.
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SECTION 5
RETIREMENT DATE
5.1 NORMAL RETIREMENT DATE. The Normal Retirement Date of a Participant
shall be the first day of the month following the month in which he attains his
65th birthday.
5.2 EARLY RETIREMENT DATE. A Participant's "Early Retirement Date" shall
be the first day of the month following his termination of service after the
Participant has attained age 55 but not age 65. A Participant who retires on an
Early Retirement Date shall be entitled to receive the benefit provided for in
Section 6.3.
5.3 POSTPONED RETIREMENT DATE. In the event that any Participant remains
in the employ of the Company after his Normal Retirement Date, his "Postponed
Retirement Date" shall be the first day of the calendar month next following the
date on which he actually retires from employment with the Company, and payment
of retirement income to such Participant will not commence until his Postponed
Retirement Date.
5.4 RETIREMENT DATE. A Participant's "Retirement Date" is his Normal
Retirement Date, his Early Retirement Date, or his Postponed Retirement Date,
whichever is applicable.
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SECTION 6
AMOUNT OF NORMAL RETIREMENT INCOME
6.1 COMPUTATION OF ANNUAL NORMAL RETIREMENT INCOME CREDIT AT NORMAL
RETIREMENT DATE. Subject to the provisions of Subsections 6.5, 6.6, 6.7, 6.8,
6.9 and 6.10 hereof, a Participant who attains his Normal Retirement Date on or
after July 1, 1981, and retires shall be entitled to an Annual Normal Retirement
Income Credit equal to the sum, not to exceed 60% of his Final Average Annual
Earnings, of (i) his Annual Basic Part Retirement Income Credit and (ii) his
Annual Supplemental Part Retirement Income Credit, if any, determined as
follows:
(A) ANNUAL BASIC PART RETIREMENT INCOME CREDIT. Each Participant
shall be credited with an Annual Basic Part Retirement Income Credit equal to
1.0% of the lesser of (a) his Final Average Monthly Earnings and (b) 1/12 of his
Integration Level, multiplied by his Credited Service.
Each such Participant who attains his Normal Retirement Date during
any calendar year after 1981 and retires shall have an Integration Level equal
to the average of maximum wages upon which Social Security taxes are based in
each of the calendar years beginning with 1959, or the year of the Participant's
29th birthday, whichever is later, and ending with the calendar year in which
the Participant reaches his 64th birthday, assuming no change in the Social
Security maximum wage base after the Participant's termination of employment,
death or retirement as applicable.
(B) ANNUAL SUPPLEMENTAL PART RETIREMENT INCOME CREDIT. Each such
Participant shall be credited with an Annual Supplemental Part Retirement Income
Credit equal to 1.6% of the excess, if any, of his Final Average Monthly
Earnings over 1/12 of his Integration Level multiplied by his Credited Service.
In the determination of any Annual Normal Retirement Income Credit for
a Participant who attains his Normal Retirement Date on or after July 1, 1981
and retires and who, solely because he is a non-resident alien of the United
States, does not qualify for United States Social Security benefits on his
Retirement Date, the Annual Basic Part Retirement Income Credit for such
Participant will be as follows and not as stated in Paragraph (A) of this
Subsection 6.1:
1.6% of the lesser of (a) his Final Average Monthly Earnings and
(b) 1/12 of his Integration Level multiplied by his Credited Service
less any old age retirement income benefits to which such Participant
is entitled under the laws of any country or countries, other than the
United States of America and which are not attributable to his
contributions under such foreign laws.
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A Participant's Annual Normal Retirement Income Credit shall not
reflect any Credited Service, Final Average Monthly Earnings, or Monthly
Earnings arising from employment subsequent to May 31, 1988.
6.2 NORMAL FORMS OF RETIREMENT INCOME PAYMENTS AT PARTICIPANT'S RETIREMENT
DATE. Unless a Participant who retires when he attains his Retirement Date on
or after July 1, 1981 elects an optional form of retirement income payment
pursuant to Section 9 hereof, retirement income payments shall be made in
whichever of the following manners is applicable:
(A) PARTICIPANT WHO IS NOT MARRIED ON HIS RETIREMENT DATE. If such a
Participant is not married on his Retirement Date, all retirement income
payments under the Plan shall be made to him in equal monthly installments.
Each monthly installment shall be equal to 1/12 of his Annual Normal Retirement
Income Credit determined in accordance with Section 6.
The first monthly installment shall be payable to such Participant as
of his Retirement Date. Subsequent monthly installments shall be payable on the
first day of each calendar month thereafter, terminating with the payment made
on the first day of the month in which he dies.
(B) PARTICIPANT WHO IS MARRIED ON HIS RETIREMENT DATE. If such a
Participant is married on his Retirement Date, all retirement income payments
shall be made as follows:
(1) TO THE RETIRED PARTICIPANT: A reduced retirement income,
the first monthly payment thereof being payable to him as of his
Retirement Date. Subsequent monthly installments shall be payable to
him on the first day of each calendar month thereafter throughout his
lifetime, terminating with the payment made on the first day of the
month in which he dies.
(2) TO THE PARTICIPANT'S SPOUSE: A contingent retirement
income, the first monthly payment thereof being payable on the first
day of the month following the calendar month in which the Participant
dies, if such spouse is living on such date. Subsequent monthly
installments shall be payable to such spouse on the first day of each
calendar month thereafter throughout such spouse's remaining lifetime,
terminating with the payment made on the first day of the month in
which such spouse dies. The monthly amount of retirement income
payable to such spouse shall be 50% of the reduced retirement income
payable to such Participant unless such Participant, prior to his
Retirement Date, elects another optional form of retirement income
payment pursuant to Section 9 hereof.
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Such Participant, prior to his Retirement Date, shall provide the
Company with evidence satisfactory to the Company as to his spouse's age. The
retirement income payable to such Participant under this Paragraph (B)(2) shall
be the Actuarial Equivalent of the retirement income to which he would otherwise
be entitled under the Plan. A written explanation of the terms and conditions
of the form of benefit under Paragraph (B)(2) and the effect of refusing it will
be furnished to a Participant on or about nine months prior to the date when he
would first become eligible to commence receiving a benefit hereunder. The
Participant may request additional information regarding the benefits under
Paragraph (B)(2) within 60 days of the furnishing of such explanation to him. A
written reply will be made within 30 days of his request. During an election
period beginning 90 days prior to the benefit commencement date, the Participant
may elect in writing to the Committee not to receive payment of his vested
benefit in the form specified under Paragraph (B)(2), in which case the normal
form of payment described in Paragraph (A) shall be applicable unless an
optional form becomes operative under Section 9. During the election period the
Participant may revoke and choose elections in writing to the Committee. A
married Participant who elects not to receive the form specified under
Paragraph (B)(2) must obtain the consent of his spouse which shall not be
effective unless: (i) Participant's spouse consents in writing to the election;
(ii) the election designates a specific alternate beneficiary (including any
class of beneficiaries or any contingent beneficiaries) and a form of benefit
which may not be changed without any further spousal consent (or the consent of
the spouse expressly permits designations by the Participant without any
requirement of further consent by the spouse); (iii) the spouse's consent
acknowledges the effect of the election; and (iv) the spouse's consent is
witnessed by a Plan representative or notary public. If it is established to
the satisfaction of a Plan representative that such written consent may not be
obtained because there is no spouse or the spouse cannot be located, a waiver
will be deemed a qualified election. Any consent by a spouse under this Section
(or establishment that the consent of the spouse cannot be obtained) shall be
effective only with respect to such spouse. A consent that permits designations
by the Participant without any requirement of further consent by the spouse must
acknowledge that the spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the spouse at any time prior to the commencement of benefits. The number of
revocations shall not be limited. For purposes of this Section, the spouse or
surviving spouse of the Participant shall be deemed the recipient of the form of
benefit under Paragraph (B)(2), provided that a former spouse will be treated as
the spouse or surviving spouse to the extent provided under a qualified domestic
relations order as described in Section 414(p) of the Code.
In the event that such Participant after meeting the requirements for
early retirement as provided in Subsection 5.2 hereof and prior to his
Retirement Date either (i) elects to receive retirement income payments in the
form described in Subsection 6.2(A), or (ii) elects to receive an optional form
of retirement income in
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accordance with Section 9 hereof, payment shall be made in accordance with
such election. In the event that a Participant's spouse is not living on
Retirement Date, payment shall be made in accordance with Section 6.2(A). In
the event that the then present value of such Participant's total Normal
Retirement Credits is less than $3,500, payment shall be made as provided in
Subsection 10.1 hereof.
6.3 AT EARLY RETIREMENT DATE. Subject to the provisions of
Subsections 6.5, 6.6, 6.7, 6.8, 6.9 and 6.10 hereof, the annual amount of normal
retirement income otherwise payable under the Plan to a Participant whose
Retirement Date is his Early Retirement Date and who has elected to commence
receiving reduced retirement income payments under the Plan prior to his Normal
Retirement Date shall be the reduced retirement income which is a percentage of
the normal retirement income he would otherwise have received commencing on his
Normal Retirement Date. For the specific formula see table set forth herein as
Exhibit A to the Plan.
6.4 AT POSTPONED RETIREMENT DATE. The annual amount of normal retirement
income payment to a retired Participant whose retirement income payments are
postponed to his Postponed Retirement Date shall be the same annual amount of
retirement income which he would have received had he retired on his Normal
Retirement Date.
6.5 FORMER PARTICIPANTS. Any participant in the Prior Plan whose
employment with the Company or with any subsidiary or Affiliate of the Company
was terminated prior to July 1, 1981 and to whom retirement income payments have
not commenced prior to July 1, 1981 shall have the annual amount of normal
retirement income payable to him, if any, determined in accordance with the
provisions of the Prior Plan in effect on the date his employment was so
terminated.
6.6 NO DUPLICATION OF BENEFITS. Except, as otherwise provided in
Subsection 13.2 or 13.3 hereof, no one shall be entitled to any benefits
hereunder with respect to any period of Credited Service for which he is
entitled to benefits under any other defined benefit pension or retirement plan,
other than Railroad Retirement and Federal Social Security, towards which the
Company or any Affiliate makes contributions.
6.7 LIMITATION ON BENEFITS. Notwithstanding any provision of this Plan to
the contrary, the total Annual Benefit (as hereinafter defined) received by an
Employee shall be subject to the following limitations:
(I) SINGLE DEFINED BENEFIT PLAN
The normal retirement benefit of any Employee under this Plan
cannot exceed the lesser of $90,000 (increased annually for Limitation
Years beginning after December 31, 1987 in accordance with
Section 415(d) of the Code to reflect cost-of-living adjustments) or
100% of such Employee's
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Average Compensation. For purposes of determining whether an Employee's
benefits exceed these limitations, the following rules shall apply:
1. Adjustment If Benefit Not Single Life Annuity
If the normal form of benefit is other than a single life
annuity, such form must be adjusted actuarially to the equivalent of a
single life annuity. This single life annuity cannot exceed the
maximum dollar or percent limitations outlined above. No adjustment
is required for the following: qualified joint and survivor annuity
benefits, pre-retirement disability benefits, pre-retirement death
benefits and post-retirement medical benefits.
2. Adjustment If Benefit Commences Before Social Security
Retirement Age
If benefit distributions commence before Social Security
Retirement Age, the actual retirement benefit cannot exceed the lesser
of 100% of the Employee's Average Compensation or the adjusted dollar
limitation. The adjusted dollar limitation is the Actuarial
Equivalent of $90,000 (adjusted in accordance with Code Section
415(d)) commencing at Social Security Retirement Age.
3. Adjustment If Benefit Commences After Social Security
Retirement Age
If Plan benefits commence after Social Security Retirement Age,
the dollar limitation shall be adjusted to the Actuarial Equivalent of
$90,000 commencing at Social Security Retirement Age.
4. Social Security Retirement Age Defined
"Social Security Retirement Age" as used herein shall mean the
age used as the retirement age under Section 216(l) of the Social
Security Act, except that such Section shall be applied without regard
to the age increase factor and as if the early retirement age under
Section 216(l)(2) of such Act were 62.
5. Interest Assumption
The interest rate used for adjusting the maximum limitations
above shall be:
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A. For benefits commencing before Social Security Retirement
Age and for forms of benefit other than straight life annuity, the
GREATER of:
(i) 5%, or
(ii) the rate used to determine
actuarial equivalence for other purposes of this
Plan.
B. For benefits commencing after Social Security Retirement
Age, the LESSER of:
(i) 5%, or
(ii) the rate used to determine
actuarial equivalence for other purposes of this
Plan.
6. Adjustment For Small Benefits
The limitations set forth in Subsection (I) shall be deemed
satisfied if the Annual Benefit payable to a Participant is not more
than $1,000 multiplied by the Participant's number of years of service
or parts thereof (not to exceed 10) with the Employer, and the
Employer has not at any time maintained a defined contribution plan, a
welfare plan as defined in Code Section 419(e), or an individual
medical account as defined in Code Section 415(l)(2), in which such
Participant participated.
7. Reduction For Participation or Service of Less Than 10 Years
If the Employee has less than 10 years of participation in a
defined benefit plan of the Employer, the dollar limitation set forth
in Subsection (I) shall be reduced by 1/10 for each year of
participation (or part thereof) less than 10. If the Employee has
less than 10 years of service with the Employer, the compensation
limitation set forth in Subsection (I) shall be reduced by 1/10 for
each year of service (or part thereof) less than 10. These
adjustments shall be applied in the denominator of the "defined
benefit plan fraction" based upon years of service. Years of service
shall include future years occurring before the Employee reaches age
65, and shall include the year which contains the date the Employee
reaches age 65 only if it can be reasonably anticipated that the
Employee will receive a year of service for such year.
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8. Protected Accrued Benefit
In the case of an Employee who was a participant in one or more
defined benefit plans of the Employer as of January 1, 1987, the
application of this Section 6.7 shall not cause the maximum annual
benefit for such Employee under all such plans to be less than such
Employee's Annual Benefit(s) as of December 31, 1986, provided, such
plans met the requirements of Code Section 415 for all Limitation
Years beginning before May 6, 1986 and any Accrued Benefit is
determined without regard to any change in the terms and conditions of
the plan (or cost of living adjustment) occurring after May 6, 1986.
(II) TWO OR MORE DEFINED BENEFIT PLANS
If the Employer maintains one or more defined benefit plans in
addition to this Plan, the sum of the normal retirement benefits of
all plans will be treated as a single benefit for the purposes of
applying the limitations in Subsection (I). If these benefits exceed,
in the aggregate, the limitations in Subsection (I), the normal
retirement benefit under this Plan shall be reduced (but not below
zero) until the sum of the benefits of the remaining plans satisfy the
limitations.
(III) DEFINED CONTRIBUTION PLAN AND DEFINED BENEFIT PLAN
1. GENERAL RULE: If the Employer maintains (or has ever
maintained) one or more defined contribution plans and one or more
defined benefit plans, the sum of the "defined contribution plan
fraction" and the "defined benefit plan fraction," as defined below,
cannot exceed 1.0 for any Limitation Year. For purposes of this
paragraph, Employee contributions to a qualified defined benefit plan
are treated as a separate defined contribution plan. For purposes of
this paragraph, all defined contribution plans of an Employer are to
be treated as one defined contribution plan and all defined benefit
plans of an Employer are to be treated as one defined benefit plan,
whether or not such plans have been terminated.
If the sum of the defined contribution plan fraction and defined
benefit plan fraction exceeds 1.0, the Annual Benefit of the defined
benefit plans will be reduced so that the sum of the fractions will
not exceed 1.0. In no event will the Annual Benefit be decreased
below the amount of the accrued benefit to date. If additional
reductions are required for the sum of the fractions to equal 1.0, the
reductions will then be made to the Annual Additions of the defined
contribution plans.
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2. Defined Contribution Plan Fraction
A. GENERAL RULE: The defined contribution fraction
for any year is 1 divided by 2, where:
1 is the sum of the actual Annual Additions
to the Employee's account at the close of the
Limitation Year; and
2 is the sum of the lesser of the following
amounts determined for such year and for each
prior year of service of the Employee:
a. 1.25 times the dollar
limitation in effect for each such year
(without regard to the special dollar
limitations for Employee stock ownership
plans), or
b. 1.4 times 25% of the
Employee's compensation for each such
year.
B. If the Employee was a participant as of January 1,
1987, in one or more defined contribution plans maintained
by the Employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of
this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as
of December 31, 1986, and disregarding any changes in the
terms and conditions of the plans made after May 6, 1986,
but using the Code Section 415 limitations applicable to the
1987 Limitation Year. The Annual Additions for any
Limitation Year before 1987 shall not be recomputed to treat
all Employee contributions as Annual Additions.
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3. Defined Benefit Plan Fraction
A. GENERAL RULE: The defined benefit plan fraction
for any year is 1 divided by 2, where:
1 is the projected Annual Benefit of the
Employee under the Plan (determined as of the
close of the Limitation Year), and
2 is the lesser of
a. 1.25 times the dollar
limitation (as adjusted in accordance
with Code Section 415(d)) for such year,
or
b. 1.4 times 100% of the
Employee's Average Compensation for the
high 3 years (as adjusted in accordance
with Code Section 415(d)).
B. Notwithstanding the above, if the Employee was a
participant as of January 1, 1987, in one or more defined
benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125% of the sum of the Annual Benefits
under such plans which the Employee had accrued as of
December 31, 1986, disregarding any changes in the terms and
conditions of the plans after May 5, 1986. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 for all Limitation Years beginning
before 1987.
(IV) DEFINITIONS. For purposes of this Section, the following defined
terms have been used:
1. EMPLOYER: The Company and any other Employer that adopts
this Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Code Section 414(b) as
modified by Code Section 415(h)) or which constitutes trades and
businesses (whether or not incorporated) which are under common
control (as defined in Code
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Section 414(c) as modified by Code Section 415(h)) or an affiliated
service group (as defined in Code Section 414(m)), all such employers
shall be considered a single Employer for purposes of applying the
limitations of this Subsection.
2. EXCESS AMOUNT: The excess of the Employee's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
3. LIMITATION YEAR: The Plan Year.
4. MAXIMUM PERMISSIBLE AMOUNT: For a Limitation Year, the
Maximum Permissible Amount with respect to any Employee shall be the
lesser of:
A. $30,000 (increased annually for Limitation Years
beginning after December 31, 1987 in accordance with
Section 415(d) of the Code to reflect cost-of-living
adjustments), or
B. 25% of the Employee's compensation for the
Limitation Year.
5. COMPENSATION: For purposes of determining compliance with
the limitations of Code Section 415, compensation shall mean an
Employee's earned income, wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered in the course of employment with an Employer maintaining the
Plan, including, but not limited to, commissions paid to salesmen,
compensation for services based on a percentage of profits,
commissions on insurance premiums, tips and bonuses, and excluding the
following:
(a) Employer contributions to a plan of deferred
compensation to the extent contributions are not included in
gross income of the Employee for the taxable year in which
contributed, or on behalf of an Employee to a simplified
Employee pension plan to the extent such contributions are
deductible under Code Section 219(b)(2), and any
distributions from a plan of deferred compensation whether
or not includable in the gross income of the Employee when
distributed (however, any amounts received by an Employee
pursuant to an unfunded nonqualified plan may be considered
as compensation in the year such amounts are included in the
gross income of the Employee);
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(b) amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or
property) held by an Employee becomes freely transferable or
is no longer subject to a substantial risk of forfeiture;
(c) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(d) other amounts which receive special tax benefits,
or contributions made by an Employer (whether or not under a
salary reduction agreement) toward the purchase of an
annuity contract described under Code Section 403(b)
(whether or not the contributions are excludable from the
gross income of the Employee).
For purposes of applying the limitations in this Section, amounts
included as compensation are those actually paid or made available to
an Employee within the Limitation Year. For Limitation Years
beginning after December 31, 1988, compensation shall be limited to
$200,000 prior to January 1, 1994, or $150,000 on or after January 1,
1994 (unless adjusted in the same manner as permitted under Code
Section 415(d)). Notwithstanding anything to the contrary in the
definition, compensation shall include any and all items which may be
includable in compensation under Section 415(c)(3) of the Code.
6. AVERAGE COMPENSATION: The average compensation during an
Employee's high 3 years of service, which period is the 3 consecutive
calendar years (or, the actual number of consecutive years of
employment for those Employees who are employed for less than
3 consecutive years with the Employer) during which the Employee had
the greatest aggregate compensation from the Employer.
7. ANNUAL BENEFIT: A benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to
which Employees do not contribute and under which no rollover
contributions are made.
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8. ANNUAL ADDITIONS: The sum of the following amounts
allocated on behalf of an Employee for a Limitation Year:
A. All Employer contributions,
B. All forfeitures, and
C. All Employee contributions.
6.8 MINIMUM AMOUNT OF RETIREMENT INCOME. Notwithstanding the foregoing
provisions of this Section 6, each Participant who:
(i) was a Participant in the Prior Plan on March 31, 1980; and
(ii) becomes entitled to retirement income benefits under this
Plan
shall be entitled to receive the minimum amount of retirement income provided in
this Subsection 6.8 in lieu of the retirement income provided under the
provisions of Subsection 6.1, 6.2, 6.3 or 6.4 hereof, whichever is applicable,
if the latter amount is less than the minimum amount hereinafter provided in
this Subsection 6.8.
In the case of such a Participant the minimum annual amount of
retirement income (hereinafter called the Prior Plan Retirement Income Minimum),
which he is entitled to receive shall be equal to the amount of retirement
income he would have been entitled to receive under the Prior Plan, had the
Prior Plan as in effect on March 31, 1980 remained in effect through May 31,
1988. The Prior Plan Retirement Income Minimum shall be computed by applying
the provisions of Section 6.1 of the Plan with the following modifications and
changes:
(i) the phrase "not to exceed 60% of his Final Average Annual
Earnings" in the first paragraph of Section 6.1 shall be replaced by
the phrase "not to exceed 45% of his Final Average Annual Earnings";
(ii) the Applicable Integration Level set forth in section 6.1(A)
shall be replaced by the following frozen integration table:
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Participant's Year Applicable Integration
of Birth Level
-------- -------
Before 1914 $ 6,000
1914 - 1938 6,600
1929 - 1935 7,200
After 1935 7,800
(iii) the reference to "1.0%" in Section 6.1(A) shall be
changed to ".9%"; and
(iv) the reference to "1.6%" in Section 6.1(B) shall be changed
to "1.35%."
6.9 OFFSET FOR BENEFITS PROVIDED UNDER PRIOR PLAN. If a Participant under
this Plan was a participant under the Prior Plan and is entitled to any benefit
under group annuity contracts purchased upon the termination of the Prior Plan
on June 30, 1981, including Metropolitan group annuity contracts 3668-3, 3669-4,
3670-7, 3671-8 and 3672-9 or Prudential group annuity contract GA-4102 (the
"Contracts"), then notwithstanding any other provision of the Plan, any benefits
payable to such Participant or his or her beneficiary hereunder (other than a
benefit payable to a spouse of a Participant pursuant to Section 7) shall be
subject to offset as set forth below:
(a) Such Participant's Annual Normal Retirement Income Credit
shall be computed as provided in Section 6.1;
(b) The Annual Normal Retirement Income Credit which would be
required to provide the Actuarial Equivalent of the benefit to which
such Participant or his beneficiary is entitled under the Contracts
shall be computed; and
(c) Such Participant's Annual Normal Retirement Income Credit
for all purposes under the Plan shall be the amount by which (a) above
exceeds (b) above.
6.10 DISABILITY. If a Participant is determined by the Committee to be
"Disabled" as provided in Section 1, such Participant shall be entitled to an
Annual Normal Retirement Income Credit as of his Normal Retirement Date,
considering his Final Average Annual Earnings as of the date of his disability
and his Credited Service at his Normal Retirement
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Date. Payment of such Participant's retirement income shall commence on such
Participant's Normal Retirement Date, which shall be considered as his
"Retirement Date" for the purposes of Section 6 hereof. For the purposes of
Section 7 hereof, a "Disabled" Participant shall be considered in the employ
of the Company until his Retirement Date, subject, however, to the provisions
of Section 1 hereof.
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SECTION 7
DEATH BENEFITS
7.1 SPOUSE'S GUARANTY.
(a) PARTICIPANTS WHO DIE PRIOR TO AGE 55. If a Participant dies
prior to the date on which such Participant attains age 55 and if such
Participant is survived by a spouse legally married to such Participant at the
time of death, the spouse shall receive the retirement income which would have
been payable under Subsection 9.2 hereof if such Participant (1) had been
eligible to retire on the date of death, (2) had retired on the first day of the
month in which death occurred using an Actuarial Equivalent reduction factor for
the period between the Participant's age at death and age 55, and (3) had
elected a 50% Contingent Annuitant Option to be effective on such Retirement
Date with the spouse designated as Contingent Annuitant. Such retirement income
shall be in lieu of any death benefit which otherwise would be payable to such
spouse under the Plan or the Prior Plan.
The first payment of retirement income to a Participant's spouse in
accordance with the provisions of this Subsection 7.1(a) shall be made on the
first day of the calendar month following the calendar month in which the death
of the Participant occurs and payments shall terminate with the payment made on
the first day of the month in which such spouse dies.
(b) PARTICIPANTS WHO DIE AT OR AFTER AGE 55. If a Participant dies
on or after the later of (i) the date on which such Participant had met the
vesting requirements under the Plan set forth in Subsection 8.1 or (ii) the date
on which such Participant attains age 55 but prior to the date on which
retirement income payments commence and if such Participant leaves a surviving
spouse, the spouse shall receive the retirement income which would have been
payable under Subsection 9.2 hereof if such Participant had retired on the first
day of the month in which the death occurred and had elected a 50% Contingent
Annuitant Option to be effective on such Retirement Date with the spouse
designated as the Contingent Annuitant. Such retirement income shall be in lieu
of any death benefit which otherwise would be payable to such spouse under the
Plan or the Prior Plan.
The first payment of retirement income to a Participant's spouse in
accordance with the provisions of this Subsection 7.1(b) shall be made on the
first day of the calendar month following the calendar month in which the death
of the Participant occurs and payments shall terminate with the payment made on
the first day of the month in which such spouse dies.
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SECTION 8
TERMINATION OF SERVICE
8.1 VESTING REQUIREMENTS. Notwithstanding any provision of the Plan to
the contrary, each Participant in the Plan on June 30, 1985, shall be fully
vested in his accrued Plan benefits as of June 30, 1985.
8.2 BENEFITS PAYABLE ON TERMINATION OF SERVICE BEFORE VESTING. If, for
any reason other than death or retirement on his Retirement Date, the Vesting
Service of a Participant is broken before he has met the requirements under the
Plan for vesting, all retirement income theretofore credited to him shall be
cancelled as of the date on which such break occurs.
8.3 BENEFITS PAYABLE ON TERMINATION OF SERVICE AFTER VESTING. If, for any
reason other than death or retirement on his Retirement Date, the Vesting
Service of a Participant is or has been broken after he has accrued 5 years or
more Vesting Service and before he has attained his 55th birthday, he shall,
upon attaining his Normal Retirement Date, be entitled to receive normal
retirement income in an annual amount determined in accordance with the
provisions of Section 6 hereof, based on his Credited Service to the date on
which such break occurs. Such a Participant may at any time not less than 60
days prior to the date on which retirement income payments are to commence to
him, elect to commence receiving reduced retirement income on the first day of
any month within the ten-year period immediately preceding his Normal Retirement
Date. The annual amount of normal retirement income payable to such a
Participant who elects to commence receiving reduced retirement income payments
under the Plan prior to his Normal Retirement Date shall be a percentage of the
normal retirement income he would otherwise have received commencing on his
Normal Retirement Date. (See table set forth herein as Appendix A to the
Plan.) Such a Participant also may elect an optional form of retirement
income in accordance with Section 9 hereof.
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SECTION 9
OPTIONAL FORMS OF RETIREMENT INCOME
9.1 GENERAL PROVISIONS RELATIVE TO OPTIONS. Subject to the conditions and
restrictions hereinafter stated in this Section 9, a Participant, in lieu of the
retirement income payments otherwise provided in the Plan, may elect one of the
following optional forms of retirement income, a special form of retirement
income different from the options described in Subsections 9.2, 9.3, 9.4 and 9.5
hereof. Each such election:
(1) must be made on a form provided by the Company for that
purpose;
(2) except as otherwise provided in Subsections 9.3 and 9.5
hereof, must be made at least 60 days prior to the date on which such
Participant wants it to become effective; provided, however, that if a
Participant's Credited Service is interrupted because his job is
discontinued and as a result his employment terminates or because he
is discharged, he may, within 30 days after his Credited Service is so
interrupted, make an election to become effective on the first day of
any calendar month after the date on which his Credited Service was
interrupted;
(3) except as otherwise provided in Subsection 9.5 hereof, must
be made to become effective on the later of (i) the Participant's
Retirement Date or (ii) the date on which retirement income payments
commence to him; and
(4) may, within 60 days of the date payments are to commence, be
modified or rescinded.
If all of the conditions set forth in Subparagraphs 1 through 3 of
this Subsection 9.1 are not met, such election shall not become effective and
payment shall be made as otherwise provided in the Plan as though the option had
never been elected.
Unless otherwise specified, any optional form of retirement income
elected by a Participant pursuant to this Section 9 will be the Actuarial
Equivalent of the retirement income to which such Participant would otherwise be
entitled under the Plan.
9.2 CONTINGENT RETIREMENT INCOME OPTION. A Participant may elect a
Contingent Retirement Income Option providing payments of retirement income in a
reduced amount to him. Payments under this option will be made as follows:
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(A) TO THE RETIRED PARTICIPANT: A reduced retirement income, the
first monthly payment thereof being payable on the option effective date and
subsequent monthly payments being payable on the first day of each month
thereafter throughout his remaining lifetime, terminating with the payment made
on the first day of the month in which his death occurs.
(B) TO THE PERSON DESIGNATED BY THE PARTICIPANT AS HIS CONTINGENT
ANNUITANT AT THE TIME HE ELECTS THIS OPTION: A contingent retirement income,
the first monthly payment thereof being payable on the first day of the month
following the calendar month in which the death of the Participant occurs on or
after the option effective date, if the Contingent Annuitant is living on such
first day of the month; subsequent monthly payments being payable on the first
day of each month thereafter throughout the Contingent Annuitant's remaining
lifetime, terminating with the monthly payment made on the first day of the
month in which the death of the Contingent Annuitant occurs.
The monthly amount of contingent retirement income payable to the
Contingent Annuitant shall be a percentage of the reduced retirement income
payable under this option to the Participant as requested by him at the time of
his election of this option. This percentage shall be 100%, 75%, or 50%,
provided that if the Contingent Annuitant is other than the Participant's
spouse:
(i) such Contingent Annuitant may not be more than 30 years
younger than the Participant if the requested percentage is 100%.
(ii) such Contingent Annuitant may not be more than 45 years
younger than the Participant if the requested percentage is 75%.
(iii) a corresponding maximum age differential shall apply if
the requested percentage is 50%.
Each election made by a Participant pursuant to this Subsection 9.2
shall provide for payments to be made to such Participant which have a present
value equal to at least 50% of the present value of the total payments to be
made to such Participant and to his Contingent Annuitant.
In the event that (i) the Participant or his Contingent Annuitant is
not living on the option effective date, (ii) the present value of such
Participant's total Normal Retirement Income Credits is less than $3,500, or
(iii) the Participant does not, within 90 days after his election of the option,
but not later than the option effective date, furnish evidence, satisfactory to
the Company, of the age of his Contingent Annuitant, the option shall not become
effective and payment shall be made as otherwise provided in the Plan as if this
option had never been elected.
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9.3 LIFE-TEN YEARS CERTAIN OPTION. A Participant may elect the Life-Ten
Years Certain Option providing payments of retirement income in a reduced amount
to the Participant during his lifetime and terminating with the monthly payment
due on the first day of the month in which the Participant's death occurs with
the provision that if the Participant's death occurs prior to the date he has
received 120 monthly payments, monthly payments in the same amount will be
continued to the person designated by the Participant as his Provisional Payee
until an aggregate of 120 monthly payments have been made to the Participant and
his Provisional Payee. The first monthly payment shall be payable on the option
effective date.
In the event the Participant dies prior to the option effective date,
the option shall not become effective, and payments, if any, shall be made as
otherwise provided in the Plan as though this option had never been elected. If
the Provisional Payee dies before the option effective date, the option shall
not become effective unless the Participant designates another Provisional Payee
prior to the option effective date. The Participant shall have the right to
change his designation of a Provisional Payee at any time before or after the
option effective date.
In the event of the death of the Participant and his Provisional Payee
before 120 monthly payments have been made, the commuted value of the balance of
such payments shall be paid in a lump sum to the executor or administrator of
the estate of the second to die of the Participant and his Provisional Payee.
A Participant may also elect a Life-Five Years (60 months) Certain
Option or a Life-Fifteen Years (180 months) Certain Option with the preceding
provisions of this Section being appropriately applicable thereto.
9.4 LUMP-SUM CASH DISTRIBUTION OPTION. Subject to the conditions
hereinafter stated in this Subsection 9.4, a Participant who retires or a
surviving spouse entitled to a benefit under Section 7, may elect to receive in
lieu of all monthly retirement income payments otherwise payable under the Plan,
a single lump-sum cash distribution from the Plan. In the case of an electing
Participant, the distribution shall be payable on his Retirement Date. Such
election must be made to become effective on such Participant's Retirement Date.
Such lump-sum cash distribution shall be equal to the present value, determined
in accordance with the provisions of this Subsection 9.4, of the normal
retirement income payments otherwise provided for him under the Plan.
If the foregoing requirements are satisfied, the option shall become
effective on the Participant's Retirement Date if he is living on such date and
the present value of the normal retirement income payments otherwise provided
for him under the Plan shall be deemed to be the value arrived at by discounting
the total value of such payments by the greater of:
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(i) 7%; or
(ii) the minimum interest rate established by the Pension Benefit
Guaranty Corporation for lump sum payments in an amount equal to or
less than $25,000 and the maximum interest rate established by the
Pension Benefit Guaranty Corporation for lump-sum payments in an
amount which exceeds $25,000.
provided, that in the case of a Participant who, both on June 30, 1985 and on
May 31, 1988, is either an active Employee or a Participant receiving credit for
Credited Service, whose retirement income did not commence to be paid before
September 1, 1990, and who is living on his retirement income payment
commencement date, such value shall not be less than a minimum value calculated
as follows:
(a) determine the reduced retirement income that the
Participant could have commenced to receive at age 55 or, if
greater, the Participant's age on May 31, 1988, by -
(i) if the Participant has attained at least
age 55 while in the employ of the Company and is,
therefore, eligible to retire at an Early
Retirement Date,
(A) applying the applicable
percentage from the table of percentages
for reducing the normal retirement
income (determined before any offset for
benefits provided under the Prior Plan
as required by Section 6.9 hereof and
before any reduction for total
accumulation under each of the Kellogg
Rust Inc. Money Purchase Pension Plan
and the Kellogg Rust Inc. Profit Sharing
Plan as required by Section 6.11 hereof)
for commencement at Early Retirement
Date, which table is set forth herein as
Appendix A of the Plan,
(B) applying any offset for
benefits provided under the
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Prior Plan as required by Section 6.9
hereof and applying any reduction for total
accumulation under each of the Kellogg
Rust Inc. Money Purchase Pension Plan
and the Kellogg Rust Inc. Profit Sharing
Plan as required by Section 6.11 hereof.
(ii) if the Participant has not attained at
least age 55 while in the employ of the Company,
applying the applicable percentage from the table
of percentages for reducing the normal retirement
income (determined after offset for benefits
provided under the Prior Plan as required by
Section 6.9 hereof and after any reduction for
total accumulation under each of the Kellogg Rust
Inc. Money Purchase Pension Plan and the Kellogg
Rust Inc. Profit Sharing Plan as required by
Section 6.11 hereof) for commencement at
retirement income payment commencement date, which
table was set forth at the end of Section 8.3 of
the Plan as in effect immediately prior to
January 1, 1984 and which table is to be applied
by selecting the "Age" factor which corresponds to
age 55.
(b) determine the present value, as of May 31, 1988
and with reference to the Participant's age as of such date,
of the reduced retirement income determined under
clause (a), above, by applying the Pension Benefit Guaranty
Corporation "Interest Rates and Quantities Used to Value
Immediate and Deferred Annuities", Appendix B, 29 C.F.R.
Part 2619 and by applying the 1971 TPF & C Forecast
Mortality Table Male Rates with a 1 year setback.
(c) adjust the present value determined under
clause (b), above, for the period from May 31, 1988 to the
retirement income payment commencement date by crediting
interest annually, on the basis of June 1 to May 31 "years"
during such period and with interest prorated for any
partial "year," at a rate for the respective "year" that is
equal to the opening annual yield on 5-year U.S. Treasury
securities that
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immediately precedes the beginning of the respective "year,"
and the resulting amount shall be the minimum value.
If such Participant is not living on his Retirement Date, the option
shall not become effective and payments, if any, shall be made as
otherwise provided in the Plan as if the option had never been
elected.
If a Participant elects this option, receives a lump-sum cash
distribution and is subsequently reemployed by the Company, he may redeposit
with the Trustee prior to the occurrence of the earlier of (i) 5 consecutive
one-year breaks in Credited Service or (ii) 5 years from the date of
re-employment by the Company the entire amount of his previous lump-sum
distribution plus interest thereon computed at the rate of 5% per annum,
compounded annually, up to December 31, 1987, and interest thereafter,
compounded annually, computed at 120% of the Federal mid-term rate (as in effect
under Code Section 1274 for the first month of the Plan Year) from the date of
distribution to the date of repayment. At the time of such reemployment, such
Participant shall be informed of his right to redeposit such amount in
accordance with the conditions described above. If such redeposit is made by
such Participant, the Credited Service represented by such lump-sum cash
distribution shall be reinstated.
9.5 STRAIGHT LIFE ANNUITY OPTION. A Participant may elect a Straight Life
Annuity Option, under which all retirement income payments under the Plan shall
be made to him in equal monthly installments. Each monthly installment shall be
equal to 1/12 of his Annual Normal Retirement Income Credit determined in
accordance with Section 6. The first monthly installment shall be payable to
such Participant as of his Retirement Date. Subsequent monthly installments
shall be payable on the first day of each calendar month thereafter and shall
cease on the first day of the month in which he dies.
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SECTION 10
PAYMENT OF RETIREMENT INCOME
10.1 SMALL BENEFITS. The Committee shall direct the Trustee to distribute
the Participant's benefits in a lump-sum payment without the consent of the
Participant if the distribution is equal to or less than $3,500. If payment is
made in a single sum, the amount of such payment shall be the Actuarial
Equivalent of the retirement income otherwise payable.
10.2 FACILITY OF PAYMENT. If any payee under the Plan is a minor, or if
the Company reasonably believes that any payee is legally incapable of giving a
valid receipt and discharge for any payment due him, the Company may have such
payment, or any part thereof, made to the person (or persons) whom it reasonably
believes is caring for or supporting such payee, unless it has received due
notice or claim therefor from a duly appointed guardian or committee of such
payee. Any such payment shall be a payment for the account of such payee and
shall, to the extent thereof, be a complete discharge of any liability under the
Plan to such payee.
10.3 CERTAIN SUSPENSIONS OF PAYMENTS. In the event a Participant who is
receiving or who is eligible to receive benefit payments under the Plan should
become reemployed by the Company or any Affiliate, benefit payments in respect
of such Participant shall be suspended during the period of his reemployment,
and shall resume thereafter, in the manner and amount:
10.3(a) Payment of any benefit derived from Company
contributions to which a Participant would otherwise be entitled shall
be suspended for any calendar month in which the Participant completes
40 or more hours of service with the Company or any member of the
Affiliate. Such suspension shall be effected in accordance with
Department of Labor Regulations Section 2530.203-3 (29 CFR 2530.203-
3), as amended, and rules and operational guidelines promulgated by
the Committee consistent with such regulations.
10.3(b) A Participant shall accrue Credited Service in
accordance with the terms of the Plan for any period prior to his
Normal Retirement Date for which his benefit payments are suspended.
The benefit to which Participant is entitled under the Plan shall be
recomputed as of the first day of the month following the end of the
suspension of benefits by taking into account such additional Credited
Service, compensation, etc. as required by the terms of the Plan, but
in no event shall the benefit payable following the suspension be less
than the benefit to which such Participant was entitled immediately
prior to the suspension.
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10.4 COMMENCEMENT OF PAYMENTS. Unless the Participant elects otherwise in
writing pursuant to Section 5.2 or 8.3, payment of retirement income shall
commence not later than the 60th day after the latest of: (1) the end of the
Plan Year in which the Participant attains age 65, (2) the end of the Plan Year
in which occurs the 10th anniversary of the year in which the Participant began
his participation in the Plan, or (3) the end of the Plan Year in which the
Participant terminates his service with an Affiliate, but in no event later than
the April 1 of the calendar year following the calendar year in which such
Participant attains age 70 1/2.
Notwithstanding any provision herein to the contrary, the distribution
of a Participant's benefits shall be made in accordance with the requirements of
Code Section 401(a)(9), including the incidental death benefit requirements of
Code Section 401(a)(9)(G), and the Treasury Regulations thereunder (including
Proposed Regulation Section 1.401(a)(9)-2).
10.5 PARTICIPANT'S RIGHT TO TRANSFER ELIGIBLE ROLLOVER DISTRIBUTION. This
Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the plan administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; and any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or
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former Employee's spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section 414(p) of the Code,
are distributees with regard to the interest of the spouse or former spouse.
Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
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SECTION 11
NON-ALIENATION OF BENEFITS
No distribution or payment of any kind made pursuant to the Plan shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, either directly or by operation of
law, and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be null and void; nor shall any such
distribution or payment be in any way liable for or subject to the debts,
contracts, liabilities, engagements, or torts of the person entitled thereto,
except as specifically provided in the Plan.
Notwithstanding the foregoing paragraph, if the Company has an
Employee benefit program for which the retired Participant is eligible, such
retired Participant may, subject to the terms of such program, authorize in
writing the deduction from his retirement income of such amounts as he is
required or permitted to contribute under such program.
Notwithstanding the foregoing, the Committee may direct the Trustee to
pay all or a portion of a Participant's benefits under the Plan to such
alternate payee as may be directed by and in accordance with a domestic
relations order or decree issued by a court of competent jurisdiction provided
such order or decree is a "qualified domestic relations order" as that term is
defined in section 414(p) of the Federal Internal Revenue Code.
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SECTION 12
ADMINISTRATION
12.1 ESTABLISHMENT OF THE COMMITTEE. The general administration of the
Plan and the responsibility for carrying out its provisions shall be placed in a
Committee of not less than three nor more than seven persons appointed from time
to time by the Board of Directors of the Company (the "Board") to serve at its
pleasure. Any member of the Committee may resign by delivering his written
resignation to the Board and the secretary of the Committee. The Committee
shall be the Plan Administrator (within the meaning of section 3 of ERISA and
section 414(g) of the Internal Revenue Code) with such authority,
responsibilities and obligations as ERISA and the Internal Revenue Code grant to
and impose upon persons so designated. For the purposes of ERISA, the Committee
shall be a "named fiduciary" under the Plan.
12.2 ORGANIZATION OF THE COMMITTEE. The members of the Committee shall
elect a chairman from their number, and shall also elect a secretary who may be
but need not be one of the members of the Committee. No member of the Committee
who is also an Employee receiving regular compensation as such shall receive any
compensation for his services as a member of the Committee. No bond or other
security shall be required of any member of the Committee in any jurisdiction.
No member of the Committee shall, in such capacity, act or participate in any
action directly affecting his own retirement income under the Plan other than an
action which affects the retirement income of Participants generally.
12.3 POWERS OF THE COMMITTEE. The powers of the Committee shall include,
but not be limited to, the following:
(a) appointing such committees with such powers as it shall
determine, including an executive committee to exercise all powers of
the Committee between meetings of the Committee;
(b) determining the times and places for holding meetings of the
Committee and the notice to be given of such meetings;
(c) employing such agents and assistants, such counsel (who may
be counsel to the Company) and such clerical, medical, accounting,
actuarial and investment services or advisers as the Committee may
require in carrying out the provisions of the Plan;
(d) authorizing one or more of their number or any agent to make
any payment, or to execute or deliver any instrument, on behalf of the
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Committee, except that all requisitions for funds from, and requests,
directions, notifications and instructions to the Trustee shall be
signed either by two members of the Committee or by one member and the
secretary thereof;
(e) fixing and determining the proportion of expenses of the
Plan from time to time to be paid by the Participating Companies and
requiring payment thereof;
(f) directing the Trustee, or appointing one or more investment
managers to direct the Trustee, subject to the conditions set forth in
the Trust Agreement, in all matters concerning the investment of the
Trust Fund;
(g) amending the Plan to the extent provided in Section 16.1;
and
(h) to interpret and construe all terms, provisions, conditions
and limitations of this Plan and to reconcile any inconsistency or
supply any omitted detail that may appear in this Plan in such manner
and to such extent, consistent with the general terms of this Plan, as
the Committee shall deem necessary and proper to effectuate the Plan
for the greatest good of all parties interested in the Plan.
12.4 DUTIES OF THE COMMITTEE. The Committee shall have the general
responsibility for administering the Plan and carrying out its provisions.
Subject to the limitations of the Plan, the Committee from time to time shall
establish rules for the administration of the Plan and the transaction of its
business. As to all matters of administration, interpretation and application
not reserved to the Board, the determination of the Committee as to any disputed
question shall be conclusive. It shall be the duty of the Committee to notify
the Trustee in writing of the monthly amount of Retirement Income which shall be
due to any Participant and the date payments thereof shall commence. The
Committee may at any time or from time to time require the Trustee by a written
direction to purchase one or more annuities, in specific amounts, in the names
of Participants, their spouses, their contingent annuitants, and/or their
beneficiaries from an insurance company designated by the Committee.
12.5 ACTIONS BY THE COMMITTEE. A majority of the members of the Committee
at the time in office shall constitute a quorum for the transaction of business
at any meeting. Resolutions or other actions made or taken by the Committee
shall require the affirmative vote of a majority of the members of the Committee
attending a meeting, or by a majority of members in office by writing without a
meeting.
12.6 ACTUARIAL TABLES AND STUDIES. The Committee shall adopt from time to
time such actuarial tables as may be required in connection with the Plan. As
an aid to the
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Committee in adopting tables and to the Company in fixing the rates of its
contribution payable under the Plan, the actuary designated by the Committee
shall make periodical actuarial studies in relation to the Plan, and shall
recommend tables to the Committee and rates of contribution to the Company.
12.7 ACCOUNTS AND REPORTS. The Committee shall maintain accounts showing
the fiscal transactions of the Plan and shall keep in convenient form such data
as may be necessary for actuarial valuations of the Plan. The Committee shall
prepare annually a report showing a reasonable summary of the financial status
of the Plan and giving a brief account of the operation of the Plan for the past
year and any further information which the Board may require and which the
Committee can reasonably furnish or can obtain from the Trustee. Such report
shall be submitted to the Board and a copy shall be filed in the office of the
secretary of the Committee.
12.8 DISCRETIONARY ACTION. Whenever in the administration of the Plan any
discretionary action is required by the Committee, such action shall be uniform
in nature as applied to all persons similarly situated.
12.9 ACTION TAKEN IN GOOD FAITH. To the extent permitted by ERISA, the
members of the Committee and the Company and its officers and directors shall be
entitled to rely upon all tables, valuations, certificates, and reports
furnished by the actuaries for the Plan, upon all certificates and reports made
by any accountant or by the Trustee, and upon all opinions given by any legal
counsel or investment adviser selected or approved by the Committee, and the
members of the Committee, the Company and its officers and directors shall be
fully protected in respect of any action taken or suffered by them in good faith
in reliance upon any such tables, valuations, certificates, reports, opinions,
or other advice of any such actuary, accountant, the Trustee, investment adviser
or legal counsel, and all action so taken or suffered shall be conclusive upon
each of them and upon all Participants and employees.
12.10 INDEMNIFICATION. To the extent not contrary to ERISA, the
Company shall indemnify the Committee, each member of it and any of them in good
faith in reliance upon any such tables, valuations, certificates, reports,
opinions, or other advice of any such actuary, accountant, the Trustee,
investment adviser or legal counsel, and all action so taken or suffered shall
be conclusive upon each of them and upon all Participants and Employees.
12.11 CLAIMS PROCEDURE. Any Participant or any other person claiming
under a deceased Participant, such as the spouse, joint pensioner or
beneficiary, may submit written application to the Administrator for the payment
of any benefit asserted to be due him under the Plan. Such application shall
set forth the nature of the claim and such other information as the
Administrator may reasonably request. Promptly upon the receipt of any
application required by this Section, the Administrator shall determine whether
or not the
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Participant or spouse, joint pensioner or beneficiary involved is entitled to
a benefit hereunder and, if so, the amount thereof and shall notify the
claimant of its findings.
If a claim is wholly or partially denied, the Administrator shall so
notify the claimant within 90 days after receipt of the claim by the
Administrator, unless special circumstances require an extension of time for
processing the claim. If such an extension of time for processing is required,
written notice of the extension shall be furnished to the claimant prior to the
end of the initial ninety-day period. In no event shall such extension exceed a
period of 90 days from the end of such initial period. The extension notice
shall indicate the special circumstances requiring an extension of time and the
date by which the Administrator expects to render its final decision. Notice of
the Administrator decision to deny a claim in whole or in part shall be set
forth in a manner calculated to be understood by the claimant and shall contain
the following:
(i) the specific reason or reasons for the denial,
(ii) specific reference to the pertinent Plan provisions on which
the denial is based,
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary, and
(iv) an explanation of the claims review procedure set forth in
Section 12.12 hereof.
If notice of denial is not furnished, and if the claim is not granted within the
period of time set forth above, the claim shall be deemed denied for purposes of
proceeding to the review stage described in Section 12.12.
12.12 CLAIMS REVIEW PROCEDURE. If an application filed under
Section 12.11 above shall result in a denial by the Administrator of the benefit
applied for, either in whole or in part, such applicant shall have the right, to
be exercised by written application filed with the Administrator within 60 days
after receipt of notice of the denial of his application or, if no such notice
has been given, within 60 days after the application is deemed denied under
Section 12.11 to request the review of his application and of his entitlement to
the benefit applied for. Such request for review may contain such additional
information and comments as the applicant may wish to present. Within 60 days
after receipt of any such request for review, the Administrator shall reconsider
the application for the benefit in light of such additional information and
comments as the applicant may have presented, and if the applicant shall have so
requested, shall afford the applicant or his designated representative a hearing
before the Administrator. The Administrator shall also permit the applicant or
his designated representative to review pertinent documents in its possession,
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including copies of the Plan document and information provided by the Company
relating to the applicant's entitlement to such benefit. The Administrator
shall make a final determination with respect to the applicant's application for
review as soon as practicable, and in any event not later than 60 days after
receipt of the aforesaid request for review, except that under special
circumstances, such as the necessity for holding a hearing, such sixty-day
period may be extended to the extent necessary, but in no event beyond the
expiration of 120 days after receipt by the Administrator of such request for
review. If such an extension of time for review is required because of special
circumstances, written notice of the extension shall be furnished to the
applicant prior to the commencement of the extension. Notice of such final
determination of the Administrator shall be furnished to the applicant in
writing, in a manner calculated to be understood by him, and shall set forth the
specific reasons for the decision and specific references to the pertinent
provisions of the Plan upon which the decision is based. If the decision on
review is not furnished within the time period set forth above, the claim shall
be deemed denied on review.
12.13 DISPUTED BENEFITS. If any dispute shall arise between a
Participant or other person claiming under a Participant and the Administrator
after the review of a claim for benefits, or in the event any dispute shall
develop as to the person to whom the payment of any benefit under the Plan shall
be made, the Trustee may withhold the payment of all or any part of the benefits
payable hereunder to the Participant or other person claiming under the
Participant until such dispute has been resolved by a court of competent
jurisdiction or settled by the parties involved.
12.14 RESPONSIBILITIES OF NAMED FIDUCIARIES OTHER THAN THE COMMITTEE.
The Trustee shall have such responsibilities with respect to the operation of
the Plan as are set forth in the Trust Agreement. Any investment adviser which
the Committee may employ pursuant to paragraph (c) of Section 12.3 shall have
the responsibility to direct the Trustee in investing and reinvesting the Fund
(or that portion thereof specified by the Committee in the instrument appointing
such adviser) and to report the book value and fair market value of each asset
in the Trust Fund (or such portion thereof) to the Committee periodically, as
such responsibilities may be more fully described in the Trust Agreement.
12.15 ALLOCATION OF RESPONSIBILITIES. The description of the
responsibilities and powers of the Committee and the description of the
responsibilities of the Trustee contained in the foregoing provisions of this
Section 12 shall constitute, for purposes of ERISA, procedures for allocating
responsibilities for the operation and administration of the Plan among named
fiduciaries.
12.16 DESIGNATION OF PERSONS TO CARRY OUT RESPONSIBILITIES OF NAMED
FIDUCIARIES. The Committee, the Trustee and any investment adviser which the
Committee may employ pursuant to paragraph (c) of Section 12.3 may, except as to
responsibilities involving management and control of assets held in the Trust
Fund, designate one or more other persons to carry out any or all of their
respective responsibilities under the Plan, provided
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that such designation shall be made in writing, filed with the Plan's records
and made available for inspection upon request by any Participant or
beneficiary under the Plan.
12.17 PAYMENT OF EXPENSES. All expenses incident to the
administration, termination or protection of the Plan, Trust, or any assets of
the Plan or related funding vehicle including, but not limited to, actuarial,
accounting, investment manager and Trustee fees, shall be paid by the Trustee
from the Trust Fund to the extent such expenses are in the judgment of the
Committee determined to be proper Plan expenses under ERISA; provided that the
obligation of the Trust to pay such expenses shall cease to exist to the extent
such expenses are paid by the Company.
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SECTION 13
MISCELLANEOUS
13.1 NO ENLARGEMENT OF EMPLOYEE RIGHTS. The Plan is strictly a voluntary
undertaking on the part of each Participating Company and shall not be deemed to
constitute a contract between any Participating Company and any Employee, or to
be consideration for, or any inducement to the employment of any Employee.
Nothing contained in the Plan shall be deemed to give any Employee the right to
be retained in the service of any Participating Company or shall be deemed to
interfere with the right of any Participating Company to discharge any Employee
at any time.
No Employee, prior to his retirement under conditions of eligibility
under the Plan for retirement income benefits or prior to his acquiring vested
rights, as provided in Section 8 hereof, shall have any right to or interest in
any portion of any fund arising from any Participating Company's contributions
under the Plan or, in any event, other than as herein specifically provided. No
person shall have any right to retirement income benefits under the Plan, except
to the extent provided herein.
13.2 TRANSFER TO STATUS OF EMPLOYEE. If an Employee is transferred from
another company in the Controlled Group to an employment status which qualifies
him as an Employee, he shall become a Participant in the Plan as of the date on
or after such transfer on which he becomes eligible to participate in the Plan
under the provisions of Section 3 hereof.
If, at the time of such Participant's retirement, death or other break
in his Credited Service, such Participant is entitled to any benefit under any
other defined benefit pension or retirement plan or plans (other than the Prior
Plan) which is or are maintained in whole or in part by contributions of any
member of the Controlled Group, the following special rule shall apply:
Upon such retirement, death or other break in Credited Service of
any such Participant, the benefit to which such Participant is
entitled under the Plan, based upon Credited Service, Monthly
Earnings, etc. during his participation in the Plan, shall be
calculated. The benefit actually payable under this Plan to such
Participant shall be the larger of (a) benefit normally payable
hereunder or (b) the "alternative benefit" described above.
If, at the time of any Participant's retirement, death or other break
in his Credited Service, such Participant is entitled to any benefits under the
Berry Metal Company Efficiency Profit Sharing Plan, the Berry Metal Profit
Sharing Plan for Salaried Employees, or the Profit Sharing Retirement Plan for
Salaried Employees of Swindell-Dressler Corporation and any part of his Credited
Service is recognized for benefit
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purposes under such other plan or plans, the portion of the benefits payable
to or on behalf of such Participant under such plan or plans which were
financed by such contributions shall be recalculated as though they were
payable under the Plan and in the same manner as his benefits, if any, under
the Plan for such period of his Credited Service regardless of the actual
form of payment utilized under such plan or plans. If such recalculated
monthly benefits are equal to or greater than the monthly benefits payable to
or on behalf of such Participant under the Plan with respect to such Credited
Service, the monthly benefits otherwise payable under the Plan shall be
cancelled and he shall be entitled to receive only the benefits payable under
such other plan or plans with respect to such Credited Service. If such
recalculated monthly benefits are less than the monthly benefits payable to
or on behalf of such Participant under the Plan with respect to such Credited
Service, the monthly benefits which would be otherwise payable under the Plan
shall be reduced by the amount of such recalculated monthly benefits under
such other plan or plans and only such reduced monthly benefits shall be
payable to or on behalf of such Participant under the Plan with respect to
such Credited Service.
13.3 TRANSFER FROM STATUS OF EMPLOYEE. Notwithstanding any other
provisions of the Plan, if a Participant is transferred to any employment status
with the Controlled Group which no longer qualifies him as an Employee, his
participation in the Plan shall be suspended until the first to occur of the
following:
(i) his retirement;
(ii) the date of his death;
(iii) the date he is transferred again to an employment
status which qualifies him as an Employee; or
(iv) the date on which his Credited Service is broken for any
reason other than his retirement or death.
In determining the amount of retirement income, if any, payable to such
Participant under the Plan, his Final Average Monthly Earnings shall be
determined as of the date of his transfer of employment status and there shall
be excluded from his Credited Service (but not his Vesting Service) all periods
after the date of his transfer.
If he is transferred again to an employment status which qualifies him
as an Employee, his participation in the Plan shall be resumed immediately after
such transfer.
13.4 NOTICE OF ADDRESS. Each Participant, former or retired Participant,
Beneficiary, Contingent Annuitant, Provisional Payee and each other person
entitled to benefits under the Plan must file with the Company, in writing, his
post office address and each change of post office address. Any communication,
statement, or notice addressed
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to such a person at his latest post office address as filed with the Company
will, on deposit in United States mail with postage prepaid, be binding upon
such person for all purposes of the Plan and neither the Trustee, nor any
insurance company, nor the Company shall be obliged to undertake a search to
ascertain the whereabouts of any such person.
13.5 DATA. Each Participant, former or retired Participant, Beneficiary,
contingent annuitant, provisional payee and each other person entitled to
benefits under the Plan must furnish to the Company and any trustee and/or
insurance company selected for the purpose of carrying out the provisions of the
Plan, such documents, evidence, or information as the Company or such trustee
and/or insurance company may consider necessary or desirable for the purpose of
administering the Plan, or necessary to protect the Company and such trustee
and/or insurance company; and it shall be a condition of the Plan that each such
person must furnish such information promptly and sign such documents before any
benefits become payable to such person under the Plan.
13.6 MERGER OR CONSOLIDATION OF PLAN. In the event that at any time the
Plan is merged or consolidated with or if the assets and/or liabilities of the
Plan are transferred to any other plan, each Participant shall be entitled to
receive a benefit under such other plan if it were terminated immediately after
such merger, consolidation, or transfer, which would be equal to or greater than
the benefit that he would have received had the Plan terminated immediately
prior to such merger, consolidation, or transfer.
13.7 UNCLAIMED BENEFITS: If at, after or during the time when a benefit
hereunder is payable to any Participant, Beneficiary, or other distributee, the
Committee, upon request of the Trustee, or in its own instance, shall mail by
registered or certified mail to such Participant, Beneficiary, or other
distributee at his last known address a written demand for his current address
or for satisfactory evidence of his continued life, or both, and if such
Participant, Beneficiary, or other distributee shall fail to furnish the same to
the Committee within two (2) years from the mailing of such demand, the
Committee may, in its sole discretion, determine that such Participant,
Beneficiary, or other distributee has forfeited his right to such benefit and
declare such benefit, or any unpaid portion thereof, terminated as if the death
of the Participant (with no surviving Beneficiary or other distributee) had
occurred on the date of the last payment made thereon, or the date such
Participant, Beneficiary, or other distributee first became entitled to receive
benefit payments, whichever is later; provided, however, that such forfeited
benefit shall be reinstated if a claim for the same is made by the Participant,
Beneficiary, or other distributee at any time thereafter.
13.8 TEMPORARY LIMITATIONS. In the event that the Plan is terminated or
the full current costs thereof applicable to the first ten years following a
Commencement Date, as hereinafter defined, have not been met at any time, the
benefits provided under the Plan which any of the 25 Highest Paid Employees, as
hereinafter defined, may receive will not
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exceed those which can be provided from Company contributions not in excess
of the largest of the following amounts:
(a) the Employer contributions (or funds attributable thereto)
which would have been applied to provide the benefits for such
Employees if the Plan as in force on the date preceding any
Commencement Date has been continued without change,
(b) $20,000, or
(c) the sum of (1) the Company contributions (or funds
attributable thereto) which would have been applied to provide the
benefits for such Employees if the Plan as in effect on the day
preceding any applicable Commencement Date had been terminated on that
day, plus (2) an amount computed by multiplying the number of years in
the period for which the current costs of the Plan on and after any
applicable Commencement Date are met by 20% of the first $50,000 of
his average annual compensation during such period.
These conditions will not restrict the current payment of full pension
benefits called for by the Plan for any Participant, survivor or beneficiary
while the Plan is in full effect and its full current costs have been met. In
the event that any funds are realized by operation of the restrictions set forth
in this Section, they will be used to reduce subsequent Company contributions to
the Plan, but if the Company has ceased contributions, they will be used for the
benefit of Employees, other than the 25 Highest Paid Employees, on a basis which
will not result in discrimination in favor of the more highly compensated
Employees.
For the purposes of this Section, the "25 Highest Paid Employees"
shall mean the 25 highest paid Employees of the Company as of the applicable
Commencement Date, including any such highest paid Employees who are not covered
by the Plan at that time but who may later be covered, but excluding any
Employees whose annual benefit will not exceed $1,500.
For the purposes of this Section, "Commencement Date" shall mean
July 1, 1981 and also the effective date of any amendment to the Plan which
increases substantially the possibility of discrimination in favor of highly
compensated Employees. The extension of the Plan by action of the Company to a
group of Employees not previously covered hereunder will not constitute an
amendment of the Plan, but the effective date of such extension will constitute
a Commencement Date for that group only.
In the event that it should be determined by statute or ruling by the
Internal Revenue Service that the provisions of this Section 13.8 are no longer
necessary to qualify
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the Plan under the Internal Revenue Code, this Section 13.8 will become
ineffective without amendment to the Plan.
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SECTION 14
FUNDING
14.1 TRUSTS AND INSURANCE CONTRACTS. It is intended that benefits under
the Plan shall be funded by means of the Trust, contracts issued by an insurance
company, or a combination of such media, or through the Trust and such other
trusts and/or insurance contracts as the Company in its discretion may establish
or cause to be established or entered into for the purpose of carrying out the
Plan (hereinafter in this Section 14 referred to as Trusts or Insurance
Contracts). The Company will determine the form, terms and provisions of any
such Trusts and Insurance Contracts. The Company may also in its discretion
direct any trustee or trustees or insurance company or insurance companies to
cause any funds held by such trustee or trustees and/or insurance company or
insurance companies for the purpose of providing benefits to Participants to be
transferred by such trustee or trustees and/or insurance company or insurance
companies to any other trustee or trustees and/or insurance company or insurance
companies to be held for the same purpose.
14.2 CONTRIBUTIONS. During the continuance of the Plan and for the purpose
of providing for the benefits under the Plan, each Participating Company intends
to deposit from time to time with the Trustee or trustees and/or with the
insurance company or insurance companies to be held in the Trusts and/or
Insurance Contracts such amounts of money as are required under accepted
actuarial principles to maintain the Plan in sound condition under the Code.
The Company may direct the Trustee and/or the insurance company to transfer all
or any part of the money deposited with it to any other trustee and/or insurance
company under other Trusts and/or Insurance Contracts described in
Subsection 14.1 hereof.
14.3 IRREVOCABILITY. A Participating Company shall have no right, title or
interest in or to any contributions made under the Plan and no part of the Trust
Fund or the assets held under a group annuity contract or any such other Trusts
or Insurance Contracts described in Subsection 14.1 hereof shall revert to a
Participating Company, except that upon the termination of the Plan as to any
Participating Company and after satisfaction or provision for the satisfaction
of all fixed and contingent liabilities or obligations to persons entitled to
benefits upon such termination, any balance remaining in the Trust Fund or under
a group annuity contract, or any such other Trusts or Insurance Contracts
described in Subsection 14.1 hereof, attributable to such Participating Company
shall be distributed to or as directed by such Participating Company.
Notwithstanding the foregoing:
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(i) if any contribution is made by a Participating Company by a
mistake of fact, such contribution shall be returned to such
Participating Company within 1 year after the payment;
(ii) if a contribution is disallowed as a deduction under
section 404 of the Internal Revenue Code, then, to the extent the
deduction is disallowed, such contribution shall be returned within
1 year after the disallowance; and
(iii) if the Plan is initially determined by the Internal
Revenue Service not to qualify under section 401 of the Internal
Revenue Code, any contributions made under the Plan shall be returned
within one year after the denial of qualification.
14.4 PAYMENT OF BENEFITS. Each Participating Company intends the Plan to
be permanent, as distinguished from a temporary program. Benefits under the
Plan are to be paid from the Trust Fund or a group annuity contract or any such
other Trusts or Insurance Contracts described in Subsection 14.1 hereof and only
to the extent that the Trust Fund and group annuity contract or any such other
Trusts or Insurance Contracts described in Subsection 14.1 hereof shall suffice
for the purpose. No Participating Company, nor any of the officers, Employees,
members of the Board of any Participating Company, or agents of any
Participating Company guarantees the payment of benefits hereunder except as
provided in ERISA and any amendments thereto. Except as provided in ERISA, any
person having any claim under or in connection with the Plan shall look solely
to the Trust Fund, group annuity contract and/or any such Trust or Insurance
Contracts described in Subsection 14.1 hereof.
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SECTION 15
QUALIFICATION UNDER INTERNAL REVENUE CODE
The Plan and the Trust and Insurance Contracts described in
Subsection 14.1 hereof are intended to meet the requirements of section 401(a)
of the Code, so that the income of the Trust Fund may be exempt from taxation
under section 501(a) of the Internal Revenue Code and contributions of each
Participating Company under the Plan may be deductible for Federal Income Tax
purposes under section 404 of the Code. Any modification or amendment of the
Plan may be made retroactive, as necessary or appropriate, to establish or
maintain such qualifications.
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SECTION 16
AMENDMENT AND TERMINATION
16.1 AUTHORITY TO AMEND OR TERMINATE. The Company hopes and expects to
continue the Plan indefinitely but reserves the right to terminate, or to
modify, alter or amend the Plan or the Trust Agreement from time to time to any
extent that it may, at its sole and complete discretion, deem advisable
including, but without limiting the generality of the foregoing, any amendment
deemed necessary to qualify or to ensure the continued qualification of the Plan
under the Internal Revenue Code. The foregoing right shall be exercised only by
action of the Board except that the Committee, by a written instrument, duly
executed by a majority of its members, may make (a) any amendment which may be
necessary or desirable to ensure the continued qualification of the Plan and its
related trust under the Internal Revenue Code or which may be necessary to
comply with the requirements of ERISA, or any regulations or interpretations
issued by the Department of Labor or the Internal Revenue Service with respect
to the requirements of ERISA or the Internal Revenue Code, (b) any amendment
which is required by the provisions of any collective bargaining agreement
between the Company and its Employees and (c) any other amendment which will not
involve an estimated annual cost under the Plan (determined at the time of the
amendment in a manner consistent with the requirements of ERISA) in excess of
$200,000. No such amendment shall increase the duties or responsibilities of
the Trustee without its consent thereto in writing. No such amendment shall
have the effect of diverting the whole or any part of the principal or income of
the Fund to purposes other than for the exclusive benefit of Participants and
others having an interest in the Plan, prior to the satisfaction of all
liabilities with respect to them. It is intended that termination of the Plan
by one or more of the Participating Companies will not necessarily constitute
termination of the Plan by the remaining Participating Companies.
16.2 EFFECT OF TERMINATION. Upon the termination or partial termination of
the Plan, the rights of all affected Participants to their respective accrued
benefits under the Plan shall be nonforfeitable to the extent then funded. Upon
the withdrawal from the Plan of, or the complete discontinuance of contributions
to the Plan by any Participating Company such rights of all Participants who are
Employees of such Company shall likewise be nonforfeitable to the extent then
funded. In either such event, the Committee shall (except as provided in
Section 16.3) direct the Trustee as to the allocation of the applicable assets
of the Plan, in accordance with the following provisions of this Section 16.2.
After providing for the expenses of the Plan, the assets remaining in the
account of each Participating Company withdrawing from the Plan or discontinuing
contributions under the Plan shall be used and applied for the benefit of its
Employees and their beneficiaries in the manner prescribed by Section 4044 of
ERISA (or corresponding provision of any subsequent applicable law in effect at
the time). The Committee may require that the benefits accrued hereunder be
paid in cash or in the form of immediate or deferred
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<PAGE>
annuities or otherwise as it shall determine. After such allocation has been
made, any residue of such applicable assets of the Plan may be distributed to
such Company if all liabilities of the Plan with respect to its Employees and
their beneficiaries have been satisfied and the distribution does not
contravene any applicable provisions of law.
16.3 TRUST FUND CONTINUATION. If the Plan is terminated but the Board
determines that the Fund shall be continued pursuant to its terms and the
provisions of this Section 16.3, no further contributions will thereafter be
made by the Company, the rights of all Participants to their accrued benefits
under the Plan shall be nonforfeitable to the extent then funded, but the Fund
shall be administered as though the Plan were otherwise in full force and
effect, except that no further benefits will accrue after the date of
termination. If the Fund is subsequently terminated, the Fund shall then be
allocated and disbursed in accordance with the provisions of Section 16.2.
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<PAGE>
SECTION 17
TOP-HEAVY PLAN REQUIREMENTS
17.1 GENERAL RULE: For any Plan Year for which this Plan is a Top-Heavy
Plan, as defined in Section 17.8, any other provisions of this Plan to the
contrary notwithstanding, this Plan shall be subject to the provisions of this
Section 17.
17.2 VESTING PROVISIONS: Each Participant who has completed an "hour of
service" (as defined in Section 1 hereof) after the Plan becomes top heavy and
while the Plan is top heavy and who has completed the Service specified in the
following table shall be vested in his accrued benefit under this Plan at least
as rapidly as is provided in the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 years 0%
2 but less than 3 years 20%
3 but less than 4 years 40%
4 but less than 5 years 60%
5 years or more 100%
If an account becomes vested by reason of the application of the preceding
schedule, it may not thereafter be forfeited by reason of reemployment after
retirement pursuant to a suspension of benefits provision, by reason of
withdrawal of any mandatory Employee contributions to which employer
contributions were keyed, or for any other reason. If the Plan subsequently
ceases to be top-heavy, the preceding schedule shall continue to apply with
respect to any Participant who had at least 3 years of service (as defined in
Treasury Regulation Section 1.411(a)-8T(b)(3)) as of the close of the last year
that the Plan was top-heavy, except that each Participant whose non-forfeitable
percentage of his accrued benefit derived from employer contributions is
determined under such amended schedule, and who has completed at least 3 years
of service with the employer, may elect, during the election period, to have the
non-forfeitable percentage of his accrued benefit derived from employer
contributions determined without regard to such amendment if his non-forfeitable
percentage under the Plan as amended is, at any time, less than such percentage
determined without regard to such amendment. For all other Participants, the
non-forfeitable percentage of their accrued benefit prior to the date the Plan
ceased to be top-heavy shall not be reduced, but future increases in the non-
forfeitable percentage shall be made only in accordance with Section 8.1.
17.3 MINIMUM BENEFIT PROVISIONS: Each Participant who is a Non-Key
Employee, as defined in Section 17.8(d), shall be entitled to an accrued benefit
in the form of a single-life annuity (with no ancillary benefits) beginning at
his Normal Retirement Date, that shall
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<PAGE>
not be less than his average annual Participant's compensation, within the
meaning of Code Section 415, for years in the Testing Period multiplied by
the lesser of: (a) 2% multiplied by the number of years of Top-Heavy Service
or (b) 20%. A Non-Key Employee may not fail to receive a minimum benefit
because of a failure to receive a specified amount of compensation or a
failure to make mandatory Employee or elective contributions.
"Testing Period" means, with respect to a Participant, the period of
consecutive years of Top-Heavy Service, not exceeding 5, during which the
Participant had the greatest aggregate compensation, within the meaning of Code
Section 415, from the Company. "Top-Heavy Service" means his Credited Service
credited under Section 1. Top-Heavy Service shall not include any Credited
Service before July 1, 1984 or any Credited Service that begins after the close
of the last Plan Year in which the Plan was a Top-Heavy Plan. Years before and
after such excluded periods shall be considered consecutive for purposes of
determining the Testing Period.
17.4 LIMITATION ON COMPENSATION: A Participant's annual compensation taken
into account under this Section 17 and under Section 1 for purposes of computing
benefits under this Plan shall not be in excess of $200,000 prior to January 1,
1994, or $150,000 on or after January 1, 1994. Such amount shall be adjusted
automatically for each Plan Year to the amount prescribed by the Secretary of
the Treasury or his delegate pursuant to regulations for the calendar year in
which such Plan Year commences.
17.5 LIMITATION OF BENEFITS: In the event that the Company, other Employer
or an Affiliate (hereinafter in this Article collectively referred to as a
"Considered Company") also maintains a defined contribution plan providing
contributions on behalf of Participants in this Plan, one of the two following
provisions shall apply:
(a) If for a Plan Year this would not be a Top-Heavy Plan if "90
percent" were substituted for "60 percent" in Section 17.8, then the
percentages used in Section 17.3 are changed to be the lesser of
(i) 3% multiplied by the number of years of Top-Heavy Service or
(ii) the lesser of 30% or 20% plus 1% for each year the Plan is taken
into account under this subsection (a).
(b) If for a Plan Year this Plan would continue to be a Top-
Heavy Plan if "90 percent" were substituted for "60 percent" in
Section 17.8, then the denominator of both the defined contribution
plan fraction and the defined benefit plan fraction shall be
calculated as set forth in Section 6.7(III), for the limitation year
ending in such Plan Year by substituting "1.0" for "1.25" in each
place such figure appears. This subsection (b) will not apply for
such Plan Year with respect to any individual for whom there are no
(i) Company contributions, forfeitures or voluntary
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<PAGE>
non-deductible contributions allocated to such individual or
(ii) accruals for such individual under the defined benefit plan.
Furthermore, the transitional rule set forth in Code
Section 415(e)(6)(B)(i) shall be applied by substituting "Forty-One
Thousand Five Hundred Dollars ($41,500)" for "Fifty-One Thousand
Eight Hundred Seventy-Five Dollars ($51,875)" where it appears therein.
17.6 COORDINATION WITH OTHER PLANS: In the event that another defined
contribution or defined benefit plan maintained by a Considered Company provides
contributions or benefits on behalf of Participants in this Plan, such other
plan shall be treated as a part of this Plan pursuant to applicable principles
prescribed by U.S. Treasury Regulations or IRS rulings to determine whether this
Plan satisfies the requirements of Sections 17.2, 17.3 and 17.4 and to avoid
inappropriate omissions or inappropriate duplication of minimum contributions.
Such determination shall be made upon the advice of counsel by the Committee.
In the event a Participant is covered both by a top-heavy defined benefit plan
and a top-heavy defined contribution plan, a comparability analysis (as
prescribed by Revenue Ruling 81-202 or any successor ruling) shall be performed
in order to establish that the plans are providing benefits at least equal to
the defined benefit minimum. If it becomes necessary to establish that the
plans are providing benefits not less than the defined benefit minimum, the
Employer or the Company shall take appropriate action to cause an adjustment in
either or both of benefits or contributions in order that such minimum benefits
be provided.
17.7 DISTRIBUTIONS TO CERTAIN KEY EMPLOYEES: Notwithstanding any other
provision of this Plan to the contrary, the entire interest in this Plan of each
Participant who is a 5% owner (as described in Section 416(i)(A) of the Code
determined with respect to the Plan Year ending in the calendar year in which
such individual attains age 70 1/2), shall be distributed to such Participant
not later than the first day of April following the calendar year in which such
individual attains age 70 1/2.
17.8 DETERMINATION OF TOP-HEAVY STATUS: The Plan shall be a Top-Heavy Plan
for any Plan Year if, as of the Determination Date, the present value of the
cumulative accrued benefits under the Plan determined as of the Valuation Date
for Participants (including former Participants) who are Key Employees exceeds
60% of the present value of the cumulative accrued benefits under the Plan for
all Participants (including former Participants) or, if this Plan is required to
be in an Aggregation Group, any such Plan Year in which such Group is a Top-
Heavy Group.
In determining Top-Heavy status, if an individual has not performed
1 hour of service for any Considered Company at any time during the five-year
period ending on the Determination Date, any accrued benefit for such individual
and the aggregate accounts of such individual shall not be taken into account.
The accrued benefit of any Employee (other than a Key Employee) shall be
determined under (a) the method, if any,
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<PAGE>
that uniformly applies for accrual purposes under all plans maintained by the
Aggregation Group or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Code Section 411(b)(1)(C).
For purposes of this Section, the capitalized words have the following
meanings:
(a) "Aggregation Group" means the group of plans, if any, that
includes both the group of plans required to be aggregated and the
group of plans permitted to be aggregated. The group of plans
required to be aggregated (the "required aggregation group") includes:
(i) Each plan of a Considered Company in which a Key
Employee is a participant in the Plan Year containing the
Determination Date, or any of the 4 preceding Plan Years,
and
(ii) Each other plan, including collectively bargained
plans, of a Considered Company which, during this period,
enables a plan in which a Key Employee is a participant to
meet the requirements of Section 401(a)(4) or 410 of the
Code.
The group of plans that are permitted to be aggregated (the
"permissive aggregation group") includes the required aggregation
group plus one or more plans of a Considered Company that is not part
of the required aggregation group and that the Considered Company
certifies as a plan within the permissive aggregation group. Such
plan or plans may be added to the permissive aggregation group only
if, after the addition, the aggregation group as a whole continues to
satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(b) "Determination Date" means for any Plan Year the last day of
the immediately preceding Plan Year or in the case of the first Plan
Year of the Plan, Determination Date means the last day of such Plan
Year.
(c) "Key Employee" means any Participant (and any beneficiary of
a Participant under this Plan) who at any time during the
determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the amount in effect
under Code Section 415(b)(1)(A), an owner (or considered an owner
under Code Section 318) of 1 of the 10 largest interests in the
Employer if such individual's compensation exceeds 100% of the amount
in effect under Section 6.7(IV)4A, a 5% owner of the Employer, or a 1%
owner of the
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<PAGE>
Employer who has an annual compensation of more than $150,000. The
determination period is the Plan Year containing the determination
date and the 4 preceding Plan Years. The determination of who is a
Key Employee will be made in accordance with Code Section 416(i)(1)
and the regulations thereunder.
(d) A "Non-Key Employee" means any Employee (and any beneficiary
of an Employee) who is not a Key Employee.
(e) "Top-Heavy Group" means the Aggregation Group, if as of the
applicable Determination Date, the sum of the present value of the
cumulative accrued benefits for Key Employees under all defined
benefit plans included in the Aggregation Group plus the aggregate of
the accounts of Key Employees under all defined contribution plans
included in the Aggregation Group exceeds 60% of the sum of the
present value of the cumulative accrued benefits for all Employees,
excluding former Key Employees as provided in paragraph (i) below,
under all such defined benefit plans plus the aggregate accounts for
all Employees, excluding former Key Employees as provided in
paragraph (i) below, under all such defined contribution plans. In
determining Top- Heavy status, if an individual has not performed
1 hour of service for any Considered Company at any time during the
five-year period ending on the Determination Date, any accrued benefit
for such individual and the aggregate accounts of such individual
shall not be taken into account. If the Aggregation Group that is a
Top-Heavy Group is a permissive aggregation group, only those plans
that are part of the required aggregation group will be treated as
Top-Heavy Plans. If the Aggregation Group is not a Top-Heavy Group,
no plan within such group will be a Top-Heavy Plan.
In determining whether this Plan constitutes a Top-Heavy Plan, the
Committee (or its agent) will make the following adjustments in
connection therewith:
(f) When more than one plan is aggregated, the Committee shall
determine separately for each plan as of each plan's Determination
Date the present value of the accrued benefits (for this purpose using
the actuarial assumptions set forth in the applicable plan, and if
such assumptions are not set forth in the applicable plan, using the
assumptions set forth in this Plan) or account balance. The results
shall then be aggregated by adding the results of each plan as of the
Determination Dates for such plans that fall within the same calendar
year.
-59-
<PAGE>
(g) In determining the present value of the cumulative accrued
benefit (for this purpose using the actuarial assumptions set forth in
Section 1(xv) hereof or the amount of the account of any Employee,
such present value or account will include the amount in dollar value
of the aggregate distributions made to such Employee under the
applicable plan during the five-year period ending on the
Determination Date unless reflected in the value of the accrued
benefit or account balance as of the most recent Valuation Date. The
amounts will include distributions to Employees which represented the
entire amount credited to their accounts under the applicable plan.
(h) Further, in making such determination, such present value or
such account shall not include any rollover contribution (or similar
transfer) initiated by the Employee and made after December 31, 1983
to an applicable plan.
(i) If the rollover contribution (or similar transfer)
is initiated by the Employee and made to or from a plan
maintained by another Considered Company, the plan providing
the distribution shall include such distribution in the
present value or such account; the plan accepting the
distribution shall not include such distribution in the
present value or such account unless the plan accepted it
before December 31, 1983.
(ii) If the rollover contribution (or similar
transfer) is not initiated by the Employee or made from a
plan maintained by another Considered Company, the plan
accepting the distribution shall include such distribution
in the present value or such account, whether the plan
accepted the distribution before or after December 31, 1983;
the plan making the distribution shall not include the
distribution in the present value or such account.
(i) Further, in making such determination, in any case where an
individual is a Non-Key Employee with respect to an applicable plan
but was a Key Employee with respect to such plan for any prior Plan
Year, any accrued benefit and any account of such Employee shall be
altogether disregarded. For this purpose, to the extent that a Key
Employee is deemed to be a Key Employee if he or she met the
definition of Key Employee within any of the 4 preceding Plan Years,
this provision shall apply following the end of such period of time.
-60-
<PAGE>
(j) "Valuation Date" means for purposes for determining the
present value of an accrued benefit as of the Determination Date the
date determined as of the most recent valuation date which is within a
twelve-month period ending on the Determination Date. For the first
plan year of a plan, the accrued benefit for a current Employee shall
be determined either as if the individual (i) terminated service as of
the Determination Date or (ii) terminated service as of the Valuation
Date, but taking into account the estimated accrued benefit as of the
Determination Date. The Valuation Date shall be determined in
accordance with the principles set forth in Q.&A. T-25 of Treasury
Regulations Section 1.416-1.
(k) For purposes of this Section, "compensation" shall have the
meaning given to it in Section 6.7(IV)5 of the Plan.
IN WITNESS WHEREOF, The M. W. Kellogg Company has caused these
presents to be executed by its duly authorized officers in a number of copies,
all of which shall constitute one and the same instrument, which may be
sufficiently evidenced by any executed copy hereof, this 15th day of
April, 1994, but effective as of January 1, 1989.
THE M. W. KELLOGG COMPANY
By David L. Bartlett
-------------------------------
David L. Bartlett
Vice President, Human Resources
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<PAGE>
APPENDIX A
EARLY RETIREMENT REDUCTION FACTORS
July 1, 1969 - Pullman Inc. Retirement Plan
YEARS OF CREDITED SERVICE:
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
55.0 .450 .500 .550 .600 .650
- --------------------------------------------------------------------------------
55.1 .453 .503 .553 .603 .653
- --------------------------------------------------------------------------------
55.2 .455 .505 .555 .605 .655
- --------------------------------------------------------------------------------
55.3 .458 .508 .558 .608 .658
- --------------------------------------------------------------------------------
55.4 .460 .510 .560 .610 .660
- --------------------------------------------------------------------------------
55.5 .463 .513 .563 .613 .663
- --------------------------------------------------------------------------------
55.6 .465 .515 .565 .615 .665
- --------------------------------------------------------------------------------
55.7 .468 .518 .568 .618 .668
- --------------------------------------------------------------------------------
55.8 .470 .520 .570 .620 .670
- --------------------------------------------------------------------------------
55.9 .473 .523 .573 .622 .673
- --------------------------------------------------------------------------------
55.10 .475 .525 .575 .625 .675
- --------------------------------------------------------------------------------
55.11 .478 .528 .578 .628 .678
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
56.0 .480 .530 .580 .630 .680
- --------------------------------------------------------------------------------
56.1 .483 .533 .583 .633 .683
- --------------------------------------------------------------------------------
56.2 .487 .537 .587 .637 .687
- --------------------------------------------------------------------------------
56.3 .490 .540 .590 .640 .690
- --------------------------------------------------------------------------------
56.4 .493 .543 .593 .643 .693
- --------------------------------------------------------------------------------
56.5 .497 .547 .597 .647 .697
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
56.6 .500 .550 .600 .650 .700
- --------------------------------------------------------------------------------
56.7 .503 .553 .603 .653 .703
- --------------------------------------------------------------------------------
56.8 .507 .557 .607 .657 .707
- --------------------------------------------------------------------------------
56.9 .510 .560 .610 .660 .710
- --------------------------------------------------------------------------------
56.10 .513 .563 .613 .663 .713
- --------------------------------------------------------------------------------
56.11 .517 .567 .617 .667 .717
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
57.0 .520 .570 .620 .670 .720
- --------------------------------------------------------------------------------
57.1 .523 .573 .623 .673 .723
- --------------------------------------------------------------------------------
57.2 .527 .577 .627 .677 .727
- --------------------------------------------------------------------------------
57.3 .530 .580 .630 .680 .730
- --------------------------------------------------------------------------------
57.4 .533 .583 .633 .683 .733
- --------------------------------------------------------------------------------
57.5 .537 .587 .637 .687 .737
- --------------------------------------------------------------------------------
57.6 .540 .590 .640 .690 .740
- --------------------------------------------------------------------------------
57.7 .543 .593 .643 .693 .743
- --------------------------------------------------------------------------------
57.8 .547 .597 .647 .697 .747
- --------------------------------------------------------------------------------
57.9 .550 .600 .650 .700 .750
- --------------------------------------------------------------------------------
57.10 .533 .603 .653 .703 .753
- --------------------------------------------------------------------------------
57.11 .557 .607 .657 .707 .757
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
58.0 .560 .610 .660 .710 .760
- --------------------------------------------------------------------------------
58.1 .563 .613 .663 .713 .763
- --------------------------------------------------------------------------------
58.2 .567 .617 .667 .717 .767
- --------------------------------------------------------------------------------
58.3 .570 .620 .670 .720 .770
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
58.4 .573 .623 .673 .723 .773
- --------------------------------------------------------------------------------
58.5 .577 .627 .677 .727 .777
- --------------------------------------------------------------------------------
58.6 .580 .630 .680 .730 .780
- --------------------------------------------------------------------------------
58.7 .583 .633 .683 .733 .783
- --------------------------------------------------------------------------------
58.8 .587 .637 .687 .737 .787
- --------------------------------------------------------------------------------
58.9 .590 .640 .690 .740 .790
- --------------------------------------------------------------------------------
58.10 .593 .643 .693 .743 .793
- --------------------------------------------------------------------------------
58.11 .597 .647 .697 .747 .797
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
59.0 .600 .650 .700 .750 .800
- --------------------------------------------------------------------------------
59.1 .604 .654 .704 .754 .804
- --------------------------------------------------------------------------------
59.2 .608 .658 .708 .758 .808
- --------------------------------------------------------------------------------
59.3 .613 .663 .713 .763 .813
- --------------------------------------------------------------------------------
59.4 .617 .667 .717 .767 .817
- --------------------------------------------------------------------------------
59.5 .621 .671 .721 .771 .821
- --------------------------------------------------------------------------------
59.6 .625 .675 .725 .775 .825
- --------------------------------------------------------------------------------
59.7 .629 .679 .729 .779 .829
- --------------------------------------------------------------------------------
59.8 .633 .683 .733 .783 .833
- --------------------------------------------------------------------------------
59.9 .638 .688 .738 .788 .838
- --------------------------------------------------------------------------------
59.10 .642 .692 .742 .792 .842
- --------------------------------------------------------------------------------
59.11 .646 .696 .746 .796 .846
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
60.0 .650 .700 .750 .800 .850
- --------------------------------------------------------------------------------
60.1 .654 .704 .754 .804 .854
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
60.2 .658 .708 .758 .808 .858
- --------------------------------------------------------------------------------
60.3 .663 .713 .763 .813 .863
- --------------------------------------------------------------------------------
60.4 .667 .717 .767 .817 .867
- --------------------------------------------------------------------------------
60.5 .671 .721 .771 .821 .871
- --------------------------------------------------------------------------------
60.6 .675 .725 .775 .825 .875
- --------------------------------------------------------------------------------
60.7 .679 .729 .779 .829 .879
- --------------------------------------------------------------------------------
60.8 .683 .733 .783 .833 .883
- --------------------------------------------------------------------------------
60.9 .688 .738 .788 .838 .888
- --------------------------------------------------------------------------------
60.10 .692 .742 .792 .842 .892
- --------------------------------------------------------------------------------
60.11 .696 .746 .796 .846 .896
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
61.0 .700 .750 .800 .850 .900
- --------------------------------------------------------------------------------
61.1 .706 .756 .806 .856 .906
- --------------------------------------------------------------------------------
61.2 .712 .762 .812 .862 .912
- --------------------------------------------------------------------------------
61.3 .718 .768 .818 .868 .918
- --------------------------------------------------------------------------------
61.4 .723 .773 .823 .873 .923
- --------------------------------------------------------------------------------
61.5 .729 .779 .829 .879 .929
- --------------------------------------------------------------------------------
61.6 .735 .785 .835 .885 .935
- --------------------------------------------------------------------------------
61.7 .741 .791 .841 .891 .941
- --------------------------------------------------------------------------------
61.8 .747 .797 .847 .897 .947
- --------------------------------------------------------------------------------
61.9 .753 .803 .853 .903 .953
- --------------------------------------------------------------------------------
61.10 .758 .808 .858 .908 .958
- --------------------------------------------------------------------------------
61.11 .764 .814 .864 .914 .964
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
62.0 .770 .820 .870 .920 .970
- --------------------------------------------------------------------------------
62.1 .775 .825 .875 .923 .971
- --------------------------------------------------------------------------------
62.2 .780 .830 .880 .927 .972
- --------------------------------------------------------------------------------
62.3 .785 .835 .885 .930 .973
- --------------------------------------------------------------------------------
62.4 .790 .840 .890 .933 .973
- --------------------------------------------------------------------------------
62.5 .795 .845 .895 .937 .974
- --------------------------------------------------------------------------------
62.6 .800 .850 .900 .940 .975
- --------------------------------------------------------------------------------
62.7 .805 .855 .905 .943 .976
- --------------------------------------------------------------------------------
62.8 .810 .860 .910 .947 .977
- --------------------------------------------------------------------------------
62.9 .815 .865 .915 .950 .978
- --------------------------------------------------------------------------------
62.10 .820 .870 .920 .953 .978
- --------------------------------------------------------------------------------
62.11 .825 .875 .925 .957 .979
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
63.0 .830 .880 .930 .960 .980
- --------------------------------------------------------------------------------
63.1 .837 .885 .933 .962 .981
- --------------------------------------------------------------------------------
63.2 .843 .890 .937 .963 .982
- --------------------------------------------------------------------------------
63.3 .850 .895 .940 .965 .983
- --------------------------------------------------------------------------------
63.4 .857 .900 .943 .967 .983
- --------------------------------------------------------------------------------
63.5 .863 .905 .947 .968 .984
- --------------------------------------------------------------------------------
63.6 .870 .910 .950 .970 .985
- --------------------------------------------------------------------------------
63.7 .877 .915 .953 .972 .986
- --------------------------------------------------------------------------------
63.8 .883 .920 .957 .973 .987
- --------------------------------------------------------------------------------
63.9 .890 .925 .960 .975 .988
- --------------------------------------------------------------------------------
63.10 .897 .930 .963 .977 .988
- --------------------------------------------------------------------------------
-66-
<PAGE>
================================================================================
AGE 10 Years to 15 Years to 10 Years to
But less But less But less
Less than than 15 than 20 than 25 25 Years
10 Years Years Years Years or more
================================================================================
63.11 .903 .935 .967 .978 .989
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
64.0 .910 .940 .970 .980 .990
- --------------------------------------------------------------------------------
64.1 .918 .945 .973 .982 .991
- --------------------------------------------------------------------------------
64.2 .925 .950 .975 .983 .992
- --------------------------------------------------------------------------------
64.3 .933 .955 .978 .985 .993
- --------------------------------------------------------------------------------
64.4 .940 .960 .980 .987 .993
- --------------------------------------------------------------------------------
64.5 .948 .965 .983 .988 .994
- --------------------------------------------------------------------------------
64.6 .955 .970 .985 .990 .995
- --------------------------------------------------------------------------------
64.7 .963 .975 .988 .992 .996
- --------------------------------------------------------------------------------
64.8 .970 .980 .990 .993 .997
- --------------------------------------------------------------------------------
64.9 .978 .985 .993 .995 .998
- --------------------------------------------------------------------------------
64.10 .985 .990 .995 .997 .998
- --------------------------------------------------------------------------------
64.11 .993 .995 .998 .998 .999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
65.0 1.000 1.000 1.000 1.000 1.000
================================================================================
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<PAGE>
Exhibit 10.24
Plan #194
DRESSER INDUSTRIES, INC.
RETIREMENT SAVINGS PLAN - A
EFFECTIVE MAY 31, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - INTRODUCTION AND MERGER PROVISIONS . . . . . . . . . . . . . . . 1
Section 1.1. Establishment of Plan. . . . . . . . . . . . . . . . . . 1
Section 1.2. Rules for Merger . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - JOINING THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. Employees Eligible to Participate. . . . . . . . . . . . 2
Section 2.2. Initial Enrollment and Membership. . . . . . . . . . . . 3
Section 2.3. Transfers. . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Recommencement by Former Employee. . . . . . . . . . . . 5
Section 2.5. Leased Employees . . . . . . . . . . . . . . . . . . . . 5
Section 2.6. Spinoff. . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3 - CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Employee Contributions . . . . . . . . . . . . . . . . . 6
Section 3.2. Company Contributions. . . . . . . . . . . . . . . . . . 7
Section 3.3. Rollover Contributions . . . . . . . . . . . . . . . . . 9
Section 3.4. Employee Contribution Elections. . . . . . . . . . . . . 9
Section 3.5. Payment of Contributions to Trust. . . . . . . . . . . . 10
Section 3.6. Statutory Limitations and Disposition of
Excess.. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.7. Reemployed Veterans. . . . . . . . . . . . . . . . . . . 14
ARTICLE 4 - ACCOUNTS OF MEMBERS. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.1. Individual Account for Each Member . . . . . . . . . . . 16
Section 4.2. Separate Accounting. . . . . . . . . . . . . . . . . . . 17
Section 4.3. Benefits Not Assignable. . . . . . . . . . . . . . . . . 17
ARTICLE 5 - INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1. In General . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2. Allocation of Contributions to
Investment Options . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3. Transfer of Investments. . . . . . . . . . . . . . . . . 19
Section 5.4. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.5. Named Fiduciary. . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6 - DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.1. When Distribution May Be Made. . . . . . . . . . . . . . 21
Section 6.2. Forms of Distribution. . . . . . . . . . . . . . . . . . 21
Section 6.3. Elections Regarding Distribution . . . . . . . . . . . . 22
Section 6.4. Required Time for Distribution . . . . . . . . . . . . . 23
Section 6.5. Statutory Requirements Regarding
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.6. Distribution upon Death. . . . . . . . . . . . . . . . . 25
Section 6.7. Direct Rollover of Distribution. . . . . . . . . . . . . 26
Section 6.8. Facility of Payment. . . . . . . . . . . . . . . . . . . 28
Section 6.9. Forfeitures. . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.10. Recovery of Payments Made by Mistake . . . . . . . . . . 29
ARTICLE 7 - WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.1. Withdrawals from After-tax Account . . . . . . . . . . . 30
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Section 7.2. Hardship Withdrawals . . . . . . . . . . . . . . . . . . 30
ARTICLE 8 - LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.1. Eligibility for Loan . . . . . . . . . . . . . . . . . . 33
Section 8.2. Terms of Loan. . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3. Accounting for Loans . . . . . . . . . . . . . . . . . . 35
Section 8.4. Administration of Loans. . . . . . . . . . . . . . . . . 35
Section 8.5. Preemption of Usury Laws . . . . . . . . . . . . . . . . 36
Section 8.6. Loans to Military Personnel. . . . . . . . . . . . . . . 36
Section 8.7. Disputes . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 9 - VESTING AND SERVICE. . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.1. Vesting. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.2. Service. . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 10 - ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . . . . 40
Section 10.1. Appointment of the Committee . . . . . . . . . . . . . . 40
Section 10.2. Conduct of Committee Business. . . . . . . . . . . . . . 40
Section 10.3. Records and Reports of the Committee . . . . . . . . . . 40
Section 10.4. Fiduciary Duties . . . . . . . . . . . . . . . . . . . . 41
Section 10.5. Investment Responsibilities. . . . . . . . . . . . . . . 41
Section 10.6. Responsibilities of the Board, the
Committee, and the Trustee . . . . . . . . . . . . . . . . . . . . 42
Section 10.7. Allocation or Delegation of Duties and
Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.8. Procedure for the Allocation or
Delegation of Fiduciary Duties . . . . . . . . . . . . . . . . . . 44
Section 10.9. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.10. Indemnification. . . . . . . . . . . . . . . . . . . . . 45
Section 10.11. Disputes . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.12. Claims Procedure . . . . . . . . . . . . . . . . . . . . 46
Section 10.13. Appeal Procedure . . . . . . . . . . . . . . . . . . . . 47
Section 10.14. Exhaustion of Administrative Remedies. . . . . . . . . . 49
Section 10.15. Limitation on Actions. . . . . . . . . . . . . . . . . . 49
Section 10.16. Federal Preemption . . . . . . . . . . . . . . . . . . . 49
Section 10.17. No Right to Jury Trial; Evidence . . . . . . . . . . . . 50
Section 10.18. Scope of Review. . . . . . . . . . . . . . . . . . . . . 50
Section 10.19. Limitation on Damages. . . . . . . . . . . . . . . . . . 50
Section 10.20. Member Plan Data . . . . . . . . . . . . . . . . . . . . 51
Section 10.21. Advisors Not Fiduciaries . . . . . . . . . . . . . . . . 51
ARTICLE 11 - AMENDMENT, TERMINATION OR MERGER. . . . . . . . . . . . . . . . 52
Section 11.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.2. Termination. . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.3. Merger . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.4. Representations Contrary to Plan . . . . . . . . . . . . 53
ARTICLE 12 - ESTABLISHMENT OF TRUST. . . . . . . . . . . . . . . . . . . . . 54
Section 12.1. Agreements of Trust. . . . . . . . . . . . . . . . . . . 54
Section 12.2. The Trustee. . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.3. Trust Fund for Exclusive Benefit of
Members of the Plan and Their Beneficiaries. . . . . . . . . . . . 55
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Section 12.4. Refund of Certain Company Contributions. . . . . . . . . 55
ARTICLE 13 - TOP-HEAVY REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . 57
Section 13.1. Top-Heaviness Determination. . . . . . . . . . . . . . . 57
Section 13.2. Effect of Top-Heaviness. . . . . . . . . . . . . . . . . 57
ARTICLE 14 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 14.1. Employment Rights. . . . . . . . . . . . . . . . . . . . 59
Section 14.2. Headings . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 14.3. Number and Gender. . . . . . . . . . . . . . . . . . . . 59
Section 14.4. Construction . . . . . . . . . . . . . . . . . . . . . . 59
Section 14.5. Adoption of Plan Contingent upon IRS
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 15 - GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 15.1. Account. . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 15.2. Affiliated Company . . . . . . . . . . . . . . . . . . . 61
Section 15.3. After-tax Contribution . . . . . . . . . . . . . . . . . 62
Section 15.4. Basic Contribution . . . . . . . . . . . . . . . . . . . 62
Section 15.5. Beneficiary. . . . . . . . . . . . . . . . . . . . . . . 62
Section 15.6. Board. . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.7. Break in Service . . . . . . . . . . . . . . . . . . . . 63
Section 15.8. Code . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.9. Committee. . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.10. Company. . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.11. Date of Employment . . . . . . . . . . . . . . . . . . . 63
Section 15.12. Date of Separation . . . . . . . . . . . . . . . . . . . 63
Section 15.13. Disability . . . . . . . . . . . . . . . . . . . . . . . 64
Section 15.14. Earnings . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 15.15. Effective Date . . . . . . . . . . . . . . . . . . . . . 65
Section 15.16. Employee . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 15.17. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 15.18. Former Member. . . . . . . . . . . . . . . . . . . . . . 65
Section 15.19. Highly Compensated . . . . . . . . . . . . . . . . . . . 66
Section 15.20. Investment Manager . . . . . . . . . . . . . . . . . . . 68
Section 15.21. Investment Option. . . . . . . . . . . . . . . . . . . . 68
Section 15.22. Limitation Year. . . . . . . . . . . . . . . . . . . . . 68
Section 15.23. Matching Contribution. . . . . . . . . . . . . . . . . . 68
Section 15.24. Member . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 15.25. Non-grandfathered Member . . . . . . . . . . . . . . . . 68
Section 15.26. Pension Equalizer Contribution . . . . . . . . . . . . . 69
Section 15.27. Period of Service. . . . . . . . . . . . . . . . . . . . 69
Section 15.28. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 15.29. Plan Year. . . . . . . . . . . . . . . . . . . . . . . . 69
Section 15.30. Predecessor Plan . . . . . . . . . . . . . . . . . . . . 69
Section 15.31. Pretax Contribution. . . . . . . . . . . . . . . . . . . 69
Section 15.32. Test Compensation. . . . . . . . . . . . . . . . . . . . 69
Section 15.33. Trust Agreement. . . . . . . . . . . . . . . . . . . . . 70
Section 15.34. Trust Fund . . . . . . . . . . . . . . . . . . . . . . . 70
Section 15.35. Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 70
APPENDIX A - CALCULATION OF PENSION EQUALIZER PERCENTAGE . . . . . . . . . A-1
APPENDIX B - CALCULATION OF MEDISAVE CONTRIBUTIONS . . . . . . . . . . . . B-1
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APPENDIX C - TK VALVE & MANUFACTURING PLAN MERGER. . . . . . . . . . . . . C-1
APPENDIX D - MERGER OF SAVINGS PLAN FOR EMPLOYEES OF BAROID CORPORATION
WITH AND INTO THE DRESSER INDUSTRIES, INC. RETIREMENT
SAVINGS PLANS . . . . . . . . . . . . . . . . . . . . . . . . D-1
APPENDIX E MERGER OF WHEATLEY TXT CORP. EMPLOYEES' SAVINGS PLAN WITH
AND INTO THE DRESSER INDUSTRIES, INC. RETIREMENT SAVINGS
PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
APPENDIX F MERGER OF AVA INTERNATIONAL CORP. 401K PLAN WITH AND INTO
THE DRESSER INDUSTRIES, INC. RETIREMENT SAVINGS PLANS . . . . F-1
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ARTICLE 1
INTRODUCTION AND MERGER PROVISIONS
SECTION 1.1. ESTABLISHMENT OF PLAN. Effective at midnight, May 31, 1995
("Effective Date"), Dresser Industries, Inc. establishes the Dresser Industries,
Inc. Retirement Savings Plan - A ("Plan-A" or "Plan"). Plan-A is a spinoff of
the Dresser Industries, Inc. Deferred Savings Plan, also known as Plan 145. As
of the Effective Date and periodically thereafter, plans or portions of plans
shall be folded into Plan-A, as more particularly described in Appendices D
through F. The Plan is intended to be a profit-sharing plan.
SECTION 1.2. RULES FOR MERGER. The Dresser Industries, Inc. Employee
Benefits Committee may make rules consistent with the Code and regulations
thereunder, governing the transactions described in Section 1.1, including rules
which specify when and in what manner assets are to be transferred to Plan-A,
how they shall be invested initially, and how and when assets transferred to
Plan-A subsequently may be invested in Investment Options in accordance with the
Members' instructions.
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ARTICLE 2
JOINING THE PLAN
SECTION 2.1. EMPLOYEES ELIGIBLE TO PARTICIPATE. An individual shall be
eligible to participate in the Plan, if he is an Employee as defined by this
Plan.
For purposes of this Plan, an Employee is any person employed by the
Company who is compensated on a salaried basis and who is not:
(a) in a unit of employees covered by a collective bargaining agreement,
unless such collective bargaining agreement specifically provides for
participation in this Plan;
(b) a nonresident alien;
(c) employed by an operation located in Puerto Rico;
(d) a leased employee within the meaning of Code section 414(n); or
(e) covered under any other 401(k) plan or active defined benefit plan
sponsored by the Company or an Affiliated Company, until such time as the
individual is no longer working in covered employment as described in the other
plan.
The Committee shall have the discretion to determine whether an individual
is compensated on a salaried basis and is an Employee described in this Plan.
In the event that accounts are transferred from a Predecessor Plan to this
Plan, only accounts of individuals who are Employees as described above, or
former Predecessor Plan participants who, in the judgment of the Committee,
would have participated in the Plan had they not terminated employment before
the transfer, shall be transferred to this Plan.
SECTION 2.2. INITIAL ENROLLMENT AND MEMBERSHIP. An Employee shall be
eligible to become a Member after completing three (3) months of Service (as
defined in Section 9.2). The Employee shall
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join the Plan on the first day of the month coincident with or next following
the date the Employee completes this Service.
An Employee may enroll in the Plan by completing and delivering to the
Committee an enrollment and beneficiary designation form and by making the
initial investment and contribution elections in such manner as the Committee
may permit. This information may be gathered electronically.
An Employee who fails to complete these forms shall become a Member, and
receive Basic and Pension Equalizer Contributions (if applicable). Such
Member's Beneficiary shall be determined as provided in Section 15.5, and such
Member's Account shall be invested in Investment Options, as provided in the
default procedure adopted by the Committee in accordance with Section 5.1.
A participant in a Predecessor Plan who is an Employee shall become a
Member on the date the Predecessor Plan is merged into this Plan. The Committee
shall determine which Investment Option under this Plan most closely resembles
an investment option under a Predecessor Plan, and a Member's Account shall be
invested accordingly, until the Company receives different investment directions
from the Member.
SECTION 2.3. TRANSFERS.
(a) A person employed by the Company or an Affiliated Company who
transfers from an ineligible job classification to an eligible job
classification shall join the Plan on the date the person becomes an Employee,
unless the individual has earned less than three months of Service at the time
of the transfer. A person with less than three months of Service who is so
transferred shall join the Plan as provided in Section 2.2.
(b) Any person employed by the Company who transfers to a position which
makes that person ineligible to participate in the Plan shall cease
participation and become a Former Member, but shall not be considered to have
terminated employment.
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(c) If a Member transfers to a position which makes that Member ineligible
to participate in this Plan but eligible under a similar plan (as determined by
the Committee) maintained by the Company or an Affiliated Company, such Member's
Account under this Plan shall be transferred to the similar plan in a trust-to-
trust transfer.
(d) Likewise, if an individual becomes a Member of this Plan in accordance
with Section 2.3(a), and was participating previously in a similar plan (as
determined by the Committee) maintained by the Company or an Affiliated Company,
this Plan shall accept a trust-to-trust transfer of his account from that Plan.
However, this Plan will not accept this transfer if the account is subject to
the survivor benefit requirements of Code section 417, unless such requirements
only apply to the portion of the account that is derived from contributions made
to a Predecessor Plan.
SECTION 2.4. RECOMMENCEMENT BY FORMER EMPLOYEE. Any Employee who
terminates employment and at a later date again becomes an Employee shall join
the Plan on the Employee's reemployment date or, if later, the first day of the
month coincident with or next following the date the Employee's Service totals
three months.
SECTION 2.5. LEASED EMPLOYEES. Leased employees (within the meaning of
Code section 414(n)) may not become Members. However, leased employees (within
the meaning of Code section 414(n)) who become common-law employees shall be
credited with Service for their periods of service as leased employees, as if
they had been common-law employees during the time that they performed services
for the Affiliated Companies.
SECTION 2.6. SPINOFF. If a Member is employed by a portion of the
Company that is sold to another entity, divested, or transferred to a joint
venture, that Member shall become a Former Member as of the date of the
transaction. The Accounts of all Members so affected by this type of
transaction shall be
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transferred in a trust-to-trust transfer to a qualified retirement plan
sponsored by the successor employer, if the successor employer agrees to the
transfer. If the successor employer does not agree to the transfer, then the
provisions of Section 6.1 apply.
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ARTICLE 3
CONTRIBUTIONS
SECTION 3.1. EMPLOYEE CONTRIBUTIONS.
(a) PRETAX CONTRIBUTIONS. A Member who is not Highly Compensated on the
last day of the preceding Plan Year may defer any whole percentage of Earnings
up to 12% for the Plan Year as a Pretax Contribution. A Member who is Highly
Compensated as of the last day of the preceding Plan Year may defer up to 10% of
Earnings as a Pretax Contribution. A Member's pay shall be reduced for each pay
period by the percentage of the elected Pretax Contribution, and this Pretax
Contribution shall be paid to the Trustee as provided in Section 3.5.
(b) AFTER-TAX CONTRIBUTIONS. A Member who is not Highly Compensated on
the last day of the preceding Plan Year may elect to contribute to the Member's
Account for a Plan Year a whole percentage of Earnings up to 12%, as an After-
tax Contribution. A Member who is Highly Compensated on the last day of the
preceding Plan Year may elect to contribute a whole percentage of Earnings up to
10%. Contributions shall be withheld from the Member's paycheck each pay period
and shall be paid to the Trustee as provided in Section 3.5.
(c) LIMIT ON TOTAL EMPLOYEE CONTRIBUTIONS. The sum of a non-Highly
Compensated Member's Pretax Contributions and After-tax Contributions shall not
exceed 12% of Earnings. For a Member who is Highly Compensated on the last day
of the preceding Plan Year, such sum shall not exceed 10% of Earnings.
SECTION 3.2. COMPANY CONTRIBUTIONS.
(a) BASIC CONTRIBUTIONS. The Company shall contribute, on behalf of each
Member, 3% of Earnings. This contribution shall be made semimonthly to the
Basic Account of each Member.
(b) MATCHING CONTRIBUTIONS.
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(1) The Company shall contribute, on behalf of each Member, a
Matching Contribution equal to:
(A) 100% of the Pretax Contributions or After-tax Contributions
of the Member, to the extent such employee contributions do not exceed 2% of
Earnings;
(B) 50% of the Pretax Contributions or After-tax Contributions
of the Member, to the extent such employee contributions exceed 2% of Earnings,
but do not exceed 6% of Earnings.
(2) Matching Contributions shall be made semimonthly to the Matching
Account of each Member who has made Employee contributions during the
semimonthly period.
(c) MEDISAVE CONTRIBUTIONS. The Company shall make a Medisave
Contribution to each eligible Member specified in Appendix B. The amount and
timing of this contribution shall be in accordance with the provisions of
Appendix B.
(d) PENSION EQUALIZER CONTRIBUTIONS. The Company shall contribute, on
behalf of each eligible Member, the Equalizer Percentage of the Member's
Earnings. This contribution shall be made semimonthly to the Pension Equalizer
Account of each eligible Member. The Equalizer Percentage for a Member shall be
determined under the formula described in Appendix A. A Member who was an
active participant in the Dresser Industries, Inc. Consolidated Salaried
Retirement Plan ("DIICON") on the Effective Date shall be eligible for Pension
Equalizer Contributions, unless such Member was not employed by the Company on
such date, and was an active participant merely because such Member was (i)
employed by an entity described in Articles 11 or 12 of DIICON, or (ii) Totally
Disabled as described in Section 1.48 of DIICON.
As soon as administratively feasible following the date a Member attains
age 65, that Member's Pension Equalizer Account balance (plus any hypothetical
equalizer account balance under a
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nonqualified plan) shall be compared to the single-sum value, calculated as
of the Member's Equalizer Age, of the Shortfall Amount determined under the
Fourth Step of Appendix A. This single-sum value shall be determined by the
DIICON Actuary, using the conversion factor described in the Third Step of
Appendix A.
If the balance determined under the preceding paragraph is equal to or
greater than the single-sum value of the Shortfall Amount, then the Member's
Pension Equalizer Contribution shall cease permanently. However, if the balance
determined under the preceding paragraph is less than the single-sum value of
the Shortfall Amount, then the minimum number of additional semimonthly Pension
Equalizer Contributions that are necessary to cause such balance to equal or
exceed the single-sum value of the Shortfall Amount shall be estimated. The
Member's Pension Equalizer Account shall continue to receive Pension Equalizer
Contributions until the earlier of (i) the date the Member retires or otherwise
terminates employment, or (ii) the date the Member receives the estimated number
of Pension Equalizer Contributions, after which date the Member's Pension
Equalizer Contributions shall cease permanently.
SECTION 3.3. ROLLOVER CONTRIBUTIONS. The Plan shall accept cash Rollover
Contributions (within the meaning of Code section 402(c), including optional
direct transfers under Code 401(a)(31)) on behalf of a Member from any plan
qualified under section 401(a) of the Code. Rollover Contributions may be made
at such time and in such manner as the Committee may prescribe. A Rollover
Contribution shall be forwarded to the Trustee as provided in Section 3.5, if it
is not paid directly to the Trustee.
SECTION 3.4. EMPLOYEE CONTRIBUTION ELECTIONS. A Member shall designate
the level of Pretax Contributions and the level of After-tax Contributions at
the time the Member enrolls in the Plan. These elections shall remain in effect
until changed by the Member,
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unless the Member's elections are suspended as a consequence of a hardship
withdrawal or any other in-service withdrawal.
A Member may change the rate of employee contributions at any time, and the
most recent change will be implemented semimonthly. Elections under this
Section shall be made at such time, in such manner and in such form as the
Committee may prescribe through uniform and nondiscriminatory rules.
Additionally, a Member may elect to suspend all employee contributions at
any time. Such suspension shall take effect with the next available pay period
following the date of the suspension request. If a Member suspends all employee
contributions, that Member shall not be permitted to share in Matching
Contributions during the suspension or to resume employee contributions until
four (4) months after the effective date of the suspension.
The Committee may reduce, suspend, or refund a Highly Compensated Member's
contributions, if the Committee finds that it is necessary to ensure compliance
with any of the nondiscrimination tests set forth in Section 3.6. Unless a
Member has changed or revoked elections in the meantime, such Member's elections
may be restored as of the first day of the Plan Year following such an action by
the Committee, or such earlier date as the Committee deems appropriate.
SECTION 3.5. PAYMENT OF CONTRIBUTIONS TO TRUST. The Company shall
forward contributions made by Employees to the Trustee on the earliest date the
contributions reasonably may be segregated from the Company's general assets.
Pretax Contributions and After-tax Contributions shall be forwarded no later
than 90 days after the date these contributions are withheld from the
contributing Member's pay. If a Rollover Contribution is not paid directly to
the Trustee, the contribution shall be forwarded no later than 90 days after the
date the Company receives the contribution.
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SECTION 3.6. STATUTORY LIMITATIONS AND DISPOSITION OF EXCESS.
(a) The maximum Pretax Contribution that a Member may make to this Plan
(when combined with any other plan containing a cash or deferred arrangement
sponsored by the Company or an Affiliated Company) is specified in Code section
402(g)(1). The limit is $9,240 for 1995 and is adjusted for cost-of-living by
the Secretary of the Treasury.
If a Member elects a rate of Pretax Contributions that, in the judgment of
the Committee, would cause the Code section 402(g)(1) limit to be violated, then
the contributions that are elected by the Member that are in excess of the limit
shall be made as After-tax Contributions. If the Committee discovers after the
close of a calendar year that Pretax Contributions in excess of the 402(g)(1)
limit have been made for that calendar year, the Committee shall implement the
procedures described in Section 3.6(b)(1).
(b) As of the end of a Plan Year, the Committee shall determine if the
limitations imposed by this Article 3 are sufficient or if contributions must be
forfeited, distributed to the Employee, or allocated to a suspense account, in
the order provided below:
(1) First, the Committee shall determine if Pretax Contributions in
excess of the Code section 402(g)(1) limit have been made to the Plan. If so,
the excess deferral shall be returned to the Member who made it. This
distribution shall include earnings allocable to the contribution and shall be
reduced by any allocable losses. The Committee shall endeavor to make a
distribution to the Member by the April 15 following the year in which the
excess deferral was made.
(2) Second, the Committee shall determine whether contributions to
the Plan have been made which exceed the
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limitations of sections 415(c) and (e) of the Code. The Committee shall use
W-2 compensation (as defined in Treas. Reg. Section 1.415-2(d)(11)(i)) in
making this determination. If, as a result of the allocation of forfeitures,
a reasonable error in determining the Member's W-2 compensation, or a
reasonable error in determining the amount of Pretax Contributions that may
be made with respect to a Member, the annual addition to a Member's Account
exceeds that which may be allocated, Company contributions which constitute
excess annual additions (and any gains on such contributions) shall be
forfeited, and used to reduce the Company's contributions for the next
succeeding Plan Year. Removal of excess annual additions shall be made first
from the Member's Basic Account, then from the Member's Pension Equalizer
Account, then from the Member's Medisave Account, and finally from the
Member's Matching Account. If further corrective measures are required,
excess annual additions resulting from employee contributions (and any gains
thereon) shall be distributed first from the Member's After-tax Account and
then from the Member's Pretax Account.
(3) Third, the Committee shall determine whether the actual
deferral percentage ("ADP") test set forth in Treas. Reg. Section
1.401(k)-1(b) has been met for the Plan Year. If the test is not met, the
Committee shall return the excess Pretax Contributions of Highly Compensated
Members, beginning with the Member with the highest actual deferral
percentage, until the maximum deferral percentage permitted under the test is
reached. Excess amounts, increased by any gains or reduced by any losses
attributable to the excess, shall be distributed within two and one-half
months after the close of the Plan Year, or as soon thereafter as is
practicable.
(4) Fourth, the Committee shall determine whether the actual
contribution percentage ("ACP") test set forth in Treas. Reg. Section
1.401(m)-1(b) has been met for the Plan Year. If the test is
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not met, the Committee shall return excess contributions of Highly
Compensated Members, beginning with the excess contributions of the Member
with the highest actual contribution percentage, until the maximum
contribution percentage permitted under the test is reached. Excess
contributions may be purged by any consistently applied method, including the
forfeiture of non-vested excess Medisave or Matching Contributions, if the
method is not discriminatory. Excess contributions, increased by any gains
or reduced by any losses attributable to the excess, shall be distributed or
forfeited within two and one-half months of the close of the Plan Year, or as
soon thereafter as is practicable.
(5) Fifth, the Committee shall determine whether the multiple use
test ("MUT") set forth in Treas. Reg. Section 1.401(m)-2(b) is met for the Plan
Year. If the test is not met, the Committee shall reduce the actual
contribution percentage of the group of Highly Compensated Members in accordance
with the provisions of Section 3.6(b)(4).
(6) Sixth, any Medisave or Matching Contribution of a Member based on
an employee contribution returned to a Member, and not distributed or forfeited
in accordance with Section 3.6(b)(4) or (5), shall be forfeited and applied to
reduce Company contributions under the Plan.
SECTION 3.7. REEMPLOYED VETERANS. If a Member terminates employment to
serve in a uniformed service (as defined in the Uniformed Services Employment
and Reemployment Rights Act of 1994) and returns to the employ of the Company
before the date the Member's reemployment rights under such statute expire,
then:
(a) The Member shall receive the Basic and Pension Equalizer Contributions
such Member would have received except for the fact that the Member was in a
uniformed service;
(b) The Member shall be permitted to make the Pretax Contributions and the
After-tax Contributions the Member would have
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been able to make, except for the fact that the Member was in a uniformed
service;
(c) The Company shall match the Member's make-up contributions in the
manner that such contributions would have been matched had they been made during
the Member's stint in a uniformed service.
This Section 3.7 shall apply only if such application would not cause the
Plan to violate the qualification requirements of section 401(a) of the Code, as
interpreted by the Secretary of the Treasury.
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ARTICLE 4
ACCOUNTS OF MEMBERS
SECTION 4.1. INDIVIDUAL ACCOUNT FOR EACH MEMBER. The Committee or, if
the Committee so determines, an agent of the Committee, shall maintain an
Account for each Member and Former Member having an amount credited in the Trust
Fund. Each Account shall be divided into separate subaccounts:
(a) a Pretax Account to accept Pretax Contributions pursuant to Section
3.1(a),
(b) an After-tax Account to accept After-tax Contributions pursuant to
Section 3.1(b),
(c) a Basic Account to accept Basic Contributions pursuant to Section
3.2(a),
(d) a Matching Account to accept Matching Contributions pursuant to
Section 3.2(b),
(e) a Medisave Account to accept Medisave Contributions under Section
3.2(c).
(f) a Pension Equalizer Account to accept Pension Equalizer Contributions
pursuant to Section 3.2(d),
(g) a Rollover Account to accept Rollover Contributions pursuant to
Section 3.3, and
(h) such additional subaccounts as the Committee deems necessary to keep
track of a Member's interest in the Trust Fund.
SECTION 4.2. SEPARATE ACCOUNTING. The amounts in a Member's Pretax
Account, After-tax Account, Matching Account, Basic Account, Medisave Account,
Pension Equalizer Account, and Rollover Account (to the extent that a Member has
such subaccounts) shall at all times be separately accounted for. Withdrawals,
distributions, and other credits or charges shall be separately allocated among
such subaccounts on a reasonable and consistent basis.
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Cash dividends on shares held in a subaccount on any record date applicable
to such shares shall be credited to such subaccount on the date the dividend is
paid and reinvested in the security with respect to which the dividends were
paid. Stock dividends and stock splits with respect to shares held in a
subaccount will be credited to that subaccount. Other distributions of
securities and rights to subscribe with respect to shares held in a subaccount
shall be sold and the net proceeds handled as a cash dividend.
SECTION 4.3. BENEFITS NOT ASSIGNABLE. An interest in a Member's Account
may not be assigned, transferred or alienated in any manner whatsoever by any
Member or Beneficiary, except to secure a loan under the provisions of Article
8. The preceding sentence also shall apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a Member pursuant
to a domestic relations order, unless such order is determined to be a qualified
domestic relations order, as defined in section 414(p) of the Code. If a
qualified domestic relations order so provides, benefits may be paid to an
alternate payee even if there has not been a separation from service by the
Member whose benefits are the subject of such order. Written consent of the
alternate payee to receive amounts in excess of $3,500 prior to the time the
Member attains age 65 shall not be necessary, unless the qualified domestic
relations order so provides. The Committee shall adopt written procedures for
processing domestic relations orders.
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ARTICLE 5
INVESTMENTS
SECTION 5.1. IN GENERAL. A Member may elect to have amounts credited to
the Member's Account invested in one or more Investment Options. A Member who
fails to make this election shall have his Account invested by the Committee in
one or more Investment Options in accordance with a uniform and
nondiscriminatory default procedure adopted by the Committee.
The Investment Options available to a Member shall be selected by the
Committee, and may be changed by the Committee at any time. Such Investment
Options shall be valued as soon as administratively practicable following each
business day.
SECTION 5.2. ALLOCATION OF CONTRIBUTIONS TO INVESTMENT OPTIONS.
Semimonthly, a Member may elect how contributions to the Member's subaccounts
described in Section 4.1 shall be allocated among the Investment Options. These
elections shall become effective for the first available payroll period
following the date in which the elections are made. Elections under this
Section shall be made at such time, in such manner, and in such form as the
Committee may prescribe through uniform and nondiscriminatory rules. The
contributions to a Member's various subaccounts may be allocated among the
Investment Options in any proportion, as long as whole percentages are used.
SECTION 5.3. TRANSFER OF INVESTMENTS. A Member may elect to transfer the
amounts in such Member's subaccounts among the Investment Options in any whole
percentages. Elections under this Section shall be made at such time, in such
manner, and on such forms or electronic media as the Committee may prescribe
through uniform and nondiscriminatory rules.
Investment in an Investment Option may be subject to a condition that funds
be held in the Investment Option for a
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specified length of time. If such a restriction is imposed on an Investment
Option held by the Member, a Member's right to transfer funds from or into
such Investment Option shall be subject to this restriction.
SECTION 5.4. LOANS. Members may receive loans from their Account, to the
extent permitted in Article 8. A loan to a Member shall be considered an
earmarked investment of such Member's Account and proportionately shall reduce
the amounts invested in the Investment Options. Repayments of a loan shall
reduce the amount of the loan investment and shall be invested in Investment
Options in accordance with the Member's then current investment direction.
SECTION 5.5. NAMED FIDUCIARY. The Committee shall be the Plan fiduciary
that is obligated to comply with Members' investment instructions under this
Article, but may delegate this duty to an agent in accordance with Section 10.7.
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ARTICLE 6
DISTRIBUTION
SECTION 6.1. WHEN DISTRIBUTION MAY BE MADE. A Member may receive a
distribution from the vested portion of the Member's Account under the following
circumstances:
(a) Termination of active employment, including retirement (or, if later,
termination of an authorized leave of absence, or the commencement of an
unauthorized leave of absence);
(b) Termination of employment on account of Disability; or
(c) Termination of employment with the Company, because of a joint venture
creation, sale, transfer, or other disposition involving all or part of the
Company's business, but only if the Member's Account is not transferred, as
provided in Section 2.6, to a plan of the Member's new employer.
SECTION 6.2. FORMS OF DISTRIBUTION. A Member may elect that the Member's
vested Account be paid in any one of the following forms:
(a) An immediate or deferred single sum in cash.
(b) Periodic installments, paid monthly, quarterly, or annually over five
years, ten years, fifteen years, or the life expectancy of the Member.
(c) Periodic installments, paid monthly, quarterly, or annually, which are
equal to a specified dollar amount chosen by the Member.
Installment payments shall not be made over a period exceeding the Member's
life expectancy.
A Member whose vested Account balance does not exceed $3,500, and has not
exceeded $3,500 at the time of any prior distribution or withdrawal, shall
receive the vested Account balance in a single sum as soon as administratively
practicable after the end of the calendar month in which he terminates
employment.
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SECTION 6.3. ELECTIONS REGARDING DISTRIBUTION. A Member eligible to
receive a distribution shall designate the time he will receive the distribution
and the form of the distribution, if his vested Account is not cashed out as
described in Section 6.2. A Member who fails to make this election shall have
the vested Account distributed as described in Section 6.4(a).
Not earlier than 90 days, but not later than 30 days before the date the
vested portion of the Member's Account is scheduled to be distributed, the
Committee shall provide a benefit notice to a Member who is eligible to make an
election under this Section 6.3. The benefit notice shall contain a general
explanation of the features of the optional forms of payment available under the
Plan and explain the Member's right to defer distribution until age 65.
Notwithstanding anything in the preceding paragraph to the contrary,
distribution may begin less than 30 days after the notice required in the
preceding paragraph is given, as long as:
(a) The benefit notice clearly informs the Member that the Member has a
right to a period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution; and
(b) The Member, after receiving the notice, affirmatively elects a
distribution.
SECTION 6.4. REQUIRED TIME FOR DISTRIBUTION.
(a) A Member, who terminates employment before attaining age 65 and defers
or does not designate the time of distribution in accordance with Section 6.3,
shall receive his Account balance as soon as administratively practicable after
the end of the calendar month in which the Member attains age 65. A Member who
terminates employment upon or after attaining age 65, shall receive his Account
balance as soon as administratively practicable after the end of the calendar
month in which the Member retires or otherwise terminates employment. However,
distribution shall be delayed, if
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necessary, to comply with the direct rollover notice and election rules
described in Section 6.6.
If the Member has not elected a form of payment by the time distribution
must begin under this Section 6.4(a), the vested portion of the Member's Account
shall be paid to that Member in a single sum in cash.
(b) If a Member is employed on the April 1 of the calendar year following
the calendar year in which the Member attains age 70-1/2, that Member shall
receive a minimum distribution on such April 1, and shall receive a minimum
distribution on each following December 31, until the Member retires or
terminates active employment.
The amount of the initial minimum distribution shall be equal to the value
of the vested portion of the Member's Account as of the December 31 preceding
the Member's attainment of age 70-1/2, divided by the applicable divisor. The
amount of any subsequent minimum distribution is equal to the value of the
Member's vested Account as of the December 31 preceding the minimum distribution
date, divided by the applicable divisor. "Applicable divisor" means the amount
in (2), if the Member's Beneficiary is his spouse, and, in any other case, the
lesser of:
(1) The applicable divisor determined in accordance with Prop. Reg.
Section 1.401(a)(9)-2, Q&A-4; or
(2) The joint life expectancy of the Member and Beneficiary, as
determined under Prop. Reg. Section 1.401(a)(9)-1, Q&A E1 - E4, using the
expected return multiples in Tables V and VI of Treas. Reg. Section 1.72-9.
(c) If a Member is required to receive a distribution, but the Committee
is unable to locate the Member (or the Member's Beneficiary) within five years,
the Member's Account shall be forfeited, and the forfeiture shall be applied to
reduce the Company's contribution for the Plan Year. Such forfeited Account
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shall be restored and distributed to the Member or Beneficiary, if a claim for
such Account is made by such Member or Beneficiary, or if the Committee is able
to locate the Member or Beneficiary. Payment of such a restored Account shall
be made approximately 60 days after the date the Committee locates the Member or
Beneficiary, or, if earlier, the date a claim is filed.
SECTION 6.5. STATUTORY REQUIREMENTS REGARDING DISTRIBUTION.
(a) Regardless of any contrary provision of the Plan, a distribution from
the Plan to a Member shall begin no later than the 60th day after the close of
the Plan Year in which the latest of the following occurs:
(1) the date on which a Member attains age 65,
(2) the 10th anniversary of the year in which a Member commenced
participation under the Plan, or
(3) the Member's termination of employment with the Affiliated
Companies.
(b) Notwithstanding anything herein to the contrary, any distribution
hereunder shall be determined in accordance with Code section 401(a)(9) and the
proposed regulations thereunder, including the "minimum distribution incidental
benefit requirement" of Section 1.401(a)(9)-2 of the proposed regulations.
SECTION 6.6. DISTRIBUTION UPON DEATH. If the Member dies before
distribution of the Member's vested Account begins, the Member's benefit shall
be distributed in a single sum to the Member's Beneficiary. Generally,
distribution shall occur as soon as administratively practicable after the end
of the calendar month in which the Committee receives satisfactory evidence of
the death of the Member. However, the Beneficiary may elect to delay
distribution to the earlier of:
(a) the fifth anniversary of the Member's death; or
(b) the date the Member would have reached age 65.
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SECTION 6.7. DIRECT ROLLOVER OF DISTRIBUTION. A distributee may elect to
have an eligible rollover distribution paid directly to at most one eligible
retirement plan specified by the distributee. However, this election may not be
made if the total eligible rollover distributions paid to the distributee will
be less than $200.
A distributee may elect to divide an eligible rollover distribution so that
part is paid directly to an eligible retirement plan and part is paid to the
distributee. However, the part paid directly to the eligible retirement plan
must total at least $500.
A distributee may elect a direct rollover after having received a written
notice that complies with the rules of section 402(f) of the Code. In general,
payment to a distributee shall not begin until 30 days after the section 402(f)
notice is given. However, payment may be made sooner if the notice clearly
informs the distributee of the right to a period of at least 30 days to consider
the decision of whether or not to make a direct rollover, and the distributee,
after receiving the notice, makes an affirmative election. A distributee who
fails to make an election in the thirty-day period shall receive the eligible
rollover distribution immediately after the 30-day period expires.
For purposes of this Section, the following terms have the meanings set
forth below:
(a) An "eligible rollover distribution" is any distribution or withdrawal
payable under the terms of this Plan to a Member, which is described in section
402(c)(4) of the Code. In general, this term includes any single-sum
distribution, and any distribution that is one in a series of substantially
equal periodic payments made over a period that is less than ten (10) years, and
is less than the distributee's life expectancy. However, an eligible rollover
distribution does not include the
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portion of any distribution which constitutes a minimum required distribution
under section 401(a)(9) of the Code, or the portion of any distribution which
is a return of the After-tax Contributions of a Member. Such term also does
not include a distribution to the Member's Beneficiary, unless the
Beneficiary is the Member's spouse.
(b) "Eligible retirement plan" means:
(1) An individual retirement account described in section 408(a) of
the Code;
(2) An individual retirement annuity described in section 408(b) of
the Code;
(3) An annuity plan described in section 403(a) of the Code; and
(4) A retirement plan qualified under section 401(a) of the Code, but
only if the terms of such plan permit the acceptance of rollover distributions.
However, in the case of an eligible rollover distribution to a distributee
who is a surviving spouse, an eligible retirement plan is an individual
retirement account or an individual retirement annuity.
(c) "Distributee" means a Member, Former Member, the spouse of a deceased
Member, or a spouse who is an alternate payee under a qualified domestic
relations order.
SECTION 6.8. FACILITY OF PAYMENT. If the Committee deems any person
entitled to receive any amount under the provisions of this Plan incapable of
receiving or disbursing the same by reason of minority, illness or infirmity,
mental incompetency, or incapacity of any kind, the Committee may, in its
discretion, direct the Trustee to take any one or more of the following actions:
(a) To apply such amount directly for the comfort, support and maintenance
of such person;
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(b) To reimburse any person for any such support previously supplied to
the person entitled to receive any such payment;
(c) To pay such amount to a court appointed legal representative or
guardian selected by the Committee to disburse it for such comfort, support and
maintenance.
SECTION 6.9. FORFEITURES. A Member who terminates employment and who, as
a result, receives a distribution of the vested portion of an Account, shall
forfeit all non-vested amounts in the Account. A Member who is not vested in
the portion of the Account derived from employer contributions shall be deemed
to have received a distribution of the entire vested Account upon termination of
employment. Forfeitures under this Section shall reduce Company contributions
under Section 3.5.
If the Member later returns to the employ of the Company or an Affiliated
Company before incurring a Break in Service, that Member's non-vested Account
shall be restored, and the Member may repay the amount of the distribution.
SECTION 6.10. RECOVERY OF PAYMENTS MADE BY MISTAKE. Notwithstanding
anything to the contrary, a Member or Beneficiary is entitled to only those
benefits provided by the Plan and promptly shall return any payment, or portion
thereof, made by mistake of fact or law. Further notwithstanding anything to
the contrary, an alternate payee under a qualified domestic relations order is
entitled to only those benefits from the Plan as are designated by the order and
promptly shall return any payment, or portion thereof, made by mistake of fact
or law. The Committee may offset the future benefits of any recipient who
refuses to return an erroneous payment, in addition to pursuing any other
remedies provided by law.
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ARTICLE 7
WITHDRAWALS
SECTION 7.1. WITHDRAWALS FROM AFTER-TAX ACCOUNT. A Member may make a
single-sum withdrawal from the Member's After-tax Account at any time. However,
there are three conditions on this right:
(a) A withdrawal must total at least $500;
(b) A Member may make only one withdrawal in a Plan Year; and
(c) A Member must have made contributions to this Plan (or a Predecessor
Plan), for at least one year.
SECTION 7.2. HARDSHIP WITHDRAWALS.
(a) ELIGIBILITY. A Member may request a hardship distribution, if:
(1) That Member has received all distributions available under this
Plan, including After-tax Account distributions described in Section 7.1, and
any in-service distribution available to a Member from a subaccount derived from
a Predecessor Plan;
(2) That Member has received the maximum loan available under this
Plan;
(3) That Member has received all in-service distributions and loans
available under any other plan of the Company or an Affiliated Company, and
(4) That Member is requesting the distribution in order to:
(A) pay medical expenses for the Member, the Member's spouse, or
dependents;
(B) purchase the Member's principal residence;
(C) pay tuition, related educational fees, or room and board for
next twelve months of post-secondary education for the Member, the Member's
spouse, or dependents;
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(D) prevent the Member's eviction from the Member's principal
residence; or
(E) prevent foreclosure on the mortgage on the Member's
principal residence.
(b) AMOUNT. In general, the Committee shall permit the Member to
designate the amount to be withdrawn. However, the withdrawal amount shall not
be more than the amount necessary to both meet the Member's financial need and
pay any reasonably anticipated federal, state, and local income taxes or
penalties that may result from the distribution.
The amount that may be withdrawn is further limited to the amount held in
the Member's Pretax, Rollover, and After-tax Accounts, as of the date of the
withdrawal, minus any income earned on the Member's Pretax Account after
December 31, 1988, as specified in Treas. Reg. Section 1.401(k)-1(d)(2)(ii).
(c) CONSEQUENCES. A Member who makes a hardship withdrawal shall not be
eligible to make Pretax Contributions or After-tax Contributions to this Plan,
or any other plan sponsored by the Company or an Affiliated Company, for the 12-
month period beginning on the date of the withdrawal.
In addition, in the calendar year following the date of the withdrawal, the
Member's Pretax Contribution shall be limited to the limit applied to these
contributions by Section 3.1(a), minus the Member's Pretax Contributions for the
year in which he received the hardship distribution.
(d) ADMINISTRATION. The Committee shall determine whether a Member is
eligible to make a hardship withdrawal, as soon as possible following receipt of
an application for such a withdrawal. If it approves the application, the
Committee shall direct the Trustee to pay to the Member the amount requested by
the Member (or any lesser amount dictated by subsection (b)) in a single sum.
If
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all or part of the distribution is an eligible rollover distribution, the
rules of Section 6.6 shall apply.
A hardship withdrawal shall be made first from the Member's After-tax
Account, then from the Member's Rollover Account, and then from the Member's
Pretax Account.
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ARTICLE 8
LOANS
SECTION 8.1. ELIGIBILITY FOR LOAN. A Member may borrow from the Member's
Account in accordance with this Article 8 and the loan procedure which the
Committee shall establish, provided:
(a) The Member has not received a loan during the Plan Year in which the
loan request is made; and
(b) The Member has repaid all loans made from this Plan or any Predecessor
Plan.
SECTION 8.2. TERMS OF LOAN. The terms of each loan shall be set by the
Committee in accordance with its loan procedure, and the following provisions of
this Section 8.2:
(a) The minimum loan amount shall be $1,000.
(b) The maximum loan amount shall be the least of:
(1) $50,000, minus the highest outstanding balance of loans from the
Plan, any Predecessor Plan, and any plan of an Affiliated Company during the
one-year and one-day period ending on the date the loan is granted;
(2) 50% of the Member's vested Account balance under the Plan, valued
as of the date the loan is processed; or
(3) The aggregate balance of the Member's subaccounts which do not
contain Basic Contributions or Pension Equalizer Contributions.
(c) The interest rate charged on the unpaid balance of the loan shall be
equal to the prime rate charged for loans, as published in the Wall Street
Journal on the first business day of the month in which the loan is made.
(d) All loans shall be repaid within 5 years, except for a loan used to
purchase the Member's principal residence.
(e) Loans shall be repaid by payroll deduction, as described in the loan
procedure established by the Committee. In the event
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the Member is on an approved leave of absence and not receiving paychecks
from the Company, the Member shall make regular repayments to the Trust Fund,
with payments made not less frequently than quarterly. These payments shall
be made at the time and in the manner described in the Committee's loan
procedure. All loan repayments shall be invested in accordance with the
Member's current investment election.
(f) Early payment of a loan may be made without penalty. However, a
single-sum repayment of a loan by an active Employee may not be made unless
normal payroll deduction payments have been made for a period of six (6) months.
Loans and loan repayments shall not be treated as elections of allocations or
transfers under Sections 5.2 and 5.3.
(g) Upon the termination of active employment (or, if later, the
termination of an approved leave of absence) of a Member, the loan shall become
immediately due and payable. Any loan balance remaining at such time shall be
repaid by direct payment to the Plan. If the Member does not make such payment,
the Member's Account shall be reduced by the amount necessary to pay off the
loan. If the termination is due to the sale of a business unit by the Company,
the foregoing provisions shall apply unless negotiated otherwise with the
purchaser.
SECTION 8.3. ACCOUNTING FOR LOANS.
(a) Loan funds for a Member shall be taken first from any subaccount
holding pretax deferrals made by a Member to a Predecessor Plan, then from the
Member's Pretax Account, then from the vested portion of any subaccount holding
matching contributions made on behalf of a Member under a Predecessor Plan
(other than the Savings Plan for Employees of Baroid Corporation), then from any
subaccount holding rollover contributions made by a Member to a Predecessor
Plan, then from the Member's Rollover Account, then from the Member's Matching
Account (if vested), then from the
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vested portion of the subaccount holding matching contributions made on
behalf of a Member from the Savings Plan for Employees of Baroid Corporation,
then from any subaccount holding voluntary after-tax contributions made by a
Member to a Predecessor Plan, then from the Member's After-tax Account.
(b) A subaccount, equal to the amount of the outstanding loan, shall be
established for the Member, and shall be maintained until the loan has been
repaid. The loan shall be the sole, directed investment of such subaccount.
SECTION 8.4. ADMINISTRATION OF LOANS. The loan program under the Plan
shall be administered by the Committee in a uniform and nondiscriminatory manner
in accordance with the loan procedures it establishes and the provisions of this
Article 8.
Loans granted under the terms of a Predecessor Plan shall be administered
by the Committee in accordance with this Article 8, to the extent that any
change in prior administrative practices would not violate the terms of the note
governing such a loan. A note negotiated under the terms of a Predecessor Plan
which is extended or modified after the date the Predecessor Plan is merged into
this Plan shall meet the requirements of this Article and the Committee's loan
procedures.
SECTION 8.5. PREEMPTION OF USURY LAWS. In any action to collect payments
due under a Plan loan or to foreclose a security interest for such a loan, no
party may interpose state usury laws as a defense to nonpayment or foreclosure.
All such laws shall be deemed preempted by section 514 of ERISA, to the extent
they purport to relate to the Plan and loans thereunder.
SECTION 8.6. LOANS TO MILITARY PERSONNEL. Notwithstanding anything in
these loan provisions to the contrary, the interest rate charged to a Member in
military service, on a loan taken out prior to the Member's entry into such
service, shall not exceed six percent (6%) per annum, during any part of the
period of military
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service, as limited by the Soldiers' and Sailors' Civil Relief Act of 1940.
SECTION 8.7. DISPUTES. All disputes over loans shall be resolved through
the Plan's claims and appeal procedures.
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ARTICLE 9
VESTING AND SERVICE
SECTION 9.1. VESTING.
(a) A Member's interest in the Member's Pretax Account, After-tax Account,
and Rollover Account at all times shall be fully vested and nonforfeitable.
(b) A Member's interest in the Member's Matching Account, Basic Account,
Medisave Account, and Pension Equalizer Account shall become fully vested and
nonforfeitable upon the Member's completion of 5 years of Service (as defined in
Section 9.2); upon the later of the attainment of age 65 or the 5th anniversary
of the Member's participation in the Plan; or upon death or Disability.
SECTION 9.2. SERVICE. In general, Service is the total time of an
Employee's employment with the Company, counted in years and months. In
determining the length of an Employee's Service, all of the Employee's Periods
of Service shall be counted, unless cancelled or excluded under subsection (b).
(a) The following periods constitute Service, even if they would not
constitute Service under the first paragraph of this Section:
(1) Service credited under the terms of a Predecessor Plan, and any
additional service credited under the terms of a merger agreement involving the
Predecessor Plan;
(2) Periods of employment with an Affiliated Company for the period
that such an entity is an Affiliated Company;
(3) Periods of employment with a predecessor to the Company or an
Affiliated Company, if:
(A) The period is credited under the terms of a plan of the
predecessor which is maintained by the Company or an Affiliated Company; or
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(B) The Committee, by resolution, agrees to count such periods
as Service under the Plan for all Employees who are or may be covered under the
Plan;
(4) Service with a joint venture of the Company, an entity which has
ceased to be an Affiliated Company, or an entity spun off from the Company, if
the Committee, by resolution, agrees to count such periods as Service under the
Plan;
(5) A leave of absence approved by the Company (or an Affiliated
Company) in writing; provided, however, if an individual does not return from
the leave, that individual's Service shall include only the first year of the
leave;
(6) A period of employment in a uniformed service (as defined in the
Uniformed Services Employment and Reemployment Rights Act of 1994), if the
Employee was an Employee before the Employee's employment in the uniformed
service and the Employee returns to the Company before the Employee's
reemployment rights under the statute expire; and
(7) Service following the date an Employee's active employment with
the Company or an Affiliated Company terminates, if the Employee resumes active
employment within 12 months.
(b) The following periods do not constitute Service, regardless of any
provision in this Section to the contrary:
(1) Service prior to a Break in Service, unless the Employee was
vested in any portion of the Employee's Account derived from Company
contributions at the time of the Break in Service; and
(2) The interim maternity or paternity leave period between the first
and second anniversaries of absence, as described in Section 15.12(d).
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ARTICLE 10
ADMINISTRATION OF THE PLAN
SECTION 10.1. APPOINTMENT OF THE COMMITTEE. The administration of the
Plan, including the payment of all benefits to Members or their Beneficiaries,
shall be the responsibility of the Dresser Industries, Inc. Employee Benefits
Committee, which is the administrator of the Plan. In addition, the Committee
and each Committee member shall be named fiduciaries of the Plan. The Committee
shall consist of at least three persons appointed from time to time by the
Board, who shall serve at the pleasure of the Board.
SECTION 10.2. CONDUCT OF COMMITTEE BUSINESS. The Committee shall elect a
Chairman who shall be a member of the Committee and a Secretary who may or may
not be a member of the Committee. The Committee may appoint such subcommittees
as it shall deem necessary and appropriate. The Committee shall conduct its
business according to the provisions of this Article 10 and shall hold meetings
in any convenient location. A majority of all of the members of the Committee
shall have power to act with or without a meeting, and the concurrence or
dissent of any member may be by telephone, e-mail, fax, wire, cablegram or
letter.
SECTION 10.3. RECORDS AND REPORTS OF THE COMMITTEE. The Committee shall
keep such written records as it shall deem necessary or proper, which records
shall be open to inspection by the Company. The Committee shall obtain from the
Trustee regular reports with respect to the current value of the assets held in
the Trust Fund, in such form as is acceptable to the Committee.
SECTION 10.4. FIDUCIARY DUTIES. In performing their duties, all
fiduciaries with respect to the Plan shall act solely in the interest of the
Members and their Beneficiaries and:
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(a) For the exclusive purpose of providing benefits to the Members and
their Beneficiaries;
(b) With the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims;
(c) To the extent a fiduciary possesses and exercises investment
responsibilities, by diversifying the investments of the Trust Fund so as to
minimize the risk of large losses, unless under the circumstances it is clearly
prudent not to do so; and
(d) In accordance with the documents and instruments governing the Plan,
insofar as such documents and instruments are consistent with the provisions of
Title I and Title IV of ERISA.
SECTION 10.5. INVESTMENT RESPONSIBILITIES. The Committee shall possess
the authority to appoint an Investment Manager or Managers (as defined in ERISA
section 3(38)) to manage (including the power to acquire and dispose of) all or
any of the assets of the Trust Fund. In the event of any such appointment, the
Committee shall establish the portion of the assets of the Trust Fund which
shall be subject to the management of the Investment Manager and shall so notify
the Trustee in writing. Likewise, the Committee may establish that all or a
portion of the assets of the Trust Fund shall be subject to the investment
jurisdiction of the Committee itself and shall advise the Trustee of such
determination. With respect to such assets over which either an Investment
Manager or the Committee has investment responsibility, the Investment Manager
or the Committee shall possess all of the investment powers and responsibilities
granted to the Trustee under the Trust Agreement, and the Trustee shall invest
and reinvest such assets pursuant to the written directions of the Investment
Manager or the Committee, as the case may be. If the Committee so directs, an
Investment Manager shall have the power to acquire and dispose of assets in
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the name of the Trust Fund. The investment jurisdiction of the Committee
may be exercised in any manner consistent with its duties as a fiduciary,
including:
(a) directing the Investment Manager or the Trustee that certain
investments or types of investments be made or liquidated;
(b) directing the Investment Manager or the Trustee that certain
investments or types of investments not be made;
(c) requiring that the Trustee or the Investment Manager obtain approval
prior to acquiring or disposing of any asset.
SECTION 10.6. RESPONSIBILITIES OF THE BOARD, THE COMMITTEE, AND THE
TRUSTEE. The Board, the Company, the Committee, and the Trustee possess certain
specified powers, duties, responsibilities and obligations under the Plan and
the Trust Agreement. It is intended under this Plan and the Trust Agreement that
each be responsible solely for the proper exercise of its own functions and that
each shall not be responsible for any act or failure to act of another, unless
otherwise responsible as a breach of its fiduciary duty or for breach of duty by
another fiduciary under the rules of co-fiduciary responsibility. In general,
(a) the Board is responsible:
(1) for appointing and removing the Committee,
(2) for making any amendments that would increase or decrease the
Company's contributions to the Plan, and
(3) for terminating the Plan;
(b) the Committee is responsible:
(1) for administering the Plan,
(2) for construing and interpreting the Plan, as provided in
Section 10.18,
(3) for amending the Plan, except to the extent provided in Sections
10.6(a)(2) and (3),
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(4) for adopting such rules and regulations as in the opinion of the
Committee are necessary or advisable to implement and administer the Plan and to
transact its business,
(5) for providing a procedure for carrying out a funding policy and
method consistent with the objectives of the Plan and the requirements of Title
I of ERISA,
(6) for complying with Member investment instructions under
Article 5,
(7) and for exercising certain investment responsibilities as
described in this Article 10; and
(c) the Trustee is responsible for the management and control of the Plan
assets, to the extent provided in the Trust Agreement. The Committee
periodically shall review the performance of the Trustee and all other persons
to whom fiduciary duties have been delegated or allocated pursuant to the
provisions of Sections 10.7 and 10.8.
SECTION 10.7. ALLOCATION OR DELEGATION OF DUTIES AND RESPONSIBILITIES. In
furtherance of its duties and responsibilities under the Plan, the Committee
may, subject always to the requirements of Section 10.4,
(a) Employ agents to carry out nonfiduciary responsibilities;
(b) Employ agents to carry out fiduciary responsibilities (other than
trustee responsibilities as defined in section 405(c)(3) of ERISA);
(c) Consult with counsel and advisors, who may be counsel and advisors to
the Company; and
(d) Provide for the allocation of fiduciary responsibilities (other than
trustee responsibilities as defined in section 405(c)(3) of ERISA) among
Committee members.
SECTION 10.8. PROCEDURE FOR THE ALLOCATION OR DELEGATION OF FIDUCIARY
DUTIES. Any action described in subsections (b) or (d) of
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Section 10.7 may be taken by the Committee in accordance with the following
procedure:
(a) Such action shall be taken by a majority of the Committee in a meeting
or by unanimous action by way of consent resolutions;
(b) Any delegation of fiduciary duties or any allocation of fiduciary
duties among members of the Committee may be modified or rescinded by the
Committee according to the procedure set forth in subsection(a) of this Section
10.8.
SECTION 10.9. EXPENSES. The expenses of administering the Plan and the
compensation of all employees, agents, counsel, or advisors of the Committee,
including the Trustee's fees, shall be paid from the Trust Fund, unless paid by
the Company. In determining whether to pay Plan expenses, the Company acts in a
corporate and not a fiduciary capacity.
SECTION 10.10. INDEMNIFICATION. The Company agrees to indemnify and
reimburse members of the Committee and employees acting for the Company, and all
such Former Members and former employees, for any and all expenses, liabilities,
or losses arising out of any act or omission relating to the rendition of
services for, or the management and administration of, the Plan.
Indemnification and reimbursement shall be made to the fullest extent permitted
by law, Dresser Industries, Inc.'s Certificate of Incorporation, and any
indemnification policy purchased by the Company.
SECTION 10.11. DISPUTES. Any dispute over the interpretation or
application of this Plan or any Predecessor Plan shall be resolved through the
claims and appeal procedures set forth in Sections 10.11 - 10.20. For purposes
of Sections 10.11 - 10.20, "Plan" includes this Plan and any Predecessor Plan.
The purpose of these claims and appeal provisions is to secure the speedy,
inexpensive resolution of all disputes over Plan benefits and rights granted by
the Plan. These provisions shall be
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liberally construed so as to avoid litigation and its attendant expenses.
SECTION 10.12. CLAIMS PROCEDURE. Each person who claims entitlement to any
right or benefit under the Plan ("claimant") may submit a claim with respect to
that benefit or right. All claims shall be submitted in writing to the
Committee and shall be accompanied by such information and documentation as the
Committee determines are required to make a ruling on the claim. Upon receipt
of a claim, the Committee shall consider the claim and shall render a decision
and communicate the same to the claimant.
The Committee shall render a decision within 90 days after receipt of the
claim, unless special circumstances require an extension of time for processing
the claim. If such an extension of time for processing is required, written
notice of the extension shall be furnished to the claimant prior to the
termination of the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of such initial period. The extension
notice shall indicate the special circumstances requiring an extension of time
and the date by which the Committee expects to render a decision.
In the event that the claim is denied in whole or in part, the claimant
shall be given notice in writing, which shall set forth the following in a
manner reasonably calculated to be understood by the claimant:
(a) the specific reason(s) for the denial;
(b) specific reference to pertinent Plan provisions on which the denial is
based;
(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary.
(d) an explanation of the Plan's appeal procedure.
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The failure of the Committee to render a decision on a claim within the
time specified shall be deemed to be a denial of such claim.
Any claim under this claims procedure must be submitted within 12 months
from the earlier of (i) the date on which the claimant learned of facts
sufficient to enable the claimant to formulate such claim, or (ii) the date
on which the claimant reasonably should have been expected to learn of facts
sufficient to enable the claimant to formulate such claim.
SECTION 10.13. APPEAL PROCEDURE. When a claim has been or is deemed
denied, the claimant (hereinafter referred to as appellant) shall have the
right within 60 days after receipt of written notice thereof or the date the
claim is deemed denied to file an appeal with Committee and to go through the
appeal procedure herein set forth. All appeals shall be in writing, and
shall set forth the reasons why the appellant believes the decision denying
the claim is erroneous. The appellant may be represented by counsel, or by
other representative authorized in writing by appellant in a manner specified
by the Committee, and appellant or appellant's counsel or duly authorized
representative may review pertinent documents and may submit issues and
comments in writing to the Committee. The expense of a paid representative
shall be borne by the appellant.
Within 60 days after such written appeal is received, the Committee
shall conduct a full and fair review of the entire claim. The Committee
shall render a decision on the appeal in writing not later than 60 days after
receipt of the written appeal, unless special circumstances (such as the need
to hold a hearing, which shall be determined by the Committee) require an
extension of time for processing, in which case a decision shall be rendered
as soon as possible, but not later than 120 days after receipt of a written
appeal. If special circumstances require an extension of time for
processing, the Committee shall so notify the appellant prior to
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the commencement of the extension. If the Committee does not render a
decision within 60 days (120 days if special circumstances arise), the appeal
shall be deemed denied.
The decision shall include specific references to provisions of this
Plan and of law and shall be written in a manner reasonably calculated to be
understood by the appellant. The decision of the Committee shall be final
and shall be binding upon the appellant, the appellant's Beneficiaries,
heirs, and assigns and all other persons claiming by, through or under the
appellant.
A failure to file a claim and an appeal in the manner and
within the time limits set forth herein shall be deemed a failure by the
aggrieved party to exhaust that party's administrative remedies and shall
constitute a waiver of the rights or benefits sought to be established under
the Plan.
SECTION 10.14. EXHAUSTION OF ADMINISTRATIVE REMEDIES. No legal action
to recover Plan benefits or to enforce or to clarify rights under the Plan
shall be commenced under section 502(a)(1)(B) of ERISA, or under any other
provisions of law, whether or not statutory, unless and until the claimant
first shall have exhausted the claims and appeal procedures available to the
claimant hereunder in Sections 10.12 - 10.13. A claimant must raise all
issues and present all theories relating to his claim to the Committee at one
time. Otherwise, the claimant shall be deemed to have abandoned forever all
issues and theories not raised and presented to the Committee.
SECTION 10.15. LIMITATION ON ACTIONS. Any suit brought to contest a
decision of the Committee shall be filed in a court of competent jurisdiction
within one (1) year from receipt of written notice of the Committee's final
decision or from the date the appeal is deemed denied, and any suit not filed
within this one-year limitation period shall be dismissed by the court.
Service of
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legal process shall be made upon the Plan by service upon the Committee.
SECTION 10.16. FEDERAL PREEMPTION. All state law causes of action that
arise out of or relate to this Plan or to entitlement to rights or benefits
under the Plan shall be deemed to have been preempted by section 514 of ERISA.
SECTION 10.17. NO RIGHT TO JURY TRIAL; EVIDENCE. In any suit contesting
a decision of the Committee, all issues of fact shall be tried by the court
and not by a jury. No evidence may be introduced in court which was not
previously presented to the Committee and no evidence may be introduced to
modify or contradict the terms of the Plan document.
SECTION 10.18. SCOPE OF REVIEW. The Committee shall have full
discretionary authority to interpret and apply the terms of the Plan document
and other relevant documents and relevant provisions of law, and deference
shall be afforded the Committee's decisions. This grant of authority shall
be broadly construed and shall include the authority to find facts, to reach
conclusions of law, to interpret and apply ambiguous terms, and to supply
missing terms reasonably necessary to resolution of claims and appeals.
No finding of fact by the Committee shall be set aside by a court unless
the party contesting the finding shall prove by clear and convincing evidence
that the finding is arbitrary and capricious. No conclusion of law reached
by the Committee shall be reversed by a court unless the party contesting the
conclusion shall demonstrate that the Committee is guilty of manifest
disregard of law.
SECTION 10.19. LIMITATION ON DAMAGES. In any suit over Plan benefits or
rights, recovery shall be limited to the amount of benefits found due,
without interest, or to specific enforcement of rights established under the
Plan, and shall not include any other
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damages whether denominated incidental, special, consequential, collateral,
compensatory, exemplary, punitive or whatever.
SECTION 10.20. MEMBER PLAN DATA. The Committee may issue, or cause to
be issued, from time to time, statements to Employees, Members, Former
Members, and Beneficiaries, indicating eligibility, Service or other data
regarding their Plan benefits. If any such person wishes to challenge the
accuracy of such data or of any information issued in response to a request
within the terms of sections 105(a) or 209(a)(1) of ERISA, the person shall
do so in the manner and within the time limits set forth above in Sections
10.11 - 10.19.
SECTION 10.21. ADVISORS NOT FIDUCIARIES. The Committee and other Plan
fiduciaries may solicit the advice of attorneys, actuaries, accountants,
consultants and other professionals and may rely upon their advice in the
performance of duties under the Plan. No such advisor shall be considered a
fiduciary by virtue of having advised a fiduciary but shall be a fiduciary
only to the extent he expressly accepts that role.
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ARTICLE 11
AMENDMENT, TERMINATION OR MERGER
SECTION 11.1. AMENDMENT. Dresser Industries, Inc. shall have the right
to amend the Plan in writing at any time and in any respect whatsoever,
provided that no amendment shall be made which would deprive any Member
retroactively of the vested portion of the Member's Account or make it
possible for any part of the Trust Fund to be used for or diverted to
purposes other than for the exclusive benefit of the Members and their
Beneficiaries (except for refunds as provided in Section 12.4). When making
decisions regarding Plan amendments, the Committee, the Board, and their
agents act in a corporate and not a fiduciary capacity.
A plan merger agreement between Dresser Industries, Inc. and any entity
which sponsors a Predecessor Plan shall serve as a formal amendment to this
Plan, to the extent that the merger agreement relates to this Plan.
SECTION 11.2. TERMINATION. Although Dresser Industries, Inc. intends
to continue the Plan, the Plan may be terminated by written action of the
Board at any time and for any reason. In the event of the termination or
partial termination of the Plan or upon the complete discontinuance of
contributions under the Plan, the rights of each affected Member to the
Member's Account on the date of such termination or discontinuance shall be
nonforfeitable and fully vested. Subject to the distribution requirements of
Article 6, payment of such amounts to each Member or Beneficiary, upon the
termination of the Plan or upon the complete discontinuance of contributions
under the Plan, shall be made by the Trustee at such time and in such manner
as is directed by the Committee, provided, however, that all Members and
Beneficiaries similarly situated shall be treated in a nondiscriminatory
manner. Distribution of Pretax Accounts shall commence only if a successor
defined
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contribution plan, as defined in Treas. Reg. Section 1.401(k)-1(d)(3), has
not been established by the Company.
SECTION 11.3. MERGER. In the case of any merger or consolidation of
this Plan and/or the Trust Fund with, or any transfer of the assets or
liabilities of the Plan and/or Trust Fund to, any other plan, or the transfer
of assets or liabilities of another plan to the Plan, the terms of such
merger, consolidation or transfer shall be such that each Member would
receive (in the event of termination of the other plan or this Plan or its
successor immediately thereafter) a benefit which is no less than the Member
would have received in the event of termination of the Plan immediately
before such merger, consolidation or transfer.
SECTION 11.4. REPRESENTATIONS CONTRARY TO PLAN. No employee,
supervisor, officer or director of the Company has authority to alter, vary
or modify the terms of the Plan, except in writing through the Plan's formal
amendment procedures set forth in Section 11.1. No representation contrary
to the terms of the Plan and the formal amendments thereto shall be binding
on the Plan, the Trustee, the Committee, or the Company.
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ARTICLE 12
ESTABLISHMENT OF TRUST
SECTION 12.1. AGREEMENTS OF TRUST. In order to implement the Plan,
Dresser Industries, Inc. has entered or will enter into one or more Trust
Agreements, to the end that such funds as may be contributed from time to time
for the payment of all or any part of the benefits under the Plan shall be
segregated from the Company's own assets and held in trust by the Trustee for
the exclusive benefit of the Members or their Beneficiaries (except for refunds
as provided in Section 12.4) under the Plan who may, in accordance with the
terms of the Plan and such Trust Agreements, be entitled to participation
thereunder.
SECTION 12.2. THE TRUSTEE. One or more banks or trust companies shall be
appointed by the Board or by such other person or persons as shall be authorized
by the Board, as Trustee of the Trust Fund. The primary duty of the Trustee is
to hold, invest and reinvest the Trust Fund, and the powers and duties of the
Trustee shall be as described in a Trust Agreement between the Company and the
Trustee.
The Trust Agreement shall be deemed to form a part of this Plan and any or
all benefits which may accrue to any Member under this Plan shall be subject to
the terms and conditions of said Trust Agreement. The Trust Agreement shall
permit establishment of one or more separate investment funds within the Trust
Fund, such separate investment funds to be invested solely in accordance with
guidelines established by the Committee and communicated to the Members.
SECTION 12.3. TRUST FUND FOR EXCLUSIVE BENEFIT OF MEMBERS OF THE PLAN AND
THEIR BENEFICIARIES. Except as otherwise provided in Section 12.4, it shall be
impossible under any circumstances at any time for any part of the corpus or
income of the Trust Fund to be
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used for, or diverted to purposes other than for the exclusive benefit of
Members and their Beneficiaries.
SECTION 12.4. REFUND OF CERTAIN COMPANY CONTRIBUTIONS. Notwithstanding
anything to the contrary:
(a) any contribution made to the Plan by the Company by a mistake of fact
shall be returned to the Company as soon as practicably possible following
discovery of the mistake, but not later than one year after the payment of the
contribution;
(b) all contributions made to the Plan by the Company are conditioned upon
initial qualification of the Plan under the Code and, if the Plan receives an
adverse determination with respect to its initial qualification, then all
contributions shall be returned to the Company within one year after such
determination, but only if application for the determination is made by the time
prescribed by law for filing the Company's return for the taxable year in which
the Plan was adopted, or such later date as the Secretary of the Treasury may
prescribe; and
(c) each contribution made to the Plan by the Company is conditioned upon
the deductibility of the contribution under section 404 of the Code and, to the
extent the deduction is disallowed, the contribution shall be returned to the
Company (to the extent disallowed), as soon as practicably possible following
disallowance of the deduction, but not later than one year after disallowance.
The maximum amount that may be returned to the Company under Section
12.4(a) or (c) is the excess of
(d) the amount contributed by the Company, over, as relevant,
(e) (1) the amount that would have been contributed had no mistake of fact
occurred, or
(2) the amount that would have been contributed had the contribution
been limited to the amount that is deductible after any disallowance by the
Internal Revenue Service.
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Earnings attributable to the excess contribution may not be returned to the
Company under Section 12.4(a) or (c), but losses attributable thereto must
reduce the amount to be so returned. Furthermore, if the withdrawal of the
amount attributable to the mistaken or nondeductible contribution would cause
the balance of the Account of any Member, Former Member, or Beneficiary to be
reduced to less than the balance which would have been in the Account had the
mistaken or nondeductible amount not been contributed, then the amount to be
returned to the Company must be limited so as to avoid such reduction.
In the case of a reversion Section 12.4(b), the entire assets of the Plan
attributable to Company contributions shall be returned to the Company.
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ARTICLE 13
TOP-HEAVY REQUIREMENTS
SECTION 13.1. TOP-HEAVINESS DETERMINATION. The Plan is Top-Heavy for a
Plan Year if, as of the last day of the preceding Plan Year, based on valuations
as of such date, the present value of the cumulative accrued benefits under any
Company defined benefit plan and of Accounts under this Plan and any other
defined contribution plan, and including any part of any accrued benefit or
account value distributed from this Plan or any other Company (or Affiliated
Company) plan within the 5-year period ending on the last business day of the
Plan Year, of key employees (as defined in section 416(i) of the Code) exceeds
60% of a similar sum for all employees under each plan of the Company and any
Affiliated Company in which a key employee participates and each other plan of
the Company or any Affiliated Company, which enables any such plan to meet the
requirements of section 401(a)(4) or 410 of the Code. Accounts and benefits
shall not be taken into account with respect to any individual who has not
performed any service for the Company or an Affiliated Company at any time
during the 5-year period ending on the last business day of the Plan Year.
SECTION 13.2. EFFECT OF TOP-HEAVINESS. If the Plan is Top-Heavy in a Plan
Year, the following provisions apply:
(a) A Member who is credited with Service in a Plan Year in which the Plan
is Top-Heavy shall be 100% vested in the Member's Account under the Plan. This
provision shall continue to apply to the Member even after the Plan ceases to be
Top-Heavy.
(b) A Member who is not a key employee shall receive a five percent
Company contribution. Basic Contributions and Pension Equalizer Contributions
shall be counted as Company contributions for this purpose. Matching
Contributions, Medisave Contributions and Pretax Contributions shall be
disregarded.
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(c) In determining whether the requirements of section 415(e) of the Code
have been met, the 1.25 factor shall be replaced by 1.0.
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ARTICLE 14
MISCELLANEOUS
SECTION 14.1. EMPLOYMENT RIGHTS. Participation in this Plan shall not
give to any Member the right to be retained in the employ of the Affiliated
Companies, nor, upon dismissal, to have any rights other than as described in
this Plan.
SECTION 14.2. HEADINGS. The headings are for reference only. In the
event of a conflict between a heading and the content of a section, the
content of the section shall control.
SECTION 14.3. NUMBER AND GENDER. The masculine pronoun when used
herein shall include the feminine pronoun, and the singular number shall
include the plural number, unless the context of the Plan requires otherwise.
SECTION 14.4. CONSTRUCTION. Except to the extent preempted by federal
law, the provisions of the Plan shall be interpreted in accordance with the
laws of the State of Texas.
SECTION 14.5. ADOPTION OF PLAN CONTINGENT UPON IRS APPROVAL.
Notwithstanding anything in this Plan to the contrary, the adoption of this
Plan by Dresser Industries, Inc. is contingent upon a determination by the
Internal Revenue Service that the Plan qualifies as a tax-exempt retirement
program under sections 401(a) and 501(a) of the Internal Revenue Code of
1986. If the Internal Revenue Service fails to issue a favorable letter of
determination, Dresser Industries, Inc., at its discretion, may treat the
adoption of this Plan, the portion of any merger agreement which relates to
this Plan, and any Plan merger which occurs on or after the Effective Date as
null and void. Title I, Part 1 of ERISA shall not apply to this Plan unless
and until the Internal Revenue Service issues a written determination that
the Plan is qualified under sections 401(a) and 501(a) of the Code.
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ARTICLE 15
GLOSSARY
Each word and phrase defined in this Article 15 shall have the following
meaning whenever such word or phrase used herein unless a different meaning
is clearly required by the context of the Plan.
SECTION 15.1. ACCOUNT. The bookkeeping account of a Member kept
pursuant to Section 4.1, used to keep track of a Member's interest in the
Trust Fund. Some of the subaccounts kept on behalf of a Member are further
defined in Section 4.1.
SECTION 15.2. AFFILIATED COMPANY. A member of a controlled group of
corporations (as defined in Code section 1563(a), determined without regard
to Code section 1563(a)(4) and Code section 1563(e)(3)(C)), of which Dresser
Industries, Inc. is a member, or
(a) an unincorporated trade or business which is under common control
with Dresser Industries, Inc., as determined under Code section 414(c) and
regulations issued thereunder; or
(b) an organization which is part of an affiliated service group with
Dresser Industries, Inc., as determined under Code section 414(m) and the
regulations thereunder; or
(c) any other entity required to be aggregated with Dresser Industries,
Inc., pursuant to the regulations published under Code section 414(o).
For the purpose of determining the length of a Member's Service, the
phrase "more than 50 percent" shall be substituted for the phrase "at least
80 percent", each time it appears in Code section 1563.
SECTION 15.3. AFTER-TAX CONTRIBUTION. That portion of a Member's
Earnings which the Member elects to contribute to the Member's Account on an
after-tax basis under Section 3.1(b).
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SECTION 15.4. BASIC CONTRIBUTION. Contributions made by the Company
under Section 3.2(a).
SECTION 15.5. BENEFICIARY. The individual the Member designates to
receive the sums credited to the Member's Account in the event of the
Member's death. The term "Beneficiary" shall include a contingent
beneficiary designated by the Member to receive said sums should the Member's
primary Beneficiary predecease the Member. The Member shall designate a
Beneficiary as provided in Section 2.2, upon initial enrollment in the Plan,
and a Member may change a Beneficiary by filing a new designation form with
the Committee. However, the designation by a married Member of a primary
Beneficiary other than the Member's spouse shall not be valid unless the
spouse consents to the designation of the alternate Beneficiary, the spouse's
consent acknowledges the effect of the designation, and the designation is
witnessed by a Plan representative or a notary public.
A designation of a Beneficiary under a Predecessor Plan shall remain
valid under this Plan, until revoked by the Member.
In the event there is no valid Beneficiary designation in effect, or if
the Member's Beneficiary has died and the Member has not made a new
Beneficiary designation, the Member's Beneficiary shall be the Member's
spouse, or if there is no spouse, the Member's estate.
SECTION 15.6. BOARD. The Board of Directors of Dresser Industries, Inc.
SECTION 15.7. BREAK IN SERVICE. A period of absence of 60 or more
consecutive months, beginning with a Date of Separation and continuing until
the next Date of Employment.
SECTION 15.8. CODE. The Internal Revenue Code of 1986, as amended, or
as it may be amended from time to time.
SECTION 15.9. COMMITTEE. The Dresser Industries, Inc. Employee
Benefits Committee as described in Article 10.
53
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SECTION 15.10. COMPANY. Dresser Industries, Inc., and any Affiliated
Company which adopts this Plan. By adopting the Plan, an Affiliated Company
shall authorize the Board and the Committee to act for it in all matters
arising under or with respect to the Plan and shall comply with such other
terms and conditions as may be imposed by the Board.
SECTION 15.11. DATE OF EMPLOYMENT. The date on which an Employee first
earns an hour of service with the Company or an Affiliated Company.
SECTION 15.12. DATE OF SEPARATION. The earlier of:
(a) the date on which an Employee (or Former Member) quits, retires, is
discharged or dies,
(b) the first anniversary of any period of absence from active
employment with the Company or an Affiliated Company, for any reason other
than those specified in Section 15.12(a), subject to the provisions of
Sections 15.12(c), 9.2(a)(6), and 9.2(a)(7). Date of Separation shall not
include the date on which an Employee transfers to an ineligible job
classification or a non-participating Affiliated Company, or
(c) the date of disposition of business unit, as described in Section
6.1(d).
(d) In the case of an Employee (or Former Member) on maternity or
paternity leave which continues beyond the first anniversary of the absence
on account of such leave, the Employee's (or Former Member's) Date of
Separation shall be the second anniversary of such absence. Maternity or
paternity leave means an absence from work for any period--
(1) by reason of the pregnancy of the individual,
(2) by reason of the birth of a child of the individual,
(3) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
54
<PAGE>
(4) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
SECTION 15.13. DISABILITY. Any physical or mental condition which
renders a Member incapable of performing the work for which he was employed
or similar work, as certified in writing by a doctor of medicine and as
approved by the Committee.
SECTION 15.14. EARNINGS. For any Plan Year, the sum of (a) and (b)
minus (c), where:
(a) is the Member's W-2 Compensation, as defined in Treas. Reg. Section
1.415-2(d)(11)(i); and
(b) is elective contributions made on behalf of the Member by the
Company that are not includible in gross income under sections 125 (relating
to cafeteria plans) and 402(e)(3) of the Code (relating to 401(k) plans); and
(c) is reimbursements or other expense allowances, foreign service
allowances, the exercise of any option under the Company Stock Option Plan,
any amounts payable under a Company performance unit/share plan or incentive
stock, fringe benefits (cash and non-cash), moving expenses, deferred
compensation, and welfare benefits, to the extent such items are considered
Earnings under Section 15.14(a).
Earnings for any Plan Year shall be limited in accordance with Code
section 401(a)(17). This limit shall be adjusted automatically as
appropriate, in accordance with any statutory changes to the dollar figure
and in accordance with any cost-of-living adjustments to that figure under
the Code.
SECTION 15.15. EFFECTIVE DATE. Midnight, May 31, 1995.
SECTION 15.16. EMPLOYEE. An individual described in Section 2.1.
SECTION 15.17. ERISA. The Employee Retirement Income Security Act of
1974, as amended, or as it may be amended.
55
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SECTION 15.18. FORMER MEMBER. Any person who was at one time a Member but
who is no longer a Member and who has not yet received a complete distribution
of the person's Account from the Plan.
SECTION 15.19. HIGHLY COMPENSATED. An Employee is Highly Compensated if at
any time during the twelve-month period preceding the first day of the current
Plan Year (the "look-back year") he:
(a) was a 5-percent owner of the Company or an Affiliated Company as
defined in Code section 416(i);
(b) earned more than $100,000 (as adjusted in accordance with section
414(q)(1) of the Code) in annual compensation from the Company and all
Affiliated Companies;
(c) earned more than $66,000 (as adjusted in accordance with section
414(q)(1) of the Code) in annual compensation from the Company and all
Affiliated Companies and was a member of the "top paid group". The "top paid
group" includes all actively employed individuals who are in the top 20 percent
of the work force of the Company and Affiliated Companies on the basis of
compensation, except individuals who have not completed 6 months of service,
individuals who normally work less than 17-1/2 hours per week, or individuals
who normally work not more than 6 months during any year; or
(d) was an officer of the Company or an Affiliated Company and received
compensation greater than 50% of the limit on annual benefits imposed by Code
section 415(b), unless such officer was an individual who has not completed 6
months of service, an individual who normally works less than 17-1/2 hours per
week, or an individual who normally works not more than 6 months during any
year.
An Employee who was not an Employee described in subsections (a),(b),(c),
or (d) during the look-back year will be treated as Highly Compensated for the
current Plan Year (the "determination year"), if he is described in subsections
(b), (c), or (d) of this
56
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Section 15.19, for the determination year, and the Employee is one of the top
100 Employees by compensation during the determination year.
The determination described above shall be made with reference to the
definition of "highly compensated employee" found in Treas. Reg. Section
1.414(q)-1T, Q&A-2.
In no event will the Company and Affiliated Companies have more than 50
officers (or, if lesser, the greater of 3 individuals or 10 percent of the
employees) who are considered to be Highly Compensated merely by reason of their
status as officers. Only those 50 officers with the highest compensation will
be considered Highly Compensated.
The determination of whether an Employee is Highly Compensated is made by
taking into account compensation as defined in Code section 415(c)(3), plus
salary deferral contributions or elective deferrals to a cafeteria arrangement
or tax-sheltered annuity. Any compensation paid to family members of a Highly
Compensated Employee shall be treated as paid to the Employee in accordance with
Code section 414(q)(6). Family member, for this purpose, means the Employee's
spouse, and the Employee's lineal ascendants or descendants and the spouses of
such lineal ascendants or descendants.
SECTION 15.20. INVESTMENT MANAGER. A person or organization who is
appointed under Section 10.5 to direct the investment of all or part of the
Trust Fund, and who is either:
(a) registered in good standing as an Investment Adviser under the
Investment Advisers Act of 1940;
(b) a bank, as defined in that Act;
(c) an insurance company qualified to perform investment management
services under the laws of more than one state of the United States; or
(d) a named fiduciary described in section 403(a)(1) of ERISA.
57
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SECTION 15.21. INVESTMENT OPTION. One of the options described in Article
5 or established by the Committee under Article 5, under which amounts credited
to certain of a Member's subaccounts may be invested at the Member's direction
(or absent Member direction, at the Committee's).
SECTION 15.22. LIMITATION YEAR. The calendar year.
SECTION 15.23. MATCHING CONTRIBUTION. Contributions made by the Company
under Section 3.2(b), that match Pretax Contributions or After-tax
Contributions.
SECTION 15.24. MEMBER. An Employee who has joined in the Plan as provided
in Article 2 and who has not transferred to an ineligible job classification.
SECTION 15.25. NON-GRANDFATHERED MEMBER. A Member:
(a) who, as of January 1, 1993, was not at least age 45 with 5 years of
Service;
(b) whose age and years of Service, as of January 1, 1993, did not total
at least 65; and
(c) who was employed by Dresser Industries, Inc. after January 1, 1993,
but before June 1, 1995.
SECTION 15.26. PENSION EQUALIZER CONTRIBUTION. Contributions made by the
Company under Section 3.2(d).
SECTION 15.27. PERIOD OF SERVICE. The period of time beginning on a Date
of Employment and continuing until the next Date of Separation.
SECTION 15.28. PLAN. The Dresser Industries, Inc. Retirement Savings Plan
- - A as set forth herein or in any amendments hereto.
SECTION 15.29. PLAN YEAR. The calendar year.
SECTION 15.30. PREDECESSOR PLAN. Any plan or a portion of a plan which has
been merged into this Plan as of the Effective Date, or may be merged into this
Plan, on or after the Effective Date.
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SECTION 15.31. PRETAX CONTRIBUTION. That portion of a Member's Earnings
which the Member elects to defer to the Member's Account on a pretax basis under
Section 3.1(a).
SECTION 15.32. TEST COMPENSATION. Compensation used for the purpose of
determining whether the nondiscrimination tests of Sections 3.6(b)(3), (4),
and (5) are met. The Committee shall have discretion to use any definition
of Test Compensation that is reasonable and nondiscriminatory under Code
section 414(s). However, Test Compensation for any Plan Year shall be limited
in accordance with Code section 401(a)(17). This limit shall be adjusted
upward and downward, as appropriate, in accordance with any statutory
changes to the dollar figure in Code section 401(a)(17) and in
accordance with any cost-of-living adjustments to that figure under the Code.
SECTION 15.33. TRUST AGREEMENT. An agreement entered into by the Company
and one or more Trustees to govern the Trust Fund, which agreement may also
provide for holding funds under any other plan maintained by the Company or an
Affiliated Company.
SECTION 15.34. TRUST FUND. The sum of the contributions made to the Plan
and held by the Trustee or Trustees in a trust or trusts, increased by any
profits or income thereon and decreased by any losses or reasonable expenses
incurred in the administration of the Trust Fund and any payments made
therefrom.
The Plan is an eligible individual account plan described in ERISA section
407(d)(3)(A) and may invest more than ten percent of its assets in qualifying
employer securities.
SECTION 15.35. TRUSTEE. The one or more banks, trust companies or other
financial institutions which are employed to hold and manage the Trust Fund.
DRESSER INDUSTRIES, INC.
By: P. M. BRYANT
-------------------------------------
Title: VICE PRESIDENT - HUMAN RESOURCES
---------------------------------
59
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APPENDIX A
CALCULATION OF PENSION EQUALIZER PERCENTAGE
Each Member who was an active participant in the Dresser Industries, Inc.
Consolidated Salaried Retirement Plan (DIICON) on May 31, 1995, whose
participation was frozen as of that date, may receive a Pension Equalizer
Contribution, unless such Member was not employed by the Company, on such date
and was an active participant merely because such Member was employed by an
entity described in Articles 11 or 12 of DIICON, or was Totally Disabled as
described in Section 1.48 of DIICON. A Member's Pension Equalizer Contribution
is the product of the Member's Equalizer Percentage as determined below and the
Member's Earnings as determined in this Plan. The Member's Equalizer Percentage
is determined according to the following steps:
FIRST STEP - The first step is to determine the Member's Equalizer Age in
accordance with the following table:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If the Member's Exact Age Then the Member's
as of June 1, 1995, is: Equalizer Age is:
- -------------------------------------------------------------------------------
Less than or equal to age 57 Age 62
Greater than age 57, but less Exact age as of
than or equal to age 60 June 1, 1995, plus 5 years
Greater than age 60, but less Age 65
than or equal to age 65
Greater than age 65 None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECOND STEP - The DIICON Actuary shall calculate the amount of monthly
retirement income the Member would have received as a life annuity beginning as
of the Equalizer Age (including adjustment for early commencement, if
applicable) under the DIICON formula, assuming DIICON as in effect on May 31,
1995, had continued in effect to the Equalizer Age and assuming the Member
continued in active employment until that age. Such projected amount shall be
A-1
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determined without regard to DIICON Section 4.01(d), which refers to certain
annuity contracts purchased by the Company.
In making this projection, the DIICON Actuary shall base the Member's
projected Final Average Monthly Earnings and projected Covered Compensation upon
the known Compensation (as defined in DIICON as of May 31, 1995) for calendar
years before 1995 and upon Projected Compensation for calendar years 1995 and
later. The calculation shall be done with mathematical precision, without
regard to Sections 1.12(c) and 10.06 of DIICON. The Projected Compensation for
any given year is the Base Year Compensation projected at a 4.5% salary scale.
For the calendar year containing the Member's Equalizer Age, the Projected
Compensation shall reflect the portion of the year up to the Member's Equalizer
Age.
The Base Year Compensation is the sum of the following two amounts:
1. The 1994 Compensation as defined in DIICON (but without regard to DIICON
Section 1.12(c)), less any bonus included therein, and
2. The two-year average of any bonus amounts earned in 1993 and 1994, whether
included in Compensation (as defined in DIICON) or previously excluded
because such amounts had been deferred.
The Final Average Monthly Earnings determined above, however, shall not be
less than the Final Average Monthly Earnings as of May 31, 1995 (excluding
earnings after January 1, 1995), determined without regard to DIICON Section
1.12(c), projected at a 4.5% salary scale to the Member's Equalizer Age. For
this purpose, the projection will include the fraction of a year, if any, from
the beginning of the year in which the Equalizer Age occurs to the Equalizer
Age.
THIRD STEP - The DIICON Actuary shall project to the Equalizer Age the
hypothetical account balance that would accumulate from Company contributions of
7% of Projected Compensation, if such
A-2
<PAGE>
contributions began on the Effective Date and were made monthly until the
date the Member attains his Equalizer Age. For this purpose, if the 1994
Compensation was for less than 12 months, the 1994 Compensation, less any
bonus included therein, used in the Base Year Compensation, shall be
annualized before use for projection. The DIICON Actuary shall assume that
the hypothetical account balance grows at the rate of 8% per annum. The
DIICON Actuary then shall convert the hypothetical account balance to a
monthly retirement income payable as a life annuity, using the appropriate
factor from the 1983 Group Annuity Mortality Table, weighted 90% male and 10%
female, with an interest discount rate of 8%.
FOURTH STEP - The DIICON Actuary shall subtract from the amount determined in
Second Step above the amount determined in the Third Step above, plus the amount
that would be received (including any purchased annuity described in Section
4.01(d) of DIICON) from DIICON, assuming that: (1) the form of payment is a life
annuity, (2) no Compensation after January 1, 1995, is considered, and (3) the
Member retires as of the Member's Equalizer Age. The result shall be called the
"Shortfall Amount". If such amount is less than zero, it will be deemed to
equal zero. The DIICON Actuary shall then determine the Equalizer Percentage
such that, if the Equalizer Percentage is multiplied by the Projected
Compensation from the Third Step above for years after June 1, 1995, and
accumulated with investment return of 8% per annum to the Equalizer Age and
divided by the same conversion factor from the Third Step above, then the result
would equal the Shortfall Amount. The Equalizer Percentage is rounded to the
nearest 1/10th of 1%.
A-3
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APPENDIX B
CALCULATION OF MEDISAVE CONTRIBUTIONS
SECTION B.1. MEDISAVE CONTRIBUTIONS. The following Members, who must be
eligible to participate in the Dresser group medical plan, shall be eligible to
receive Medisave Contributions if they were eligible to participate in this Plan
(or a Predecessor Plan) for at least one year:
(a) Non-grandfathered Members;
(b) Members hired by Dresser Industries, Inc. after May 31, 1995, who are
not employed by the Oilfield Services Group;
(c) Members hired by Dresser Industries, Inc. before June 1, 1995, who are
employed by the Security Division or the Guiberson-AVA Division of Dresser
Industries, Inc; and
(d) Members who were participants in the Baroid Corporation Savings Plan
on May 31, 1995.
The Medisave Contribution on behalf of Members described in subsections
(a), (b) or (c) shall be equal to 50% of the Pretax and After-tax Contributions
of the Member, to the extent such Member's contributions do not exceed 4% of the
Member's Earnings. These contributions shall be made semimonthly to the
Medisave Account of each Member described in subsections (a), (b) or (c), who
has made employee contributions during the semimonthly period. Medisave
Contributions made in accordance with this Section may be forfeited or returned,
in accordance with the provisions of Section 3.6(b).
The Medisave Contribution on behalf of each Member described in subsection
(d) shall be $400 each Plan Year, but shall be made at the discretion of
Oilfield Services Group's management. If this contribution is authorized, it
shall be paid out of the profits of the Oilfield Services Group, to each Member
described in subsection (d) who is (i) employed on the last day of the Plan Year
for which
B-1
<PAGE>
the contribution is made, or (ii) died, retired, or became disabled during
the Plan Year.
B-2
<PAGE>
APPENDIX C
TK VALVE & MANUFACTURING PLAN MERGER
SECTION C.1. BACKGROUND. On March 31, 1993, the Company acquired all of
the outstanding stock of TK Valve & Manufacturing, Incorporated ("TK").
Effective January 1, 1994, the Profit Sharing Plan of TK Valve & Manufacturing,
Incorporated ("TK Plan") was merged into the Dresser Industries, Inc. Salary
Deferral Plan. This Appendix contains special rules related to this merger, that
continue to apply to the accounts of participants that were transferred to this
Plan.
SECTION C.2. SERVICE. The rules in this Section C.2 apply to individuals
who were employed by TK at any time prior to January 1, 1994.
(a) SERVICE FOR PERIODS BEFORE AUGUST 1, 1993. Years of service credited
under the TK Plan as of July 31, 1993, will count as years of Service under this
Plan.
(b) SERVICE FOR PERIODS AFTER JULY 31, 1993. In general, Service for all
periods of employment after July 31, 1993, will be determined in accordance with
Article 9 of this Plan. However, any individual who is credited with at least
1,000 hours of service under the TK Plan during the period from August 1, 1993
to December 31, 1993, will be credited with a year of Service under this Plan on
December 31, 1993. This year of Service will be the only Service credited to
such an individual for the period from August 1, 1993 to July 31, 1994.
(c) RELATIONSHIP TO BREAK IN SERVICE RULES CLARIFIED. Any Service that
would otherwise be credited under this Section C.2 is subject to forfeiture
under the regular Break in Service rules in Section 9.2(b)(1).
SECTION C.3. TK SUBACCOUNTS.
C-1
<PAGE>
(a) IN GENERAL. A separate subaccount will be established for each
individual for whom an amount was transferred to the Plan from the TK Plan ("TK
subaccount"). The TK subaccount will consist of the amount transferred to the
Plan, and will be credited with earnings and other investment gains and losses
of the Trust Fund. An individual will be 100% vested in all the amounts in his
TK subaccount.
(b) EFFECT OF CERTAIN RULES LIMITED TO TK SUBACCOUNT. The rules in Sections
C.4 to C.5 only apply to the TK subaccount. A withdrawal under Section C.4 will
reduce the TK subaccount by the amount of the withdrawal. A distribution under
Section C.5 will reduce the TK subaccount to zero. At any given time, the rules
in Sections C.4 to C.5 apply only to the balance of the TK subaccount remaining
after these reductions have been made.
SECTION C.4. SPECIAL WITHDRAWAL RULES. A Member may withdraw the portion of
his TK subaccount, if any, attributable to voluntary employee contributions
under the TK Plan (after-tax contributions in excess of the 2% mandatory
employee contribution required under that plan). Withdrawals under this Section
may be made no more than once in any 12-month period.
SECTION C.5. SPECIAL DISTRIBUTION RULES. An Employee who does not have an
election in effect to make Pretax Contributions may elect to receive a
distribution of his entire TK subaccount, regardless of the fact that he has not
separated from service. An Employee electing to do so, however, will not be
allowed to make any Pretax Contributions during the 12-month period following
this election. Notwithstanding the previous sentence, no withdrawals of amounts
attributable to pretax contributions shall be permitted if the distribution
would violate the requirements of section 401(k)(2)(B) of the Code.
C-2
<PAGE>
APPENDIX D
MERGER OF SAVINGS PLAN FOR EMPLOYEES OF BAROID CORPORATION
WITH AND INTO THE DRESSER INDUSTRIES, INC.
RETIREMENT SAVINGS PLANS
WHEREAS, Baroid Corporation ("Baroid") has heretofore adopted the Savings
Plan for Employees of Baroid Corporation (the "Baroid Plan"); and
WHEREAS, Dresser Industries, Inc. ("Dresser") sponsors and maintains the
Dresser Industries, Inc. Retirement Savings Plan-A (the "Dresser Plan-A"), the
Dresser Industries, Inc. Retirement Savings Plan-B (the "Dresser Plan-B"), and
the Dresser Industries, Inc. Deferred Savings Plan, (the "Savings Plan")
(jointly, the "Dresser Plans"); and
WHEREAS, Baroid was merged with Dresser and the parties hereto desire that
the employees of Baroid become covered by the Dresser Plans; and
WHEREAS, the parties hereto desire to provide simultaneously for a spin-off
of the Baroid Plan into functional group components and for the mergers of the
resulting group components of the Baroid Plan into the Dresser Plan-A, the
Dresser Plan-B, and the Savings Plan effective as of June 1, 1995:
NOW, THEREFORE, the parties hereto agree as follows:
1. Effective as of June 1, 1995, the accounts under the Baroid Plan of
Baroid employees eligible to participate in the Dresser Plan-A, the accounts
under the Baroid Plan of Baroid employees eligible to participate in the Dresser
Plan-B, and the accounts under the Baroid Plan of Baroid employees eligible to
participate in the Savings Plan are hereby transferred to and merged with and
into, respectively, the Dresser Plan-A, the Dresser Plan-B, and the Savings Plan
with the result that the provisions of
D-1
<PAGE>
the Dresser Plans replace the provisions of the Baroid Plan in their entirety
except as otherwise herein provided.
Former employees with account balances in the Baroid Plan will be
transferred to the Dresser Plans in accordance with their eligibility status
immediately prior to termination of employment.
Pursuant to such merger, the assets held under the Baroid Plan shall be
transferred as soon as practicable as provided in Item 2 hereof to the Dresser
Plans to be held under the existing trusts maintained under said Dresser Plans.
Such transfers shall be in cash or in kind as directed by the Dresser Plans'
administrative committee (the "Committee") except that in accordance with the
provisions of Item 6 hereof shares of Dresser Industries, Inc. common stock,
shares of NL Industries common stock, shares of Tremont Corporation common
stock, as well as temporary Investment Funds under the Baroid Plan which were
established in connection with such merger pursuant to Item 6 hereof, and
including outstanding participant loans, shall be transferred in kind.
2. Immediately after the merger of the relevant group component of the
Baroid Plan with and into the Dresser Plan-A, each Member of the Dresser Plan-A
shall, if the Dresser Plan-A were then terminated, be entitled to a benefit
which is at least equal to the benefit such Member would have been entitled to
immediately prior to the merger if the Baroid Plan and the Dresser Plan-A had
then terminated.
Immediately after the merger of the group component of the Baroid Plan with
and into the Dresser Plan-B, each Member of the Dresser Plan-B shall, if the
Dresser Plan-B were then terminated, be entitled to a benefit which is at least
equal to the benefit such Member would have been entitled to immediately prior
to the merger if the Baroid Plan and Dresser Plan-B had then terminated.
Immediately after the merger of the group component of the Baroid Plan with
and into the Savings Plan, each Member of the
D-2
<PAGE>
Savings Plan shall, if the Savings Plan were then terminated, be entitled to a
benefit which is at least equal to the benefit such Member would have been
entitled to immediately prior to the merger if the Baroid Plan and the Savings
Plan had then terminated.
The provisions of this instrument shall be construed under and in
accordance with section 208 of the Employee Retirement Income Security Act of
1974, as amended, and sections 401(a)(12) and 414(1) of the Internal Revenue
Code of 1986, as amended, and federal regulations promulgated thereunder.
3. As soon as practicable after the merger of the Baroid Plan with and
into the Dresser Plans, the appropriate officers of Dresser and Baroid shall
determine if Baroid is projected to attain (or if such determination cannot be
made until the end of 1995, in fact attained) the profit objectives established
for 1995 as a condition for 1995 Employer Contributions to the Baroid Plan
(based upon the corporate performance of Baroid for the period of January 1,
1995 through May 31, 1995 if such determination is made prior to the close of
1995). If it is determined that Baroid attained or is projected to attain, as
applicable, such profit objectives, Dresser shall make Employer Contributions to
the applicable Dresser Plan (as successor to the portion of the Baroid Plan
which was merged into it) pursuant to Section 5.1 of the Baroid Plan for the
period of January 1, 1995 through May 31, 1995 on a prorated basis as determined
by the appropriate officers of Dresser and Baroid. Any such pro-rata Employer
Contributions for such period shall be made as soon as practicable after the
determination of the amount thereof to and shall be allocated as of May 31, 1995
to the Plan Accounts of the Baroid Plan Participants in accordance with the
provisions of Article V of the Baroid Plan but based upon Pre-Tax and After-tax
Contributions made and Compensation earned during the period of January 1, 1995
through May 31, 1995 and based upon May 31, 1995 as the Plan Year end for
D-3
<PAGE>
the Baroid Plan for 1995. If the pro-rata Employer Contributions for to
Baroid Plan for the period of January 1, 1995 through May 31, 1995 are
determined and made prior to the close of 1995 then, at the end of 1995, the
appropriate officers of Dresser shall determine if Baroid attained the profit
objectives established for 1995 as a condition for 1995 Employer
Contributions to the Baroid Plan and, if so, whether the pro-rata Employer
Contributions made for the Baroid Plan Participants as of May 31, 1995 were
sufficient to constitute pro-rata Employer Contributions for such short
period. If it is determined that such contributions were not sufficient to
constitute pro-rata Employer Contributions for such short period, Dresser
may, as directed by the appropriate officers of Dresser, contribute to the
Dresser Plans on behalf of the Baroid Plan Participants such Employer
Contributions as are determined to be appropriate. Any such additional 1995
pro-rata Employer Contributions for the Baroid Plan Participants shall be
allocated in the same way and to the same persons as if they had been
contributed as a part of the 1995 pro-rata Employer Contributions made for
the Baroid Plan Participants earlier in 1995.
All contributions made in accordance with this Item 3 shall be treated as
having been made to the Baroid Plan as of May 31, 1995, provided such
contributions are made no later than 30 days after the end of the period
described in Code 404(a)(6) applicable to the taxable year of Dresser in which
the 1995 Plan year for the Baroid Plan ends.
4. The provisions of Items 5 through 8 of this instrument shall be
applicable to the accounts (the "Baroid Plan Accounts") transferred to the
Dresser Plans pursuant to the merger of the Baroid Plan with and into the
Dresser Plans of an individual ("Baroid Participant") who was a participant in
the Baroid Plan prior to such mergers.
D-4
<PAGE>
5. Except as provided specifically herein, Baroid Plan Accounts shall be
governed by the provisions of the Dresser Plans in the same manner as any other
account under the Dresser Plans as follows:
(a) The portion of a Baroid Plan Account which is attributable to Pretax
Contributions made to the Baroid Plan shall be treated in the same manner as a
Pretax Account;
(b) The portion of a Baroid Plan Account which is attributable to Employer
Contributions made to the Baroid Plan shall be treated in the same manner as a
Matching Account;
(c) The portion of a Baroid Plan Account which is attributable to
After-tax Contributions made to the Baroid Plan shall be treated in the same
manner as an After-tax Account;
(d) The portion of a Baroid Plan Account which was attributable to a
rollover into the Baroid Plan shall be treated in the same manner as a Rollover
Account; and
(e) The portion of a Baroid Plan Account which was attributable to a
Medisave Contributions made to the Baroid Plan shall be treated in the same
manner as a Medisave Account.
6. Incident to the transfer to the Dresser Plans of the Baroid Plan
Accounts, the Investment Funds of the Baroid Plan shall be liquidated and the
proceeds invested in the investment funds of the Dresser Plans with the proceeds
from the liquidation of the Baroid Plan Investment Fund being invested by the
Employee Benefits Committee in the investment fund of the applicable Dresser
Plan which is most comparable thereto in terms of type of investments and nature
of investment goals except that:
(a) Baroid Plan outstanding Participant loans shall be continued as
outstanding participant loans subject, however, to such adjustments as may be
appropriate or necessary to conform to the Dresser Plans' loan procedures and
administration;
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(b) The common stock of Dresser Industries, Inc., Tremont Corporation
and NL Corporation shall be invested in separate frozen investment funds
established under the Dresser Plans for such assets. The assets of such
frozen funds shall continue to be invested in such assets unless and until a
Baroid Participant directs sale and reinvestment into any of the regular
investment funds under the Dresser Plans in accordance with the standard
investment change provisions of the Dresser Plans. Any such sale and
reinvestment elections must be made on or before December 1, 1996 and, from
and after such date, the remaining common stock of Tremont Corporation and NL
Corporation in the frozen investment funds established pursuant to this
subitem (b) shall be liquidated on or about December 1, 1996 and will
initially be invested in the equity index funds of the Dresser Plans.
All amounts distributable from the Tremont Stock Fund and/or the NL Fund
prior to December 1, 1996 shall be paid entirely in cash, or entirely in
whole shares of the applicable stock and in cash to the extent of any
fractional shares (to 1/1,000th of a share), as the Participant shall elect.
Absent such an election, amounts distributable from the Tremont Stock Fund
and/or the NL Fund shall be paid in whole shares of Employer Stock (and
fractional shares to 1/1,000th of a share paid in cash).
No amounts may be invested in the frozen investment funds established
pursuant to this subitem (b) other than the common stock of Dresser
Industries, Inc., Tremont Corporation and NL Corporation transferred in kind
from the Baroid Plan to the Dresser Plans; and
(c) The funds under the Baroid Plan assigned to the Merrill Lynch
Retirement Preservation Trust shall remain invested in this fund and shall
become a frozen investment fund under the Dresser Plans. The assets of such
frozen funds shall continue to be invested in such assets unless and until a
Baroid Participant
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directs sale and reinvestment into a "noncompeting" fund under the Dresser
Plans in accordance with the standard investment change provisions of the
Dresser Plans.
From and after such initial transfer and subject to the provisions of
this Item 6, Baroid Plan Participants may direct as to the investment of
their Baroid Plan Accounts in accordance with the then applicable provisions
of the Dresser Plans. Notwithstanding the foregoing and in order to more
efficiently effectuate the merger of the Baroid Plan with and into the
Dresser Plans, the Investment Funds of the Baroid Plan (other than the
Investment Funds which are to be maintained as frozen funds pursuant to items
(a), (b) and (c) of this Item 6 following merger of the Baroid Plan with and
into the Dresser Plans) may, as directed by the Committee, be liquidated
during a reasonable period prior to the merger of the Baroid Plan with and
into the Dresser Plans (rather than coincident with such mergers) and the
proceeds invested under the Baroid Plan in temporary Investment Funds
established thereunder which are identical to the investment funds of the
Dresser Plans with the proceeds from the liquidation of an original Baroid
Plan Investment Fund being invested in the temporary Investment Fund under
the Baroid Plan which is most comparable thereto in terms of type of
investments and nature of investment goals. In the event that such
liquidation and reinvestment in temporary Investment Funds which are
identical to the investment funds of the Dresser Plans is effected, such
temporary Investment Funds shall be transferred in kind to the Dresser Plans
upon the merger of the Baroid Plan with and into the Dresser Plans and
thereupon merged into the respective parallel investment funds of the Dresser
Plans.
7. From and after transfer to the Dresser Plans, each Baroid Plan
Participant shall have a vested and nonforfeitable interest in
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<PAGE>
the portion of his Baroid Plan Account attributable to Employer Contributions
in accordance with the following schedule:
YEARS OF SERVICE VESTED INTEREST
---------------- ---------------
Less than 3 0%
3 50%
4 75%
5 or more 100%
For purposes of the foregoing schedule, a Baroid Plan Participant's
"Years of Service" shall be calculated in accordance with the provisions of
the Dresser Plans (with respect to service completed both before and after
June 1, 1995) but for the period prior to December 31, 1995 shall not be less
than the amount computed as follows:
(a) the number of years equal to the number of years credited to him
under the Baroid Plan for vesting purposes as of December 31, 1994; plus
(b) the greater of (1) the period of service that would be credited to
him for vesting purposes under the Dresser Plans, whichever is applicable to
him, for his service during the period of January 1, 1995 through December
31, 1995 or (2) the service credited as of June 1, 1995 for vesting purposes
under the Baroid Plan for the 1995 computation period.
Provisions of the Dresser Plans notwithstanding, the nonforfeitable
percentage in the Dresser Plans of any Baroid Plan Participant who had
completed at least three years of service as of June 1, 1995 shall not be
less than the percentage determined in accordance with the foregoing schedule
if application of such schedule would result in a greater nonforfeitable
percentage than would otherwise be applicable under the Dresser Plans.
8. Distribution and withdrawal provisions of the Dresser Plan to the
contrary notwithstanding, this Item 8 shall govern as to distributions and
withdrawals from the Dresser Plans by the Baroid Plan Participants:
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(a) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plan, a Baroid Plan Participant may at any time
withdraw any portion of the then value of his Baroid Plan Account which is
attributable to After-Tax Contributions, Rollover Contributions and ESOP
Contributions.
(b) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plan, a Baroid Plan Participant who has attained the
age of 59 1/2 may withdraw any portion of the then value of his Baroid Plan
Account which is attributable to Pre-Tax Contributions.
(c) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plan, a Baroid Plan Participant may withdraw any
portion of the then value of the vested portion of his Baroid Plan Account
which is attributable to Employer Contributions which were made to the Baroid
Plan at least 24 months prior to the date of such withdrawal.
(d) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plan, a Baroid Plan Participant who has a combined
period of participation in the Baroid Plan and the applicable Dresser Plan of
at least 60 months may withdraw any portion of the then value of his Baroid
Plan Account which is attributable to Employer Contributions made to the
Baroid Plan.
(e) In addition to other benefit forms available pursuant to the
Dresser Plan upon termination of employment, a Baroid Plan Participant may
elect to have his Baroid Plan Account distributed in equal annual
installments over a fixed number of years not to exceed the lesser of fifteen
years or his life expectancy.
(f) The vested portion of a Baroid Plan Participant's Baroid Plan
Account may be withdrawn on account of hardship, in accordance with the
procedures and restrictions set forth in the Dresser Plans' hardship
withdrawal provisions.
D-9
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(g) In addition and as an elective alternative to the normal benefit
payment form available under the Dresser Plans upon termination of
employment, a Baroid Plan Participant who terminates employment by reason of
Disability or Retirement may elect to receive his Baroid Plan Account in the
form of a commercial annuity contract providing payments for the life of the
Baroid Plan Participant if he is not married or a joint and survivor annuity
providing payments for his life and a fifty percent surviving spouse annuity
for the life of his surviving spouse if he is married. In lieu of the
foregoing forms of annuity contract payments for his Baroid Plan Account
under this subitem (g), a Baroid Plan Participant may elect a commercial
annuity contract providing alternate forms of annuity payments. The terms of
any commercial annuity contract distributed to a Baroid Plan Participant
shall provide that payments under such annuity will commence immediately,
subject to the Baroid Plan Participant's rights to defer commencement of
payments in accordance with applicable provisions of the Dresser Plans. The
procedure for a Baroid Plan Participant to elect the commercial annuity
contract form of distribution will be to deliver to the Committee a written
notice of his interest in an annuity form of distribution. Upon receipt of
such notice, the Committee will give the Baroid Plan Participant a written
explanation in non-technical language of: (i) the terms and conditions of the
annuity contract distribution form in general and of the normal annuity
contract form of payment of the qualified joint and fifty percent surviving
spouse form of annuity or, as applicable, the single life form of annuity,
(ii) the Baroid Plan Participant's right to make, and to revoke, an election
waiving the joint and fifty percent surviving spouse form of annuity or, as
applicable, single life form of annuity, (iii) the financial effect upon his
benefit (in terms of dollars per benefit payment) of his making or revoking
an election to waive the
D-10
<PAGE>
qualified joint and fifty percent surviving spouse form of annuity, or, as
applicable, single life form of annuity, (iv) the rights of his spouse with
respect to his elections and (v) sufficient additional information to explain
the relative values of alternative forms of payment under the annuity
contract distribution option. The Committee will either mail or personally
deliver the written explanation to the Baroid Plan Participant by such time
as to reasonably assure that it will be received on or about the later of:
(1) No more than ninety days prior to his entry date into the annuity
contract: and
(2) No less than thirty days prior to his entry date into the annuity
contract.
If an additional written explanation is due because of the Baroid Plan
Participant's written request for additional information, such explanation
may be personally delivered or mailed (first class, postage prepaid) within
thirty days from the date of the Baroid Plan Participant's written request.
The period within which the Baroid Plan Participant must make his election
shall be the ninety-day period ending on his annuity starting date (as such
term is defined in Code 417(f)(2)). The Baroid Plan Participant may revoke
any election made (or make a new election) at any time during such election
period. If, during such election period, the Baroid Plan Participant makes a
written request to the Committee for additional information, the election
period will be extended to the extent necessary, to include the ninety
calendar days immediately following the furnishing of all the additional
information to him. Once an insurance company has issued the form of annuity
contract elected, the election period shall cease and the Baroid Plan
Participant's annuity election shall be irrevocable. If a married Baroid Plan
Participant whose benefits, in the absence of an election otherwise, would be
paid in the joint
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<PAGE>
and fifty percent surviving spouse form of annuity elects a different annuity
form, such election must be in the form of a qualified election. A qualified
election is a benefit election accompanied by a written waiver of the joint
and fifty percent surviving spouse form of annuity which waiver along with,
where applicable, the designation of a specific beneficiary other than the
spouse and his specific form of benefit is consented to by his spouse in a
writing which is witnessed by a representative of the Dresser Plan-A or the
Dresser Plan-B, as applicable, or a notary public, which acknowledges the
effect of the election and which may not be changed without the consent of
the Baroid Plan Participant's spouse, except to elect a joint and fifty
percent surviving spouse form annuity. Upon receipt of the executed forms
wherein a Baroid Plan Participant elects the annuity contract distribution
form and the type of annuity he desires to receive, the portion of his
Accounts under the Dresser Plans which are governed by this subitem (g) shall
be converted into cash and used to purchase a commercial annuity contract
providing the annuity form of payment selected by the Baroid Plan Participant.
(h) If a Baroid Plan Participant who is married and who has elected an
annuity contract form of distribution pursuant to subitem (g) above
(regardless of the form of payment he elected under such contract) dies prior
to the purchase of such contract, 50% of his Baroid Plan Account shall be
distributed to his surviving spouse (and any beneficiary designation or other
election to the contrary shall be null and void) in the form of an annuity
contract providing a single life annuity for the life of such spouse unless
such spouse elects a lump sum payment or an alternate form of benefit
provided in this subitem 8 or in the Dresser Plan-A, Dresser Plan-B or the
Savings Plan, as applicable. If a Baroid Plan Participant who is married has
elected an annuity contract form of distribution pursuant to subitem (g)
above
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<PAGE>
(regardless of the form of payment he elected under such contract), any
withdrawals from or loans made from his Baroid Plan Account prior to the
purchase of such contract shall be subject to the election and spousal
consent rules described in subitem (g) above in the same manner as the Baroid
Plan Participant's elections to take an annuity form of payment other than
the joint and fifty percent surviving spouse annuity.
(i) This Item 8 is intended to preserve with respect to the account
balances transferred to the Dresser Plans from the Baroid Plan Accounts all
forms of benefits required to be preserved pursuant to section 411 of the
Code and Treasury Regulations promulgated thereunder and is to be interpreted
and construed to effectuate such purpose. To the extent that any form of
benefit provided with respect to the Baroid Plan Accounts pursuant to this
Item 8 is generally available under the Dresser Plans, a Baroid Plan
Participant shall not have a separate benefit form election with respect to
his Baroid Plan Account by virtue of this Item 8.
9. For purposes of this instrument, capitalized terms shall have the
meanings ascribed to them in the Dresser Plans or the Baroid Plan, as
applicable, unless otherwise defined herein.
10. As amended hereby, the Dresser Plans are specifically ratified and
reaffirmed.
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<PAGE>
APPENDIX E
MERGER OF WHEATLEY TXT CORP. EMPLOYEES' SAVINGS PLAN
WITH AND INTO THE DRESSER INDUSTRIES, INC.
RETIREMENT SAVINGS PLANS
WHEREAS, Wheatley TXT Corp. ("Wheatley") has heretofore adopted the
Wheatley TXT Corp. Employees' Savings Plan (the "Wheatley Plan") and merged
the Axelson Inc. Retirement Savings Plan (the "Axelson Plan") into the
Wheatley Plan; and
WHEREAS, Dresser Industries, Inc. ("Dresser") sponsors and maintains the
Dresser Industries, Inc. Retirement Savings Plan-A (the "Dresser Plan-A") and
the Dresser Industries, Inc. Retirement Savings Plan-B (the "Dresser Plan-B")
(jointly, the "Dresser Plans");
WHEREAS, Wheatley TXT, was merged with Dresser and the parties hereto
desire that the employees of Wheatley TXT become covered by the Dresser
Plans; and
WHEREAS, the parties hereto desire to provide simultaneously for a
spin-off of the Wheatley Plan into functional group components and for the
mergers of the resulting group components of the Wheatley Plan into,
respectively, the Dresser Plan-A and the Dresser Plan-B, effective as of June
1, 1995;
NOW, THEREFORE, the parties hereto agree as follows:
1. Effective as of June 1, 1995, the accounts under the Wheatley Plan
of Wheatley employees eligible to participate in the Dresser Plan-A, and the
accounts under the Wheatley Plan of Wheatley employees eligible to
participate in the Dresser Plan-B, are hereby transferred to and merged with
and into, respectively, the Dresser Plan-A and the Dresser Plan-B, with the
result that the provisions of the Dresser Plans replace the provisions of the
Wheatley Plan in their entirety except as otherwise herein provided.
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<PAGE>
Former employees of Wheatley and Axelson, Inc., with account balances in
the Wheatley Plan will be transferred to the Dresser Plans in accordance with
their eligibility status immediately prior to termination of employment.
Pursuant to such merger, the assets held under the Wheatley Plan shall
be transferred as soon as practicable to the Dresser Plans to be held under
the existing trusts maintained under said Dresser Plans. Such transfers shall
be in cash or in kind as directed by the Dresser Plans' administrative
committee (the "Committee") except that shares of Dresser Industries, Inc.
common stock, and shares of Hanson Corporation common stock shall be
transferred in kind.
2. Immediately after the merger of the group component of the Wheatley
Plan with and into the Dresser Plan-A, each Member of the Dresser Plan-A who
was a Participant in the Wheatley Plan shall, if the Dresser Plan-A were then
terminated, be entitled to a benefit which is at least equal to the benefit
such Member would have been entitled to immediately prior to the merger if
the Wheatley Plan had then terminated. Immediately after the merger of the
group component of the Wheatley Plan with and into the Dresser Plan-B, each
Member of the Dresser Plan-B who was a Participant in the Wheatley Plan
shall, if the Dresser Plan-B were then terminated, be entitled to a benefit
which is at least equal to the benefit such Member would have been entitled
to immediately prior to the merger if the Wheatley Plan had then terminated.
The provisions of this instrument shall be construed under and in accordance
with section 208 of the Employee Retirement Income Security Act of 1974, as
amended, and sections 401(a)(12) and 414(1) of the Internal Revenue Code of
1986, as amended, and federal regulations promulgated thereunder.
3. After the merger of the Wheatley Plan with and into the Dresser
Plans, the appropriate officers of Dresser and Wheatley
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<PAGE>
shall determine a matching percentage level of Employer Matching
Contributions to make on behalf of the Wheatley Plan Participants (based upon
such factors as they deem appropriate) for the period of March 1, 1995
through May 31, 1995. Such Employer Matching Contributions for such period
shall be made to the Dresser Plans as soon as practicable following the
merger of the Wheatley Plan into the Dresser Plans and shall be allocated as
of May 31, 1995 in accordance with the provisions of Wheatley Plan based upon
Wheatley Plan Participants' eligible contributions to the Wheatley Plan which
were made during the period of March 1, 1995 through May 31, 1995.
All contributions made in accordance with this Item 3 shall be treated
as having been made to the Wheatley Plan as of May 31, 1995.
4. The provisions of Items 5 through 8 of this instrument shall be
applicable to the benefits (the "Wheatley Plan Accounts") transferred to the
Dresser Plans pursuant to the merger of the Wheatley Plan into the Dresser
Plans of an individual ("Wheatley Participant") who was a participant in the
Wheatley Plan prior to such merger.
5. Except as provided specifically herein, a Wheatley Participant's
Wheatley Plan Account shall be governed by the provisions of the Dresser
Plan-A or the Dresser Plan-B, as applicable, in the same manner as any other
account thereunder as follows:
(a) The portion of a Wheatley Participant's Wheatley Plan Account which
is attributable to elective salary deferral contributions made on his behalf
to the Wheatley Plan shall be treated in the same manner as a Pretax Account;
(b) The portion of a Wheatley Participant's Wheatley Plan Account which
is attributable to employer contributions made on his
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<PAGE>
behalf to the Wheatley Plan shall be treated in the same manner as a Matching
Account; and
(c) The portion of a Wheatley Participant's Wheatley Plan Account which
was attributable to a rollover into the Wheatley Plan shall be treated in the
same manner as a Rollover Account.
6. Incident to the transfer to the Dresser Plans of the Wheatley Plan
Accounts, the Investment Funds of the Wheatley Plan shall be liquidated and
the proceeds invested in the investment funds of the Dresser Plans with the
proceeds from the liquidation of the Wheatley Plan Fund being invested by the
Employee Benefits Committee in the investment fund of the applicable Dresser
Plan which is most comparable thereto in terms of type of investments and
nature of investment goals, except that the common stock of Dresser
Industries, Inc. and Hanson Corporation shall be invested in separate frozen
investment funds established under the Dresser Plans for such assets. The
assets of such frozen funds shall continue to be invested in such assets
unless and until a Wheatley Participant directs sale and reinvestment into
any of the regular investment funds under the Dresser Plans in accordance
with the standard investment change provisions of the Dresser Plans. Any such
sale and reinvestment elections must be made on or about December 1, 1996
and, from and after such date, the remaining common stock of Hanson
Corporation in the frozen investment funds established pursuant to this item
6 shall be liquidated on December 1, 1996 and initially invested in the
equity index funds of the Dresser Plans. No amounts may be invested in the
frozen investment funds established pursuant to this item 6 other than the
common stock of Dresser Industries, Inc. and Hanson Corporation transferred
in kind from the Wheatley Plan to the Dresser Plans. All amounts
distributable from the Hanson Stock Fund prior to December 1, 1996 shall be
distributed entirely in cash.
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<PAGE>
After such initial transfer, Wheatley Participants may direct as to the
investment of their Wheatley Plan Accounts in accordance with the then
applicable provisions of the Dresser Plans.
7. From and after transfer to the Dresser Plan, each Wheatley Plan
Participant shall have a vested and nonforfeitable interest in the portion of
his Wheatley Plan Account attributable to employer contributions made on his
behalf to the Wheatley Plan in accordance with the vesting provisions of the
Dresser Plans except that in determining his service which is credited for
vesting purposes to determine such vested and nonforfeitable interest, a
Wheatley Plan Participant's Service shall be calculated in accordance with
the Dresser Plans (with respect to Service completed both before and after
June 1, 1995) but for the period prior to December 31, 1995 such Service
shall not be less than the amount computed as follows:
(a) the number of years equal to the number of years credited to him
under the Wheatley Plan for vesting purposes as of December 31, 1994; plus
(b) the greater of (1) the period of Service that would be credited to
him for vesting purposes under the Dresser Plans, whichever is applicable to
him, for his Service during the period of January 1, 1995 through December
31, 1995 or (2) the Service credited as of June 1, 1995 for vesting purposes
under the Wheatley Plan for the 1995 computation period.
8. Distribution and withdrawal provisions of the Dresser Plan to the
contrary notwithstanding, this Item 8 shall govern as to distributions and
withdrawals from the Wheatley Plan Accounts:
(a) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plans, a Wheatley Plan Participant who has attained
the age of 65 may withdraw at any time any portion of the then value of his
Wheatley Plan Account.
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<PAGE>
(b) In addition to the other in-service withdrawal rights available
pursuant to the Dresser Plans, a Wheatley Plan Participant who has attained the
age of 59 1/2 may withdraw at any time any portion of the then value of his
Wheatley Plan Account which is attributable to elective salary deferral
contributions and qualified employer non-elective contributions to the Wheatley
Plan and Compensation Deferral Contributions and Employer Matching Contributions
to the Axelson Plan.
(c) In addition to other benefit forms available pursuant to the Dresser
Plan upon termination of employment, a Wheatley Plan Participant may elect to
have his Wheatley Plan account distributed in the form of a lump sum, in the
form of installment payments (annually, quarterly or monthly) over a specified
period of time not exceeding his life expectancy or the joint life expectancy of
him and his designated beneficiary or in a combination thereof.
(d) In addition and as an elective alternative to the normal benefit
payment form pursuant to the Dresser Plans upon termination of employment, a
Wheatley Plan Participant who was a Member of the Axelson Plan ("Axelson
Member") who terminates employment other than by reason of death may elect to
receive his Wheatley Plan Account in the form of a commercial annuity contract
providing payments for the life of the Axelson Member if he is not married or a
joint and survivor annuity providing payments for his life and a fifty percent
surviving spouse annuity for the life of his surviving spouse if he is married.
In lieu of the foregoing normal forms of annuity contract payments for his
Wheatley Plan Account under this subitem (d), an Axelson Member may elect a
commercial annuity contract providing alternate forms of annuity payments. The
terms of any commercial annuity contract distributed to an Axelson Member shall
provide that payments under such annuity will commence immediately, subject to
the Axelson Member's rights to defer commencement of payments in accordance with
applicable provisions
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of the Dresser Plans. The procedure for an Axelson Member to elect the
commercial annuity contract form of distribution will be to deliver to the
Committee a written notice of his interest in an annuity form of
distribution. Upon receipt of such notice, the Committee will give the
Axelson Member a written explanation in non-technical language of: (i) the
terms and conditions of the annuity contract distribution form in general and
of the normal annuity contract form of payment of the qualified joint and
fifty percent surviving spouse form of annuity or, as applicable, the single
life form of annuity, (ii) the Axelson Member's right to make, and to revoke,
an election waiving the joint and fifty percent surviving spouse form of
annuity or, as applicable, single life form of annuity, (iii) the financial
effect upon his benefit (in terms of dollars per benefit payment) of his
making or revoking an election to waive the qualified joint and fifty percent
surviving spouse form of annuity, or, as applicable, single life form of
annuity, (iv) the rights of his spouse with respect to his elections and (v)
sufficient additional information to explain the relative values of
alternative forms of payment under the annuity contract distribution option.
The Committee will either mail or personally deliver the written explanation
to the Axelson Member by such time as to reasonably assure that it will be
received on or about the later of:
(1) No more than ninety days prior to his entry date into the annuity
contract: and
(2) No less than thirty days prior to his entry date into the annuity
contract
If an additional written explanation is due because of the Axelson Member's
written request for additional information, such explanation may be personally
delivered or mailed (first class, postage prepaid) within thirty days from the
date of the Axelson Member's written request. The period within which the
Axelson
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<PAGE>
Member must make his election shall be the ninety-day period ending on his
annuity starting date (as such term is defined in Code 417(f)(2)). The
Axelson Member may revoke any election made (or make a new election) at any
time during such election period. If, during such election period, the
Axelson Member makes a written request to the Committee for additional
information, the election period will be extended to the extent necessary, to
include the ninety calendar days immediately following the furnishing of all
the additional information to him. Once an insurance company has issued the
form of annuity contract elected, the election period shall cease and the
Axelson Member's annuity election shall be irrevocable. If a married Axelson
Member whose benefits, in the absence of an election otherwise, would be paid
in the joint and fifty percent surviving spouse form of annuity elects a
different annuity form, such election must be in the form of a qualified
election. A qualified election is a benefit election accompanied by a written
waiver of the joint and fifty percent surviving spouse form of annuity which
waiver along with, where applicable, the designation of a specific
beneficiary other than the spouse and his specific form of benefit is
consented to by his spouse in a writing which is witnessed by a
representative of the Dresser Plan-A or the Dresser Plan-B, as applicable, or
a notary public, which acknowledges the effect of the election and which may
not be changed without the consent of the Axelson Member's spouse, except to
elect a joint and fifty percent surviving spouse form of annuity. Upon
receipt of the executed forms wherein the Axelson Member elects the annuity
contract distribution form and the type of annuity he desires to receive, the
portion of his Accounts under the Dresser Plans which are governed by this
subitem (d) shall be converted into cash and used to purchase a commercial
annuity contract providing the annuity form of payment selected by the
Axelson Member.
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<PAGE>
(e) If an Axelson Member who is married and who has elected an annuity
contract form of distribution pursuant to subitem (d) above (regardless of the
form of payment he elected under such contract) dies prior to the purchase of
such contract, 50% of his Wheatley Plan Account shall be distributed to his
surviving spouse (and any beneficiary designation or other election to the
contrary shall be null and void) in the form of an annuity contract providing a
single life annuity for the life of such spouse unless such spouse elects a lump
sum payment or an alternate form of benefit provided in this subitem 8 or in the
Dresser Plan-A or Dresser Plan-B as applicable. If an Axelson Member who is
married has elected an annuity contract form of distribution pursuant to subitem
(d) above (regardless of the form of payment he elected under such contract),
any withdrawals from his Wheatley Plan Account prior to the purchase of such
contract shall be subject to the election and spousal consent rules described in
subitem (d) above in the same manner as the Axelson Member's elections to take
an annuity form of payment other than the joint and fifty percent surviving
spouse annuity.
(f) This item 8 is intended to preserve with respect to the Wheatley Plan
Accounts all forms of benefits required to be preserved pursuant to section 411
of the Code and Treasury Regulations promulgated thereunder and is to be
interpreted and construed to effectuate such purpose.
Nothing in this item 8 is intended to provide a separate distribution or
withdrawal election with respect to a Wheatley Participant's Wheatley Plan
Account to the extent that such withdrawal or distribution is generally
available under the Dresser Plan.
9. For purposes of this instrument, capitalized terms shall have the
meanings ascribed to them in the Dresser Plan, the
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<PAGE>
Wheatley Plan or the Axelson Plan, as applicable, unless otherwise defined
herein.
10. As amended hereby, the Dresser Plan is specifically ratified and
reaffirmed.
E-10
<PAGE>
APPENDIX F
MERGER OF AVA INTERNATIONAL CORP. 401K PLAN
WITH AND INTO THE DRESSER INDUSTRIES, INC.
RETIREMENT SAVINGS PLANS
WHEREAS, AVA International Corp. ("AVA") has heretofore adopted the AVA
International Corp. 401k Plan (the "AVA Plan"); and
WHEREAS, Dresser Industries, Inc. ("Dresser") sponsors and maintains the
Dresser Industries, Inc. Retirement Savings Plan-A (the "Dresser Plan-A") and
the Dresser Industries, Inc. Retirement Savings Plan-B (the "Dresser Plan-B")
(jointly, the "Dresser Plans"); and
WHEREAS, AVA was acquired by Dresser and the parties hereto desire that the
employees of AVA become covered by the Dresser Plans, and
WHEREAS, the parties hereto desire to provide simultaneously for a spinoff
of the AVA Plan into functional group components and for the mergers of the
resulting group components of the AVA Plan into, respectively, the Dresser
Plan-A and the Dresser Plan-B, effective as of June 1, 1995;
NOW, THEREFORE, the parties hereto agree as follows:
1. Effective as of June 1, 1995, the accounts under the AVA Plan of AVA
employees eligible to participate in the Dresser Plan-A and the accounts under
the AVA Plan of AVA employees eligible to participate in the Dresser Plan-B are
hereby transferred to and merged with and into, respectively, the Dresser Plan-A
and the Dresser Plan-B, with the result that the provisions of the Dresser Plans
replace the provisions of the AVA Plan in their entirety except as otherwise
herein provided. Pursuant to such merger, the assets held under the AVA Plan
shall be transferred as soon as practicable to the Dresser Plans to be held
under the existing trusts maintained under said Dresser Plans. Such transfers
shall be
F-1
<PAGE>
in cash except that outstanding participant loans shall be transferred
in kind.
Former employees with account balances in the AVA Plan will be transferred
to the Dresser Plans in accordance with their eligibility status immediately
prior to termination of employment.
2. Immediately after the merger of the relevant group component of the
AVA Plan with and into the Dresser Plan-A, each Member of the Dresser Plan-A
shall, if the Dresser Plan-A were then terminated, be entitled to a benefit
which is at least equal to the benefit such Member would have been entitled to
immediately prior to the merger if the AVA Plan and the Dresser Plan-A had then
terminated. Immediately after the merger of the group component of the AVA Plan
with and into the Dresser Plan-B, each Member of the Dresser Plan-B shall, if
the Dresser Plan-B were then terminated, be entitled to a benefit which is at
least equal to the benefit such Member would have been entitled to immediately
prior to the merger if the AVA Plan and Dresser Plan-B had then terminated. The
provisions of this instrument shall be construed under and in accordance with
section 208 of the Employee Retirement Income Security Act of 1974, as amended,
and sections 401(a)(12) and 414(1) of the Internal Revenue Code of 1986, as
amended, and federal regulations promulgated thereunder.
3. The provisions of Items 4 through 7 of this instrument shall be
applicable to the accounts (the "AVA Plan Accounts") transferred to the Dresser
Plans pursuant to the merger of the AVA Plan with and into the Dresser Plans of
an individual ("AVA Participant") who was a participant in the AVA Plan prior to
such mergers.
4. Except as provided specifically herein, AVA Plan Accounts shall be
governed by the provisions of the Dresser Plan-A or the Dresser Plan-B, as
applicable, in the same manner as any other account thereunder as follows:
F-2
<PAGE>
(a) The portion of an AVA Plan Account which is attributable to "deferred
contributions" made to the AVA Plan shall be treated in the same manner as a
Pretax Account;
(b) The portion of an AVA Plan Account which is attributable to Employer
"matching contributions" and "discretionary contributions" made by AVA to the
AVA Plan shall be treated in the same manner as, respectively, a Matching
Account and an After-tax Account; and
(c) The portion of an AVA Plan Account which was attributable to a
rollover into the AVA Plan shall be treated in the same manner as a Rollover
Account.
5. Incident to the transfer to the Dresser Plans of the AVA Plan
Accounts, the Investment Funds of the AVA Plan shall be liquidated and the
proceeds invested in the investment funds of the Dresser Plans with the proceeds
from the liquidation of the AVA Plan Fund being invested by the Employee
Benefits Committee in the investment fund of the applicable Dresser Plan which
is most comparable thereto in terms of type of investments and nature of
investment goals, except that AVA Plan outstanding Participant loans shall be
continued as outstanding participant loans subject, however, to such adjustments
as may be appropriate or necessary to conform to the Dresser Plans' loan
procedures and administration. After such initial transfer, AVA Plan
Participants may direct as to the investment of their AVA Plan Accounts in
accordance with the then applicable provisions of the Dresser Plans.
6. From and after transfer to the Dresser Plans, each AVA Plan
Participant shall have a vested and nonforfeitable interest in the portion of
his AVA Plan Account attributable to Employer "matching contributions" and
"discretionary contributions" made by AVA to the AVA Plan in accordance with the
following schedule:
YEARS OF SERVICE VESTED INTEREST
F-3
<PAGE>
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
For purposes of the foregoing schedule, an AVA Plan Participant's "Years of
Service" shall be calculated in accordance with the Dresser Plans (with respect
to service completed both before and after June 1, 1995) but for the period
prior to December 31, 1995 shall not be less than the amount computed as
follows:
(a) the number of years equal to the number of years credited to him under
the AVA Plan for vesting purposes as of December 31, 1994; plus
(b) the greater of (i) the period of service that would be credited to him
for vesting purposes under the Dresser Plans, whichever is applicable to him,
for his service during the period of January 1, 1995 through December 31, 1995
or (2) the service credited as of June 1, 1995 for vesting purposes under the
AVA Plan for the 1995 computation period.
The nonforfeitable percentage in the Dresser Plans of any AVA Plan
Participant who had completed at least three years of service as of June 1, 1995
shall not be less that the percentage determined in accordance with foregoing
schedule if application of such schedule would result in a greater
nonforfeitable percentage than would otherwise be applicable under the Dresser
Plans.
7. Distribution and withdrawal provisions of the Dresser Plan to the
contrary notwithstanding, this Item 7 shall govern as to distributions and
withdrawals from the Dresser Plans by the AVA Plan Participants:
(a) In addition to the other benefit forms available pursuant to the
Dresser Plans upon termination of employment, an AVA Plan Participant may elect
to have his AVA Plan Account distributed in the form of a lump sum, in the form
of equal monthly, quarterly or
F-4
<PAGE>
annual installments over a fixed number of years not to exceed his life
expectancy or the joint life and last survivor expectancy of him and his
beneficiary, or any combination thereof.
(b) In addition to the other in service withdrawal rights available
pursuant to the Dresser Plans, an AVA Plan Participant who has attained the age
of fifty-nine and one-half (59 1/2) may at any time withdraw any portion of the
then value of his AVA Plan Account which is attributable to "deferred
contributions" and qualified matching and non-elective contributions made by AVA
to the AVA Plan.
(c) This Item 7 is intended to preserve with respect to the account
balances transferred to the Dresser Plans from the AVA Plan all forms of
benefits required to be preserved pursuant to section 411 of the Code and
Treasury Regulations promulgated thereunder and is to be interpreted and
construed to effectuate such purpose. To the extent that any form of benefit
provided with respect to the AVA Plan Accounts pursuant to this Item 7 is
generally available under the Dresser Plans, an AVA Plan Participant shall not
have a separate benefit form election with respect to his AVA Plan Account by
virtue of this Item 7.
8. For purposes of this instrument, capitalized terms shall have the
meanings ascribed to them in the Dresser Plans or the AVA Plan, as applicable,
unless otherwise defined herein.
9. As amended hereby, the Dresser Plans are specifically ratified and
reaffirmed.
F-5
<PAGE>
Exhibit 21
EXHIBIT 21. PARENTS AND SUBSIDIARIES
There is furnished a list of subsidiaries of Dresser Industries, Inc.
as of October 31, 1995.
See Note (a).
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- --------------------------------------------- ----------------- -----------
<S> <C> <C>
AVA Italiana S.r.L. Italy 100%
AVA Norway A/S Norway 100%
AVA S.A.R.L. France 100%
Baroid Corporation Delaware 100%
Baroid Drilling Fluids, Inc. Delaware 100%
American Thai Barite Limited Thailand 100%
Atlantic Minerals and Products Corporation Florida 100%
Sperry Sun International, Inc. Delaware 78.26% (1)
NL do Brazil Ltda. Brazil 100%
Sperry Sun Drilling Services (Cyprus)
Ltd. Cyprus 100%
Sperry-Sun Saudia Company Limited Saudi Arabia 75% (2)
Baroid Industrial Minerals, Inc. Delaware 100%
Bentonite Corporation Delaware 100%
Petrotech Environmental Services, Inc. Delaware 100%
Baroid Drilling Chemical Products Limited Nigeria 60% (2)
Baroid International Inc. Delaware 100%
Baroid, S.A. de C.V. Mexico 51%
NL Baroid (Cameroon) S.A.R.L. Cameroun 100%
Baroid of Nigeria Limited Nigeria 60% (2)
Baroid Rus Energy Services Russia 100%
Baroid Sales Export Corporation Delaware 100%
Baroid Trading International, Inc. Nevada 100%
Baroid de Venezuela, S.A. Venezuela 97.4% (3)
Basin Surveys, Inc. West Virginia 100%
Compania Transandina de Exportacion, Inc. Delaware 100%
Industrial Reactor Laboratories, Inc. New York 100%
Baroid International Trading Corporation Delaware 100%
Baroid Australia Pty. Limited Australia 90%
Baroid Corporation A/S Norway 100%
Baroid Corporation of Canada, Ltd. Canada 100%
Baroid Group (Partnership) Canada 54% (4)
DB Stratabit (Canada) Ltd. Canada 100%
Baroid (Far East) Pte. Ltd. Singapore 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 2
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- --------------------------------------------- ----------------- -----------
<S> <C> <C>
Baroid International, S.p.A. Italy 100%
Security DBS Italia S.r.L. Italy 100%
Baroid Pigmina Industrial e Comercial Ltda. Brazil 100%
Baroid S.A.R.L. Tunisia 100%
Pacific Petroleum Products, Inc. Delaware 97%
Minerales Andinos, S.A. Peru 100%
Petroleum Information & Equipment Services
Pte. Ltd. Singapore 100%
Societe de Developpement de Barytine Morocco 100%
Sperry-Sun de Ecuador S.A. Ecuador 100%
Baroid Management Company Delaware 100%
Baroid Technology, Inc. Delaware 100%
Canadian Baroid Sales Ltd. Canada 100%
DB Stratabit, Inc. Delaware 100%
DB Stratabit GmbH Germany 100%
DB Stratabit (M.E.) E.C. Bahrain 100%
DB Stratabit Pte. Ltd. Singapore 100%
DB Stratabit S.A. Belgium 100%
DB Stratabit S.A. France 100%
DBS-Tunisie Tunisia 100%
DB Stratabit S.A.R.L. Tunisia 100%
DB Stratabit (USA) Inc. Delaware 100%
Industrias DB Stratabit, C.A. Venezuela 100%
Xinjiang DB Stratabit Bit and Tool
Company Ltd. China 60%
Sperry-Sun Drilling Services, Inc. Delaware 100%
Drilling Services International, Inc. Delaware 100%
Sperry-Sun de Venezuela, S.A. Venezuela 100%
Tre-Tech, Inc. Delaware 100%
Sub Sea International Inc. Delaware 100%
Sub Sea do Brasil-Servicos Submarinos Ltda. Brazil 90% (5)
Sub Sea International Australia, Inc. Delaware 100%
Sub Sea International New Zealand Inc. Delaware 100%
Sub Sea Offshore Espana, S.A. Spain 100%
Sub Sea Offshore (Holdings) Limited United Kingdom 100%
Camera Alive United Kingdom 100%
Sub Sea Offshore Limited United Kingdom 100%
Sub Sea Offshore Holdings Norge A/S Norway 100%
SubSea Offshore Pte. Ltd. Singapore 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 3
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- -------------------------------------- ----------------- -----------
<S> <C> <C>
Sub Sea Survey Limited Scotland 50% (6)
Sub Sea Offshore, Inc. Delaware 100%
Sub Sea Offshore (Nigeria) Limited Nigeria 75% (7)
Sub Sea Overseas, Inc. Panama 100%
Sub Sea Underwater Associates, Inc. Delaware 51%
Sub Sea Worldwide, Inc. Panama 100%
Subtec Middle East Limited Delaware 100%
Subtec Asia Limited Isle of Man 100%
Subtec Laut Sdn. Bhd. Brunei 100% (8)
Subtec Middle East Company (Private)
Limited Sharjah 100%
Subtec Offshore (Sabah) Sdn. Bhd. Malaysia 60%
Subtec Off-Shoroe Support Limited Cyprus 100%
Subtec (M) Sdn. Bhd. Malaysia 100%
Subtec Saudi Arabia Ltd. Saudi Arabia 50% (9)
Subtec Survey Services Limited Isle of Man 100%
Subtec S.T.B.S. Limited Isle of Man 100%
Subtec Marine Services Limited Cyprus 100%
Yamado Enterprises Sdn. Bhd. Brunei 100%
Wellstream, Inc. Delaware 100%
Baroid Middle East Inc. Delaware 100% (10)
Bredero Price Holding B.V. Netherlands 100%
Bredero Price Coaters (Thailand) Limited Thailand 100%
Bredero Price Coatings Pty. Ltd. Australia 100%
Bredero Price Colombia B.V. Netherlands 100%
Bredero Price International B.V. Netherlands 100%
Zhanjiang Zhonghai Bredero Price
Coasters Inc. China 60%
Bredero Price International, Inc. Texas 100%
Bredero Price (Middle East) Limited Cyprus 100%
Bredero Price (Nigeria) Limited Nigeria 60%
Bredero Price Services Limited England 100%
Bredero Price (West Africa) Limited Cyprus 60%
Bredero Norway B.V. Netherlands 100%
Bredero Price Norway A/S Norway 100%
Chalfont Limited Cyprus 100% (11)
Kapeq Trading Limited Cyprus 100% (12)
P.T. Bredero Price Indonesia Indonesia 75%
SIF-Isopipe S.A. France 100%
SIF Overseas Trading Limited Cyprus 100% (11)
Uniglobe Engineering Limited Cyprus 100%
Vosnoc Limited Cyprus 100% (11)
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 4
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- -------------------------------------- ----------------- -----------
<S> <C> <C>
Dresser AG Liechtenstein 100%
Dresser Anstalt Liechtenstein 100%
Dresser Australia Pty. Ltd. Australia 100%
Dresser Singapore Pte. Ltd. Singapore 100%
Magcobar Manufacturing Nigeria Limited Nigeria 60%
P.T. Dresser Magcobar Indonesia Indonesia 60%
Dresser Argentina S.A. Argentina 100%
Dresser Canada, Inc. Canada 85% (13)
Dresser Ireland Finance Company Ireland 78%
Dresser Congo S.A.R.L. Congo 100%
Dresser Corporation Nevada 100%
Dresser Far East, Inc. Delaware 100%
Dresser Oil Services Vietnam Limited Vietnam 100%
Dresser Foreign Sales Corporation Limited Guam 100%
Dresser Holding, Inc. Delaware 100%
Dresser (Holdings) Limited England 76.89% (14)
AVA (U.K.) Limited England 100%
Baroid Corporation Limited United Kingdom 100%
Baroid Limited United Kingdom 100%
DB Stratabit Limited United Kingdom 100%
Strata Bit Limited Scotland 100%
Dresser Drilling and Production
Services Limited United Kingdom 100%
Sperry-Sun (U.K.) Limited United Kingdom 100%
Dresser Acquisitions Limited England 100%
North Sea Assets PLC Scotland 100%
British Underwater Engineering Limited England 100%
Bue Ships Ltd. England 100%
Grangecrest Ltd. England 100%
HMB Subwork Limited Scotland 100%
Sub Sea Norge A/S Norway 100%
Improv (UK) Ltd. Scotland 100%
SeaMark Systems Limited Scotland 100%
SeaMark Systems Norge AS Norway 100%
Dresser Holmes Limited England 100%
George Street Parade Limited England 100%
Dresser U.K. Limited England 100%
Dresser U.K. Pensions Limited England 100%
M. W. Kellogg (Eastern Hemisphere) Limited England 100%
M. W. Kellogg Limited England 55%
KESA Limited England 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 5
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- --------------------------------------------- ----------------- -----------
<S> <C> <C>
K.R.S.A. Limited England 100%
Kellogg Construction Limited England 100%
Kellogg Offshore Limited England 100%
Kellogg Plant Services Limited England 100%
M. W. Kellogg International Limited England 100%
M. W. Kellogg (Pensions) Limited England 100%
MWKL Field Services Limited Cayman Islands 100%
MWKL Middle East Limited England 100%
Mono Group Limited Scotland 100%
Mono Pumps Limited England 100%
Mono Pumps (Australia) Pty. Limited Australia 100%
Mono Pumps (New Zealand) Limited New Zealand 100%
T K Valve Holdings Limited England 100%
T K Valve Limited England 100%
T K Valve (Abu Dhabi) Limited Scotland 100%
T K Valve (Europe) Limited Scotland 100%
T K Valve (Borneo) Limited Scotland 100%
T K Valve (Singapore) Pte. Ltd. Singapore 100%
Dresser Industria e Comercio Ltda. Brazil 100%
Dresser International, Ltd. Delaware 100%
Dresser Investments N.V. Netherlands Antilles 100%
Dresser Korea, Inc. Korea 100%
Dresser Minerals International, Inc. Texas 100%
Dresser-Nagano, Inc. Delaware 71.4%
Dresser Norge A/S Norway 100%
Dresser Oilfield Gabon S.a.r.L. Gabon 95% (15)
Dresser Oilfiled Services, Inc. Delaware 100%
Dresser-Rand Canada, Inc. Canada 51%
Dresser-Rand Company (Partnership) New York 51%
Dresser-Rand Argentina S.A. Argentina 100%
Dresser-Rand Compression Services, S.A. Switzerland 100%
Dresser-Rand Holding Company Delaware 100%
Dresser-Rand B.V. Netherlands 100%
Dresser-Rand GmbH Germany 100%
Dresser-Rand Japan Ltd. Japan 100%
Dresser-Rand Overseas Sales Company Delaware 100%
Dresser-Rand (U.K.) Ltd. England 100%
Dresser-Rand Sales Company, S.A. Switzerland 100%
Dresser-Rand Services, S.a.r.L. Switzerland 100%
Dresser-Rand de Venezuela S.A. Venezuela 100%
Turbodyne Electric Power Corporation Delaware 100%
Dresser-Rand International B.V. Netherlands 100%
Dresser-Rand Italia S.r.L. Italy 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 6
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- --------------------------------------------- ----------------- -----------
<S> <C> <C>
Dresser-Rand Machinery Repair Belgie N.V. Belgium 100%
Dresser Rand de Mexico, S.A. de C.V. Mexico 100%
Dresser-Rand Power, Inc. Delaware 100%
Dresser-Rand Comercio e Industria
Ltda. Brazil 100%
Dresser-Rand A/S Norway 100%
Dresser-Rand (SEA) Pte. Ltd. Singapore 100%
Dresser-Rand S.A. France 100%
Dresser-Rand Services B.V. Netherlands 100%
Dresser-Rand Czech spol. S r.o. Czechoslavalkia 100%
Dresser Services, Inc. Delaware 100%
Dresser de Venezuela, C.A. Venezuela 100%
Fann Instrument Company Delaware 100%
M. W. Kellogg-Delaware Inc. Delaware 100%
Kellogg Oil & Gas Inc. Delaware 100%
Bredero Price Company Delaware 100%
M. W. Kellogg Company, The Delaware 100%
Kellogg Capital Corporation Delaware 100%
Kellogg Pan American C.A. Venezuela 100%
M. W. Kellogg Technology Company Delaware 100%
M. W. Kellogg Holdings, Inc. Delaware 100%
Aromatics Plant Services Limited Delaware 100%
Conkel, S. de R.L. de C.V. Mexico 100%
Intercontinental Services Limited Virgin Islands 100%
KCI Constructors, Inc. Delaware 100%
KPA, S.A. de C.V. Mexico 100%
KRW Energy Systems Inc. Delaware 80%
Kellogg Cardon, C.A. Venezuela 100%
Kellogg China Consultants Inc. Delaware 100%
Kellogg China Inc. Delaware 100%
Kellogg Development Corporation Delaware 100%
Kellogg Far East, Inc. Delaware 100%
Kellogg ISL Limited Cayman Islands 100%
Kellogg India Limited Delaware 100%
Kellogg Indonesia, Inc. Delaware 100%
Kellogg International Corporation Delaware 100%
Kellogg International Services Corporation Delaware 100%
Kellogg International Services Limited Cayman Islands 100%
Kellogg Iran, Inc. Delaware 100%
Kellogg Iraq Limited Delaware 100%
Kellogg Italy, Inc. Delaware 100%
Kellogg Korea, Inc. Delaware 100%
Kellogg Malaysia, Inc. Delaware 100%
Kellogg (Malaysia) Sdn. Bhd. Malaysia 100%
Kellogg Mexico, Inc. Delaware 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 7
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- ------------------------------------------- ----------------- -----------
<S> <C> <C>
Kellogg Middle East Limited Delaware 100%
Kellogg Middle East Services Inc. Delaware 100%
Kellogg Nigeria Inc. Delaware 100%
Kellogg Overseas Construction Corporation Delaware 100%
Kellogg Overseas Corporation Delaware 100%
Kellogg Overseas Services Corporation Panama 100%
Kellogg Pan American Corporation Delaware 100%
Kellogg Plant Services Inc. Delaware 100%
Kellogg Rust Services Inc. Delaware 100%
Kellogg Rust Synfuels, Inc. Delaware 100%
Kellogg Saudi Arabia Limited Delaware 100%
Kellogg Services, Inc. Delaware 100%
Kuwait Kellogg Ltd. Delaware 100%
Middle East Technologies, Inc. Delaware 100%
M. W. Kellogg Company Limited Canada 100%
M. W. Kellogg Constructors Inc. Delaware 100%
Pullman Incorporated Capital Corporation Delaware 100%
Pullman Kellogg Algeria Inc. Delaware 100%
Pullman Kellogg Plant Services Algeria,
Inc. Delaware 100%
Societe Kellogg Delaware 100%
Masoneilan International, Inc. Delaware 100%
DB Stratabit B.v. Netherlands 100%
Dresser B.V. Netherlands 100% (16)
Dresser Europe S.A. Belgium 100%
Ebro-Electronic GmbH Germany 100% (17)
Dresser Industrial Products B.V. Netherlands 100%
AVA Netherlands B.V. Netherlands 100%
Dresser Japan Ltd. Japan 100%
Dresser Netherlands B.V. Netherlands 100%
Dresser Wayne AB Sweden 100%
Dresser Produits Industriels France 100%
Kellogg France, S.A. France 100%
Dresser Oilfield Services B.V. Netherlands 100%
Dresser Italia S.p.A. Italy 99% (18)
Grove S.p.A. Italy 100%
Grove Valve and Regulator Company California 100%
Grove Foreign Sales Corporation Barbados 100%
Grove UK Ltd. England 100%
Grove Scandinavia A/S Norway 100%
Ledeen Italia S.p.A. Italy 100%
Masoneilan HP + HP GmbH Germany 100%
Masoneilan Internacional, S.A. de C.V. Mexico 100%
Masoneilan S.A. Spain 75% (19)
Masoneilan (S.E.A.) Pte. Ltd. Singapore 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 8
<TABLE>
<CAPTION>
% OF VOTING
STATE OR OTHER SECURITIES
SOVEREIGN POWER OWNED BY
UNDER THE LAWS OF IMMEDIATE
NAME WHICH ORGANIZED PARENT
- ------------------------------------------- ----------------- -----------
<S> <C> <C>
P.T. Security Mulia Indonesia Indonesia 70%
Property and Casualty Insurance, Limited Bermuda 100%
Property and Casualty Insurance Ltd. - U.S. Vermont 100%
Triconos Mineros S.A. Chile 100%
Wheatley TXT Corp. Delaware 100%
Axelson Canada, Inc. Delaware 100%
Axelson, Inc. Delaware 100%
Axelson Pump Company Delaware 100%
Clif Mock Company Delaware 100%
Texsteam Inc. Delaware 100%
Tom Wheatley Valve Company Delaware 100%
Wheatley Corporation Delaware 100%
Wheatley Gaso Inc. Delaware 100%
Wheatley Pump Incorporated Delaware 100%
Worthington Corporation Delaware 100%
Worthington do Brasil, Inc. Delaware 100%
Worthington Pump Inc. Delaware 100%
Ingersoll-Dresser Pumps de Colombia, S.A. Colombia 93% (20)
</TABLE>
(a) The names of certain subsidiaries of Registrant have been omitted since
the unnamed subsidiaries considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary.
(1) Remaining 21.74% owned by Sperry-Sun Drilling Services Inc.
(2) Shares held in trust by NL Industries, Inc.
(3) Remaining 2.7% held by various individuals.
(4) Remaining owned by Canadian Branch of Baroid Equipment Canada, Inc.
(30.7%) and by DB Stratabit (Canada) Ltd. (15.3%).
(5) Remaining 10% owned by Sub Sea International Australia Inc.
(6) Remaining 50% owned by Sub Sea Offshore (Holdings) Limited.
(7) Shares held in trust by Seun Oyefess (99%) and Mrs. Olympia Abeka Oyefess
(1%).
(8) Shares held in trust by Datu Hulubalong Hj Abd Wahab 50% and Hj Mohd Akib
Bin Ghani 50% for the benefit of Subtec Asia Ltd.
(9) Remaining 50% held by Majid Salamah for the benefit of Subtec Middle East
Company (Private) Limited
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1995
Page 9
(10) Shares held for the benefit of Dresser Industries, Inc. However shares
have not been subscribed.
(11) Shares held in trust by Abacus (Nominees) Limited (99.9%) and Abacus
(Cyprus) Limited (.1%).
(12) Shares held in trust by Abacus (Cyprus) Limited (50%) and Abacus
(Nominees) Limited (50%).
(13) Remaining 15% owned by Wheatley Gaso Inc.
(14) Remaining 23.11% held by Baroid International Trading Corporation (22.66%);
Dresser AG (.45%). 100% of the issued preferred voting shares are owned by
Dresser Canada, Inc.
(15) Remaining 5% owned by Dresser Minerals International, Inc.
(16) 100% of issued voting preference shares held by Dresser Anstalt.
(17) Share holding interest actually held by German Branch of Dresser Europe
S.A.
(18) Remaining 1% owned by Dresser B.V.
(19) Remaining 25% owned by Dresser Produits Industriels.
(20) Remaining 7% owned by Dresser Minerals International, Inc. (1.8%); Dresser
International, Ltd. (1.8%); Dresser Industries, Inc. (1.7%); Worthington
Corporation (1%); and Dresser Holding, Inc.(.7%).
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 2-91309,
33-47832, 33-59562, and 33-50563) and the Registration Statements on Form S-8
(Nos. 2-76847, 2-81536, 33-26099, 33-30821, 33-48165, 33-52067, 33-52989,
33-50563, and 33-54099) of Dresser Industries, Inc. of our report dated
November 30, 1995 appearing on page 31 of the Annual Report to Shareholders
which is incorporated in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Dallas, Texas
January 26, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
Dresser Industries, Inc. ("Dresser") and each of the undersigned, an officer or
director, or both, of Dresser, do hereby appoint Rebecca R. Morris and Alice A.
Hinds, and each of them severally, its, his or her true and lawful attorney-in-
fact to execute on behalf of Dresser and the undersigned the following documents
and any and all amendments thereto (including post-effective amendments):
(i) Registration Statement No.33-30821 relating to the offer and sale
of Dresser's Common Stock under Dresser's 1989 Director Retirement
Plan and resales of such shares by Directors;
(ii) Registration Statement No.2-91309 relating to the offer and sale
of Dresser's Common Stock under Dresser's Automatic Dividend
Reinvestment Plan;
(iii) Registration Statements No.33-59562 and 33-53077 relating to the
offer and sale of Dresser's unsecured debentures, notes and other
evidences of indebtedness and the offer, sale and guarantee of
Baroid Corporation 8% Senior Notes due 2003 and any registration
statements deemed by any such attorney-in-fact to be necessary or
appropriate to register the offer and sale of debt securities or
warrants of Dresser and any other subsidiary of Dresser or
guarantees by Dresser of any of its subsidiaries' debt securities
or warrants;
(iv) Registration Statements No.33-48165, 33-26099 and 2-76847 relating
to the offer and sale of shares of Dresser Common Stock to officers
under Dresser's 1992 Stock Compensation Plan, the offer and sale
of shares of Dresser Common Stock to officers under Dresser's
Deferred Compensation Plan, the offer and sale of shares of Dresser
Common Stock to officers under the 1982 Stock Option Plan and
various option plans and sales of such shares by officers of
Dresser;
(v) Registration Statements No.2-81536 and 33-52989 relating to the
offer and sale of shares of Dresser Common Stock under Dresser's
Stock Purchase Plan and the offer and sale of shares of Dresser
Common Stock under The M.W. Kellogg Company Employee's Stock
Purchase Plan and any registration statements deemed by any such
attorney-in-fact to be necessary or appropriate to register the
offer and sale of shares of Dresser Common Stock under the stock
purchase plans of any other subsidiary of Dresser;
(vi) Registration Statement No. 33-52067 relating to the offer and sale
of shares of Dresser Common Stock under the Savings Plan for
Employees of Baroid Corporation and any registration statements
deemed by any such attorney-in-fact to be necessary or appropriate
to register the offer and sale of shares of Dresser Common Stock
under the savings plan programs of any other subsidiary of Dresser;
(vii) Registration Statement No.33-50563, 33-54099, and 33-47832 all
relating to the offer and sale of Dresser Common Stock issued or
exchanged in connection with acquisition transactions and any
registration statements deemed by any such attorney-in-fact to be
necessary or appropriate to register the offer and sale of
Dresser Common Stock issued or exchanged in acquisition
transactions;
(viii) all other applications, reports, registrations, information,
documents and instruments filed or required to be filed by
Dresser with the Securities and Exchange Commission, any stock
exchanges or any state official or agency in connection with the
listing, registration or approval of Dresser's Capital Stock,
Dresser's debt securities or warrants or Dresser's
<PAGE>
guarantees of its subsidiaries' debt securities or warrants, or
the offer and sale thereof, or in order to meet Dresser's reporting
requirements to such entities or persons;
and to file the same, with all exhibits thereto and other documents in
connection therewith, and each of such attorneys shall have the power to act
hereunder with or without the other.
IN WITNESS WHEREOF, the undersigned has executed this instrument on January 18,
1996.
DRESSER INDUSTRIES, INC.
By: /s/ CLINT E. ABLES
-----------------------------------
Clint E. Ables
Vice President and General Counsel
/s/ WILLIAM E. BRADFORD, President
- ------------------------------------
William E. Bradford, President,
Chief Executive Officer and Director
/s/ GEORGE H. JUETTEN
- ------------------------------------
George H. Juetten, Vice President-Controller
(Chief Accounting Officer)
/s/ B. D. ST. JOHN
- ------------------------------------
B. D. St. John, Vice Chairman of the
Board and Director
(Principal Financial Officer)
/s/ SAMUEL B. CASEY /s/ J. LANDIS MARTIN
- ------------------------------------ ------------------------------
Samuel B. Casey, Jr., Director J. Landis Martin, Director
/s/ LAWRENCE S. EAGLEBURGER /s/ JOHN J. MURPHY
- ------------------------------------ ------------------------------
Lawrence S. Eagleburger, Director John J. Murphy, Chairman
of the Board and Director
/s/ SYLVIA A. EARLE /s/ LIONEL H. OLMER
- ------------------------------------ ------------------------------
Sylvia A. Earle, Ph.D., Director Lionel H. Olmer, Director
/s/ RAWLES FULGHAM /s/ JAY A. PRECOURT
- ------------------------------------ ------------------------------
Rawles Fulgham, Director Jay A. Precourt, Director
/s/ JOHN A. GAVIN /s/ RICHARD W. VIESER
- ------------------------------------ ------------------------------
John A. Gavin, Director Richard W. Vieser, Director
/s/ RAY L. HUNT
- ------------------------------------
Ray L. Hunt, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 248,700
<SECURITIES> 0
<RECEIVABLES> 988,300
<ALLOWANCES> 24,600
<INVENTORY> 809,400
<CURRENT-ASSETS> 2,201,200
<PP&E> 2,572,900
<DEPRECIATION> 1,445,800
<TOTAL-ASSETS> 4,707,400
<CURRENT-LIABILITIES> 1,712,400
<BONDS> 459,300
46,100
0
<COMMON> 0
<OTHER-SE> 1,610,700
<TOTAL-LIABILITY-AND-EQUITY> 4,707,400
<SALES> 5,612,600
<TOTAL-REVENUES> 5,628,700
<CGS> 4,357,900
<TOTAL-COSTS> 5,267,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,400
<INCOME-PRETAX> 342,200
<INCOME-TAX> 109,300
<INCOME-CONTINUING> 213,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (16,000)
<NET-INCOME> 197,100
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
