<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
----------------------------------
For Quarter Ended September 30, 1997 Commission File Number 1-13179
------------------ --------
FLOWSERVE CORPORATION
---------------------
(Exact name of Registrant as specified in its charter)
New York
--------
(State or other jurisdiction of incorporation or organization)
31-0267900
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(I.R.S. Employer Identification Number)
3100 Research Boulevard, Dayton, Ohio 45420
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (937) 476-6100
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Shares of Common Stock, $1.25 par value,
outstanding as of September 30, 1997 40,573,941
<PAGE> 2
PART I: Financial Information
<PAGE> 3
FLOWSERVE CORPORATION
Consolidated Statement of Income
Quarters Ended September 30, 1997 and 1996
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 281,805 $ 271,023
Cost of sales 174,395 165,134
--------- ---------
Gross profit 107,410 105,889
Selling and administrative expense 71,199 67,680
Research, engineering and development expense 5,647 4,817
Other income (deductions) (699) (1,886)
Merger transaction expense (footnote 2) 10,200 --
Interest expense 2,697 3,259
--------- ---------
Income before income taxes 16,968 28,247
Provision for income taxes 9,918 10,019
--------- ---------
Net income 7,050 18,228
========= =========
Net income per share $ 0.17 $ 0.44
========= =========
</TABLE>
(See accompanying notes)
<PAGE> 4
FLOWSERVE CORPORATION
Consolidated Statement of Income
Nine Months Ended September 30, 1997 and 1996
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 844,974 $ 812,990
Cost of sales 512,205 490,966
--------- ---------
Gross profit 332,769 322,024
Selling and administrative expense 210,885 206,040
Research, engineering and development expense 16,946 15,751
Other income (deductions) (2,053) (5,694)
Merger transaction expense (footnote 2) 10,200 --
Restructuring expense -- 5,778
Interest expense 9,612 9,866
--------- ---------
Income before income taxes 83,073 78,895
Provision for income taxes 34,343 28,572
--------- ---------
Net income 48,730 50,323
========= =========
Net income per share $ 1.19 $ 1.21
========= =========
</TABLE>
(See accompanying notes)
<PAGE> 5
FLOWSERVE CORPORATION
Consolidated Balance Sheet
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32,140 $ 38,932
Accounts receivable 224,216 223,274
Inventories 206,387 182,423
Prepaid expenses 23,984 24,405
-------- --------
Total current assets 486,727 469,034
Property, plant and equipment, at cost 465,325 455,050
Less accumulated depreciation and amortization 254,403 243,311
-------- --------
Net property, plant and equipment 210,922 211,739
Intangibles and other assets 153,675 149,003
-------- --------
Total assets $851,324 $829,776
======== ========
</TABLE>
(See accompanying notes)
<PAGE> 6
FLOWSERVE CORPORATION
Consolidated Balance Sheet
(dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 71,217 $ 68,011
Notes payable 14,985 14,871
Income taxes 6,265 4,961
Accrued liabilities 100,405 93,695
Long-term debt due within one year 5,278 7,525
--------- ---------
Total current liabilities 198,150 189,063
Long-term debt due after one year 144,850 143,962
Postretirement benefits and other deferred items 105,648 108,127
Shareholders' equity:
Serial preferred stock, $1.00 par value,
no shares issued -- --
Common stock, $1.25 par value, 41,484,300
shares issued ( 41,482,400 in 1996) 51,856 51,853
Capital in excess of par value 71,353 72,629
Retained earnings 329,528 298,563
--------- ---------
452,737 423,045
Treasury stock, 910,400 shares at cost (1,081,000 in 1996) (23,823) (27,455)
Foreign currency and other equity adjustments (26,238) (6,966)
--------- ---------
Total shareholders' equity 402,676 388,624
--------- ---------
Total liabilities and shareholders' equity $ 851,324 $ 829,776
========= =========
</TABLE>
(See accompanying notes)
<PAGE> 7
FLOWSERVE CORPORATION
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1997 and 1996
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows provided by operating activities
before merger transaction expenses $ 58,095 $ 41,537
Merger transaction expenses (10,200) --
-------- --------
Cash flows provided by operating activities 47,895 41,537
Cash flows from investing activities:
Capital expenditures (28,979) (23,487)
Acquisitions and dispositions, net (9,000) 390
Other 171 (3,374)
-------- --------
Net cash used in investing activities (37,808) (26,471)
Cash flows from financing activities:
Net borrowings under lines-of-credit 1,010 17,286
Payments on long-term debt (36,476) (12,375)
Proceeds from long-term debt 38,833 27,355
Proceeds from common stock transactions 2,306 2,245
Repurchases of common stock -- (27,850)
Dividends paid (20,435) (17,572)
Other (170) --
-------- --------
Net cash flows used in financing activities (14,932) (10,911)
Effect of exchange rate changes (1,947) (2,027)
-------- --------
Net (decrease) increase in cash and cash equivalents (6,792) 2,128
Cash and cash equivalents at beginning of year 38,932 28,596
-------- --------
Cash and cash equivalents at end of period $ 32,140 $ 30,724
======== ========
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest $ 8,344 $ 8,017
Income taxes $ 26,914 $ 24,922
</TABLE>
(See accompanying notes)
<PAGE> 8
FLOWSERVE CORPORATION
Notes to Consolidated Financial Statements
1. Accounting Policies - Basis of Presentation
The interim consolidated financial statements include the accounts of
Flowserve Corporation (the Company) and its subsidiaries. As described
in Note 2, on July 22, 1997 the shareholders of Durco International
Inc. and BW/IP Inc. voted to approve a merger between a wholly owned
subsidiary of Durco International Inc. and BW/IP Inc. in a
stock-for-stock merger of equals that was accounted for as a
pooling-of-interests transaction. As part of the merger agreement, the
Company changed its name from Durco International Inc. to Flowserve
Corporation.
These consolidated financial statements reflect the combined balance
sheets, statements of income, and cash flows of Durco International
Inc. and BW/IP Inc. as if they had been combined for all periods
presented. Certain amounts have been reclassified to conform with the
current year presentation.
The accompanying consolidated balance sheet as of September 30, 1997
and the related consolidated statements of income and cash flows for
the three months and nine months ended September 30, 1997 and 1996 are
unaudited. In management's opinion, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of such
financial statements have been made. The accompanying consolidated
financial statements and notes in this Form 10-Q are presented as
permitted by Regulation S-X and do not contain certain information
included in the Companys' annual financial statements and notes.
Accordingly, the accompanying consolidated financial information should
be read in conjunction with the respective Companys' 1996 Annual
Reports to Stockholders. Interim results are not necessarily indicative
of results to be expected for a full year and are subject to audit and
adjustments at the end of the year.
2. Merger of Durco International Inc. and BW/IP International Inc.
On July 22, 1997, shareholders of Durco International Inc. and BW/IP
Inc. voted to approve a merger between a wholly owned subsidiary of
Durco International and BW/IP Inc. in a stock-for-stock merger of
equals that was accounted for as a pooling-of-interests transaction. As
part of the merger agreement, the Company changed its name from Durco
International to Flowserve Corporation. On July 23, 1997, the Company's
common stock began trading on the New York Stock Exchange under the
symbol "FLS". The Company issued approximately 16.9 million shares of
common stock in connection with the merger. BW/IP shareholders received
.6968 shares of the Company's common stock for each previously owned
share of BW/IP stock.
<PAGE> 9
In connection with the merger, the Company recorded a one-time charge
of $10.2 million for merger related expenses in the third quarter of
1997. These expenses include investment banking fees, legal fees, and
other costs related to the merger, which are non-deductible for tax
purposes.
The consolidated financial statements have been restated for all
periods prior to the merger to include the financial position, results
of operations, and cash flows of BW/IP Inc. and Durco International
Inc. The following reflects certain unaudited financial information of
the individual entities for the period prior to the merger as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
Six Months Six Months
ended ended
June 30, 1997 June 30, 1996
------------- --------------
<S> <C> <C>
Net sales
BW/IP Inc. $252,701 $241,702
Durco International Inc. 310,468 300,265
-------- --------
Total $563,169 $541,967
======== ========
Net income
BW/IP Inc. $ 15,062 $ 13,067
Durco International Inc. 26,618 19,029
-------- --------
Total $ 41,680 $ 32,096
======== ========
</TABLE>
<PAGE> 10
3. Inventories.
Inventories for the Company are stated at the lower of cost or market,
using the last-in, first-out (LIFO) method or the first-in, first-out
(FIFO) method.
The amount of inventories and the method of determining costs for the
quarter ended September 30, 1997 and the year ended December 31, 1996
were as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
Inventories Inventories Total
(FIFO) (LIFO) inventories
--------- --------- ------------
<S> <C> <C> <C>
September 30, 1997
Raw materials $ 18,278 $ 4,583 $ 22,861
Work in process and
finished goods 144,682 55,814 200,496
--------- --------- ---------
Less: Progress billings (16,970) -- (16,970)
--------- --------- ---------
$ 145,990 $ 60,397 $ 206,387
========= ========= =========
December 31, 1996
Raw materials $ 12,811 $ 2,285 $ 15,096
Work in process and
finished goods 121,921 52,613 174,534
--------- --------- ---------
Less: Progress billings (7,207) -- (7,207)
--------- --------- ---------
$ 127,525 $ 54,898 $ 182,423
========= ========= =========
</TABLE>
LIFO inventories at current cost are $39,125,000 and $38,039,000 higher
than reported at September 30, 1997 and December 31, 1996,
respectively.
<PAGE> 11
4. Dividends.
Dividends paid during the quarters ended September 30, 1997 and 1996
were based on 40,574,000 and 41,471,200 respectively, common shares
outstanding on the applicable dates of record.
5. Earnings per share.
Earnings per share for the nine months ended September 30, 1997 and
1996 were based on average common shares and common share equivalents
outstanding of 40,873,000 and 41,616,000 respectively.
6. Contingencies.
As of September 30, 1997, the Company was involved as a "potentially
responsible party" at five former public waste disposal sites which may
be subject to remediation under pending government procedures. The
sites are in various stages of evaluation by federal and state
environmental authorities. The projected cost of remediating these
sites, as well as the Company's alleged "fair share" allocation, is
uncertain and speculative until all studies have been completed and the
parties have either negotiated an amicable resolution or the matter has
been judicially resolved. At each site, there are many other parties
who have similarly been identified, and the identification and location
of additional parties is continuing under applicable federal or state
law. Many of the other parties identified are financially strong and
solvent companies which appear able to pay their share of the
remediation costs. Based on the Company's preliminary information about
the waste disposal practices at these sites and the environmental
regulatory process in general, the Company believes that it is likely
that ultimate remediation liability costs for each site will be
apportioned among all liable parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes
shown to have been disposed of at the sites.
The Company is a defendant in numerous pending lawsuits (which include,
in many cases, multiple claimants) which seek to recover damages for
alleged personal injury allegedly resulting from exposure to
asbestos-containing products formerly manufactured and distributed by
the Company. All such products were used within self-contained process
equipment, and management does not believe that there was any emission
of ambient asbestos fiber during the use of this equipment. The Company
continues to have a substantial amount of available insurance for these
claims.
The Company is also a defendant in several other products liability
lawsuits which are insured, subject to the applicable deductibles, and
certain other non-insured lawsuits received in the ordinary course of
business. Management believes that the Company has adequately accrued
estimated losses for such lawsuits. No insurance recovery has been
projected for any of the insured claims because management currently
believes that all
<PAGE> 12
will be resolved within applicable deductibles. The Company is also a
party to other non-insured litigation which is incidental to its
business and which, in management's opinion, will be resolved without a
material impact on the Company's financial statements.
On July 22, 1997, the Company completed a merger with BW/IP Inc. and
effectively assumed certain contingent liabilities of BW/IP as a result
thereof. Management does not now believe that any such newly assumed
contingent liabilities will either individually nor in the aggregate be
resolved in a way that has a material impact on the Company's financial
statements.
Although none of the aforementioned gives rise to any additional
liability that can now be reasonably estimated, it is possible that the
Company could incur additional costs in the range of $250,000 to
$1,000,000 over the upcoming five years to fully resolve these matters.
Although the Company has accrued the minimum end of this range as a
precaution, management has no current reason to believe that any such
additional costs are probable or quantifiable. The Company will
continue to evaluate these contingent loss exposures and, if they
develop, recognize expense as soon as such losses can be reasonably
estimated.
7. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
earnings per share, the dilutive effect of stock options would be
excluded. The impact of Statement 128 on the calculation of earnings
per share is not material for the periods presented.
8. Subsequent event
On October 27, 1997, the Company announced a merger integration program
of approximately $85 million. The program includes investments of
approximately $25 million in capital and approximately $60 million in
integration expenses. Of this $60 million, $25 million is expected to
be recognized as a one-time restructuring charge in the fourth quarter
of this year. The remaining $35 million will be recognized as incurred
over the three-year life of the plan, as required by current accounting
rules. The Company program includes facility rationalizations in North
America and Europe, organizational realignments at the corporate and
division levels, procurement initiatives, investments in training, and
support for the service and repair operations. The Company believes the
program will produce benefits that exceed the earlier announced merger
synergy estimates of $35-$45 million in additional annual operating
income at the end of three years. Most of this income is expected to be
produced by eliminating cost redundancies and the balance by
procurement savings and earnings increases from sales synergies.
---------------------------------------------
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997
- -------------------------------------------------------------
The interim consolidated financial statements include the accounts of Flowserve
Corporation (the Company) and its subsidiaries. On July 22, 1997 the
shareholders of Durco International Inc. and BW/IP International Inc. voted to
approve a merger between a wholly owned subsidiary of Durco International Inc.
and BW/IP Inc. in a stock-for-stock merger of equals that was accounted for as a
pooling-of-interests transaction. As part of the merger agreement, the Company
changed its name from Durco International Inc. to Flowserve Corporation. These
consolidated financial statements reflect the combined balance sheets,
statements of income, and cash flows of Durco International Inc. and BW/IP Inc.
as if they had been combined for all periods presented.
Excluding merger transaction expenses of $10.2 million, net income was $17.3
million, or $.42 per share, for the three months ended September 30, 1997,
compared with $18.2 million, or $.44 per share, for the corresponding period in
1996. Including merger transaction expenses, net income was $7.1 million, or
$.17 per share, for the third quarter of 1997 compared to net income of $18.2
million, or $.44 per share, for the third quarter of 1996. Merger transaction
costs were primarily related to investment banking fees, legal fees, and other
costs related to the merger, which are non-deductible for tax purposes.
Bookings, an indicator of future sales, were $279.6 million for the third
quarter of 1997. This compares to $267.3 million in the third quarter of 1996.
Reported bookings for the quarter were adversely affected by translating foreign
currencies into U.S. dollars.
Backlog at September 30, 1997 was $296.8 million, compared with a backlog of
$287.1 million at December 31, 1996. Increased backlog in 1997 is due to
acquisitions and overall strong original equipment bookings.
Net sales for the three months ended September 30, 1997 were $281.8 million,
compared to net sales of $271.0 million for the same period in 1996. The 4%
increase in net sales reflects increased shipments from the Flow Control
Division, significant shipments of Rotating Equipment Division original
equipment orders, and additional sales from recently acquired entities.
Partially offsetting the increase in sales was the impact of the strengthening
of the U.S. dollar against foreign currencies. International contributions to
consolidated net sales were 41% for both of the three month periods ended
September 30, 1997 and 1996. Total net sales to international customers,
including export sales from the U.S., were 53% for both of the respective
periods.
The gross profit margin was 38% for the three months ended September 30, 1997.
This compares to 39% for the same period in 1996. The decrease in the margin
reflects the impact of lower-margin pump original equipment shipments in the
third quarter. Selling and administrative expenses as a percentage of net sales
were 25% for both of the three month periods ended September 30, 1997 and 1996.
<PAGE> 14
The effective tax rate for the third quarter of 1997, including merger
transaction expenses, was 58%, compared with 36% in 1996. Excluding the tax
impact of the merger transaction expenses, which are not deductible, the tax
rate for the third quarter of 1997 was 36%.
On October 27, 1997, the Company announced an approximately $85 million merger
integration program. The program includes investments of approximately $25
million in capital and approximately $60 million in integration expenses. Of
this $60 million, $25 million is expected to be recognized as a one-time
restructuring charge in the fourth quarter of this year. The remaining $35
million will be recognized as incurred over the three-year life of the plan, as
required by current accounting rules. The Company program includes facility
rationalizations in North America and Europe, organizational realignments at the
corporate and division levels, procurement initiatives, investments in training,
and support for the service and repair operations. The Company believes the
program will produce benefits that exceed the earlier announced merger synergy
estimates of $35-$45 million in additional annual operating income at the end of
three years. Most of this income is expected to be produced by eliminating cost
redundancies and the balance by procurement savings and earnings increases from
sales synergies.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997
- ------------------------------------------------------------
Excluding merger transaction expenses of $10.2 million, net income was $58.9
million, or $1.44 per share, for the nine months ended September 30, 1997,
compared with $53.9 million, or $1.30 per share, for the corresponding period in
1996. Including merger transaction expenses, net income was $48.7 million, or
$1.19 per share, for the first nine months of 1997 compared to net income,
including restructuring charges, of $50.3 million, or $1.21 per share, for the
corresponding period of 1996.
Bookings increased to $869.6 million for the first nine months of 1997, compared
to $851.3 million in 1996's first nine months. Bookings increased despite
strengthening of the U.S. dollar against the European currencies, which
negatively impacted total Company bookings by approximately $35 million or 4%.
Net sales for the nine months ended September 30, 1997 were $845.0 million,
compared to net sales of $813.0 million for the same period in 1996. The 4%
increase in net sales reflects increased shipments from the Flow Control
Division, significant shipments of Rotating Equipment Division original
equipment orders, and additional sales from recently acquired entities.
Partially offsetting the increase in sales was the impact of the strengthening
of the U.S. dollar against foreign currencies, which negatively impacted net
sales by approximately $35 million. International contributions to consolidated
net sales were 40% for both of the nine month periods ended September 30, 1997
and 1996. Total net sales to international customers including export sales from
the U.S. were 51% and 53%, respectively. The reduction in international
contributions reflects the currency translation impact of the weaker European
currencies.
<PAGE> 15
The gross profit margin was 39% for the nine months ended September 30, 1997
compared to 40% for the same period in 1996. Selling and administrative expenses
as a percentage of net sales were 25% for both of the nine month periods ended
September 30, 1997 and 1996.
The effective tax rate for the nine months ended September 30, 1997, including
merger transaction expenses, was 41%, compared with 36% in 1996. Excluding the
tax impact of the merger transaction expenses, which are non-deductible, the tax
rate for the nine months ended September 30, 1997 was 37%.
During 1996, the Company recognized a restructuring charge in the former Durco
units of $5.8 million, before income taxes, to consolidate former Durco
operations in Europe and Australia. Through September 30, 1997, essentially all
termination fees and exit costs were incurred with no changes in estimate from
the original accrual.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
The Company's capital structure, consisting of long-term debt, deferred items
and shareholders' equity, continues to enable the Company to finance short and
long-range business objectives. At September 30, 1997, long-term debt was 22% of
the Company's capital structure, compared to 23% at December 31, 1996. Based
upon annualized 1997 results, the interest coverage ratio of the Company's
indebtedness was 9.6 at September 30, 1997, compared with 9.9 for the twelve
months ended December 31, 1996.
The return on average net assets based on annualized results at September 30,
1997, excluding the impact of merger transaction expenses, was 13%, compared to
14% at December 31, 1996. Excluding the impact of merger transaction expenses,
annualized return on average shareholders' equity was 20% at September 30, 1997,
compared to 19% at December 31, 1996.
The Company's liquidity position is reflected in a current ratio of 2.5 to 1 at
September 30, 1997, unchanged from December 31, 1996. Cash in excess of current
requirements was invested in high-grade, short-term securities. The Company
believes that cash flow generated by operations and amounts available under
borrowing arrangements will be adequate to fund operating needs, the integration
plans, and capital expenditures through the remainder of the year.
SAFE HARBOR STATEMENT: This document contains various forward-looking statements
and includes assumptions about the Company's future market conditions,
operations, and results. These statements are based on current expectations and
are subject to significant risks and uncertainties. They are made pursuant to
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Among the many factors that could cause actual results to differ materially from
the forward-looking statements are: further changes in the already competitive
environment for the Company's products or competitor's responses to the
Company's strategies, political risks or trade embargoes affecting important
country markets, unanticipated expenses or unfavorable market reaction to the
merger of the Company and BW/IP Inc., unanticipated difficulties or costs
associated with integrating
<PAGE> 16
the management and operations of the Company and BW/IP Inc. following the
merger, and recognition of significant expenses associated with adjustments to
realign the combined company's facilities and other capabilities with its
strategies.
Net earnings for future quarters of 1997 and thereafter are uncertain and
dependent on general worldwide economic conditions in the Company's major
markets and their strong impact on the level of bookings activity.
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLOWSERVE CORPORATION
(Registrant)
/s/Bruce E. Hines
----------------------------
Bruce E. Hines
Senior Vice President
Chief Financial Officer
Date: November 14, 1997
- -----------------------
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 1 Not Applicable During Reporting Period
ITEM 2 Not Applicable During Reporting Period
ITEM 3 Not Applicable During Reporting Period
ITEM 4 See Special Meeting of Stockholders Summary located after
Index to Exhibits
ITEM 5 Not Applicable During Reporting Period
ITEM 6 Exhibits and Reports on Form 10-K
(a) The following Exhibits are attached hereto:
4.12 Guaranty, dated August 1, 1997, between
Flowserve Corporation and ABN-AMRO Bank N.V.
10.38 BW/IP International, Inc. Retirement Plan
(as amended and restated as of August 1,
1996)
10.39 Amendment Number One to the BW/IP
International, Inc. Retirement Plan
10.53 Employment Agreement, effective July 22,
1997 between Durco International Inc. and
Bernard G. Rethore
10.54 Employment Agreement, effective July 22,
1997 between Durco International Inc. and
William M. Jordan
27.1 Financial Data Schedule
All other Exhibits are incorporated by reference
(b) A Report on Form 8-K dated July 22, 1997, was filed
with respect to Item 5, "Other Events" for completion
of the merger of the Company and BW/IP Inc. on July
22, 1997.
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C>
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
2.1 Agreement and Plan of Merger dated as of May 6, 1997, among
the Company, Bruin Acquisition Corp. and BW/IP, Inc.
"BW/IP" was filed as Annex I to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997......................... *
2.2 Durco Stock Option Agreement dated as of May 6, 1997,
between the Company, as issuer, and BW/IP, Inc. as grantee,
was filed as Annex II to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997............................ *
2.3 BW/IP Stock Option Agreement dated as of May 6, 1997,
between BW/IP Inc., as issuer, and the Company, as grantee,
was filed as Annex III to the Joint Proxy Statement/
Prospectus which is part of the Registration Statement on
Form S-4, dated June 19, 1997............................. *
3.1 1988 Restated Certificate of Incorporation of The
Duriron Company, Inc. was filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1988...................... *
3.2 1989 Amendment to Certificate of Incorporation
was filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989............................................. *
3.3 By-Laws of The Duriron Company, Inc.
(as restated) were filed with the Commission as Exhibit
3.2 to The Company's Annual Report on Form 10-K for the
year ended December 31,
1987.......................................................... *
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C>
3.4 1996 Certificate of Amendment of Certificate of
Incorporation was filed as Exhibit 3.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995............................................ *
3.5 Amendment No. 1 to Restated Bylaws was filed as
Exhibit 3.5 to the Company's Annual Report on
Form 10-K for the year ended December 31,
1995.................................................................. *
3.6 July 1997 Certificate of Amendment of Certificate
of Incorporation was filed as Exhibit 3.6 to the
Company's Quarterly Report on Form 10-Q, for the
Quarter ended June 30, 1997................................... *
(4) INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING INDENTURES:
4.1 Lease agreement, indenture of mortgage and deed of trust, and
guarantee agreement, all executed on June 1, 1978 in
connection with 9-1/8% Industrial Development Revenue Bonds,
Series A, City of Cookeville, Tennessee.............. +
4.2 Lease agreement, indenture of trust, and guaranty agreement,
all executed on June 1, 1978 in connection with 7-3/8%
Industrial Development Revenue Bonds, Series B, City of
Cookeville, Tennessee........................................ +
4.3 Lease agreement and indenture, dated as of January 1, 1995 and
bond purchase agreement dated January 27, 1995, in connection
with an 8% Taxable Industrial Development Revenue Bond, City
of
Albaquerque, New Mexico.................................. +
4.4 Form of Rights Agreement dated as of August 1,
1986 was filed as an Exhibit to the
Company's Form 8-A dated August 13, 1986....... *
4.5 Amendment to Rights Agreement dated August 1, 1996 was filed
as Exhibit 4.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996.......... *
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
4.6 Interest Rate and Currency Exchange Agreement between the
Company and Barclays Bank dated November 17, 1992 PLC in the
amount of $25,000,000 was filed as Exhibit 4.9 to Company's
Report of Form 10-K for year ended
December 31, 1992............................................. *
4.7 Loan Agreement in the amount of $25,000,000 between the
Company and Metropolitan Life Insurance Company dated November
12, 1992 was filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992 ............................................ *
4.8 Revolving Credit Agreement between the Company and First of
America Bank - Michigan, N.A. in the amount of $20,000,000 and
dated August 22, 1995 was filed as Exhibit 4.11 to the
Company's Report on Form 10-K for the year ended
December 31, 1995................................................ +
4.9 Credit Facility between the Company in the amount of
$100,000,000 and National City Bank, as Agent, dated December
3, 1996 was filed as Exhibit 4.8 to the Company's Report on
Form 10-K for the year
ended December 31, 1996..................................... *
4.10 Rate Swap Agreement in the amount of $25,000,000 between the
Company and National City Bank dated November 14, 1996 was
filed as Exhibit 4.9 to the Company's Report on Form 10-K for
the year ended
December 31, 1996................................................. *
4.11 Rate Swap Agreement in the amount of $25,000,000 between the
Company and Key Bank National Association dated October 28,
1996 was filed as Exhibit 4.10 to the Company's Report on Form
10-K for the year ended December 31, 1996..................... *
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C>
4.12 Guaranty, dated August 1, 1997 between Flowserve
Corporation and ABN-AMRO Bank N.V..................... (filed herewith)
4.13 Credit Agreement, dated as of September 10, 1993, between BW/IP
International B.V. and ABN/AMRO was filed as Exhibit 10.dd to
BWIP's Annual Report on Form
10-K for the year ended December 31, 1993...................... *
4.14 Note Agreement, dated as of November 15, 1996, between
BW/IP International, Inc. and the Note Purchasers named
therein, with respect to $30,000,000 principal amount of
7.14% Senior Notes, Series A, due November 15, 2006, and
$20,000,000 principal amount of 7.17% Senior Notes, Series
B, due March 31, 2007, was filed as Exhibit 4.l to BW/IP's
Registration Statement on Form S-8
(Registration No. 333-21637) as filed February 12, 1997....... *
4.15 Note Agreement, dated as of April 15, 1992, between BW/IP
International, Inc. and the Note Purchasers named therein, with
respect to $50,000,000 principal amount of 7.92% Senior Notes
due May 15, 1999, filed as Exhibit 4.a to BW/IP's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1992.................................................... *
(10) MATERIAL CONTRACTS: (See Footnote "a")
10.1 The Duriron Company, Inc. Incentive Compensation Plan (the
"Incentive Plan") for Senior Executives, as amended and
restated effective January 1, 1994, was filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K for the year ended
December 31,
1993........................................................... *
10.2 Amendment No. 1 to the Incentive Plan was filed as
Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995....... *
10.3 The Duriron Company, Inc. Supplemental Pension
Plan for Salaried Employees was filed with the
Commission as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1987............................................. *
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C>
10.4 The Duriron Company, Inc. amended and
restated Director Deferral Plan was filed as Attachment A to
the Company's definitive 1996 Proxy Statement filed with the
Commission
on March 10, 1996............................................. *
10.5 Change in Control Agreement ("CIC") between
The Duriron Company, Inc. and William M. Jordan,
Chairman, President and CEO was filed as Exhibit
10.5 to the Company's Report on Form 10-K for
the year ended December 31, 1996........................... *
10.6 Form of CIC Agreement between all other executive officers of
the Company was filed as Exhibit 10.6 to the Company's Report
on Form 10-K for the
year ended December 31, 1996................................ *
10.7 The Duriron Company, Inc. First Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987... *
10.8 Amendment #1 to the first Master Benefit Trust Agreement dated
October 1, 1987 was filed as Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993........................................................... *
10.9 Amendment #2 to First Master Benefit Trust Agreement was filed
as Exhibit 10.25 to the Company's Annual Report on Form 10-K
for the
year ended December 31, 1993........................... *
10.10 The Duriron Company, Inc. Second Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987.... *
10.11 First Amendment to Second Master Benefit Trust Agreement was
filed as Exhibit 10.26 to the Company's Annual Report on Form
10-K for the
year ended December 31, 1993........................... *
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
10.12 The Duriron Company, Inc. Long-Term Incentive Plan (the
"Long-Term Plan"), as amended and restated effective November
1, 1993 was filed as Exhibit 10.8 to the Company's Annual
Report on
Form 10-K for the year ended December 31, 1993.. *
10.13 Amendment No. 1 to the Long-Term Plan was filed
as Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1995............................................................ *
10.14 The Duriron Company, Inc. 1989 Stock Option Plan as amended
and restated effective January 1, 1997 was filed as Exhibit
10.14 to the Company's Report on Form 10-K for the year ended
December 31,
1996............................................................ *
10.15 The Duriron Company, Inc. 1989 Restricted Stock Plan (the
"Restricted Stock Plan") as amended and restated effective
January 1, 1997 was filed as Exhibit 10.15 to the Company's
Report on Form
10-K for the year ended December 31, 1996............ *
10.16 The Duriron Company, Inc. Retirement
Compensation Plan for Directors ("Director
Retirement Plan") was filed as Exhibit 10.15 on
the Company's Annual Report to Form 10-K for
the year ended December 31, 1988....................... *
10.17 Amendment No. 1 to Director Retirement Plan
was filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995............................................... *
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C>
10.18 The Company's Benefit Equalization Pension
Plan ("Equalization Plan") was filed as Exhibit
10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989....... *
10.19 Amendment #1 dated December 15, 1992 to the Equalization Plan
was filed as Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the
year ended December 31, 1992........................... *
10.20 The Company's Equity Incentive Plan as amended and restated
effective July 21, 1995 was filed as Exhibit 10.25 to the
Company's Annual Report on
Form 10-K for the year ended December 31, 1995.. *
10.21 Supplemental Pension Agreement between the Company and William
M. Jordan dated January 18, 1993 was filed as Exhibit 10.15 to
the Company's Annual Report on Form 10-K
for the year ended December 31, 1992................ *
10.22 1979 Stock Option Plan, as amended and restated April 23,
1991, and Amendment #1 thereto dated December 15, 1992, was
filed as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended
December 31, 1992 ............................................ *
10.23 Deferred Compensation Plan for Executives was filed as Exhibit
10.19 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992 ............................................ *
10.24 Executive Life Insurance Plan of The Duriron
Company, Inc. was filed as Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995............................ *
10.25 Executive Long-Term Disability Plan of The
Duriron Company, Inc. was filed as Exhibit 10.30
to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995........................ *
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C>
10.26 Consulting Agreement between James S. Ware and Durametallic
Corporation dated April 21, 1991 was filed as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995................................................ *
10.27 Senior Executive Death Benefit Agreement between James S. Ware
and Durametallic dated April 12, 1991 was filed as Exhibit
10.32 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995........................ *
10.28 Executive Severance Agreement between James S. Ware and
Durametallic Corporation dated January 6, 1994 was filed as
Exhibit 10.33 to the Company's Annual Report on Form 10-K for
the
year ended December 31, 1995.............................. *
10.29 Agreement between James S. Ware and the Company dated
September 11, 1995 was filed as Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1995....................................... *
10.30 Agreement and Plan of Merger Among The Duriron Company, Inc.,
Wolverine Acquisition Corporation and Durametallic
Corporation, dated as of September 11, 1995 was filed as Annex
A on the Form S-4 Registration Statement filed by the Company
on September 11, 1995....................................................... *
10.31 Split-Dollar Life Insurance Agreement between the Company and
James S. and Sheila D. Ware Irrevocable Trust II signed March
6, 1996 was filed as Exhibit 10.36 to the Company's quarterly
report on Form 10-Q for the quarter ended
March 31, 1996.................................................................... *
10.32 Employee Protection Plan, as revised effective March 1, 1997
(which provides certain severance benefits to employees upon a
change of control of the Company) was filed as Exhibit 10.32
to the Company's Report on Form 10-K for the year
ended December 31, 1996..................................................... *
10.33 1997 Stock Option Plan was included as Exhibit A to the
Company's 1997 Proxy Statement which was filed with
the Commission on March 17, 1997...................................... *
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C>
10.34 BW/IP International, Inc. 1992 Long-Term Incentive Plan
was filed as Appendix A to BW/IP's Proxy Statement for the 1992
Annual Meeting of Stockholders, dated April 17, 1992............... *
10.35 BW/IP, Inc. 1996 Long-Term Incentive Plan was filed as
Appendix A to BW/IP's Proxy Statement for the 1996 Annual
Meeting of Stockholders, dated April 9, 1996.......................... *
10.36 First Amendment to the BW/IP, Inc. 1996 Long-Term Incentive
Plan was filed as Exhibit 99.d to BW/IP's Registration
Statement on Form S-8 (Registration No. 333-21637) as filed
February 12, 1997......................................................... *
10.37 Supplemental Executive Retirement Plan was filed as Exhibit
10.rrrr to BW/IP's Registration Statement on Form S-1
(Registration No. 33-45165) as filed February 18, 1992......... *
10.38 BW/IP International, Inc. Retirement Plan (as amended and
restated as of August 1, 1996)........................................ (filed herewith)
10.39 Amendment Number One to the BW/IP International, Inc.
Retirement Plan......................................................... (filed herewith)
10.40 Amendment Number One to the Supplemental Executive Retirement
Plan was filed as Exhibit 10.ee to BW/IP's Annual
Report on 10-K for the year ended December 31, 1993........ *
10.41 BWIP Holding, Inc. Non Employee Directors Stock Option
Plan, filed as Appendix A to BW/IP's Proxy Statement
for the 1993 Annual Meeting of Stockholders, dated
April 16, 1993.......................................................... *
10.42 BW/IP, Inc. 1996 Directors Stock and Deferred Compensation
Plan was filed as Appendix B to BW/IP's Proxy Statement for the
1996 Annual Meeting of Stockholders dated April 9, 1996....... *
10.43 First Amendment to the BW/IP Inc. 1996 Directors Stock and
Deferred Compensation Plan was filed as Exhibit 99.f to BW/IP's
Registration Statement on Form S-8 (Registration No. 333-21637)
dated February 12, 1997.................................................. *
10.44 Amended and Restated BW/IP International, Inc. Retiree Health
Care Plan was filed as Exhibit 10.jj to BW/IP's Annual Report
on Form 10-K for the year ended December 31, 1993.............. *
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C>
10.45 Amendment to the BW/IP International Inc. Retiree Health Care
Plan was filed as Exhibit 10.mm to BW/IP's Annual Report on
Form 10-K for the year ended December 31, 1994................. *
10.46 Amendment to the BW/IP International, Inc. Retiree Health Care
Plan was filed as Exhibit 10.x to BW/IP's Annual Report on Form
10-K for the year ended December 31, 1995.......................... *
10.47 Amendment to the BW/IP International, Inc. Supplemental
Executive Retirement Plan was filed as Exhibit 10.nn to
BW/IP's Annual Report on Form 10-K for the year ended
December 31, 1994................................................. *
10.48 Amendment to the BW/IP International, Inc. Supplemental Executive
Retirement Plan was filed as Exhibit 10.z to BW/IP's Annual Report
on Form 10-K for the year ended December 31, 1995................ *
10.49 Employment Agreement, dated October 19, 1995 between BW/IP, Inc.
and Bernard G. Rethore was filed as Exhibit 10.bb to BW/IP's Annual
Report on Form 10-K for the year ended December 31, 1995......... *
10.50 Employment Continuation Agreement, dated December 14, 1995,
between BW/IP, Inc. and Bernard G. Rethore was filed as
Exhibit 10.cc to BW/IP's Annual Report on Form 10-K for the
year ended
December 31, 1995............................................................... *
10.51 1995 Stock Option Agreements, dated as of October 19, 1995,
between BW/IP, Inc. and Bernard G. Rethore were filed as
Exhibit 10.dd to BW/IP's Annual Report on Form 10-K for the
year ended
December 31, 1995................................................................ *
10.52 BW/IP International, Inc. 1997 Management Incentive Plan was
filed as Exhibit 10.kk to BW/IP's Annual Report on Form 10-K
for the
year ended December 31, 1996.................................................. *
10.53 Employment Agreement, effective July 22, 1997, between Durco
International Inc. and Bernard G. Rethore................................... (filed herewith)
10.54 Employment Agreement, effective July 22, 1997, between Durco
International Inc. and William M. Jordan.................................... (filed herewith)
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule (submitted for the SEC's
information).............................................. (filed herewith)
<FN>
- --------------
"*" Indicates that the exhibit is incorporated by reference into
this Quarterly Report on Form 10-Q from a previous filing with
the Commission. The Company's file number with the Commission
is "1-13179" (previous file number "0-325")
"+" Indicates that the document relates to a class of indebtedness
that does not exceed 10% of the total assets of the Company
and subsidiaries and that the Company will furnish a copy of
the document to the Commission upon request.
"a" The documents identified under Item 10 include all management
contracts and compensatory plans and arrangements required to
be filed as exhibits.
</TABLE>
<PAGE> 30
Item 4 Submission of Matters to a Vote of Security Holders
(a) A Special Meeting of Stockholders of the Company was held
on July 22, 1997.
(c) The following matters were submitted to a vote of
the stockholders:
(I) A proposal to approve issuance of shares of
Company common stock in accordance with the
terms of the Agreement and Plan of Merger,
dated May 6, 1997, among Durco International
Inc. ("Durco"), Bruin Acquisition Corp., a
wholly owned subsidiary of Durco ("Sub") and
BW/IP, Inc. (BW/IP) which provided for the
merger of Sub with and into BW/IP, with
BW/IP surviving as a wholly owned subsidiary
of Durco. The proposal was approved with
18,251,793 votes cast for the proposal,
186,960 votes cast against the proposal and
an aggregate of 44,955 abstentions and
broker non-votes.
(II) A proposal to amend the Company's Restated
Certificate of Incorporation to change the
corporate name from Durco International Inc.
to Flowserve Corporation. The proposal was
approved with 19,039,619 votes cast for the
proposal, 958,782 votes cast against the
propsal and an aggregate of 87,982
abstentions and broker non-votes.
(III) A proposal to increase the authorized
number of shares of Durco common stock from
60,000,000 to 120,000,000. The proposal was
approved with 18,955,103 votes cast for the
proposal, 1,056,832 votes against the
proposal and an aggregate of 74,449
abstentions and broker non-votes.
<PAGE> 1
Exhibit 4.12
Date: August 1, 1997
--------------------
GUARANTY
--------
Know all men by these presents, that in consideration of the extension by
ABN-AMRO Bank N.V. (hereinafter called the "Bank") acting through its branch at
Etten-Leur, Stationsplein 21, (4872 XL) of financial accommodation to BW/IP
International B.V. of its successors or assigns (hereinafter called the
"Borrower"), for the period from August 1, 1997 to August 1, 1999 the
undersigned hereby unconditionally guarantees the payment in NLG 50,000,000
(SAY: FIFTY MILLION DUTCH GUILDERS) when due (at maturity, by acceleration, or
otherwise), of any and all liabilities, present or future, direct or
contingent, joint, several or independent, for principal, interest, charges,
commissions or otherwise, of the Borrower due or to become due to, or held or
to be held by, the Bank, whether created directly or acquired by assignment or
otherwise (all such liabilities being hereinafter called the "Guaranteed
Liabilities").
The termination of this Guaranty as provided herein shall be ineffective with
regard to any credit granted in the Borrower during the time period in which
this Guaranty was in full force and effect.
The undersigned hereby waives (a) notice of the acceptance of this Guaranty and
of any demand for payment hereunder, (b) notice of the incurring by the
Borrower or the acquisition by the Bank of the Guaranteed Liabilities, and (c)
presentment, demand, protest and notice of dishonor or default with respect to
any of the Guaranteed Liabilities.
The Bank may from time to time accept, exchange, surrender, realize on and
otherwise deal with and dispose of any security for any of the Guaranteed
Liabilities; the Guaranteed Liabilities or any of them may be prepaid
accelerated as to maturity, renewed or extended as to maturity; any default
thereunder may be waived; and any of the provisions thereof modified,
supplemented or waived; all without notice to or assent by the undersigned and
without affecting the obligations of the undersigned under this Guaranty.
<PAGE> 2
-2-
The aggregate amount of the Guaranteed Liabilities upon which the undersigned
shall be liable hereunder shall not exceed NLG 50,000,000 (SAY: FIFTY MILLION
DUTCH GUILDERS) plus interest.
No delay by the Bank in exercising any right or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right or
power hereunder preclude other or further exercise thereof or the exercise of
any other right or power, nor shall the Bank be liable for exercising or
failing to exercise any such right of power, nor shall any action by the Bank
omitted hereunder in any way impair or affect this Guaranty.
Notwithstanding the foregoing, the Guarantor specifically waives all defenses
that it may have based upon any election of remedies by the Bank which destroys
the Guarantor's subrogation rights to proceed against the Borrower or any other
person for reimbursement, including any loss of rights suffered by reason of
any privileges, rights, powers or remedies of the Borrower in connection with
any antideficiency laws or any other laws limiting, qualifying or discharging
the indebtedness of or remedies against the Borrower.
The Guarantor represents, warrants and agrees that each of the waivers set
forth herein is made with the Guarantor's full knowledge of their significance
and consequences, with the understanding that events giving rise to any
defenses waived may diminish, destroy or otherwise adversely affect rights
which the Guarantor may otherwise have against the Borrower or others, or
against collateral, and that under the circumstances these waivers are
reasonable.
This Guaranty shall inure to the benefit of the successors of the Bank and
shall be construed and governed in accordance with the laws of the State of New
York.
In witness whereof, this instrument has been duly executed and sealed by the
undersigned the day and year first above written.
Attest: FLOWSERVE CORPORATION
/s/R.F. Shuff
- --------------------------
Secretary
/s/Bruce E. Hines
--------------------------
Vice President
<PAGE> 1
EXHIBIT 10.38
BW/IP INTERNATIONAL, INC.
RETIREMENT PLAN
(as amended and restated as of August 1, 1996)
(Successor to
the Borg-Warner Corporation Retirement Plan)
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <S>
Page
SECTION 1. - PURPOSE AND EFFECTIVE DATE 1
1.01 Purpose 1
1.02 Effective Date 1
1.03 Supplements and Exhibits 1
SECTION 2. - DEFINITIONS 2
Actuarial Equivalent or Actuarial Value 2
Adjustment Factor 2
Administrative Committee 3
Affiliated Company 3
Authorized Leave of Absence 3
BW/IP 3
Code 3
Commencement Date 3
Committee 3
Company 3
Compensation 4
Continuous Service 6
Contributory Participant 6
Covered Compensation 6
Credited Service 7
Earnings 7
Eligible Employee 8
Employee 9
Employer 9
ERISA 10
Final Average Earnings 10
Highly Compensated Employee 11
Leased Employee 14
Nonhighly Compensated Employee 15
Hour of Service 15
Inactive Participant 15
Investment Committee 16
Normal Retirement Date 16
Participant 16
Pension 16
Plan 16
Plan Year 16
Primary Social Security Benefit 16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <S>
Prior Plan 17
Social Security Benefits 17
Social Security Retirement Age 18
Totally and Permanently Disabled 18
Trust Fund 19
Trustee 19
SECTION 3. - PARTICIPATION 19
3.01 Participation 19
3.02 Transfer 19
3.03 Special Transitional Rules in Connection with the Sale of Borg-
Warner Industrial Products, Inc 20
3.04 Special Transitional Rules in Connection with the Plan Merger
Effective April 1, 1989 21
SECTION 4. - ELIGIBILITY FOR RETIREMENT PENSION 22
4.01 Normal Retirement 22
4.02 Early Retirement 22
4.03 Disability Retirement 22
4.04 Vested Deferred Retirement 23
4.05 Vesting of Fluid Controls Division Employees 24
4.06 Vesting of Fresno Pump Division Employees 25
SECTION 5. - AMOUNT OF RETIREMENT BENEFIT 25
5.01 Normal Retirement Pension 25
5.02 Early Retirement Pension 30
5.03 Disability Retirement Pension 30
5.04 Vested Deferred Retirement Pension 31
5.05 Maximum Benefit 31
5.06 Maximum Benefit for Participation in More Than One Plan 34
5.07 Nonduplication of Benefits 37
5.08 Notice of Option to Determine Primary Social Security Benefits
by Actual Salary History 37
5.09 COLA Cessation 38
SECTION 6. - MANNER OF PAYMENT 39
6.01 Normal Form of Benefit Payment 39
6.02 Surviving Spouse Benefit 39
6.03 Automatic Death Before Age 55 Surviving Spouse Benefit 41
6.04 Automatic Post-Termination Surviving Spouse Benefit 42
6.05 Automatic Joint and Contingent Annuitant Benefit 43
6.06 Election and Election Period 43
6.07 Optional Forms of Benefit Payment 44
6.08 Election of Optional Form of Retirement Benefit 48
6.09 Level Income Option 49
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <S>
6.10 Commencement and Duration of Retirement Pension 50
6.11 Reemployment 51
6.12 Small Retirement Pension 52
6.13 Direct Rollovers 54
6.13 Rate of Distribution 55
SECTION 7. - CONTINUOUS SERVICE: CREDITED SERVICE 57
7.01 Continuous Service 57
7.02 Credited Service 62
SECTION 8. - ADMINISTRATION 62
8.01 Establishment of the Administrative Committee 62
8.02 Establishment of the Investment Committee 63
8.03 Organization of the Committees 64
8.04 Powers of the Administrative Committee 64
8.05 Powers of the Investment Committee 66
8.06 Duties of the Administrative Committee 67
8.07 Actions by a Committee 68
8.08 Accounts and Reports 68
8.09 Discretionary Action 68
8.10 Action Taken in Good Faith 68
8.11 Indemnification 69
8.12 Responsibilities of Named Fiduciaries Other than the Committees
69
8.13 Allocation of Responsibilities 70
8.14 Designation of Persons to Carry Out Responsibilities of Named
Fiduciaries 70
8.15 Information Required by Committee 70
8.16 Forms 71
8.17 Evidence 71
8.18 Review of Benefit Determinations 71
8.19 Administrative Committee's Decision Final 72
8.20 Missing Persons 72
SECTION 9. - FUNDING 72
9.01 Employer Contributions 72
9.02 Funding of Benefits 73
9.03 Assets for the Exclusive Benefit of Participants 73
9.04 Reversion of Employer Contributions 74
SECTION 10. - AMENDMENT AND TERMINATION OF THE PLAN 74
10.01 Employers May Amend or Terminate Their Participation in the Plan 74
10.02 Discontinuance of a Division, Subsidiary or Affiliate 75
10.03 Cessation of Participation by the Company 76
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
10.04 Allocation and Distribution of Assets on Termination or Partial
Termination 76
10.05 Manner of Distribution 77
10.06 Residual Amounts 77
SECTION 11. - MISCELLANEOUS 78
11.01 Nonalienation of Benefits 78
11.02 Incapacity 78
11.03 Continuance of Employment 79
11.04 Merger or Consolidation of Plan 79
11.05 Construction 80
SECTION 12. - RESTRICTIONS ON BENEFITS PAYABLE TO HIGHLY
COMPENSATED PARTICIPANTS 80
12.01 Termination Restrictions. 80
12.02 Ongoing Restrictions 80
SECTION 13. - TOP-HEAVY RESTRICTIONS 81
13.01 Determination of Top-Heavy 81
13.02 Minimum Benefit 83
13.03 Minimum Vesting 84
13.04 Change in Top-Heavy Status 85
13.05 Impact on Maximum Benefits 85
13.06 Exception 85
SUPPLEMENT A - CONTRIBUTORY PARTICIPANTS 87
A-1. Normal Retirement Income 87
A-2. Termination of Employment 88
A-3. Death Benefits 88
A-4. Optional Forms of Retirement Pension 90
A-5. Withdrawal of Contributions Not Permitted 92
A-6. Interest 92
SUPPLEMENT B - MERGER OF MECHANICAL SEAL PLAN, PUMP DIVISION PLAN,
FLUID CONTROLS PLAN AND UCP PLAN 93
Benefits Accrued Prior to Merger 93
EXHIBIT A - EARLY RETIREMENT INCOME DETERMINANTS 95
</TABLE>
iv
<PAGE> 6
BW/IP INTERNATIONAL, INC.
RETIREMENT PLAN
(As amended and restated as of August 1, 1996)
1. SECTION - PURPOSE AND EFFECTIVE DATE
1.1 PURPOSE. The purpose of this Plan is to provide regular income after
retirement for eligible employees of the participating divisions, subsidiaries
and affiliates of BW/IP International, Inc.
1.2 EFFECTIVE DATE. The Plan was adopted as of January 1, 1987, as a successor
plan to the Borg-Warner Corporation Retirement Plan with respect to those
employees affected by the sale of BW/IP International, Inc. by Borg-Warner
Corporation on May 20, 1987. The Plan, as set forth herein, is amended and
restated effective August 1, 1996 to incorporate amendments made through such
date to the prior restatement of the Plan dated January 1, 1993, except as to
any provision thereof where the Plan or any amendment thereto specifies an
earlier or later effective date.
1.3 SUPPLEMENTS AND EXHIBITS. From time to time, the Committee, at the request
of an Employer, may adopt supplements and exhibits to the Plan for the purpose
of modifying the provisions of the Plan as they apply to the Employees of the
Employer (or any group or classification of Employees of the Employer) to
provide additional, substitute or restrictive terms and provisions of the Plan
as it applies to such Employees, including provisions to preserve benefits
attributable to such Employees' participation in a plan of the Employer or
predecessor of the Employer or to coordinate such benefits with the benefits of
this Plan. Each such supplement or exhibit will be
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attached to and form a part of this Plan, will specify the group or class of
Employees to which it applies and will supersede the provisions of the Plan to
the extent necessary to eliminate any inconsistencies between the Plan and such
supplement or exhibit.
1. SECTION - DEFINITIONS
The following words and phrases as used herein have the following
definitions, unless the context clearly requires otherwise.
ACTUARIAL EQUIVALENT OR ACTUARIAL VALUE. Actuarial Equivalent or Value
means equality in value of the aggregate amounts expected to be received under
different forms of payments, based on the 1971 Group Annuity Mortality Table
which is weighted 90% male and 10% female, with interest at 6%. Application of
such assumptions to the computations of benefits payable under the Plan shall be
made uniformly and consistently with respect to all Participants in similar
circumstances.
ADJUSTMENT FACTOR. The cost of living adjustment factor prescribed by
the Secretary of the Treasury under Section 415(d) of the Code for years
beginning after December 31, 1987, applied to such items and in such manner as
the Secretary shall prescribe.
ADMINISTRATIVE COMMITTEE. Administrative Committee means the BW/IP
Administrative Committee designated by the Board to administer, interpret and
construe the Plan as provided in Section 8.
AFFILIATED COMPANY. Any corporation which is included in a controlled
group of corporations (within the meaning of Section 414(b) of the Code) of
which the Company
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is a member, any trade or business which is under common control with the
Company (within the meaning of Section 414(c) of the Code), any affiliated
service group (within the meaning of Section 414(m) of the Code) of which the
Company is a member, and any other entity required to be aggregated with the
Employer pursuant to Section 414(o) of the Code.
AUTHORIZED LEAVE OF ABSENCE. Authorized Leave of Absence means any
absence authorized by an Employer under the Employer's standard personnel
practices.
BW/IP. BW/IP means the Company.
CODE. Code means the Internal Revenue Code of 1986, as amended.
COMMENCEMENT DATE. Commencement Date means the date an Employee first
completes an Hour of Service.
COMMITTEE. Committee means the Retirement Committee described in
Section 8.
COMPANY. Company means BW/IP International, Inc., a Delaware
corporation.
COMPENSATION. Compensation means all amounts paid or made available to
a Participant during a Plan Year by the Company or any Affiliated Company for
personal services actually rendered to the Company or any Affiliated Company in
the course of employment by the Participant during such Plan Year and which are
subject to inclusion as gross income for federal income tax purposes in the
calendar year such amounts are first paid or made available. Such term shall
specifically include:
i) all wages, salaries, bonuses and commissions;
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ii) taxable fringe benefits;
iii) reimbursements or other expense allowances under a
nonaccountable plan; and
iv) all amounts contributed to any plan established by the
Corporation under Section 125 of the Code with respect to the payment
of certain insurance premiums on a pre-tax basis.
Such term shall specifically exclude:
i) all employer contributions to this Plan and all other
qualified plans of deferred compensation for the period in question;
ii) amounts realized from the exercise of a non-qualified
stock option or when restricted stock or property held by an employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
iii) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option, and
iv) other amounts which receive special tax benefits, such as
premiums for group-term life insurance to the extent they are not
includible in the gross income of the employee.
In no event shall annual Earnings taken into account hereunder for any employee
for any Plan Year exceed the first one hundred fifty thousand dollars of
Compensation for such employee; provided, that said amount shall be adjusted as
provided under Code Section 401(a)(17)(B).
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Notwithstanding anything herein to the contrary, in the case of a Participant
(i) whose spouse, or lineal descendant(s) who have not attained age 19 prior to
the end of a Plan Year, are also Participants, and (ii) who is a five percent
owner (as defined in Section 416(i) of the Code) or one of the ten Highly
Compensated Employees paid the highest compensation (as defined in Section
414(q)(7) of the Code), then (iii) all such family members shall be treated as a
single participant for purposes of the $150,000 limitation in the preceding
sentence, and (iv) all Compensation paid to all family members shall be treated
as if paid to the Highly Compensated Employee.
CONTINUOUS SERVICE. Continuous Service means Continuous Service
determined as described in Section 7.01.
CONTRIBUTORY PARTICIPANT. Contributory Participant means a Participant
who contributed to the Prior Plan prior to March 1, 1970. The rights and
benefits of a Contributory Participant shall be determined by the terms and
provisions of this Plan as modified by Supplement A.
COVERED COMPENSATION. Covered Compensation means as to any Participant
the average (without indexing) of the Taxable Wage Bases in effect for each
calendar year during the 35-year period ending with the last day of the calendar
year in which the Participant attains or will attain social security retirement
age (as defined in Section 415(b)(8) of the Code). In determining the Covered
Compensation for any Participant for a Plan Year, the Taxable Wage Base for all
calendar years beginning after the first day of the Plan Year shall be assumed
to be the same as the Taxable Wage
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Base in effect as of the beginning of the Plan Year. The Covered Compensation
for a Participant for a Plan Year beginning after such 35-year period shall be
the Participant's Covered Compensation for the Plan Year during which such
35-year period ends. The Covered Compensation for a Participant for a Plan Year
beginning before such 35-year period shall be the Taxable Wage Base in effect as
of the beginning of the Plan Year. The Covered Compensation for a Participant
shall be automatically adjusted for each Plan Year. For purposes of this
definition, the term "Taxable Wage Base" shall mean the contribution and wage
base under Section 230 of the Social Security Act, as the same may be amended
from time to time.
CREDITED SERVICE. Credited Service means Credited Service determined as
described in Section 7.02.
EARNINGS. With respect to any Employee, Earnings for a Plan Year means
the total wages or earnings received by the Employee for services rendered by
him to the Company and Affiliated Companies during the calendar year ending in
the Plan Year, as reported on Internal Revenue Service Form W-2, including the
amount of any performance bonus actually paid to such Participant during such
Plan Year but excluding any payment, allowance, bonus or premium determined or
paid solely by reason of the location at which the services were rendered to the
Employer, any payment which is not considered compensation for services rendered
and any amounts paid in a form other than cash. Notwithstanding the above, in
the event a Participant has an Authorized Leave of Absence without earnings due
to sickness, accident, military or government service, or any other cause, and
such Authorized Leave of Absence is for a period in excess of one month during a
calendar year, his Earnings
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for the Plan Year in which said calendar year ends shall not be less than his
Earnings for the preceding Plan year. Earnings for plan years under the Prior
Plan beginning before March 1, 1956, shall be determined as provided in the
Prior Plan in effect prior to March 1, 1970.
ELIGIBLE EMPLOYEE. Eligible Employee means an Employee who is either:
(a) a salaried or commissioned Employee, or
(b) an hourly paid Employee on the office payroll, or engaged in a
supervisory, administrative, engineering or professional capacity, or performing
work of the type most frequently performed by salaried Employees whose terms and
conditions of employment are not determined by a collective bargaining agreement
which does not extend the Plan to said Employee, or who is not a participant in
another plan of retirement income to which the Employer contributes and under
which such Employee is accruing benefits for current service, or
(c) any hourly-rated shop and warehouse, production, maintenance and
mechanical employee not covered by a collective bargaining agreement who is
regularly employed by the Employer in its Mechanical Seal Division or in its
Pump Division or in its Fluid Controls Division in Van Nuys, California, or
(d) any employee of the Employer in its United Centrifugal Pump
Division except if such employee's wages and working conditions are determined
pursuant to a collective bargaining agreement, if there is evidence that
retirement benefits were the subject of good faith bargaining in association
with such collective bargaining agreement which does not expressly provide for
participation in this Plan or
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the United Centrifugal Pumps Second Amended and Restated Defined Benefit Pension
Plan.
EMPLOYEE. Employee means any resident of the United States employed by
an Employer, including Leased Employees within the meaning of section 414(n)(2)
of the Code, and any citizen of the United States employed by an Employer or by
a foreign subsidiary of the Company, which subsidiary has entered into an
agreement with the Company under Section 3121(1)of the Code which is in effect
and as to whom no contributions under a funded plan of deferred compensation are
being provided by any other person with respect to the earnings paid to such
individual by such subsidiary. Notwithstanding the foregoing, if Leased
Employees constitute less than twenty percent of the Employer's non-highly
compensated work force within the meaning of section 414(n)(1)(C)(ii) of the
Code, the term "Employee" shall not include those Leased Employees covered by a
plan described in section 414(n)(5) of the Code. If approved by the Committee,
the term Employee may include a non-U.S. citizen who is employed by the Company,
its subsidiaries or affiliates outside of the United States. The term Employee
shall not include a non-U.S. citizen who is temporarily transferred to an
Employer.
EMPLOYER. Employer means the Company and the divisions, subsidiaries
and Affiliated Companies of the Company which are participating in the Plan.
Divisions of the Company shall participate in the Plan as determined from time
to time by the Committee. Subsidiaries and Affiliated Companies of the Company
shall participate in
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<PAGE> 14
the Plan by taking appropriate corporate action with the Committee's consent.
BWIP Inc., effective as of January 1, 1994 has adopted the Plan, and shall
thenceforth be deemed an Employer for all purposes under the Plan.
ERISA. ERISA means the Employee Retirement Income Security Act of 1974,
P.L.93-406, as hereafter amended from time to time.
FINAL AVERAGE EARNINGS. Final Average Earnings means one-fifth of the
aggregate Earnings paid to a Participant during the highest five consecutive
complete Plan Years within the last ten complete Plan Years of his Continuous
Service immediately preceding the earlier of his Termination Date. For a
Participant with less than five consecutive complete Plan Years of Continuous
Service, the Final Average Earnings means the sum of his Earnings for the last
five complete Plan Years of Continuous Service (or actual number of complete
Plan Years of Continuous Service if less than five) immediately preceding his
Termination Date divided by the actual number of such Plan Years.
For purposes of determining the Final Average Earnings of an Employee
who was a participant in the Prior Plan on December 31, 1986 and who became a
Participant in this Plan in connection with the sale of BW/IP by Borg-Warner
Corporation on May 20, 1987, amounts of compensation received during employment
with a member of the Borg-Warner Corporation controlled group of corporations
prior to January 1, 1987 that would have been treated as Earnings pursuant to
the Prior Plan shall be considered Earnings of the Employee pursuant to this
Plan.
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Solely for purposes of determining the Final Average Earnings of an
Employee who was a participant in the Mechanical Seal Plan, the Pump Division
Plan, the Fluid Controls Plan or the UCP Plan prior to April 1, 1989 amounts of
compensation received during employment with the Mechanical Seal Division, the
Pump Division, the Fluid Controls Division, or the UCP Division of the Employer
or with United Centrifugal Pumps that would have been treated as Earnings
hereunder if the Employee was covered hereby when such compensation was earned
shall be considered Earnings of the Employee pursuant to this Plan.
HIGHLY COMPENSATED EMPLOYEE. Highly Compensated Employee means an
Employee who, as required by, and as that term shall be interpreted consistently
with, Section 414(q) of the Code:
(i) is a 5% owner (as defined in Section 416(i)(1)(iii)
of the Code) at any time during the Determination
Year or the Look-Back Year;
(ii) receives compensation in excess of $75,000, as
adjusted by the Secretary of the Treasury, during the
Look-Back Year;
(iii) receives compensation in excess of $50,000, as
adjusted by the Secretary of the Treasury, during the
Look-Back Year and is a member of the Top Paid Group
for the Look-Back Year; or
(iv) is an officer, within the meaning of Section 416(i)
of the Code, during the Look-Back Year and who
receives compensation greater than 50 percent of the
amount in effect under Section 415(b)(1)(A) of the
Code for the calendar year in which the Look-Back
Year begins;
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(v) is both (A) described in subparagraphs (ii), (iii) or
(iv) above when these provisions are modified
substituting the Determination Year for the Look-Back
Year and (B) is among the group consisting of the 100
Employees with the greatest compensation during the
Determination Year. Solely for purposes of this
definition, the following special rules and
definitions shall apply:
(vi) "Determination Year" shall mean the Plan Year with
respect to which the determination is being made.
(vii) "Look-Back Year" shall mean the twelve-month period
immediately preceding the Determination Year;
provided, however, that the Company may elect to
treat the calendar year ending with the Determination
Year as the Look-Back Year.
(viii) "Top Paid Group" shall mean the group of Employees
consisting of the top 20 percent of all Employees
when ranked on the basis of Compensation paid during
each year. For purposes of determining the number of
Employees in the Top Paid Group, employees described
in Section 414(q)(8) of the Code and Q&A 9(b) of
Section 1.414(q)-1T of the Treasury Regulations shall
be excluded.
(ix) The number of officers is limited to 50 (or, if
lesser, the greater of 3 Employees or 10 percent of
Employees).
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(x) When no officer has Compensation in excess of 50
percent of the amount in effect under Section
415(b)(1)(A) of the Code, the highest paid officer
shall be a Highly Compensated Employee.
(xi) "Compensation" shall mean compensation within the
meaning of Section 415(c)(3) of the Code including
elective or salary reduction contributions to a
cafeteria plan, cash or deferred arrangement or
tax-sheltered annuity.
(xii) The term "Highly Compensated Employee" shall include
a former Highly Compensated Employee if such Employee
was a Highly Compensated Employee when such Employee
separated from service, or such Employee was a Highly
Compensated Employee at any time after attaining age
55.
(xiii) To the extent that any provision of this definition
shall conflict with any provision of final
regulations issued by the Secretary of the Treasury
under Section 414(q) of the Code, the provisions
hereof shall cease to have effect to extent of such
conflict.
LEASED EMPLOYEE. Leased Employee means, with respect to services
performed after December 31, 1986, any individual (other than a common law
employee of an Employer) who, pursuant to an agreement between an Employer and
any other person (the "leasing organization"), has performed services for such
Employer or for such Employer and related persons (within the meaning of Section
144(a)(3) of the Code) on a substantially full-time basis (as defined in
regulations under Section 414(n) of
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the Code) for a period of at least one year, and such services are of a type
historically performed by employees in the business field of such Employer.
Contributions or benefits provided by the leasing organization which are
attributable to the services performed for such Employer shall be treated as
provided by such Employer. Notwithstanding anything in this Section to the
contrary, an individual shall not be considered a Leased Employee during any
Plan Year in which (i) the leasing organization sponsors a money purchase
pension plan which provides a nonintegrated employer contribution of ten percent
of compensation, full and immediate vesting, and immediate participation for all
employees of the leasing organization (other than employees who perform
substantially all of their services for the leasing organization); (ii) the
individual in question participates in the leasing organization's plan; and
(iii) Leased Employees (determined without regard to this sentence) constitute
less than twenty percent of the work force of the Employer and any Affiliates.
For purposes of the preceding sentence, "compensation" shall mean an
individual's compensation as defined under Section 415 of the Code, except that
"compensation" shall exclude Pre-Tax Contributions hereunder (or any other
elective deferrals under any plan maintained by the Employer or any Affiliate),
and any amount which the individual would have received in cash but for an
election under a cafeteria plan (within the meaning of Section 125 of the Code)
maintained by the Employer or any Affiliate."
NONHIGHLY COMPENSATED EMPLOYEE. Nonhighly Compensated Employee means an
Employee of the Employer who is neither a Highly Compensated Employee nor a
family member described in Section 414(q)(6)(B) of the Code.
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HOUR OF SERVICE. Hour of Service means an hour for which an employee is
paid or entitled to payment for the performance of duties for the Company or an
Affiliated Company.
INACTIVE PARTICIPANT. Inactive Participant means a person who
participated in the Plan and subsequently ceases to be an Eligible Employee.
INVESTMENT COMMITTEE. Investment Committee means the BW/IP Investment
Committee designated by the Board to have the Investment Responsibilities under
the Plan designated in Section 8.
NORMAL RETIREMENT DATE. Normal Retirement Date of a Participant means
the later of (i) the date he reaches age sixty-five (65) or (ii) the fifth
anniversary of the date his participation in the Plan commenced if such
Participant commences participation in the Plan at age 60 or older.
PARTICIPANT. Participant means an Eligible Employee participating in
the Plan in accordance with Section 3.
PENSION. Pension means a series of monthly amounts which are payable to
a person who is entitled to receive benefits under the Plan.
PLAN. Plan means the BW/IP International, Inc. Retirement Plan.
PLAN YEAR. A Plan Year means the 12 consecutive calendar months
beginning each January 1.
PRIMARY SOCIAL SECURITY BENEFIT. Primary Social Security Benefit means
the annual amount available to the Participant at age 65 (or upon actual
retirement, if later) under the provisions of Title II of the Social Security
Act in effect at the time of his
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Termination Date, without regard to any increase in the wage base, or benefit
levels that take effect thereafter. However, if his Termination Date occurs
prior to age 65, the Participant's Primary Social Security Benefit shall be
estimated by assuming continuation of his Earnings until age 65 at the same rate
as in effect during the last completed Plan Year before his Termination Date.
The computation of the Participant's Primary Social Security Benefit shall
assume that his compensation for years prior to the last complete Plan Year
before his Termination Date is his Earnings during the last complete Plan Year
before his Termination Date discounted at 6% per year. However, a Participant
may submit documentation of actual salary history (in accordance with the
provisions of Section 5.08) which shall be used to determine compensation in
computing that Participant's Primary Social Security Benefits in lieu of the
assumptions set forth in this definition. The fact that a Participant does not
actually receive a Primary Social Security Benefit because of failure to apply
or continuance of work, or for any other reason, shall be disregarded.
PRIOR PLAN. Prior Plan means the Borg-Warner Corporation Retirement
Plan as in effect on December 31, 1986 unless another effective date is
specifically provided.
SOCIAL SECURITY BENEFITS. Social Security Benefits means unreduced old
age benefit payments or disability benefit payments (other than those payable
because of military service) under the Federal Social Security Act, as amended,
or under any future Federal legislation, amending, superseding, supplementing or
incorporating the Federal Social Security Act to which the Participant or former
Participant would be
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entitled upon proper application therefor, assuming that the Pension paid under
this Plan is his only income.
SOCIAL SECURITY RETIREMENT AGE. The age used as the retirement age for
the Participant under section 216(1) 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(1)(2) of such Act were 62.
TERMINATION DATE. Termination Date means the earliest of the date a
Participant terminates his employment with all Employers and Affiliated
Companies by reason of a voluntary quit, involuntary discharge, death, or his
retirement under the Plan or under the Prior Plan.
TOTALLY AND PERMANENTLY DISABLED. A Participant shall be deemed to be
Totally and Permanently Disabled when on the basis of medical evidence, it is
determined by the Committee that:
(a) he is totally disabled by bodily injury or disease so as to be prevented
thereby from engaging in any occupation or employment (for remuneration or
profit) for which he is or may become reasonably fitted by reason of education,
training or experience, but excluding a disability resulting from service in the
armed forces of any country, participation in a felonious criminal act, or
intentional self infliction; and
(b) his disability will continue during the remainder of his life.
TRUST FUND. Trust Fund means the trust fund established and maintained
under the Plan, to which all contributions are paid and from which all benefits
are disbursed.
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TRUSTEE. Trustee means the bank, trust company or other entity acting
at any time as trustee of the Trust Fund.
1. SECTION - PARTICIPATION
1.1 PARTICIPATION. Each Eligible Employee, other than a Leased Employee,
shall become a Participant in the Plan on the first day of the calendar month
coincident with or next following the date on which he has both: (i) completed a
one year period of Continuous Service and (ii) attained the age of 21; provided,
however, if an Eligible Employee satisfies the requirements of this Section 3.01
while on an Authorized Leave of Absence, he shall become a Participant on the
first day of the calendar month coincident with or next following the date on
which he returns to active employment.
Participation in the Plan shall terminate if an Employee ceases to be
an Eligible Employee.
1.1 TRANSFER. If a person is transferred from a position in which he was
excluded from participation in the Plan to a position in which he is not so
excluded, he shall be eligible to participate under the Plan as of the first day
of the calendar month coincident with or next following the later of (i) such
transfer date or (ii) the date as of which he satisfied the requirements of
Subsection 3.01.
1.2 SPECIAL TRANSITIONAL RULES IN CONNECTION WITH THE SALE OF BORG-WARNER
INDUSTRIAL PRODUCTS, Inc. This Plan was adopted by the Employer effective as of
January 1, 1987 as a continuation of the Prior Plan for former employees of
Borg-Warner Corporation or its subsidiaries who became or continued to be
employees of the
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Employer following and in connection with the sale of Borg-Warner
Industrial Products, Inc. by Borg-Warner Corporation on May 20, 1987 (the
"Sale"). It is the intent of the following transitional rules that this Plan be
interpreted as assuring the uninterrupted continuation of the provisions of the
Prior Plan for employees of the Employer who were or would have been eligible to
participate in the Prior Plan before the Sale. (Nevertheless, the Company
reserves the right to amend the Plan as provided herein so long as no such
amendment adversely affects benefits accrued by such employees prior to the
effective date of amendment.) Therefore, notwithstanding any provision of the
Plan to the contrary, each employee of the Employer who was immediately prior to
January 1, 1987, a participant in the Prior Plan shall, as of such date, be a
Participant in this Plan. For purposes of determining eligibility to participate
and vesting, qualifying service shall include all periods of employment which
would have been taken into account in computing qualifying service under the
Prior Plan as in effect immediately before the Sale. Notwithstanding any other
provision of the Plan, no Participant in this Plan shall derive any accrued
benefit hereunder with respect to any period during which he was also a
participant in the Prior Plan and accordingly there shall be no duplication of
benefits with respect to such Participant.
1.3 SPECIAL TRANSITIONAL RULES IN CONNECTION WITH THE PLAN MERGER
EFFECTIVE APRIL 1, 1989. Pursuant to Supplement B effective April 1, 1989
hereto, the Mechanical Seal Plan, the Pump Division Plan, the Fluid Controls
Plan and the UCP Plan (the "Merged Plans") were merged into this Plan. In order
to recognize prior service of participants in and employees covered by such
plans for eligibility, participation and
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vesting purposes (but not for benefit accrual purposes) service of such
participants and employees under such plans for all periods of employment shall
be taken into account for purposes of determining eligibility to participate and
vesting hereunder as if such periods of employment would have been taken into
account in computing qualifying service if earned hereunder.
Any person who is a participant as of April 1, 1989 in the Merged Plans
shall continue to be a Participant hereunder from and after such date subject
otherwise to the terms hereof.
In no event, however, shall any Participant in this Plan derive any
accrued benefit hereunder with respect to any period during which he was a
participant in the Merged Plans, all such accrued benefits being determined
under the applicable Merged Plan as provided in Supplement B hereto, and
accordingly there shall be no duplication of benefits with respect to such
Participant.
1. SECTION - ELIGIBILITY FOR RETIREMENT PENSION
1.1 NORMAL RETIREMENT. A Participant shall be eligible for a Normal
Retirement Pension if his Termination Date occurs on or after his Normal
Retirement Date. Payment of a Normal Retirement Pension shall commence on the
first day of the calendar month coincident with or next following his actual
retirement.
1.2 EARLY RETIREMENT. A Participant shall be eligible for an Early
Retirement Pension if his Termination Date occurs on or after his fifty-fifth
birthday and prior to his Normal Retirement Date and he elects to commence his
Early Retirement
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immediately after his Termination Date. Payment of an Early Retirement Pension
shall commence on the first day of the calendar month coincident with or next
following his Early Retirement.
1.3 DISABILITY RETIREMENT. A Participant who has not reached his Normal
Retirement Date and who is not receiving an Early Retirement Benefit under this
Plan shall be eligible for a Disability Retirement Pension if:
(a) He has been Totally and Permanently Disabled for a continuous period
of at least six months and
(b) He was a Participant on the date his Total and Permanent Disability
commenced and he had completed at least ten years of Continuous Service prior to
that date.
Payment of a Disability Retirement Pension will commence on the first day of the
calendar month coincident with or next following the date the Participant
fulfills the provisions of this Section 4.03, provided he is Totally and
Permanently Disabled at that time.
1.1 VESTED DEFERRED RETIREMENT. A Participant or an Inactive Participant
shall be eligible for a Vested Deferred Retirement Pension if for any reason,
other than death, he terminates employment with the Company and its Affiliated
Companies prior to his retirement under the Plan and (i) he has at least 5 years
of Continuous Service or (ii) he is age fifty-five or older on the date of such
termination.
a) Any Eligible Employee who was a Participant in the Plan on
December 31, 1988 and who completes at least four years of
Continuous Service shall be
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eligible to receive forty percent (40%) of his Vested Deferred
Retirement Benefit after completing four years of Continuous
Service and shall be eligible to receive one hundred percent
(100%) of his Vested Deferred Retirement Pension after
completing five years of Continuous Service.
b) Any Eligible Employee who becomes a Participant in the Plan on
or after January 1, 1989 shall be eligible to receive one
hundred percent (100%) of his Vested Deferred Retirement
Pension after completing five years of Continuous Service.
Payment of a Vested Deferred Retirement Pension shall commence on the first day
of the month coincident with or next following his sixty-fifth birthday. Any
person entitled to a Vested Deferred Retirement Pension under the Plan may,
however, elect to receive his benefit commencing on the first day of any month
coincident with or next following his fifty-fifth birthday, in an amount
actuarially reduced based on the actuarial assumptions described in Section 2.
Such election must be made on a written application filed with the Committee,
provided, however, such written application may not be made prior to the
sixtieth day preceding his fifty-fifth birthday.
1.1 VESTING OF FLUID CONTROLS DIVISION EMPLOYEES. Notwithstanding any other
provision hereof, in the event of a sale of the assets of Fluid Controls
Division of the Company to E-Systems, Inc. on or before December 31, 1994, any
Participant in the Plan who is actively employed in the Fluid Controls Division
of the Company on the date immediately preceding the closing date of such sale
shall be
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entitled to a Vested Deferred Pension Benefit as if such Participant
had, for vesting purposes only, five years of Continuous Service as of such
date.
1.2 VESTING OF FRESNO PUMP DIVISION EMPLOYEES.
Notwithstanding any other provision hereof, any Participant in the Plan
who is actively employed in the Fresno Pump Division of the Company on January
9, 1995 and who terminates from the Company during 1995 shall be entitled to a
Vested Deferred Pension Benefit as if such Participant had, for vesting purposes
only, five years of Continuous Service as of such date.
1. SECTION - AMOUNT OF RETIREMENT BENEFIT
1.1 NORMAL RETIREMENT PENSION. Effective as of January 1, 1989 for
Participants who accrue an Hour of Service from and after such date, the monthly
Normal Retirement Pension will be an amount, except as otherwise provided herein
and specifically subject to Sections 5.05, 5.06, 5.07 and 12, equal to the
greater of (a) or (b):
(a) one-twelfth of the sum of (i), (ii) and (iii):
(i) 1.15% of his Final Average Earnings, but not in excess of his Covered
Compensation, multiplied by the number of Plan Years and fractions thereof, with
completed months as twelfths, of his Credited Service.
(ii) 1.6% of his Final Average Earnings in excess of his Covered
Compensation multiplied by the number of Plan Years and fractions thereof, with
completed months as twelfths, of his Credited Service.
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(iii) .50% of his Final Average Earnings, multiplied by the number of
Plan Years and fractions thereof, with completed months as twelfths, of his
Continuous Service in excess of 30 years but not in excess of 40 years.
Provided, however, and continued subject to Sections 5.05, 5.06, 5.07 and 12, as
to any Participant who was a Non-Highly Compensated Employee prior to January 1,
1992 the amount of his monthly Normal Retirement Pension shall not be less than
the amount of his monthly Normal Retirement Pension which would have been
accrued as of December 31, 1991, and as to any Participant who was a Highly
Compensated Employee prior to January 1, 1992 the amount of his monthly Normal
Retirement Pension shall not be less than the amount of his monthly Normal
Retirement Pension which was accrued as of December 31, 1988, each under the
following formula:
One-twelfth of the sum of (i) and (ii):
(i) 1.6% of his Final Average Earnings multiplied by the number
of Plan Years and fractions thereof, with completed months as twelfths, of his
Credited Service; less 1% of his Primary Social Security Benefits multiplied by
the number of Plan Years and fractions thereof, with completed months as
twelfths, of his Credited Service.
(ii) .50% of his Final Average Earnings, multiplied by the number
of Plan Years and fractions thereof, with completed months as twelfths, of his
Continuous Service in excess of 30 years but not in excess of 40 years.
(a) The "Minimum Normal Retirement Pension" which shall mean:
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(i) in the case of an individual who was a Participant under the Prior Plan
on December 31, 1984 and had reached age fifty-five (55) on or prior to December
31, 1984, the amount of the monthly Normal Retirement Pension to which he would
be entitled at his Normal Retirement Date determined under the provisions of the
Prior Plan as in effect prior to January 1, 1985, and based on his Continuous
Service, Credited Service and Final Average Earnings at his Normal Retirement
Date;
(ii) in the case of an individual who was a Participant under the Prior Plan
on December 31, 1984 and had not reached age fifty-five (55) on or prior to
December 31, 1984, the amount computed as of December 31, 1984, to be the
monthly Normal Retirement Pension to which he would be entitled at his Normal
Retirement Date determined under the provisions of the Prior Plan as in effect
prior to January 1, 1985.
The Normal Retirement Pension of a Participant shall not be decreased by reason
of any increase in the benefit levels or wage base under the provisions of Title
II of the Social Security Act if such increase takes place after the earlier of
the date as of which the Participant begins to receive payments under the Plan
or the date the Participant separates from service.
The Normal Retirement Pension of a Participant who continues in the employ of an
Employer after his Normal Retirement Date shall be the greater of (1) the
Actuarial Equivalent of the Normal Retirement Pension to which the Participant
would have been entitled at his Normal Retirement Date, adjusted to reflect the
value, if any, of the amount
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<PAGE> 30
of benefits accrued by him as of his Normal Retirement Date and not paid to him
for any calendar month commencing on or after his Normal Retirement Date in
which he fails to complete at least one Hour of Service per day (which service
qualifies as "Section 203(a)(3)(B) service" under ERISA Regulation Section
2530.203-3(c)(1)) for at least eight days during that calendar month, and (2)
the amount of a benefit computed as a Normal Retirement Benefit based upon the
Participant's Continuous Service and Credited Service at his actual date of
retirement from the Company and all Affiliated Companies. Notwithstanding the
foregoing, but continued subject to Sections 5.05, 5.06, 5.07 and 12, a
Participant's Normal Retirement Pension under the Plan at any time after
December 31, 1993 will be equal to the greater of (a) or (b) below:
(a) the sum of (1) and (2) below:
(1) the Participant's Normal Retirement Benefit,
determined under the Plan as of December 31, 1993
(determined without regard to the $150,000 limit on
Compensation described in the definition of
Compensation set forth in Section 2, but after
application of the limitation on the maximum amount
of Compensation permitted to be taken into account
under the Plan pursuant to Code Section 401(a)(17)
immediately prior to the adoption of the $150,000
limit, where applicable),
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<PAGE> 31
(2) the Participant's Normal Retirement Pension based all
periods of Credited Service and Continuous Service,
as applicable, otherwise taken into account in
determining his Normal Retirement Pension earned
after December 31, 1993 (determined by applying the
$150,000 limit on Compensation to all years, whether
before 1994 or after 1993),
(b) the Participant's Normal Retirement Pension based on all
periods of Credited Service and Continuous Service, as
applicable, otherwise taken into account in determining his
Normal Retirement Pension (whether completed before 1994 or
after 1993) and determined by applying the $150,000 limit on
Compensation to all years (whether before 1994 or after 1993).
In no event shall a Participant's Normal Retirement Pension be less
than the Participant's Normal Retirement Pension on the date
immediately preceding the date on which any Plan provision that affects
accrued benefits is amended.
1.1 EARLY RETIREMENT PENSION. The monthly Early Retirement Pension will be
an amount, as determined in accordance with the provisions of Section 5.01,
based on his Continuous Service and Credited Service at his Early Retirement
Date, multiplied by the percentages set forth in the Table contained in Exhibit
A hereof adopted by his Employer and in effect on the date of his Early
Retirement.
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<PAGE> 32
1.1 DISABILITY RETIREMENT PENSION. The monthly Disability Retirement
Pension will be an amount, subject to Sections 5.05, 5.06, 5.07 and 12, equal to
the sum of (a) and (b):
(a) The amount determined in accordance with Section 5.01, based on his
Continuous Service and Credited Service prior to the earlier of his Termination
Date or the first anniversary date of the date his Authorized Leave of Absence
for medical reasons commenced.
(b) If the Participant is not entitled to Social Security Benefits, an
amount equal to $2.80 multiplied by his complete Plan Years of Continuous
Service prior to the applicable date described in Subsection 5.03(a).
The amounts so determined above in accordance with (a) and (b) shall be reduced
by any amount payable due to any sickness, injury or disability benefits under
any Employer sponsored plan, except for any benefits provided by any long term
disability income plan under which the benefits are reduced by the benefits
payable under this Plan.
1.1 VESTED DEFERRED RETIREMENT PENSION. The monthly Vested Deferred
Retirement Pension will be an amount as determined in accordance with Section
5.01 of the Plan, as in effect on the date he ceased to be an Eligible Employee
and based on his Continuous Service and Credited Service at that date,
multiplied by his Vested Percentage.
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1.1 MAXIMUM BENEFIT. Effective January 1, 1987, the monthly benefits
provided under the Plan and all defined benefit plans maintained by the "BW/IP
Companies" (as defined in Subsection 5.06(g)) shall not exceed the lesser of
one-twelfth of his "Average Earnings for His High Three Years" (as defined in
Subsection 5.06 (c)) or $7,500 ("Dollar Limitation"); subject to the following:
(a) The Dollar Limitation shall apply to the Actuarial Equivalent of the
single life Pension excluding the value of the Surviving Spouse Benefit, if
applicable, as provided in Section 6.02.
(a) If the Participant has fewer than 10 years of Participation in this
Plan at retirement, the applicable Dollar Limitation shall be multiplied by a
fraction, of which the numerator is the number of years of Participation and the
denominator is 10 and if the Participant has fewer than 10 years of Continuous
Service at retirement, then his Average Earnings for His High Three Years shall
be multiplied by a fraction, of which the numerator is the number of years of
Participation and the denominator is 10.
(b) Notwithstanding the Dollar Limitation of this Section 5.05, a
Participant shall receive a monthly benefit which is not less than the amount of
his accrued monthly pension as of December 31, 1982, determined under the
provisions of the Prior Plan as then in effect, and a Participant shall receive
a monthly benefit which is not less than the amount of his accrued monthly
pension as of December 31, 1986.
(c) The Dollar Limitation of $7,500 shall be increased by the cost of
living adjustment factor as provided under Section 415 (the "Adjustment
Factor").
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<PAGE> 34
(d) If the retirement benefit of a Participant commences before the
Participant's Social Security Retirement Age, the Dollar Limitation shall be
adjusted so that it is the Actuarial Equivalent of an annual benefit of $90,000
multiplied by the Adjustment Factor, as prescribed by the Secretary of the
Treasury, beginning at the Social Security Retirement Age. The adjustment
provided for in the preceding sentence shall be made in such manner as the
Secretary of the Treasury may prescribe which is consistent with the reduction
for old-age insurance benefits commencing before the Social Security Retirement
Age under the Social Security Act.
(e) If the retirement benefit of a Participant commences after the
Participant's Social Security Retirement Age, the Dollar Limitation shall be
adjusted so that it is the actuarial equivalent of a benefit of $90,000
beginning at the Social Security Retirement Age, multiplied by the Adjustment
Factor as provided by the Secretary of the Treasury, based on the lesser of the
interest rate assumption under the Plan or on an assumption of five percent (5%)
per year.
(f) The foregoing limitations shall apply to the Plan and all defined
benefit plans maintained by the BW/IP Companies. Company. Any reduction
necessary to comply with this provision shall first come under the defined
benefit plan that provides the Participant with the greatest Retirement Pension.
1.1 MAXIMUM BENEFIT FOR PARTICIPATION IN MORE THAN ONE PLAN. If a
Participant also participates in one or more defined contribution plans of an
BW/IP Companies, then in no event, except as otherwise provided by ERISA, shall
the sum of
29
<PAGE> 35
his Defined Benefit Plan Fraction and his Defined Contribution Plan
Fraction (both as defined below) exceed 1.0. This requirement shall be applied
by the Committee in accordance with the following which shall be effective as of
January 1, 1987:
(a) A Participant's "Defined Benefit Plan Fraction" for any Plan Year is a
fraction, the numerator of which is his Projected Annual Benefit (as defined
below) determined at the end of such year under this Plan and all defined
benefit plans maintained by the BW/IP Companies and the denominator of which is
the lesser of:
(i) 1.25 multiplied by $90,000 as adjusted by the Adjustment
Factor, or
(ii) 1.4 multiplied by 100% of his Average Earnings for His
High Three Years (as defined below).
(b) A Participant's "Projected Annual Benefit" means his Projected Annual
Benefit under this Plan, adjusted for Participant contributions, if any, in
accordance with regulations prescribed by the Secretary of Treasury, which is
Actuarially Equivalent to an annual benefit commencing at his Normal Retirement
Date.
(c) A Participant's "Average Earnings for His High Three Years" means his
average annual Limitation Compensation during that period of three consecutive
calendar years of his participation in the Plan (or during his actual number of
such years of participation if less than three such years) in which his
aggregate Limitation Compensation from an Affiliated Company were the greatest.
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<PAGE> 36
"Limitation Compensation" is defined as wages within the meaning of section
3401(a) of the Code (for purposes of income tax withholding at the source) but
determined without regard to any rules that limit the remuneration included in
wages based on the nature or location of the employment or the services
performed (such as the exception for agricultural labor in section 3401(a)(2) of
the Code).
(d) A Participant's "Defined Contribution Plan Fraction" for any Plan Year
is a fraction, the numerator of which is the sum of the Annual Additions (as
defined below) to his accounts under all defined contribution plans of the BW/IP
Companies for all years as of the close of such year, and the denominator of
which is the sum of the Maximum Annual Additions (as defined below) for each
year of his employment with the BW/IP Companies, subject to the transitional
rules described in Sections 415(e)(4) and 415(e)(6) of the Code.
(e) A Participant's "Annual Addition" for any Plan Year means the sum for
that year of:
(i) the contributions of the BW/IP Companies and the amount of
forfeitures, if any, credited to his account under any defined
contribution plan maintained by any of the BW/IP Companies;
(ii) the amount of such Participant's own contributions for
such year to any defined contribution plan maintained by the BW/IP
Companies other than his 'rollover contributions' (as defined in
section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code); and
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<PAGE> 37
(iii) amounts, if any, described in sections 415(l) and
419A(d)(2) of the Code relating to amounts allocated to the
Participant's medical account under such plan.
(a) A Participant's "Maximum Annual Addition" for any Plan Year means the
lesser of:
(i) 1.25 multiplied by $30,000 adjusted by the Adjustment
Factor; or
(ii) 1.4 multiplied by 25% of his compensation (as defined
under Section 415(c)(3) of the Code.
(b) BW/IP Companies shall mean each Affiliated Company and the controlled
group of corporations (within the meaning of section 1563(a) of the Code,
determined without regard to section 1563(a)(4) and (e)(3)(C) thereof and
substituting for the phrase "at least 80 percent" each place it appears in
section 1563(a)(1) the phrase "at least 50 percent") whose common parent is
BW/IP.
If a reduction in benefits or contributions is required under Section 415(e) of
the Code, such reduction shall be applied to the benefits under this Plan. The
limitations of this Section are intended to comply with the provisions of
Section 415 of the Internal Revenue Code, as amended, so that the maximum
benefits provided by plans of the BW/IP Companies shall be exactly equal to the
maximum amounts allowed under Section 415 of the
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<PAGE> 38
Code and regulations thereunder. If there is any discrepancy between the
provisions of this Section 5.06 and the provisions of Section 415 of the Code
and regulations thereunder, such discrepancy shall be resolved in such a way as
to give full effect to the provisions of the Code.
1.1 NONDUPLICATION OF BENEFITS. The amount of any benefit payable under
this Plan shall be reduced by the Actuarial Equivalent of any benefit payable at
any time under any pension plan other than this Plan, which meets the
requirements of Section 401 of the Code, and to which contributions have been
made by the Company or the BW/IP Companies, that is attributable to any period
included in the years of Continuous Service and Credited Service used in
computing the Pension under this Plan.
1.2 NOTICE OF OPTION TO DETERMINE PRIMARY SOCIAL SECURITY BENEFITS BY
ACTUAL SALARY HISTORY. A Participant's Primary Social Security Benefit shall be
computed as set forth in Section 2 of the Plan. A Participant shall have the
right to have his Primary Social Security Benefit recomputed on the basis of the
Participant's actual Social Security salary history up to his Termination Date
instead of estimated compensation. A Participant shall be furnished with a clear
written notice of his right to supply such actual salary history, of the
financial consequences of failing to supply such history, and that the
Participant can obtain such actual salary history on a year-by-year basis from
the Social Security Administration. The notice shall be included with each
summary plan description provided to the Participant and shall also be given to
the Participant upon his Termination Date.
If the Participant supplies documentation from the Social Security
Administration of his actual year-by-year salary history, the Participant's
Primary Social
33
<PAGE> 39
Security Benefit, which previously was estimated, shall be recalculated based on
the actual salary history prior to his Termination Date. Such documentation must
be provided to the Committee within a reasonable time following the later of the
date of the Participant's Termination Date and the time when the Participant is
notified by the Committee of the amount of the benefit to which he is entitled.
1.1 COLA CESSATION. The automatic cost of living adjustment as provided in
Section 5.05 of the Prior Plan as in effect prior to January 1, 1985, shall
apply only to a Participant or former Participant whose Termination Date
occurred prior to January 1, 1985, or the surviving spouse or beneficiary of
such Participant or former Participant, and only to benefits earned under the
Prior Plan prior to that date.
1. SECTION - MANNER OF PAYMENT
1.1 NORMAL FORM OF BENEFIT PAYMENT. Retirement Pension will be paid
monthly on an immediate life annuity basis except as otherwise provided in this
Section 6.
1.2 SURVIVING SPOUSE BENEFIT.
(a) If a Participant or a former Participant eligible to receive or
receiving a Pension (but not including a former Participant eligible to
receive or receiving a Vested Deferred Retirement Pension, unless his
termination of employment with his Employer occurred on or after
January 1, 1979 by reason of the sale or discontinuance of all or a
substantial portion of his Employer's operation or any similar event
beyond the control of the Participant, as determined
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by the Committee in its sole discretion) shall die, a Surviving
Spouse's Benefit in addition to the benefit under Paragraph A-3 of
Supplement A, if applicable, shall be payable to his surviving spouse
provided:
(i) he shall have reached age fifty-five (55) on or
prior to his Termination Date, unless he is receiving a
Disability Retirement Pension, and
(ii) he shall have been married to such surviving
spouse at the time of his Pension commencement date, if
applicable, and for a period of at least one year immediately
preceding the date of his death, and
(iii) he shall not have elected during his Election
Period to reject the Surviving Spouse Benefit in accordance
with Section 6.06.
(b) The amount of the Retirement Pension payable to a Participant or former
Participant described in Subsection 6.02(a) shall be equal to 95% of the monthly
Retirement Pension which would have been payable to him under Section 6.01.
(c) The monthly retirement benefit payable to a surviving spouse of a
Participant or former Participant described under Subsection 6.02(a) shall be
fifty percent of (i) the amount of the Retirement Pension he was receiving at
the time of his death, less the amount he was receiving under Subsection
5.03(b), if applicable, or (ii) if he was not then receiving a Retirement
Pension, the Retirement Pension he would have been eligible to receive if he had
commenced receiving his Pension on the first day of the month next following his
death.
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(d) The provisions of Subsection 6.02(b) shall not reduce the amount of a
monthly retirement benefit payable to a Participant (or former Participant) and
his surviving spouse below:
(i) In the case of an individual who was a Participant under the
Prior Plan on December 31, 1984 and had reached age fifty-five (55) on
or prior to December 31, 1984, the amount of monthly retirement benefit
which would have been payable to such person under the provisions of
the Prior Plan as in effect prior to January 1, 1985, and based on his
Continuous Service, Credited Service and Final Average Earnings at his
Termination Date.
(ii) In the case of an individual who was a Participant under the
Prior Plan on December 31, 1984 and had not reached age fifty-five (55)
on or prior to December 31, 1984, the amount of monthly retirement
benefit which would have been payable to such person had the
Participant retired immediately prior to January 1, 1985.
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1.3 AUTOMATIC DEATH BEFORE AGE 55 SURVIVING SPOUSE BENEFIT.
(a) If a Participant who is eligible to receive a Vested Deferred
Retirement Pension (but not including a former Participant eligible to
receive or receiving a Vested Deferred Retirement Pension) shall die
prior to his fifty-fifth birthday, a surviving spouse benefit, as
described in Subsection 6.03(b), shall be payable to his surviving
spouse (commencing at the time described in Subsection 6.10(c))
provided he shall have been married to such spouse at least one year
immediately preceding the date of his death.
(b) The monthly retirement benefit payable to a surviving spouse
of a Participant described under Subsection 6.03(a) shall be fifty
percent of the amount of Retirement Pension he would have received
under Subsection 6.02(b) had he died on his fifty-fifth birthday, based
on his Continuous Service, Credited Service, Final Average Earnings,
Covered Compensation and Primary Social Security Benefits at the date
of his actual death.
1.4 AUTOMATIC POST-TERMINATION SURVIVING SPOUSE BENEFIT. A former
Participant eligible to receive a Vested Deferred Retirement Pension who is not
entitled to coverage under Section 6.02, shall be deemed to have elected the
surviving spouse benefit coverage described in this Section 6.04 for that
portion of the period between his Termination Date and his Pension commencement
date during which he has a spouse to whom he has been married for at least one
year. If such former Participant dies prior to
37
<PAGE> 43
his Pension commencement date, the monthly retirement benefit payable to his
spouse (to whom he has been married at least one year immediately preceding the
date of his death) if surviving shall be equal to fifty percent of:
(a) The reduced amount of Retirement Pension he would have received if
he had commenced receiving his Pension under Section 6.05 on the first
day of the month next following his death, if applicable, or
(b) If he dies before his fifty-fifth birthday, the reduced amount of
Retirement Pension he would have received had he died on his
fifty-fifth birthday, based on his Continuous Service, Final Average
Earnings and Primary Social Security Benefits at his Termination Date.
1.5 AUTOMATIC JOINT AND CONTINGENT ANNUITANT BENEFIT. In lieu of a benefit
payment on a Life Annuity Basis, if a former Participant eligible to receive a
Vested Deferred Retirement Pension (other than a former Participant entitled to
coverage in Section 6.02) has a spouse to whom he has been married throughout
the one-year period ending on his Pension commencement date, his Pension shall
be paid in the form of an immediate 50% joint and contingent annuitant option as
described in Subsection 6.07(a) under which such spouse will be deemed to be the
Contingent Annuitant unless such Participant elects during his Election Period
to reject the joint and contingent annuitant benefit in accordance with Section
6.06.
1.6 ELECTION AND ELECTION PERIOD.
(a) Any election by a Participant (including a former Participant)
to reject the benefits provided for under Section 6.02 or 6.05
("Waiver") must be
38
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made in writing consented to by the Participant's spouse and filed with
his Employer at any time, and from time to time, during his Election
Period. A Participant's "Election Period" shall be the ninety-day
period ending on his Pension commencement date.
(b) The spouse's consent to a Waiver must acknowledge the effect
thereof and be witnessed by a notary public. Such spouse's consent
shall not be required if the Participant establishes to the
satisfaction of the Committee that such written consent may not be
obtained because he has no spouse or his spouse cannot be located. A
Waiver made by a Participant may be revoked by such Participant in
writing without the consent of his spouse at any time during the
Election Period. The number of revocations shall not be limited. A
Waiver consented to by a former spouse of a Participant shall not be
binding on his new spouse.
(c) A written general explanation of the surviving spouse benefit
shall be furnished to the Participant by his Employer within a
reasonable period of time before his Pension commencement date (and
consistent with Treasury Regulations).
1.7 OPTIONAL FORMS OF BENEFIT PAYMENT. In lieu of the Pension (including
any surviving spouse benefit) payable pursuant to the foregoing provisions of
this Section 6, a Participant (or former Participant, if indicated below) may
elect to have his Retirement Pension payable in a reduced amount, determined on
an Actuarial
39
<PAGE> 45
Equivalent basis to the Pension otherwise payable to him on a Life Annuity basis
(without regard to any surviving spouse benefit), under one of the options
described below:
(a) Contingent Annuitant: A Pension during the joint lives of the
Participant or former Participant, and a person designated by him
("Contingent Annuitant"); so that after the death of the Participant or
former Participant, payment of the same amount or a further reduced
amount (as elected by the Participant or former Participant) will be
paid to the Contingent Annuitant. If the Contingent Annuitant is not
the spouse of the Participant or former Participant, the Actuarial
Value of the income continued to the Contingent Annuitant after the
death of the Participant or former Participant shall not exceed fifty
percent of the excess of the Actuarial Value of the benefits to be paid
to the Participant or former Participant and his Contingent Annuitant
over the total contributions made by the Participant or former
Participant under the Prior Plan.
(b) Ten Year Certain and Continuous: A life income to the Participant
or former Participant with payments for a minimum period of ten years.
If the Participant or former Participant dies after commencement of the
Pension and before he has received 120 monthly payments, his
beneficiary will receive the Actuarial Value (as of the first day of
the month following the Participant's or former Participant's death) of
the balance of the remaining 120 monthly payments.
(c) Cash Refund: A life income to the Participant or former Participant
and upon his death, a payment to his beneficiary equal to the excess,
if any, of the Actuarial Value of his Retirement Pension at Retirement
Date over the aggregate
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<PAGE> 46
Retirement Pension payments received prior to his death, computed as if
no cost of living adjustments (as provided in Section 5.05 of the Plan
as in effect under the Prior Plan prior to January 1, 1985) to his
Pension had been made.
(d) Installment Payments: Substantially uniform installment
payments commencing no later than the later of the Participant's or
former Participant's Normal Retirement Date or actual retirement date,
to be paid to the Participant or former Participant or his beneficiary
at least annually over a period of time elected by the Participant or
former Participant and, to the extent necessary to insure compliance
with the Code, ERISA and the terms of this Plan, as approved by the
Committee; provided that the Actuarial Value of the Pension paid to the
Participant or former Participant over his normal life expectancy shall
be at least 50% of the Actuarial Equivalent thereof in excess of the
total contributions made by the Participant or former Participant under
the Plan.
(e) Smaller Lump Sums: A distribution in a single lump sum of the
entirety of the Participant's accrued benefit in the event that the
Actuarial Value of the Participant's accrued benefit under this Plan,
determined at the time and in accordance with Section 6.12 of this Plan
(notwithstanding the above provisions of this Section 6.07), is not in
excess of $7,500 and was not distributed under Section 6.12, to be paid
to the Participant or former Participant or his beneficiary at the
earliest date the Participant, former Participant or beneficiary would
have otherwise been entitled to commence receiving benefits hereunder.
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<PAGE> 47
For a Participant or former Participant whose Ten Year Certain and
Continuous or Cash Refund option election was made effective under the Prior
Plan prior to March 1, 1978, the payment to his beneficiary shall be in a lump
sum or such other Actuarially Equivalent form as the Committee shall determine.
For a Participant or former Participant whose Ten Year Certain and Continuous or
Cash Refund option election was made effective under the Prior Plan on or after
March 1, 1978 and before May 20, 1987 or is made under this Plan, the payment to
his beneficiary shall be in a lump sum; provided, however, the Participant may
elect, at the time he elects said option, to have the Actuarial Equivalent of
said payment paid to the beneficiary in such form as the Committee shall
determine.
1.1 ELECTION OF OPTIONAL FORM OF RETIREMENT BENEFIT. The election of an
option under Section 6.07 must be made by a Participant in writing to his
Employer during the Election Period, subject to the Waiver and spousal consent
requirements in Section 6.06, and if applicable must state the name, sex and
date of birth of the beneficiary or Contingent Annuitant, and the percentage of
his Retirement Pension to be continued to the Contingent Annuitant after his
death or the duration of any installment payments. The terms and conditions of
these options are governed by the provisions of any applicable insurance company
contract and by such rules and actuarial tables as may be adopted by the
Committee. The options must be elected as follows:
(a) In the case of Normal Retirement, the election must be made prior
to his Pension commencement date and the option will become effective
on the
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first day of the month next following the date of the election, but not
prior to his Normal Retirement Date.
(b) In the case of Early Retirement, the election must be made prior to
his Early Retirement Date and the option will become effective on his
Early Retirement Date.
(c) In the case of Disability Retirement, the election must be made
prior to his Normal Retirement Date and the option will become
effective on his Normal Retirement Date.
(d) In the case of a Vested Deferred Retirement, the election is to be
made at the time he applied for such benefit and the option will become
effective as of the date his benefits commence. If the Participant (or
former Participant), his Contingent Annuitant or beneficiary dies prior
to the effective date of the option, or if the Participant cancels the
option prior to the effective date of the option, the election of the
option shall become inoperative. If the Participant (or former
Participant), his Contingent Annuitant or beneficiary dies on or after
the effective date of the option, the election of the option shall
continue to be operative. The election of the option by a Participant
or former Participant who would otherwise be entitled to the benefit
described in Sections 6.02 and 6.05 shall be inoperative unless he
shall have rejected said benefit in accordance with Section 6.06.
1.2 LEVEL INCOME OPTION. If payment of an Early or Vested Deferred
Retirement Pension commences prior to the earliest age as to which the
Participant or former Participant will become eligible for an Old-Age Insurance
Benefit under the Social
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Security Act, the amount of the Pension may be adjusted so that an increased
amount will be paid prior to such age and a reduced amount thereafter. The
purpose of this adjustment is to enable the Participant or former Participant to
receive, from this Plan and under the Social Security Act, an aggregate income
in approximately a level amount for life. Such adjusted Pension payments shall
be the Actuarial Equivalent of the Pension otherwise payable to such
Participant, and the option may be elected in conjunction with the Early
Retirement Pension or the Vested Deferred Retirement Pension payable on either a
Life Annuity basis or as otherwise provided in Section 6.02, 6.04 or 6.05.
6.10 COMMENCEMENT AND DURATION OF RETIREMENT PENSION.
(a) A Participant's or former Participant's Retirement Pension will
commence on the later of the date set forth in the applicable provision
of Section 4, or the first day of the month next following the month
the Participant or former Participant has filed an application for his
Pension in the manner prescribed by the Committee. Except as provided
in Subsection 6.07(b), subsequent payments will be made monthly
thereafter, ceasing with the last payment preceding the Participant's
or former Participant's death.
(b) The Disability Retirement Pension will cease with the last payment
preceding the Participant's death or the date he ceases to be Totally
and Permanently Disabled prior to his Normal Retirement Date. The
portion of the Disability Retirement Pension payable in accordance with
Subsection 5.03(b) will cease at his Normal Retirement Date.
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(c) Any Surviving Spouse's Benefit or Contingent Annuitant's benefit
payable under Section 6 shall commence on the first of the month
following the death of the Participant or former Participant and shall
cease with the last payment preceding the date of the surviving
spouse's or Contingent Annuitant's death.
(d) Notwithstanding the foregoing, benefit payments must commence no
later than April 1 of the calendar year next following the calendar
year in which he attains age 70 1/2 years.
6.11 REEMPLOYMENT. (a)
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If a former Participant who is receiving or who is entitled to receive a Pension
under this Plan is reemployed by the Company or an Affiliated Company, no
benefits shall be paid under the Plan to him during his period of reemployment.
Any benefits payable to such Participant under this Plan upon his subsequent
retirement shall be determined in accordance with the provisions of the Plan as
then in effect but shall be reduced by the Actuarial Equivalent of any Pension
payments received prior to his reemployment.
(b) Notwithstanding Subsection 6.11(a) above:
(i) if a reemployed Participant fails to complete at least one Hour of
Service per day for at least eight days during any calendar month
commencing on or after his Normal Retirement Date, the amount of
benefits payable to him upon subsequent retirement shall include the
Actuarial Equivalent of the Normal Retirement Pension not paid to him
for such calendar month; and
(ii) in no event shall the amount of Participant's benefit (on a life
annuity basis) be less than the benefit (one life annuity basis) that
he was receiving immediately prior to his date of reemployment.
6.12 SMALL RETIREMENT PENSION.
(a) In the event the Actuarial Value of any accrued benefit under this
Plan for any given Participant is not in excess of $3,500, and at the time of
any prior distribution did not exceed $3,500, the Participant upon Separation
from Service shall receive such benefit in a lump sum payment and distributable
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without the consent of the Participant or his spouse. The Actuarial Value of the
lump sum payment shall be determined using an interest rate equal to the
interest rate on 30-year Treasury securities as specified by the Commissioner of
Internal Revenue under Code Section 417(e) for the month of November of the year
preceding the year in which the date of distribution shall occur and using the
prevailing mortality table of the Commissioner of Internal Revenue used to
determine reserves for group annuity contracts under Code Section 807(d)(5) as
required under Code Section 417(e). In the event of the death of a married
Participant prior to commencing to receive benefits hereunder, his surviving
spouse shall be treated as the Participant for purposes of this Section 6.12.
(b) Notwithstanding any other terms of this Plan to the contrary, a
Participant who has Separated from Service shall from and after the date of such
Separation from Service be entitled to make a written election, if at the time
of his election the Actuarial Value of such former Participant's accrued benefit
under this Plan determined in accordance with Section 6.12 of this Plan is not
in excess of $7,500 and was not distributed under Section 6.12, (1) to
immediately commence to receive his benefit as provided in Section 6.10 and
subject to Section 6.11 (A) in the form of an immediate 50% joint and contingent
annuitant option as described in Subsection 6.07(a) under which such spouse will
be deemed to be the Contingent Annuitant if the former Participant has a spouse
to whom he has been married throughout the one-year period ending on his Pension
commencement date, or (B) in the form of an immediate Life Annuity to such
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former Participant as provided under Section 6.01 of the Plan if such former
Participant is not so married, or (2) subject to the provisions of Section 6.06
of the Plan, to elect against such form of benefit and to immediately receive
his benefit in the form of a single lump sum payment in the amount of such
Actuarial Value as so determined. Nothing in this Section 6.12(b) shall be
construed as requiring a Participant to commence receipt of his benefit or as
preventing such Participant from receiving his benefit as a Vested Deferred
Benefit or from exercising the options otherwise available to him under Section
Six of this Plan.
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6.13 DIRECT ROLLOVERS. A Distributee may elect, at the time and in the
manner prescribed by the Employer, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover. The following definitions shall apply for
purposes of this Section 6.13: (a)
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"Eligible Rollover Distribution": An Eligible Rollover Distribution is
any distribution of all or any portion of the balance to the credit of a
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 Beneficiary or for a specified period of ten
years or more; any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(b) "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 a Participant's surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement annuity.
(c) "Distributee": A Distributee is a Participant or former Participant, a
Participant's or former Participant's surviving spouse, and a Participant's or
former Participant's spouse or former spouse who is the alternate
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payee under a qualified domestic relations order (as defined by section 414(p)
of the Code).
(d) "Direct Rollover": A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
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6.14 RATE OF DISTRIBUTION. Notwithstanding any other provision hereof, if
distributions to a Participant shall be considered to have begun in accordance
with Code Section 401(a)(9)(A)(ii) before the Participant's death, the remaining
interest of the Participant will distributed at least as rapidly as under the
method of distribution in effect as of the date of the Participant's death.
Further, the provisions of this Section 6 shall be interpreted in such a manner
so that if a Participant shall die before distributions to the Participant shall
be considered to have begun in accordance with Code Section 401(a)(9)(A)(ii):
(a) any benefits that may be payable to a person not designated as his
beneficiary by the Participant shall be distributed in their entirety by
December 31 of the calendar year in which shall fall the fifth anniversary of
the Participant's death, or (b) any benefits that are payable to the
Participant's designated beneficiary shall be distributed either (i) over the
five year period set forth in the immediately preceding clause (a) or (ii) over
the life of the beneficiary or a period certain not extending beyond the life
expectancy of the beneficiary and which benefits shall commence (A) with respect
to a beneficiary who is not the Participant's spouse, not later December 31 of
the calendar year immediately following the calendar year in which the
Participant died or (B) with respect to a beneficiary which is the Participant's
spouse, not later than the later of (I) December 31 of the calendar year
immediately following the calendar year in which the Participant died or (II)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
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1. SECTION - CONTINUOUS SERVICE: CREDITED SERVICE
1.1 CONTINUOUS SERVICE.
(a) For the period prior to January 1, 1987, a Participant's Continuous
Service shall be his accrued Continuous Service under the Prior Plan as
of December 31, 1986, determined in accordance with the terms and
provisions of the Prior Plan as in effect prior to January 1, 1987.
(b) For the period after December 31, 1986, a Participant's Continuous
Service shall be the last period of uninterrupted employment with his
Employer (including all adjustments to Continuous Service provided for
in this Section 7) beginning with the later of January 1, 1987, or his
latest Commencement Date and ending on his Termination Date as
determined and adjusted in accordance with the following provisions:
(i) Authorized Leave of Absence or Lay-off. If a Participant
is on an Authorized Leave of Absence (other than an Authorized
Leave of Absence for medical reasons) or lay off, his
Continuous Service shall not be deemed to be interrupted
during such Authorized Leave of Absence or layoff, provided he
returns to active employment with the Employer at the
expiration of such Authorized Leave of Absence or layoff. If
he fails to return to active service his Continuous Service
for the purpose of determining eligibility for a Pension shall
be deemed to have been terminated on the earlier of his
Termination Date or the first anniversary date of
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such Authorized Leave or layoff commenced; however, his
Continuous Service for the purpose of computing his Pension
shall be deemed to have terminated on the date such Authorized
Leave of Absence or layoff commenced.
(ii) Authorized Leave of Absence for Medical Reasons. If a
Participant is on an Authorized Leave of Absence for medical
reasons, his Continuous Service shall not be deemed to be
interrupted during such Authorized Leave of Absence, provided
he returns to active employment with the Employer at the
expiration of such Authorized Leave of Absence. If he fails to
return to active service, his Continuous Service shall be
deemed to have terminated on the earlier of his Termination
Date or the first anniversary date of the date such Authorized
Leave of Absence commenced.
(iii) Predecessor Employers. If a person becomes an Eligible
Employee by reason of, or in conjunction with, the acquisition
by an Employer of all, or substantially all, of the assets or
capital stock of the business entity by which such person was
employed at the time of the acquisition, any period of
employment performed by such person prior to the time of the
acquisition of such business entity shall be considered
employment with an Employer under this Section 7.01 for only
such purposes and to the extent, if any, determined by the
Committee.
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(iv) Non-Participating Service. Continuous Service shall
include a Participant's employment with an Employer during
which he was not an Eligible Employee and his employment with
a nonparticipating Affiliated Company (provided such
employment is continuous between periods of participating
service and non-participating service) for purposes of (A)
determining eligibility for a Pension under this Plan and/or
(B) to the extent, if any, determined by the Committee,
computing the amount of Pension under this Plan.
(v) Certain Periods of Severance. Continuous Service, for the
purpose of determining eligibility and vesting for a Pension
(but not for computing the amount thereof), will include a
severance period between a Participant's previous Termination
Date and his subsequent reemployment date if such reemployment
date occurs prior to the first anniversary date of his
previous Termination Date.
(vi) Military Service. Continuous Service will include the
period a Participant is in the Armed Forces provided he is
eligible for reemployment upon his discharge pursuant to the
Military Selective Service Act (or under any prior or
subsequent corresponding law) and he makes application for
reemployment within the period prescribed by said Act; if he
fails to apply for reemployment within such period, his
Continuous Service shall be deemed to have
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terminated on the earlier of his Termination Date or the first
anniversary date of the date his Military Service Leave
commenced.
(c) Reemployment. If the employment of a Participant with an Employer is
terminated at any time and he is subsequently reemployed by an Employer, his
Continuous Service with the Employer will include his Continuous Service accrued
prior to the date of said termination under the Plan in effect on the date of
said termination and as adjusted pursuant to this Paragraph 7.01(c) if:
(i) he was entitled to receive a Vested Deferred Retirement
Benefit under the Plan in effect on his previous Termination
Date; or
(ii) the period between the previous Termination Date and the
date of said reemployment does not equal or exceed the greater
of (A) five years or (B) his Continuous Service accrued prior
to the previous Termination Date. Notwithstanding the
foregoing, if a Participant's termination of employment is due
to a "maternity or paternity leave", then paragraph (ii) of
Subsection 7.01(c) shall be read by substituting "six years"
for "five years". For the purposes of this Plan, "maternity or
paternity leave" means termination of employment or absence
from work due to pregnancy of the Participant, the birth of a
child of the Participant, the placement of a child in
connection with the adoption of the child by a Participant, or
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the caring for a Participant's child during the period
immediately following the child's birth or placement for
adoption. The Committee shall determine, under rules of
uniform application and based on information provided to the
Committee by the Participant, whether or not the Participant's
termination of employment or absence from work is due to
"maternity or paternity leave".
1.2 CREDITED SERVICE. A Participant's Credited Service shall be his period
of Continuous Service, to a maximum of 30 years, reduced by one year if he was
eligible under the Prior Plan to be a Contributing Participant in the Prior Plan
year beginning March 1, 1969, but did not become a Contributing Participant in
such plan year, and further reduced by one year for each plan year under the
Prior Plan after March 1 nearest his 35th birthday and prior to March 1, 1969,
that a Participant under the Prior Plan was eligible to be a Contributing
Participant but was not a Contributing Participant. For the purposes of
computing Credited Service under this Section:
(a) An Employee on an Authorized Leave of Absence or temporary layoff
during a plan year under the Prior Plan, or (b) An Employee who during
a plan year under the Prior Plan commencing on or after March 1, 1963,
and prior to March 1, 1970, who was eligible to contribute on Basis B
but not on Basis A but did not subsequently contribute on Basis B,
shall not be deemed to have been eligible to be a Contributing
Participant during such plan year.
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1. SECTION - ADMINISTRATION
1.1 ESTABLISHMENT OF THE ADMINISTRATIVE COMMITTEE. The general
administration of the Plan and the responsibility for carrying out its
provisions shall be placed in the BW/IP Administrative Committee (the
"Administrative Committee") of not less than three nor more than seven persons
appointed from time to time by the Board to serve at its pleasure. Any member of
the Administrative Committee may resign by delivering his written resignation to
BW/IP and the secretary of the Administrative Committee. The Administrative
Committee shall be the Plan Administrator (within the meaning of section 3 of
ERISA and section 414(g) of the Code) with such authority, responsibilities and
obligations as ERISA and the Code grant to and impose upon persons so
designated. For the purposes of ERISA, the Administrative Committee shall be a
"named fiduciary" under the Plan.
1.2 ESTABLISHMENT OF THE INVESTMENT COMMITTEE. The responsibility for the
formulation of the general investment practices sad policies of the Plan and its
related Trust Fund and for effectuating such practices and policies shall be
placed in the BW/IP Investment Committee (the "Investment Committee") of not
less than three nor more than seven persons appointed from time to time by the
Board to serve at its pleasure. Any member of the Investment Committee may
resign by delivering his written resignation to BW/IP and the secretary of the
Investment Committee. For purposes of ERISA, the Investment Committee shall be a
"named fiduciary" under the Plan.
1.3 ORGANIZATION OF THE COMMITTEES. The members of each Committee shall
elect a chairman from their number, and shall also elect a secretary who may be
but
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need not be one of the members of the Committee. No member of a Committee
who is also an Employee receiving regular compensation as such shall receive any
compensation for his services as a member of such Committee. No bond or other
security shall be required of any member of a Committee in any jurisdiction. No
member of a Committee shall, in such capacity, act or participate in any action
directly affecting his own Accounts other than an action which affects the
Accounts of Participants generally.
1.4 POWERS OF THE ADMINISTRATIVE COMMITTEE. The powers of the
Administrative Committee shall include, but are not limited to, the following:
(1) appointing such committees with such powers as it shall
determine, including an executive committee to exercise all powers of
the Administrative Committee between meetings of the Administrative
Committee;
(2) determining the times and places for holding meetings of
the Administrative Committee and the notice to be given of such
meetings;
(3) employing such agents and assistants, such counsel (who
may be counsel to the Employer) and such clerical, medical, accounting
and actuarial services or advisers as the Administrative Committee may
require in carrying out the provisions of the Plan;
(4) 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 Administrative Committee, except that all requisitions for funds
from, and requests, directions,
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notifications and instructions to the Trustee shall be signed either by
two members of the Administrative Committee or by one member and the
secretary thereof;
(5) fixing and determining the proportion of expenses of the
Plan from time to time to be paid by the participating Employers and
requiring payment thereof;
(6) establishing one or more subcommittees in a location at
which BW/IP or any of its subsidiaries or affiliates does business,
appointing the members of any such subcommittees, in such number and
for such service as the Administrative Committee shall deem
appropriate, and delegating any power or duty granted to the
Administrative Committee by this Section 8 to any such subcommittees;
(7) appointing and removing the Trustee pursuant to a Master
Trust Agreement between BW/IP and the Trustee;
(8) receiving and reviewing reports from the Trustee as to the
financial condition of the Fund, including its receipts sad
disbursements;
(9) executing and filing with the appropriate governmental
agencies such registration and other statements, forms, applications,
notifications, and other documents or information as the Administrative
Committee may from time to time deem appropriate in connection with the
Plan; and
(10) approving the adoption of the Plan by any subsidiary or
affiliate of the Employer.
1.1 POWERS OF THE INVESTMENT COMMITTEE. The powers of the Investment
Committee shall include, but not be limited to, the following:
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(1) 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 Fund;
(2) 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 Investment 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 Investment Committee or by
one member and the secretary thereof;
(3) receiving and reviewing reports from the Trustee as to the
financial condition of the Fund, including its receipts and
disbursements; and
(4) employing such agents and assistants, such counsel (who
may be counsel to the Employer) and such clerical, accounting,
actuarial and investment services or advisers as the Investment
Committee may require in carrying out its responsibilities under the
Plan.
1.1 DUTIES OF THE ADMINISTRATIVE COMMITTEE. The Administrative Committee
shall have the general responsibility for administering the Plan and carrying
out its provisions. Subject to the limitations of the Plan, the Administrative
Committee from time to time shall establish rules and regulations for the
administration of the Plan and the transaction of its business. All matters of
interpretation of the terms hereof and all determinations concerning the
entitlement of any person to any benefit or other right hereunder are hereby
reserved exclusively to the Administrative Committee, to be exercised in its
sole and absolute discretion, except as the same may from time to time
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be delegated by the Administrative Committee to another person or group of
persons in which instance such delegee or delegees shall have all discretionary
authority of the Administrative Committee with respect thereto. All such
interpretations and determinations made shall be final and binding. It shall be
the duty of the Administrative Committee to notify the Trustee in writing of the
amount of any benefit which shall be due to any Participant and in what form and
when such benefit is to be paid.
1.2 ACTIONS BY A COMMITTEE. A majority of the members of a 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 a Committee shall require
the affirmative vote of a majority of the members of such Committee attending a
meeting, or by a majority of members in office by writing without a meeting.
1.3 ACCOUNTS AND REPORTS. The Administrative Committee shall maintain
accounts showing the fiscal transactions of the Plan and shall keep in
convenient form such data as may be necessary for the effective operation of the
Plan.
1.4 DISCRETIONARY ACTION. Whenever in the administration of the Plan any
discretionary action is required by a Committee, such action shall be uniform in
nature as applied to all persons similarly situated.
8.10 ACTION TAKEN IN GOOD FAITH. To the extent permitted by ERISA, the
members of the Committee, BW/IP and the Employer and the officers and directors
of BW/IP and the Employer shall be entitled to rely 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 a Committee, and
the members of a
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Committee, BW/IP, the Employer and the officers and directors of BW/IP and the
Employer shall be fully protected in respect of any action taken or suffered by
them in good faith in reliance upon say such certificates, reports, opinions or
other advice of any accountant, 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 Full-time and Part-time Employees.
8.11 INDEMNIFICATION. To the extent not contrary to ERISA, the Employer
and BW/IP shall indemnify each Committee, each member of a Committee and any
other director, officer or employee of an Employer and of BW/IP who is
designated to carry out any responsibilities under the Plan for any liability,
joint and/or several, arising out of or connected with their duties hereunder,
except such liability as may arise from their gross negligence or willful
misconduct.
8.12 RESPONSIBILITIES OF NAMED FIDUCIARIES OTHER THAN THE COMMITTEES.
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 Investment Committee may appoint pursuant to Section 8.05 shall have the
responsibility to direct the Trustee in investing and reinvesting the Trust Fund
(or that portion thereof specified by the Investment 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 Investment
Committee periodically, as such responsibilities may be more fully described in
the Trust Agreement.
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8.13 ALLOCATION OF RESPONSIBILITIES. The description of the
responsibilities and powers of the Committees and the description of the
responsibilities of the Trustee contained in the foregoing provisions of this
Section 8 shall constitute, for purposes of ERISA, procedures for allocating
responsibilities for the operation and administration of the Plan among named
fiduciaries.
8.14 DESIGNATION OF PERSONS TO CARRY OUT RESPONSIBILITIES OF NAMED
FIDUCIARIES. The Committees, the Trustee and any investment adviser which the
Investment Committee may employ pursuant to Section 8.05 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 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.
8.15 INFORMATION REQUIRED BY COMMITTEE. Each person entitled to
benefits under the Plan must file with the Administrative Committee from time to
time, in writing, such person's post office address and each change of post
office address. Any communication, statement or notice addressed to any such
person at the last post office address filed with the Administrative Committee
will be binding upon such person for all purposes of the Plan. Each person
entitled to benefits under the Plan shall also furnish the Administrative
Committee with such documents, evidence, data or information as the
Administrative Committee considers necessary or desirable for the purpose of
administering this Plan. The Employers shall furnish the Administrative
Committee with
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such data and information as the Administrative Committee may deem necessary or
desirable in order to administer the Plan. The records of an Employer as to an
Employee's or Participant's period of employment, termination of employment and
the reason therefor, leave of absence, reemployment and earnings will be
conclusive on all persons unless determined to the Administrative Committee's
satisfaction to be incorrect.
8.16 FORMS. Any application for benefits or any election provided by
this Plan shall be on terms prescribed by the Administrative Committee.
8.17 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
8.18 REVIEW OF BENEFIT DETERMINATIONS. The Administrative Committee
will provide notice in writing to any Participant or beneficiary whose claim for
benefits under the Plan is denied and the Administrative Committee shall afford
such Participant or beneficiary a full and fair review of its decision if so
requested.
8.19 ADMINISTRATIVE COMMITTEE'S DECISION FINAL. Subject to applicable
law, any interpretation of the provisions of the Plan and any decisions on any
matter within the discretion of the Administrative Committee made by the
Administrative Committee in good faith shall be binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known
and the Administrative Committee shall make such adjustment on account thereof
as it considers equitable and practicable.
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8.20 MISSING PERSONS. No Committee, the Trustee, or any Employer is
required to search for or locate any person entitled to benefits under the Plan.
1. SECTION - FUNDING
1.1 EMPLOYER CONTRIBUTIONS. Each Employer will from time to time while the
Plan is in effect make such contributions to the Plan as shall be recommended by
a qualified actuary selected by the Committee as sufficient to maintain the Plan
in effect as qualified under Section 401 of the Code, reserving, however, the
right to discontinue contributions pursuant to Section 10.01. The liability of
the Employer is limited to such contributions and remittances except as may be
provided by ERISA. Neither the Committee nor any Employer in any way guarantees
the Trust Fund from loss or depreciation. Forfeitures arising under the Plan for
any reason shall be used to reduce the Employer's Contributions under the Plan
and shall not be used to increase benefits.
1.2 FUNDING OF BENEFITS. The benefits of the Plan are currently funded
through various Trust Funds and annuity contracts. The Company reserves the
right at any time to have all or part of said Trust Funds transferred from the
present Trustees to their corporate and/or individual trustees or to an
insurance company, to have said contracts assigned and transferred to a
corporate trustee, individual trustees, or another insurance company, or to the
Company, and to appoint, or permit the Trustee to appoint, an investment or
financial management or consulting firm, company or individual to manage any
assets of the Plan. The Company further reserves the right to cause any
Retirement Pension payable from two or more of said Trust Funds or contracts to
be
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consolidated and paid from a single source. Copies of the Plan, trust
agreements, annuity contracts, and any amendments thereto, will be available at
the office of the Secretary of the Company and of each Employer which adopts the
Plan, where they may be examined by any Eligible Employee or Participant. The
provisions of and benefits under the Plan are subject to the terms and
provisions of the trust agreements and annuity contracts.
1.3 ASSETS FOR THE EXCLUSIVE BENEFIT OF PARTICIPANTS. All assets of the
Plan shall be retained for the exclusive benefit of Participants, former
Participants and their beneficiaries and shall be used to pay benefits to such
persons or to pay administrative expenses to the extent not paid by the Employer
and shall not revert to or inure to the benefit of any Employer.
1.4 REVERSION OF EMPLOYER CONTRIBUTIONS. Notwithstanding any other
provision of the Plan, contributions made by an Employer are expressly
conditioned upon the deductibility under Section 404 of the Code of
contributions made to provide Plan benefits. A contribution which was made by a
mistake of fact or upon the deductibility of the contribution under Section 404
of the Code, shall be returned to the Employer within one year after the payment
of the contribution or the disallowance of the deduction (to the extent mistaken
or disallowed), whichever is applicable, but reduced by the amount of any
investment losses thereon.
2. SECTION - AMENDMENT AND TERMINATION OF THE PLAN
2.1 EMPLOYERS MAY AMEND OR TERMINATE THEIR PARTICIPATION IN THE PLAN. The
Company and each of the Employers hope and expect to continue the Plan
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indefinitely, but necessarily reserve the right with respect to the application
of the Plan to their employees to change, modify or discontinue the Plan at any
time at their discretion, to discontinue or reduce their contributions under the
Plan, and to fix such other terms and conditions as they deem necessary to carry
out the purpose of the Plan. Each Employer hereby appoints the Company as its
agent to amend, change or modify the Plan at any time, whether prospectively or
retroactively. Any such amendment, change or modification shall be made be
through the duly taken action of the Compensation Committee of the Company's
Board of Directors or if the Board of Directors shall determine by the duly
taken action of the Board of Directors. No amendment shall have an adverse
effect upon benefits provided by prior contributions or upon benefits currently
being paid pursuant to the provisions of the Plan in effect immediately prior to
such amendments except as may be necessary to comply with ERISA and the Code, or
any other applicable laws or regulations. Furthermore, no amendment shall have
the effect of eliminating or reducing a subsidy or an early retirement benefit
(as defined in Treasury Regulations issued under Section 411(d)(6) of the Code),
or eliminating an optional form of benefit, with respect to benefits
attributable to service prior to the date of the amendment. No amendment shall
be construed to modify or expand the Employer liability as set forth in Section
9.01.
2.2 DISCONTINUANCE OF A DIVISION, SUBSIDIARY OR AFFILIATE. In the event all
or a portion of the operation of any division, subsidiary or affiliate of the
Company participating hereunder is sold or discontinued by the Company, or a
division, subsidiary or affiliate for any other reason ceases to be an Employer,
the Committee may determine
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that all or that portion of the affected Employees of said division, subsidiary
or affiliate shall no longer participate in the Plan; may waive, on a
nondiscriminatory basis, with respect to said Employees any or all Continuous
Service requirements as they relate to eligibility for a benefit under the Plan
but not Continuous Service or Credited Service requirements as they relate to
the computation of said benefits; and may direct the Trustees or insurance
companies to segregate in an equitable manner the portion of the funds or
annuity contracts allocable to said Employees, but not inconsistent with the
terms of any applicable annuity contract; provided, however, that it shall be
impossible for any part of the corpus of or the income from the trust funds or
annuity contracts so segregated, to be used for or diverted to purposes other
than for the exclusive benefit of the Participants of said division or former
subsidiary or affiliate and their Contingent Annuitants or beneficiaries, any
time prior to the satisfaction of all liabilities with respect to such
Participants and their Contingent Annuitants or beneficiaries. The Committee
shall then cause the assets to be distributed as provided in Section 10.04.
2.3 CESSATION OF PARTICIPATION BY THE COMPANY. In the event that the
Company for any reason ceases to participate in the Plan, then each of the
remaining participating subsidiaries and affiliates shall have, insofar as its
employees are concerned, the powers now reserved to the Company under the Plan,
subject to the terms of the applicable trust agreements or annuity contracts.
2.4 ALLOCATION AND DISTRIBUTION OF ASSETS ON TERMINATION OR PARTIAL
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
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nonforfeitable to the extent then funded. On termination or partial
termination of this Plan as to any Employer, the Committee may segregate and
allocate the Plan assets to the affected Participants, former Participants and
beneficiaries in the manner set forth in Section 10.02. After payment of all
expenses of liquidation, the Committee shall allocate the remainder of the
portion of the Plan assets and cause them to be distributed to the affected
Participants, former Participants and beneficiaries in the manner and order set
forth in Section 4044 of ERISA to the extent of the sufficiency of such assets.
2.5 MANNER OF DISTRIBUTION. Subject to the foregoing provisions of this
Section 10, such distribution may be made in cash or property or partly in each,
provided the property is distributed at its fair market value as of the date of
distribution and that no discrimination in value results.
2.6 RESIDUAL AMOUNTS. In no event shall the Company or any Employer receive
any amounts from the Fund upon termination of the Plan, except that, and
notwithstanding any other provision of the Plan, the Company or any Employer
shall receive such amounts, if any, as may remain after satisfaction of all
liabilities of the Plan and arising out of any variations between actual
requirements and expected actuarial requirement.
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1. SECTION - MISCELLANEOUS
1.1 NONALIENATION OF BENEFITS. Except as may be required by law, no right
or benefit provided for in the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary and any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, charge or otherwise dispose of any right or benefit provided
for hereunder, shall be void. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order (i) is determined to be a "Qualified Domestic Relations Order" as such
term is defined in Section 414(p) of the Code or (ii) is permitted to be treated
as a "Qualified Domestic Relations Order" by the Plan under the provisions of
the Retirement Equity Act of 1984. The Committee shall establish a written
procedure to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Notwithstanding the
foregoing, a person receiving Retirement Pension payments may authorize a
deduction in such payments for the purpose of paying his contributions to any
contributory group insurance maintained by the Company for which he is eligible.
1.2 INCAPACITY. If any person entitled to a benefit under the Plan is, in
the judgment of the Committee, legally, physically or mentally incapable of
personally receiving and receipting for any payment due hereunder, the Committee
at its discretion may determine that payment thereof shall be made to such other
person, persons, or
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institution who, in the opinion of the Committee, are then maintaining or have
custody of such person, until claim is made by a duly appointed guardian or
other legal representative of such person. Such payments shall constitute a full
discharge of the liability of the Plan to the extent thereof.
1.3 CONTINUANCE OF EMPLOYMENT. The Plan shall not be construed to create or
enlarge any right of any person to remain in the employment of the Company, its
subsidiaries or affiliates, nor shall it interfere in any manner with the right
of the Company, its subsidiaries or affiliates to discharge any person or
otherwise treat him without regard to the effect upon his rights under the Plan.
1.4 MERGER OR CONSOLIDATION OF PLAN. In the case of any merger or
consolidation of this Plan, with, or transfer of Plan assets and liabilities to,
any other plan, provisions shall be made so that each Participant in the Plan on
the date thereof (if the Plan then terminated) would receive a benefit
immediately after the merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
prior to the merger, consolidation or transfer if the Plan had then terminated.
1.5 CONSTRUCTION. The masculine gender, where appearing in the Plan, shall
be deemed to include the feminine gender, and the singular may include the
plural, unless the context clearly indicates to the contrary.
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1. SECTION - RESTRICTIONS ON BENEFITS PAYABLE TO HIGHLY COMPENSATED PARTICIPANTS
1.1 TERMINATION RESTRICTIONS. The limitations contained in this Section 12
are required by the Internal Revenue Service for benefits payable to certain
Participants. In the event of a termination of the Plan, no Highly Compensated
Employee or former Highly Compensated Employee shall receive a benefit which is
discriminatory under Section 401(a)(4) of the Code.
1.2 ONGOING RESTRICTIONS. Except as otherwise provided in this Section 12,
the payment of benefits in any Plan Year to or on behalf of a "Restricted
Employee" as defined in the following sentence shall in no event exceed the sum
of (i) a straight life annuity that is the actuarial equivalent of the accrued
benefit and other benefits payable under the Plan to such Restricted Employee
(other than a social security supplement), and (ii) the amount of any payments
that such Restricted Employee is entitled to receive under a social security
supplement under the Plan. For purposes of this Section 12, the term "Restricted
Employee" shall mean any Participant if he is a Highly Compensated Employee or a
former Highly Compensated Employee unless such Participant is not among the 25
nonexcludable Employees and former Employees of the Employer with the largest
amount of Compensation in the current or any preceding Plan Year. The
restrictions contained in this Section 12.02 shall not apply in the event of any
of the following:
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(a) After the payment of all benefits payable under the Plan to or
on behalf of the Restricted Employee, the value of Plan assets
equals or exceeds 110% of the value of current liabilities of
the Plan as defined in Code Section 412(l)7).
(b) The value of the benefits payable to or on behalf of the
Restricted Employee is less than one percent of the value of
current liabilities of the Plan before the distribution.
(c) The value of the benefits payable to or on behalf of the
Restricted Employee does not exceed the $3,500 amount
described in Code Section 411(a)(11)(A) applicable to certain
mandatory distributions from the Plan.
1. SECTION - TOP-HEAVY RESTRICTIONS
The following provisions shall become effective in any Plan Year in
which the Plan is determined to be a Top-Heavy Plan.
1.1 DETERMINATION OF TOP-HEAVY. The Plan will be considered a Top Heavy
Plan for the Plan Year if, as of the last day of the preceding Plan year or, in
the case of the first Plan Year, as of the last day of such first Plan Year (the
"Determination Date"):
(a) the present value of the accrued benefits of Participants who are
Key Employees (as defined in Section 416(i) of the Code) exceeds 60% of
the present value of the accrued benefits of all Participants (the "60%
Test"); or
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(b) the Plan is part of a "required aggregation group" (which is
defined as each plan of BW/IP or any Affiliated Company in which a Key
Employee is a participant and each other plan of BW/IP or any
Affiliated Company which enables any plan in which a key employee is a
participant to satisfy the requirements of Section 401(a)(4) or 410 of
the Code).
However, notwithstanding the results of the 60% Test, the Plan shall
not be considered a Top-Heavy Plan for any Plan Year in which the Plan is a part
of a required aggregation group or "permissive aggregation group" (which is
defined as any plan of BW/IP or any Affiliated Company which is not part of a
required aggregation group but which continues to satisfy the requirements of
Section 401(a)(4) and 410 of the Code).
For the purposes of making the "60% Test" for any Plan Year, accrued
benefits shall be those amounts calculated as of the first day of the preceding
Plan Year and the present value of those amounts shall be based on the actuarial
assumptions used in the actuarial valuation made as of the first day of such
preceding Plan Year. The determination of the value of a Participant's account
in a defined contribution plan shall be made as of the last day of the preceding
plan year. If another valuation date is prescribed in regulations promulgated by
the Secretary of the Treasury, such alternate valuation date shall be used.
The determination of whether the Plan is a Top-Heavy Plan in any Plan
Year shall be made in accordance with sections 416(g)(3), 416(g)(4)(A),
416(g)(4)(B) and 416(g)(4)(E) of the Code and the regulations promulgated
thereunder.
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Solely for the purpose of determining if the Plan, or any other plan
included in a required aggregation group of which this Plan is a part, is
top-heavy (within the meaning of section 416(g) of the Code) the accrued benefit
of an Employee other than a Key Employee ("Non-Key Employee") shall be
determined under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Affiliated Employers,
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
section 411(b)(1)(C) of the Code.
1.1 MINIMUM BENEFIT. For any Plan Year in which the Plan is a Top-Heavy Plan,
the minimum Normal Retirement Pension accrued by a Participant who is a Non-Key
Employee terminating employment at or after age 65, and the minimum accrued
benefit, payable at Normal Retirement Date, accrued by a Participant who is a
Non-Key Employee who terminates employment prior thereto with entitlement to a
Pension, shall be equal to the product of (a) 2% of his average monthly Earnings
during his five highest-paid consecutive calendar years (exclusive of plan years
under the Prior Plan prior to January 1, 1984 and Plan Years during which the
Plan is not a Top-Heavy Plan) of Service multiplied by (b) each of the first 10
years of his Credited Service after December 31, 1983 in which the Plan is a
Top-Heavy Plan. For purposes of this Section 13.02 each Participant who is a
Non-Key Employee and who has completed at least 1,000 Hours of Service shall
accrue the benefit provided for in this Section 13.02 irrespective of the level
of the Participant's Compensation for the Plan Year in which the accrual is to
be made.
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1.2 MINIMUM VESTING. Notwithstanding the provisions of Sections 4.04 and
5.04, a Participant shall be eligible for a Vested Deferred Retirement Pension,
if while the Plan is a Top-Heavy Plan, his employment is terminated before death
or retirement after he has completed at least 2 years of Service. The amount of
his Vested Deferred Retirement Pension on a Life Annuity basis, commencing as of
his Normal Retirement Date shall be equal to his vested percentage of his
accrued benefit, determined in accordance with the following table:
Years of Service Vested Percentage
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%
A Participant who had at least five years of Service at the date of his
termination of employment, may request the Committee to authorize commencement
of his Vested Deferred Retirement Pension as of the beginning of any calendar
month within the 10-year period preceding his Normal Retirement Date; and in
such case his Pension shall commence as of the date requested, but the amount
thereof shall be reduced as provided in Section 4.04. 1.1 CHANGE IN TOP-HEAVY
STATUS. If the Plan becomes a Top-Heavy Plan and subsequently ceases to be such,
the vesting schedule in Section 13.03 of this Section 13 shall continue to apply
in determining the Vested Deferred Retirement Pension of any Participant who had
at least three years of Service as of December 31 in the last Plan Year of
top-heaviness. For other Participants, said schedule shall apply only to their
accrued benefits as of such December 31. 1.2 IMPACT ON MAXIMUM BENEFITS. Except
as provided in Section 13.06, for any Plan Year in which the Plan is a Top-Heavy
Plan, Section 5.06 shall be read by substituting the number "1.00" for the
number "1.25" wherever it appears therein. 1.3 EXCEPTION. The change in the
415(e) limitation specified in Section 13.05 above shall not be applicable for a
Plan Year in which the Plan is a Top-Heavy Plan if, with respect to any Plan
within the aggregate group described in Section 13.01(b), (a) the sum of the
present value of the accrued benefits of all Participants who are Key Employees
does not exceed 90 percent of a similar sum for all Participants of such plans,
and (b) the minimum benefit described in Section 13.02 above is modified by
replacing "three percent (3%)" for "two percent (2%)".
IN WITNESS WHEREOF, the Company maintaining the Plan has caused this
restatement to be executed as of the 1st day of August, 1996.
BW/IP International, Inc.
By /s/ D.G. Taylor
---------------------------
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SUPPLEMENT A
CONTRIBUTORY PARTICIPANTS
A-1. Normal Retirement Income. The annual Normal Retirement Pension
under Section 5.01 for a Contributing Participant (or for a Participant or
former Participant who was eligible to contribute to the Prior Plan in effect
prior to March 1, 1970, but never contributed) will not be less than the greater
of:
(a) The sum of:
(i) The amount of his accrued Normal Retirement Pension as of February
28, 1970, under the Prior Plan in effect prior to March 1, 1970,
without regard to the Five Year Aver age Retirement under paragraph
4.03(c) of such Prior Plan; plus
(ii) 1.3% of his plan year earnings as defined in the Prior Plan up to
and including the greater of $12,000 or the Average Social Security
Base plus 1.5% of his plan year earnings in excess of the greater of
$12,000 or the Average Social Security Base for each complete plan year
of his Continuous Service on and after March 1, 1970; or
(b) An amount equal to the "Minimum Retirement Income" determined under
paragraph 4.03(b) of the Prior Plan as in effect prior to March 1, 1970.
A-2. Termination of Employment. Upon termination of employment prior to
his retirement under the Plan for any reason other than death:
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(a) A Contributing Participant eligible for a Vested Deferred
Retirement Pension may elect at any time prior to or at the time he applies for
a benefit under the Plan to have paid to him his own contributions with interest
in which case:
(i) If his current period of Continuous Service commenced prior to
January 1, 1957, his retirement pension will be reduced in accordance
with actuarial tables adopted by the Committee; or
(ii) If his current period of Continuous Service commenced on or after
January 1, 1957, his retirement pension shall be reduced by the amount
of his accrued Contributory Retirement Income as of February 28, 1970,
under the Prior Plan as in effect on that date.
(b) A Contributing Participant who, at the date of such termination, is
not eligible for a Vested Deferred or other type of Pension under this Plan
shall have paid to him his own contributions with interest.
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A-3. Death Benefits.
(a) A Contributing Participant may name one or more beneficiaries and
contingent beneficiaries on the forms provided by the Committee, and he may
change the beneficiaries in the same manner. In the event of the death of a
Contributing Participant prior to the first to occur of any of the following
events:
(i) the date his Normal, Early Retirement or Vested Deferred Pension
commences;
(ii) the date an option under Section 6.03 of the Plan becomes
effective; or
(iii) the date he attains age 65 if the Contributing Participant is
receiving a Permanent and Total Disability Pension under the Plan;
the beneficiary will receive a death benefit.
(a) The amount of this death benefit will be equal to:
(i) the Participant's contributions and the Employer's contributions
while participating under Basis B of the Prior Plan as in effect prior
to March 1, 1970; and
(ii) the amount of the Participant's contributions while participating
under Basis A of said Prior Plan, with interest to the first of the
month coincident with or preceding his death.
(b) The death benefit will be paid in a lump sum; provided, however, if the
amount of such death benefit payable is equal to or exceeds $1,000, the
Contributing Participant may elect, subject to the provisions of any applicable
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annuity contract, that payment shall be made on an Actuarially Equivalent basis
in one of the following forms:
(i) A specified number of equal installments of not less than $10 over
a period not exceeding 20 years.
(ii) A specified number of equal installments over a period not to
exceed 20 years and as long thereafter as the beneficiary survives.
(iii) Proceeds left on deposit in the Trust Fund for a period not to
exceed 12 months, or left on deposit with the insurance company
involved. The beneficiary will receive interest subject to future
election of option (i) or (ii) of this subparagraph, or the payment of
accumulated proceeds in cash.
(iv) For elections effective under the Prior Plan or under this Plan on
or after March 1, 1973, such other form as the Committee shall
determine.
A-4. Optional Forms of Retirement Pension. In addition to the options
available under Section 6.03 of the Plan, a Contributing Participant may elect a
Modified Cash Refund option to provide income during the lifetime of the
Contributing Participant after retirement and upon his subsequent death, a
payment to his beneficiary equal to the excess, if any, of his own contributions
with interest to his date of retirement, over the aggregate retirement income
payments received prior to date of death computed as if no cost of living
adjustment (as provided in Section 5.05 of the Prior Plan as in effect prior to
January 1, 1985) had been made to his Pension. For a Contributing Participant
whose Modified Cash Refund option election was made effective under the Prior
Plan prior to
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March 1, 1978, the payment to his beneficiary shall be in a lump
sum or such other Actuarially Equivalent form as the Committee shall determine.
For a Contributing Participant whose Modified Cash Refund option election is
made effective under the Prior Plan on or after March 1, 1978 and before May 20,
1987 or under this Plan, the payment to his beneficiary shall be in a lump sum;
provided, however, the Participant may elect, at the time he elects said option,
to have the Actuarial Equivalent of said payment paid to the beneficiary in such
form as the Committee shall determine. If a Contributing Participant elects a
Contingent Annuitant option and the Contingent Annuitant is not the spouse of
the Participant, the Actuarial Value of the income continued to the Contingent
Annuitant after the death of the Participant shall not exceed the sum of:
(a) the total contributions made by the Participant under the Prior
Plan; plus
(b) 50% of the excess of the Actuarial Value of the benefits to be paid
to the Participant and his Contingent Annuitant over the total
contributions made by the Participant under the Prior Plan.
A-5. Withdrawal of Contributions Not Permitted. A Contributing
Participant may withdraw his contributions made under the Prior Plan prior to
March 1, 1970, only upon the termination of his employment with the Company and
Affiliated Companies for reasons other than retirement under any pension plan
maintained by the Company and Affiliated Companies.
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A-6. Interest. For periods ending prior to January 1, 1976, interest on
Participant contributions shall be computed at rates adopted by the Company from
time to time but not less than the rates specified in paragraph 7.02(b) of the
Prior Plan as in effect prior to March 1, 1970. For periods beginning on or
after January 1, 1976, interest shall be computed at the rate of 5% (or such
other rate as may be in effect for particular years as prescribed by regulations
issued by the Secretary of Treasury), compounded annually from January 1, 1976.
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SUPPLEMENT B
MERGER OF MECHANICAL SEAL PLAN, PUMP DIVISION PLAN,
FLUID CONTROLS PLAN AND UCP PLAN
Effective April 1, 1989, the Borg-Warner Industrial Products, Inc.
Mechanical Seal Division Hourly Pension Plan ("Mechanical Seal Plan"), the
Borg-Warner Industrial Products, Inc. Pump Division Pension Plan No. 1 Covering
Service Operations Hourly Employees ("Pump Division Plan"), the Borg-Warner
Industrial Products, Inc. Fluid Controls Division Pension Plan Covering Hourly
Employees ("Fluid Controls Plan") and the United Centrifugal Pumps Second
Amended and Restated Defined Benefit Pension Plan ("UCP Plan") (collectively,
the Mechanical Seal Plan, the Pump Division Plan, the Fluid Controls Plan and
the UCP Plan are hereinafter sometimes referred to as "the Plans") were merged
with and into this Plan.
BENEFITS ACCRUED PRIOR TO MERGER
Notwithstanding any other provision of the Plan to the contrary, with
respect to service rendered to the Employer, or any predecessor Employer, prior
to April 1, 1989 by any employee in the Mechanical Seal Division, the Pump
Division, the Fluid Controls Division or the UCP Division of the Employer, such
employees shall be entitled to the benefits accrued by them as Participants
under, and as determined pursuant to the benefit formula of, the Mechanical Seal
Plan, the Pump Division Plan, the Fluid Controls Plan or the UCP Plan, as the
case may be, as of such date, including all ancillary benefits thereunder with
respect thereto including all forms of settlement and distribution,
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early retirement benefits and subsidies, disability benefits and all other
benefits or forms of benefit protected under Section 411(d)(6) of the Code,
provided that all such benefits and ancillary benefits shall be provided under
this Plan and the provisions of such plans with respect to such benefits and
ancillary benefits as to such service shall be, and they hereby are,
incorporated by this reference herein. With respect to any such employee as to
service from and after April 1, 1989, benefits shall accrue and all ancillary
benefits with respect thereto shall be provided under the terms of this Plan
without respect to this Section.
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EXHIBIT A
EARLY RETIREMENT INCOME DETERMINANTS
Early Retirement Pension under Section 5.02 of the Plan shall
be determined using the percentages in the Table set forth herein. The
percentages are based on the number of years computed to twelfths of a year that
a Participant's Early Retirement Date precedes his Normal Retirement Date and
shall be adjusted by straight line interpolation for fractions of years.
Years Early Retirement Date
Precedes Normal Retirement Date Percentage
1 100
2 100
3 100
4 93
5 86
6 79
7 73
8 67
9 61
10 55
<PAGE> 1
EXHIBIT 10.39
AMENDMENT NUMBER ONE
TO THE
BW/IP INTERNATIONAL, INC.
RETIREMENT PLAN
(AS AMENDED AND RESTATED AS OF AUGUST 1, 1996)
The BW/IP International, Inc. Retirement Plan, as amended and restated as of
August 1, 1996 (the "Plan"), is hereby amended in the following respects:
1. LIMITS ON PARTICIPATION.
-----------------------
The definition of the term Eligible Employee contained in Section 2 of the Plan
is hereby amended by adding the following to the end thereof:
Notwithstanding the foregoing, the term "Eligible Employee" shall not, however,
include an employee who is employed as a temporary part-time field service valve
technician in connection with the operations of the Company or its Affiliates in
Williamsport, Pennsylvania.
2. DISTRIBUTIONS.
-------------
Section 6.13, entitled "Rate of Distribution," is hereby redesignated as Section
6.14, and said Section 6.14 of the Plan is amended by adding the following to
the end thereof:
"Notwithstanding any other provision of this Plan to the contrary, all
distributions hereunder shall be made in accordance with the minimum
distribution requirements and the minimum distribution incidental benefit
requirements of Section 401(a)(9) of the Code, including as further set forth in
Proposed Treasury Regulations 1.401(a)(9)-1 and 1.401(a)(9)-2."
3. EFFECTIVE DATE.
---------------
This Amendment Number One shall be effective as of January 1, 1997, except as
to Paragraph 2 hereof which shall be effective as of January 1, 1996.
4. RATIFICATION AND RE-AFFIRMATION.
--------------------------------
Except as specifically amended hereby, the Plan, as heretofore amended to date
shall remain in full force and effect in accordance with its terms.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed at
Long Beach, California, as of the ____ day of ________________, 1997.
BW/IP International, Inc.
By _________________________________
Its ___________________________
<PAGE> 1
Exhibit 10.53
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into this 1st day
of August, 1997, between FLOWSERVE CORPORATION ("Company") and Bernard G.
Rethore ("Executive").
BACKGROUND
----------
A. Executive is currently employed by BW/IP, Inc., as its Chief
Executive Officer.
B. A subsidiary of Company and BW/IP, Inc. are to merge
pursuant to an Agreement and Plan of Merger dated as of May 7, 1997 ("Merger
Agreement").
C. The Company wishes to assure that it will have the
Executive's services and dedication after the Merger.
D. The Executive wishes to serve Company after the Merger as
provided in this Agreement.
AGREEMENT
---------
In consideration of the premises, and for other valuable
consideration, it is agreed as follows:
1. GENERAL AGREEMENT. The company agrees to employ the
Executive, and the Executive agrees to accept employment with the Company, as
provided in this Agreement for the period beginning on the Effective Date and
ending on the fifth anniversary of the Effective Date.
2. DEFINITIONS. For purposes of this Agreement, the following
terms, when capitalized, shall have the meanings specified below:
(a) "Accrued Compensation" means the sum of (i) the
Executive's annual base salary through the date his employment
terminates to the extent not previously paid and (ii) the Executive's
Historical Bonus multiplied by a fraction, the numerator of which is
the number of complete months in the fiscal year of termination that
precede the Executive's termination and the denominator of which is
twelve.
(b) "Board" means the Company's Board of Directors.
(c) "Board Chairman" means Chairman of the Company's
Board of Directors.
(d) "Cause" means (i) the Executive's continuing
substantial failure to perform his duties for the Company (other than
as a result of incapacity due to mental or physical illness) after a
written demand is delivered to the Executive by the Board; (ii) the
<PAGE> 2
Executive's wilful engaging in illegal conduct or gross misconduct that
is materially and demonstrably injurious to the Company; (iii) the
Executive's conviction of a felony or his plea of guilty or nolo contendere
to a felony, or (iv) the Executive's wilful and material breach of the
confidentiality portion of this Agreement. "Cause" shall be determined as
provided in Paragraph 8(e).
(e) "Disability" and "Disabled" refer to the Executive's failure to
perform his duties with the Company on a full-time basis for 180
consecutive days, if an independent physician selected by the Company or
its insurers and acceptable to the Executive (or, in the case of
Executive's incapacity, his legal representative) finds that such failure
has resulted from the Executive's inability to perform such duties because
of his physical or mental incapacity.
(f) "Effective Date" means the Effective Time of the Merger (as defined
in the Merger Agreement).
(g) "Employment Term" means the period beginning on the Effective Date
and ending on the fifth anniversary of the Effective Date.
(h) "First Employment Period" means the period beginning on the
Effective Date and ending on the earlier of (i) the Board's acceptance of
the Executive's resignation as Chairman, Chief Executive Officer, and
director in accordance with Paragraph 3 or (ii) the fifth anniversary of
the Effective Date.
(i) "Good Reason" means, during the First Employment Period, (i) the
Company's removal of the Executive from his position as Board Chairman
or Chief Executive Officer, (ii) the Company's (A) assignment of duties to
the Executive that are materially inconsistent with his position as Board
Chairman or Chief Executive Officer, or (B) actions resulting in a
material diminution of the Executive's position or duties, (iii) the
Company's material failure to comply with any provision of this Agreement,
(iv) the Company requiring the Executive to relocate his primary residence
from Phoenix, Arizona or to maintain his principal office more than 35
miles from DFW Airport, Dallas, Texas, and (v) the Company's termination
of the Executive's employment, other than as permitted by this Agreement.
"Good Reason" shall be determined as provided in Paragraph 8(c).
(j) "Historical Bonus" means, for the fiscal year in which the
Executive's employment terminates, the Executive's highest annual bonus
for the two fiscal years preceding termination, reduced by any annual
bonus previously paid to him for the fiscal year of termination.
(k) "Other Benefit" means any accrued compensation or benefit of the
Executive other than Accrued Compensation that is payable on or after
termination of employment
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under a plan, policy, or program of the Company. In case of the
Executive's death before the end of the Employment Term, "Other Benefit"
shall include a special death benefit equal to 36 months of the
Executive's base salary at the rate in effect on the date of his death,
which benefit shall be reduced by the death benefit payable with respect
to the Executive under any life insurance program of the Company. In the
case of the Executive's termination of employment on account of
Disability, "Other Benefit" shall include a salary continuation payment
until the fifth anniversary of the Effective Date, equal to 70% of the
Executive's base salary at the time he terminated employment on account of
Disability, reduced by any disability payments made to the Executive for
such period from another disability plan or program of the Company or
Social Security.
(l) "Second Employment Period" means the period beginning with the end
of the First Employment Period and ending on the fifth anniversary of the
Effective Date.
(m) "Willful" means that the Executive has acted, or failed to act, in
bad faith or without reasonable belief that his act or omission was in the
Company's best interest. For purposes of the preceding sentence, any act,
or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and pursuant to his belief that it is in the
best interests of the Company.
(n) "Welfare Benefit Plan" has the meaning given to such term by 29
U.S.C. Section 1002(l).
3. EXECUTIVE'S POSITION AND DUTIES DURING FIRST EMPLOYMENT PERIOD.
During the First Employment Period, the Executive shall serve as the Company's
Chief Executive Officer and Board Chairman with general responsibility for
and control of the Company's business and affairs, all in accordance with the
provisions of this paragraph. The Executive shall have such authority, duties,
and responsibilities as are commensurate with his position and as may be
assigned to him from time to time by the Board. The Executive shall serve the
Company diligently and faithfully, devoting substantially all of his time and
attention during normal business hours to the business and affairs of the
Company and to the faithful performance of his duties. The Executive shall not
perform any other services for remuneration, unless the performance of such
services is approved by the Board as being in the best interests of the
Company; provided, however, the Executive may continue as a board member of
Maytag Corporation and/or Belden, Inc. The Executive shall not engage in any
activity that substantially interferes with the performance of his
responsibilities to the Company. For purposes of this paragraph, the
Executive's service as a director of Phoenix Country Day School and Thunderbird
Graduate School shall be permitted. The Executive's performance as a director of
any other not-for-profit organization shall be subject to the approval of the
Board, which approval shall not be unreasonably withheld. The Company shall use
its best efforts to cause the Executive to be elected as a director of the
Company and to remain as such throughout the first Employment
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<PAGE> 4
Period. On the third anniversary of the Effective Date, the Executive shall
tender to the Board his resignation as Board Chairman, Chief Executive Officer,
and director. If the Board accepts the Executive's resignation, the First
Employment Period shall end. If the Board does not accept the Executive's
resignation, the first Employment Period shall continue until the earlier of
(i) the Board's acceptance of the Executive's resignation or (ii) the fifth
anniversary of the Effective Date.
4. EXECUTIVE'S POSITION AND DUTIES DURING SECOND EMPLOYMENT PERIOD. During
the Second Employment Period, the Executive shall serve as consultant to the
Board and shall provide such consulting and advisory services as may be
reasonably requested by the Board, to the extent consistent with the
Executive's other obligations. The Executive shall make himself available for
consultation with the Board at times mutually agreeable to the Board and the
Company, provided that the Executive shall not be required to perform services
at the Company's headquarters.
5. EXECUTIVE'S COMPENSATION AS CHAIRMAN AND CEO. During the First
Employment Period, the Executive shall be entitled to the following
compensation:
(a) BASE SALARY. The Executive's initial base salary shall be $550,000
per year. The Executive's base salary may be increased, but not decreased,
throughout the First Employment Period and shall be reviewed at least once
every 12 months.
(b) BONUS. For each fiscal year, the Executive shall have an annual
bonus opportunity, with a minimum target bonus of no less than 50% of his
base salary payable pursuant to Subparagraph (a) during that fiscal year.
(c) LONG-TERM INCENTIVE COMPENSATION PLAN. The Executive shall
participate in the Company's long-term incentive compensation plan.
(d) INCENTIVE, SAVINGS, RETIREMENT, AND WELFARE BENEFIT PLANS. The
Executive shall be eligible to participate in all incentive compensation,
savings, retirement, and Welfare Benefit Plans available to other senior
executives of the Company on a basis at least as favorable as provided to
such other executives.
(e) VACATION. The Executive shall be entitled to paid vacation on terms
at least as favorable as available to other senior executives; provided,
however, the Executive shall be entitled to at least four weeks of paid
vacation per year.
(f) FRINGE BENEFITS. The Executive shall be entitled to reimbursement
of country club initiation fees and dues and automobile expenses and other
fringe benefits on a basis no less favorable than provided to other senior
executives of the Company.
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<PAGE> 5
(g) OFFICE AND SUPPORT STAFF. The Executive shall be entitled to an
office or offices or a size and with furnishings and other appointments
comparable to those of other senior executives of the Company.
(h) REIMBURSEMENT OF EXPENSES. The Executive shall be entitled to
reimbursement of reasonable business expenses on terms and conditions at
least as favorable as provided to other senior executives of the Company.
The Executive shall also be entitled to reimbursement of his reasonable
legal fees incurred in negotiating this Agreement.
(i) SERVICE CREDIT AND POST-EMPLOYMENT BENEFITS. The Executive shall
be given full service credit for his years of service at BW/IP, Inc. for
purposes of eligibility, vesting, and benefit accrual under the employee
benefit plans and programs of the Company in which he participates,
provided that any benefit that the Executive accrued under a defined
benefit pension plan of BW/IP, Inc. before becoming a participant in the
Company defined benefit pension plan shall be offset. To the extent that
the terms of a defined benefit do not permit compliance with the preceding
sentence, the Company shall provide such benefit through a supplemental
retirement benefit. Notwithstanding the foregoing, the Executive shall be
entitled to a supplemental retirement benefit at least as generous as the
supplemental retirement benefit that would have been provided under his
agreement with BW/IP, Inc., a copy of which is attached as Appendix A, had
such agreement remained in effect throughout the Employment Term, taking
into account, among other things, the double service crediting provided
thereunder.
6. EXECUTIVE'S COMPENSATION AS A CONSULTANT. During the Second
Employment Period, the Executive shall be entitled to the following
compensation:
(a) BASE SALARY. The Executive's base salary shall be equal to his
base salary at the time of his resignation as Chairman and Chief Executive
Officer.
(b) BONUS. For each fiscal year, the Executive shall have an annual
bonus opportunity with a minimum target bonus of no less than 50% of his
base salary payable pursuant to Subparagraph (a) during such fiscal year.
(c) LONG-TERM INCENTIVE COMPENSATION PLAN. The Executive shall not be
eligible to participate in any stock-based or long-term incentive
compensation plan of the Company; provided, however, the Executive's
service during the Second Employment Period shall be taken into account in
determining the Executive's vested interest in stock-based awards granted
before the Second Employment Period.
(d) INCENTIVE, SAVINGS, RETIREMENT, AND WELFARE BENEFIT PLANS. Except
as provided in Subparagraph (c), the Executive shall be entitled to
participate in all incentive compensation, savings, retirement, and
Welfare Benefit Plans in which he was a
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<PAGE> 6
participant at the end of the First Employment Period on a basis at least
as favorable as provided to other senior executives.
(e) TREATMENT OF OUTSTANDING STOCK OPTIONS. The Executive shall be
entitled to continue to hold, and be credited with vesting service respect
to, all stock options that were outstanding at the end of the First
Employment Period.
7. LOCATION OF SERVICES. During the First Employment Period, in lieu of
relocating to the Company's headquarters, the Executive shall continue to have
his permanent residence in Phoenix, Arizona, and shall commute to the Company's
headquarters. During this period, the Company shall pay the Executive $2,500
per month to compensate him for costs associated with commuting to and from and
living in the headquarters city. During the Second Employment Period, the
Executive shall not be required to perform services at the Company's
headquarters.
8. TERMINATION OF EMPLOYMENT.
(a) DEATH. The Executive's employment shall terminate automatically
upon his death during the Employment Term.
(b) DISABILITY. If the Executive becomes Disabled during the
Employment Term, the Company may notify the Executive of its intention to
terminate his employment pursuant to this Subparagraph (b). In such event,
the Executive's employment shall terminate on the 30th day after the
Executive receives such notice, unless he returns to substantially
full-time performance of his duties within such 30-day period.
(c) EXECUTIVE'S TERMINATION FOR GOOD REASON. To terminate his
employment for Good Reason, the Executive must notify the Board of his
intent to terminate employment for Good Reason and describe all
circumstances that he believes in good faith to constitute Good Reason. If
the Company corrects all situations identified by the Executive within 30
days after receiving his notice, the Executive shall not be entitled to
terminate for Good Reason. If the Company agrees to the Executive's
termination for Good Reason or fails to correct the conditions identified
by the Executive within 30 days after receipt of the Executive's notice,
the Executive's employment shall terminate on the 30th day after the
Company received his notice or such earlier date agreed to by the Company.
(d) EXECUTIVE'S TERMINATION WITHOUT GOOD REASON. If the Executive
terminates his employment without Good Reason, he shall provide the
Company at least 30 days' notice (which 30-day requirement may be waived
by the Company) of his intent to terminate, state that the termination is
without Good Reason, and identify his termination date. The Executive's
termination date shall be the date specified in the notice provided
pursuant to the preceding sentence.
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<PAGE> 7
(e) COMPANY'S TERMINATION FOR CAUSE. Before the Board terminates the
Executive's employment for Cause, it shall provide the Executive an
opportunity, after reasonable notice, to appear before the Board with
counsel. To terminate the Executive for Cause, the Board must adopt a
resolution terminating the Executive by affirmative vote of at least 75%
of its members, after having given the Executive the opportunity to
present his case to the Board. The Board's resolution must state that the
Board finds in good faith that (i) the Executive is guilty of conduct
constituting Cause, specifying the details of such conduct, and (ii) the
Executive failed to cure such conduct within 30 days after receiving
written notice from the Company detailing such conduct. The effective date
of the Executive's termination for Cause shall be the date on which the
Executive receives a copy of the resolution adopted by the Board or such
later date specified in the resolution.
(f) COMPANY'S TERMINATION WITHOUT CAUSE. If the Company terminates the
Executive's employment without Cause, it shall notify the Executive of its
decision and state that the termination is without Cause. The effective
date of the Executive's termination shall be the date on which he receives
the Company's notice or such later date as specified in the notice.
9. COMPANY'S OBLIGATIONS ON TERMINATION OF EMPLOYMENT.
(a) DEATH. If the Executive's employment is terminated by reason of
his death during the Employment Term, this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Compensation and the
timely payment or provision of Other Benefits. Accrued Compensation shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days after the Executive's death, and Other Benefits
shall be paid pursuant to the applicable plan, program, or policy of the
Company.
(b) DISABILITY. If the Executive's employment is terminated by reason
of his Disability during the Employment Term, this Agreement shall
terminate without further obligations to the Executive, other than for
payment of Accrued Compensation and the timely payment or provision of
Other Benefits. Accrued Compensation shall be paid to the Executive in a
lump sum in cash within 30 days after his employment terminates, and Other
Benefits shall be paid pursuant to the applicable plan, program, or policy
of the Company. Notwithstanding the preceding provisions, all stock-based
awards that would have become vested by the end of the fiscal year in
which the Executive's employment terminates on account of Disability shall
become vested upon the termination of his employment, and any stock
options or other exercisable awards shall remain exercisable as if the
Executive's employment had terminated on the fifth anniversary of the
Effective Date.
(d) COMPANY'S TERMINATION FOR CAUSE. If the Executive's employment is
terminated for Cause, or the Executive terminates his employment without
Good Reason
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<PAGE> 8
during the Employment Term, this Agreement shall terminate without
further obligations to the Executive, other than for payment of Accrued
Compensation, the payment of any compensation previously deferred by the
Executive pursuant to a non-qualified deferred compensation plan and not
previously paid, and the timely payment of Other Benefits. Accrued
Compensation shall be paid to the Executive in a lump sum in cash within
30 days after his employment terminates, and Other Benefits and deferred
compensation referred to in the preceding sentence shall be paid pursuant
to the applicable plan, program, or policy of the Company.
(d) COMPANY'S TERMINATION FOR REASON OTHER THAN CAUSE, DEATH OR
DISABILITY ON EXECUTIVE'S TERMINATION FOR GOOD REASON. If the Company
terminates the Executive's employment for a reason other than Cause or
Disability, or if the Employee terminates his employment for Good Reason,
the Company shall continue to compensate the Executive hereunder as if he
had not terminated employment throughout the Employment Term; provided,
however, the First Employment Period shall terminate on the later of the
Executive's termination of employment or the third anniversary of the
Effective Date. If the Executive is no longer eligible to participate in
a benefit plan of the Company because he is no longer an employee, the
Company shall provide a benefit equivalent to the benefit to which
Executive would have been entitled under such plan if he had remained an
employee; provided however, the Executive shall not be reimbursed for the
loss of his ability to make elective deferrals under any qualified defined
contribution plan of the Company.
(e) NON-EXCLUSIVITY OF RIGHTS. This Agreement shall not prevent the
Executive from continuing or future participation in any plan, program,
policy, or practice of the Company according to its terms or, subject to
Section 17, affect the Executive's rights under any agreement with the
Company. Benefits that are vested or that the Executive is otherwise
entitled to receive under any plan, policy, practice, or program of, or
any agreement with, the Company at or after the termination of his
employment shall be payable in accordance with such plan, policy,
practice, program, or agreement, except as expressly modified by this
Agreement.
10. ADDITIONAL PAYMENTS BY THE COMPANY. If it is determined that any
payment hereunder other than a payment pursuant to this Paragraph or Paragraph
11, is subject to Code Section 4999, or any interest or penalties are incurred
by the Executive with respect to such excise tax on account of such payments,
then the Executive shall be entitled to receive an additional payment
sufficient to compensate him for any such tax, interest, or penalties and any
taxes with respect to payments made pursuant to this Paragraph. The Executive
shall promptly notify the Company of any notice from the Internal Revenue
Service with respect to excise taxes described in this Paragraph.
11. TERMINATION FOLLOWING CHANGE OF CONTROL. If the Executive's
employment terminates during the Employment Term but following a change of
control (as defined in a signed
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change of control agreement between the Company and the Executive) during the
Employment Term, the Executive shall receive compensation upon such termination
pursuant to the change of control agreement and not pursuant to this Agreement.
12. CONFIDENTIALITY.
(a) The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge, or data
relating to the Company or any of its affiliated companies, and their
respective businesses, that has been acquired by the Executive during his
employment and that has not become public knowledge (other than by acts by
the Executive or his representatives in violation of this Agreement).
After termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the Company's
Board or as may otherwise be required by law, or legal process or in order
to enforce his rights under this Agreement or as necessary to defend
himself against a claim asserted directly or indirectly by the Company or
its affiliates, communicate or divulge any such information, knowledge, or
data that is not otherwise publicly available to anyone other than the
Company and those designated by it. An asserted violation of this
Paragraph shall not be a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
(b) In the event of a breach or threatened breach of this Paragraph,
the Executive agrees that the Company shall be entitled to seek injunctive
relief in a court of appropriate jurisdiction to remedy such breach or
threatened breach, and the Executive acknowledges that damages would be
inadequate and insufficient.
(c) The Executive's obligations under this Paragraph shall continue
forever.
13. INDEMNIFICATION. The Company agrees that if Executive is made a party,
or is threatened to be made a party, to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the
fact that he is or was a director, officer, or employee of the Company,
Executive shall be indemnified and held harmless by the Company to the fullest
extent legally permitted or authorized by the Company's certificate of
incorporation or bylaws or resolutions of the Board or, if greater, by the laws
of the State of New York, against all cost, expense, liability, and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by Executive in connection therewith. The Company agrees
to continue and maintain a directors' and officers' liability insurance policy
covering Executive to the extent the Company provides such coverage for its
other executive officers.
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive:
Bernard G. Rethore
6533 E. Maverick Rd.
Paradise Valley, AZ 85253
If to the Company or Board:
Miami Valley Research Park
3100 Research Boulevard
Dayton, OH 45420
Attention: Vice President, Secretary and General Counsel
or to such other address as either party shall have furnished to the other in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.
15. SEVERABILITY. Each provision of this Agreement shall be considered
severable. If a court finds any provision to be invalid or unenforceable, the
validity, enforceability, operation, and effect of the remaining provisions
shall not be affected, and this Agreement shall be construed in all respects as
if the invalid or unenforceable provision had been omitted or limited in
accordance with the court's ruling.
16. ASSIGNABILITY. This Agreement may not be assigned by the Executive,
because it is personal in nature. The Company may assign, delegate, or transfer
this Agreement and all of its rights and obligations hereunder to any successor
in interest, any purchaser of substantially all of the Company's assets, or any
entity to which the Company transfers all or substantially all of its assets
before or after the term of this Agreement. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
17. GOVERNING LAW AND WAIVER. The laws of the State of New York shall
govern the construction, enforceability, and interpretation of this Agreement.
The parties intend this Agreement to supplement, but not displace, their
respective rights and responsibilities under the laws of the State of New York,
as amended from time to time. The failure of either party to insist upon
performance of any provision of this Agreement or to pursue his or its rights
hereunder shall not be construed as a waiver of any such provision or the
relinquishment of any such right.
17. PRIOR AGREEMENT. On the Effective Date, this Agreement shall
supersede the Employment Continuation Agreement and Employment Agreement
between the Executive and BW/IP, Inc., dated as of December 14, 1995, and
October 19, 1995, respectively, and the terms and
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conditions of this Agreement shall be controlling during the Employment Period.
The Change of Control Agreement between the Executive and the Company, dated as
of July __, 1997 (the "Severance Agreement"), shall become effective in the
event of any change of control (as defined in the Severance Agreement)
subsequent to the consummation of the Merger. Except for the Change of Control
Agreement referred to above, this Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements, and writings with respect
to the subject matter hereof, all such other negotiations, commitments,
agreements, and writings will have no further force or effect, and the parties
to any such other negotiation, commitment, agreement or writing will have no
further rights or obligations thereunder.
18. NO PARTY DEEMED DRAFTER. Neither the Company nor the Executive
shall be deemed to be the drafter of this Agreement, and, if this Agreement or
any provision thereof is construed in any court or other proceeding, said court
or other adjudicator shall not construe this Agreement or any provision thereof
against either party as the drafter thereof.
19. NO ORAL MODIFICATIONS. This Agreement may not be modified orally.
Any change of this Agreement must be made in writing and signed by Executive
and an officer of Company.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
FLOWSERVE CORPORATION
By: /s/ Hugh K. Coble
----------------------------------
HUGH K. COBLE
Title: CHAIRMAN, EXECUTIVE COMMITTEE
-------------------------------
ATTEST:
/s/ Ronald F. Schuff /s/ Bernard G. Rethore
- ------------------------- -------------------------------------
Signature Bernard G. Rethore
- -------------------------
Title
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AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT (THE "AGREEMENT")
DATED JULY 22, 1997
BY AND BETWEEN
FLOWSERVE CORPORATION (THE "COMPANY") AND
BERNARD G. RETHORE ("EXECUTIVE")
The Company and Executive hereby agree to the following amendment to their
Agreement dated July 22, 1997:
Termination Following Change in Control
- ---------------------------------------
1. Paragraph 2 is hereby amended effective immediately by adding the
following sentence which shall become new Section 3(E):
(E) "Notwithstanding anything in this Agreement to the
contrary, if your employment is terminated by the Company
prior to a change in control, where a change in control in
fact occurs, and you reasonably demonstrate that such
termination was at the request of a third party who
effectuates such change in control, or that such termination
was directly related to or in anticipation of such change in
control, then, for all purposes of this Agreement, you shall
be entitled all payments and benefits provided under this
Agreement."
2. All the other provisions of the Agreement shall remain in full force
and effect and unchanged, subject to the specific addition noted above.
FLOWSERVE CORPORATION EXECUTIVE
By: /s/ Kevin E. Sheehan By: /s/ Bernard G. Rethore
- ------------------------ --------------------------
Kevin E. Sheehan Bernard G. Rethore
Chairman, Compensation Committee
<PAGE> 1
Exhibit 10.54
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into this 1st day of
August, 1997, between DURCO INTERNATIONAL INC. ("Company") and William M. Jordan
("Executive").
BACKGROUND
----------
A. Executive is currently employed by Durco International Inc. as its
Chief Executive Officer.
B. A subsidiary of Company and BW/IP, Inc. are to merge pursuant to an
Agreement and Plan of Merger, dated as of May 7, 1997 ("Merger Agreement").
C. The Company wishes to assure that it will have the Executive's
services and dedication after the Merger.
D. The Executive wishes to serve Company after the Merger as provided
in this Agreement.
AGREEMENT
---------
In consideration of the premises, and for other valuable consideration,
it is agreed as follows:
1. GENERAL AGREEMENT. The Company agrees to employ the Executive, and
the Executive agrees to accept employment with the Company, as provided in this
Agreement for the period beginning on the Effective Date and ending on the fifth
anniversary of the Effective Date.
2. DEFINITIONS. For purposes of this Agreement, the following terms,
when capitalized, shall have the meanings specified below:
(a) "Accrued Compensation" means the sum of (i) the
Executive's annual base salary through the date his employment
terminates to the extent not previously paid and (ii) the Executive's
Historical Bonus multiplied by a fraction, the numerator of which is
the number of complete months in the fiscal year of termination that
precede the Executive's termination and the denominator of which is
twelve.
(b) "Board" means the Company's Board of Directors.
(c) "Board Chairman" means Chairman of the Company's Board of
Directors.
(d) "Cause" means (i) the Executive's continuing substantial
failure to perform his duties for the Company (other than as a result
of incapacity due to mental or physical
<PAGE> 2
illness) after a written demand is delivered to the Executive by the
Board; (ii) the Executive's wilful engaging in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the
Company; (iii) the Executive's conviction of a felony or his plea of
guilty or nolo contendere to a felony, or (iv) the Executive's wilful
and material breach of the confidentiality portion of this Agreement.
"Cause" shall be determined as provided in Paragraph 6(e).
(e) "Disability" and "Disabled" refer to the Executive's
failure to perform his duties with the Company on a full-time basis for
180 consecutive days, if an independent physician selected by the
Company or its insurers and acceptable to the Executive finds that such
failure has resulted from the Executive's inability to perform such
duties because of his physical or mental incapacity.
(f) "Effective Date" means the Effective Time of the Merger
(as defined in the Merger Agreement).
(g) "Employment Period" means the First Employment Period
and/or Second Employment Period.
(h) "Employment Term" means the period beginning on the
Effective Date and ending on the fifth anniversary of the Effective
Date; provided, however, the Employment Term shall automatically be
extended for one-year periods, unless either party gives the other
notice of its intention not to extend the term at least three months
before the end of the initial Employment Term or any extension thereof.
(i) "First Employment Period" means the period beginning on
the Effective Date and ending on the third anniversary of the Effective
Date.
(j) "Good Reason" means, during the First Employment Period or
Second Employment Period, (i) the Company's removal of the Executive
from his position for the applicable Employment Period (as provided in
Paragraph 3 or 4, whichever is applicable), (ii) the Company's (A)
assignment of duties to the Executive that are materially inconsistent
with his position for the applicable Employment Period, or (B) actions
resulting in a material diminution of the Executive's position or
duties for the applicable Employment Period, (iii) the Company's
material failure to comply with any provision of this Agreement,
including its failure to designate the Executive as its Board Chairman
and Chief Executive officer, effective as of the beginning of the
Second Employment Period, and (iv) the Company's termination of the
Executive's employment, other than as permitted by this Agreement.
"Good Reason" shall be determined as provided in Paragraph 6(c).
(k) "Historical Bonus" means, for the fiscal year in which the
Executive's employment terminates, the Executive's highest annual bonus
for the two fiscal years
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preceding termination, reduced by any annual bonus previously paid to
him for the fiscal year of termination.
(l) "Other Benefit" means any accrued compensation or benefit
of the Executive other than Accrued Compensation that is payable on or
after termination of employment under a plan, policy, or program of the
Company.
(m) "Second Employment Period" means the period beginning with
the end of the First Employment Period and ending on the fifth
anniversary of the Effective Date; provided, however, the Second
Employment Period shall automatically be extended for one-year periods,
unless either party gives the other notice of its intention not to
extend the term at least three months before the end of the initial
Employment Term or extension thereof.
(n) "Wilful" means that the Executive has acted in bad faith
or without reasonable belief that his act or omission was in the
Company's best interest.
(o) "Welfare Benefit Plan" has the meaning given to such term
by 29 U.S.C. section 1002(1).
3. EXECUTIVE'S DUTIES DURING FIRST EMPLOYMENT PERIOD. During the First
Employment Period, the Executive shall serve as the Company's President and
Chief Operating Officer in accordance with the provisions of this Paragraph. The
Executive shall have such authority, duties, and responsibilities as are
commensurate with his position and as may be assigned to him from time to time
by the Board. The Executive shall serve the Company diligently and faithfully,
devoting substantially all of his time and attention during normal business
hours to the business and affairs of the Company and to the faithful performance
of his duties. The Executive may continue to serve as a director of Thomas
Industries and NIBCO. Except as provided in the preceding sentence, the
Executive shall not perform any other services for remuneration, unless the
performance such services is approved by the Board as being in the best
interests of the Company. The Executive shall not engage in any activity that
substantially interferes with the performance of his responsibilities to the
Company.
4. EXECUTIVE'S DUTIES DURING SECOND EMPLOYMENT PERIOD. During the
Second Employment Period, the Executive shall serve as the Company's Chief
Executive Officer and Board Chairman with general responsibility for and control
of the Company's business and affairs, all in accordance with the provisions of
this Paragraph. The Executive shall have such authority, duties, and
responsibilities as are commensurate with his position and as may be assigned to
him from time to time by the Board. The Executive shall serve the Company
diligently and faithfully, devoting substantially all of his time and attention
during normal business hours to the business and affairs of the Company and to
the faithful performance of his duties. The Executive may continue to serve as a
director of Thomas Industries and NIBCO. Except as provided in the preceding
sentence, the Executive shall not perform any other services for
3
<PAGE> 4
remuneration, unless the performance of such services is approved by the Board
as being in the best interests of the Company. The Executive shall not engage in
any activity that substantially interferes with the performance of his
responsibilities to the Company.
5. EXECUTIVE'S COMPENSATION. During the Employment Term, the Executive
shall be entitled to the following compensation:
(a) BASE SALARY. The Executive's ihitial base salary shall be
an amount agreed to by the Executive and the Company and set out in
Appendix A. The Executive's base salary may be increased, but not
decreased, throughout the Employment Term and shall be reviewed at
least once every 12 months.
(b) BONUS. The Executive shall have an annual bonus
opportunity, with a minimum target bonus of no less than 50% of his
base salary.
(c) LONG-TERM INCENTIVE COMPENSATION PLAN. The Executive shall
participate in the Company's long-term incentive compensation plan.
(d) INCENTIVE, SAVINGS, RETIREMENT, AND WELFARE BENEFIT PLANS.
The Executive shall be entitled to participate in all incentive
compensation, savings, retirement, and Welfare Benefit Plans available
to other senior executives of the Company on a basis at least as
favorable as provided to such other executives.
(e) VACATION. The Executive shall be entitled to paid vacation
on terms at least as favorable as available to other senior executives.
(f) FRINGE BENEFITS. The Executive shall be entitled to an
office, reimbursement of country club initiation fees and dues and
automobile expenses, and other fringe benefits on a basis no less
favorable than provided to other senior executives of the Company.
(g) REIMBURSEMENT OF EXPENSES. The Executive shall be entitled
to reimbursement of reasonable business expenses on terms and
conditions at least as favorable as provided to other senior executives
of the Company. The Executive shall be entitled to reimbursement of his
reasonable expenses of relocation from Dayton, Ohio, to Dallas, Texas,
in accordance with the Company's reimbursement policy for senior
executives.
6. TERMINATION OF EMPLOYMENT.
(a) DEATH. The Executive's employment shall terminate
automatically upon his death during the Employment Term.
4
<PAGE> 5
(b) DISABILITY. If the Executive becomes Disabled during the
Employment Term, the Company may notify the Executive of its intention
to terminate his employment pursuant to this Subparagraph (b). In such
event, the Executive's employment shall terminate on the 30th day after
the Executive receives such notice, unless he returns to substantially
full-time performance of his duties within such 30-day period.
(c) EXECUTIVE'S TERMINATION FOR GOOD REASON. To terminate his
employment for Good Reason, the Executive must notify the Board of his
intent to terminate employment for Good Reason and describe all
circumstances that he believes in good faith to constitute Good Reason.
If the Company corrects all situations identified by the Executive
within 30 days after receiving his notice, the Executive shall not be
entitled to terminate for Good Reason. If the Company agrees to the
Executive's termination for Good Reason or fails to correct the
conditions identified by the Executive within 30 days after receipt of
the Executive's notice, the Executive's employment shall terminate on
the 30th day after the Company received his notice or such earlier date
agreed to by the Company.
(d) EXECUTIVE'S TERMINATION WITHOUT GOOD REASON. If the
Executive terminates his employment without Good Reason, he shall
provide the Company at least 30 days' notice (which 30 day requirement
may be waived by the Company) of his intent to terminate, state that
the termination is without Good Reason, and identify his termination
date. The Executive's termination date shall be the date specified in
the notice provided pursuant to the preceding sentence.
(e) COMPANY'S TERMINATION FOR CAUSE. Before the Board
terminates the Executive's employment for Cause, it shall provide the
Executive an opportunity, after reasonable notice, to appear before the
Board with counsel. To terminate the Executive for Cause, the Board
must adopt a resolution terminating the Executive by affirmative vote
of at least 75% of its members, after having given the Executive the
opportunity to present his case to the Board. The Board's resolution
must state that the Board finds in good faith that (i) the Executive is
guilty of conduct constituting Cause, specifying the details of such
conduct, and (ii) the Executive failed to cure such conduct within 30
days after receiving written notice from the Company detailing such
conduct. The effective date of the Executive's termination for Cause
shall be the date on which the Executive receives a copy of the
resolution adopted by the Board or such later date specified in the
resolution.
(f) COMPANY'S TERMINATION WITHOUT CAUSE. If the Company
terminates the Executive's employment without Cause, it shall notify
the Executive of its decision and state that the termination is without
Cause. The effective date of the Executive's termination shall be the
date on which he receives the Company's notice or such later date as
specified in the notice.
5
<PAGE> 6
7. COMPANY'S OBLIGATIONS ON TERMINATION OF EMPLOYMENT.
(a) DEATH. If the Executive's employment is terminated by
reason of his death during the Employment Term, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Compensation and the timely payment or provision of Other Benefits.
Accrued Compensation shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days after
the Executive's death, and Other Benefits shall be paid pursuant to the
applicable plan, program, or policy of the Company.
(b) DISABILITY. If the Executive's employment is terminated by
reason of his Disability during the Employment Term, this Agreement
shall terminate without further obligations to the Executive, other
than for payment of Accrued Compensation and the timely payment or
provision of Other Benefits. Accrued Compensation shall be paid to the
Executive in a lump sum in cash within 30 days after his employment
terminates, and Other Benefits shall be paid pursuant to the applicable
plan, program, or policy of the Company.
(c) COMPANY'S TERMINATION FOR CAUSE. If the Executive's
employment is terminated for Cause, or the Executive terminates his
employment without Good Reason, during the Employment Term, this
Agreement shall terminate without further obligations to the Executive
other than for payment of Accrued Compensation and the timely payment
of Other Benefits. Accrued Compensation shall be paid to the Executive
in a lump sum in cash within 30 days after his employment terminates,
and Other Benefits shall be paid pursuant to the applicable plan,
program, or policy of the Company.
(d) COMPANY'S TERMINATION FOR REASON OTHER THAN CAUSE, DEATH
OR DISABILITY ON EXECUTIVE'S TERMINATION FOR GOOD REASON. If the
Company terminates the Executive's employment for a reason other than
Cause or Disability, or if the Employee terminates his employment for
Good Reason, the Company shall continue to compensate the Executive
hereunder throughout the Employment Term as if he had not terminated
employment. If the Executive is no longer eligible to participate in a
benefit plan of the Company because he is no longer an employee, the
Company shall provide a benefit equivalent to the benefit to which
Executive would have been entitled under such plan if he had remained
an employee; provided however, the Executive shall not be reimbursed
for the loss of his ability to make elective deferrals under any
qualified defined contribution plan of the Company.
8. ADDITIONAL PAYMENTS BY THE COMPANY. If it is determined that any
payment hereunder other than a payment pursuant to this Paragraph or Paragraph 9
is subject to Code Section 4999, or any interest or penalties are incurred by
the Executive with respect to such excise tax on account of such payments, then
the Executive shall be entitled to receive an additional payment sufficient to
compensate him for any such tax, interest, or penalties and any taxes with
6
<PAGE> 7
respect to payments made pursuant to this Paragraph. The Executive shall
promptly notify the Company of any notice from the Internal Revenue Service with
respect to excise taxes described in this Paragraph.
9. TERMINATION FOLLOWING CHANGE OF CONTROL. If the Executive's
employment terminates during the Employment Term but following a change of
control (as defined in a signed change of control agreement between the Company
and the Executive) during the Employment Term, the Executive shall receive
compensation upon such termination pursuant to the change of control agreement
and not pursuant to this Agreement.
10. CONFIDENTIALITY.
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information,
knowledge, or data relating to the Company or any of its affiliated
companies, and their respective businesses, that has been acquired by
the Executive during his employment and that has not become public
knowledge (other than by acts by the Executive or his representatives
in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior
written consent of the Company's Board or as may otherwise be required
by law, communicate or divulge any such information, knowledge, or data
that is not otherwise publicly available to anyone other than the
Company and those designated by it. An asserted violation of this
Paragraph shall not be a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
(b) In the event of a breach or threatened breach of this
Paragraph, the Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy such
breach or threatened breach, and the Executive acknowledges that
damages would be inadequate and insufficient.
(c) The Executive's obligations under this Paragraph shall
continue forever.
11. NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
William M. Jordan
Miami Valley Research Park
3100 Research Boulevard
Dayton, OH 45420
7
<PAGE> 8
If to the Company or Board:
Miami Valley Research Park
3100 Research Boulevard
Dayton, OH 45420
Attention: Vice President, Secretary and General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
12. SEVERABILITY. Each provision of this Agreement shall be considered
severable. If a court finds any provision to be invalid or unenforceable, the
validity, enforceability, operation, and effect of the remaining provisions
shall not be affected, and this Agreement shall be construed in all respects as
if the invalid or unenforceable provision had been omitted or limited in
accordance with the court's ruling.
13. ASSIGNABILITY. This Agreement may not be assigned by the Executive,
because it is personal in nature. The Company may assign, delegate, or transfer
this Agreement and all of its rights and obligations hereunder to any successor
in interest, any purchaser of substantially all of the Company's assets, or any
entity to which the Company transfers all or substantially all of its assets
before or after the term of this Agreement. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
14. GOVERNING LAW AND WAIVER. The laws of the State of New York shall
govern the construction, enforceability, and interpretation of this Agreement.
The parties intend this Agreement to supplement, but not displace, their
respective rights and responsibilities under the laws of the State of New York,
as amended from time to time. The failure of either party to insist upon
performance of any provision of this Agreement or to pursue his or its rights
hereunder shall not be construed as a waiver of any such provision or the
relinquishment of any such right.
15. PRIOR AGREEMENTS. This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements, and writings with respect
to the subject matter hereof, all such other negotiations, commitments,
agreements, and writings will have no further force or effect, and the parties
to any such other negotiation, commitment, agreement or writing will have no
further rights or obligations thereunder.
16. NO PARTY DEEMED DRAFTER. Neither the Company nor the Executive
shall be deemed to be the drafter of this Agreement, and, if this Agreement or
any provision thereof is
8
<PAGE> 9
construed in any court or other proceeding, said court or other adjudicator
shall not construe this Agreement or any provision thereof against either party
as the drafter thereof.
17. NO ORAL MODIFICATIONS. This Agreement may not be modified orally.
Any change of this Agreement must be made in writing and signed by Executive and
an officer of Company.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
ATTEST: DURCO INTERNATIONAL, INC.
/s/ Ronald F. Schuff By: /s/ Kevin E. Sheehan
- -------------------------------- ------------------------------------
Signature Title: Chairman - Compensation Committee
Ronald F. Schuff
- --------------------------------
Printed Name
/s/ William M. Jordan
---------------------------------------
William M. Jordan
9
<PAGE> 10
APPENDIX A
The Executive's initial base salary shall be $500,000 per year.
10
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