SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the year ended April 26, 1996.
Commission file no. 1-5590
Fluke Corporation
(Exact name of registrant as specified in its charter)
Washington
(State of incorporation or organization)
91 - 0606624
(I.R.S. Employer Identification No.)
6920 Seaway Boulevard Everett, Washington 98203
(Address of principal executive offices)
(206) 347 - 6100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.25 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock Purchase Rights
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 the filing requirements for the
past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
As of July 8, 1996, there were 8,695,563 shares of $0.25 par value
common stock outstanding and the aggregate market value of the common
shares (based upon the closing price of the shares on the New York
Stock Exchange) held by nonaffiliates was approximately $259 million.
Documents Incorporated By Reference
The following documents are incorporated by reference in the listed
parts of this Annual Report on Form 10-K:
Document Part of 10-K
1. Annual Report to Stockholders for the year ended
April 26, 1996
(only the portions listed in this report) Parts I and II
2. Proxy Statement dated July 18, 1996
(only the portions listed in this report) Part III
PART I
ITEM 1 - BUSINESS
Fluke Corporation (the Company), was founded in 1948 and incorporated
under the laws of the State of Washington on October 7, 1953. In
August, 1993, the Company changed its name from John Fluke Mfg. Co.,
Inc. to Fluke Corporation. The Company is engaged in the design,
manufacture and marketing of compact, professional electronic test
tools. The Company's principal products are portable instruments
that measure voltage, current, power quality, frequency, temperature,
pressure and other key functional parameters of electronic equipment.
The Company believes that there are a number of key trends occurring
throughout the world that are driving the need for portable
electronic test tools: increasing device complexity, growing
electronic content in existing and new applications, decentralization
of electronic systems and increasing reliance on mission critical
electronic systems. In addition, the increasing need for companies
to improve quality, document compliance with regulatory or industrial
standards, and maintain a safe working environment, has further
increased the demand for electronic test tools. These general trends
have greatly increased the need for trained technicians to be able to
install, maintain and diagnose electrical systems at widespread
locations. These trained technicians are responsible for enhancing
the up-time of electrical systems and have a new set of needs in the
tools they use to perform their jobs. These tools need to be
portable, precise, rugged and easy to use. These technicians use
these tools to measure electrical parameters across a wide variety of
fields and industries.
Fluke's targeted end-users are service, installation and maintenance
professionals who use the Company's tools to identify, diagnose and
solve electrical problems. Fluke's portable digital multimeters,
ScopeMeter (Registered Trademark) test tools, network testers and
calibration equipment, which have substantial and leading market
shares, are used for field testing and verification of a broad range
of electronic equipment. The Company has leveraged its competencies
and market presence by offering new products for emerging
applications. These include products that address local area
networks (LANs), process control, data acquisition (temperature
control, counting and other unattended data gathering), power
analyzers and automotive electronics. The Company also manufactures
and markets traditional bench test and measurement instruments, such
as bench oscilloscopes.
PRODUCTS AND SERVICES
PRODUCTS
The Company is in a single line of business, the manufacturing and
selling of electronic test tools. Although the products vary in
capability, sophistication, use, size and price, they all
fundamentally test and measure electrical parameters such as voltage,
current, resistance, etc.
The Company currently offers over 200 product models with over 1,300
options and accessories. These products are divided into two product
classes: handheld service tools and benchtop test instruments.
Handheld service tools are typically used in field service
applications by technicians to install and troubleshoot electronic
and electrical equipment. Most of these tools are sold through
indirect distribution channels. Representative products include
handheld digital multimeters, ScopeMeter test tools, and network
testers.
Benchtop test instruments are used primarily by engineers and are
most often sold through direct sales channels. Products include
bench oscilloscopes, calibrators, data acquisition systems, and
generators.
Handheld service tools were approximately 57 percent of revenues in 1996, 55
percent in 1995, and 49 percent in 1994. Benchtop test instruments were
approximately 34 percent of the Company's revenues in 1996, 36 percent in
1995, and 42 percent in 1994. The remaining business consisted of service
and parts for products that the Company sells.
NEW PRODUCTS
Fluke Corporation introduced the following major products in fiscal 1996.
DSP-100 LAN CableMeter (Trademark). This handheld test tool was designed to
meet the standards for testing installed Category 5, ISO and IEC local area
network (LAN) cabling to 100 MHz. The DSP-100 uses a patented digital
signal processing (DSP) technology.
Fluke 105 ScopeMeter (registered trademark). This 100 MHz bandwidth
ScopeMeter test tool combines the functions of an oscilloscope with that of
a digital multimeter in a handheld instrument.
Fluke 76 TRMS Multimeter. This handheld digital multimeter provides true-
rms measurement capability to the 70 series product family.
FlukeView (registered trademark) II Software. FlukeView software integrates
the CombiScope oscilloscope with Microsoft's Windows (registered trademark)
environment. FlukeView software enhances the versatility of Fluke's
autoranging CombiScope oscilloscopes, which combine both analog and digital
storage functions in one unit.
Fluke 98 Automotive ScopeMeter. The Fluke 98 Automotive ScopeMeter service
tool is designed exclusively for automotive service technicians. This
Automotive ScopeMeter, a combined oscilloscope/multimeter/engine
analyzer/flight recorder, is a handheld diagnostic tool that solves
driveability problems.
Fluke 39/41B Power Meters. Fluke's Models 39 and 41B Harmonics Meters are
handheld tools designed for electricians, electrical contractors, power
system engineers and power quality consultants who make measurements to
evaluate power usage, troubleshoot electrical problems, improve power
efficiency and manage energy costs.
5500A-SC Oscilloscope Calibration Option. The 5500A-SC used with the 5500A
Multi-Product Calibrator is designed to support the calibration requirements
of the most widely used analog and digital oscilloscopes.
SALES AND DISTRIBUTION
The Company currently markets its products in more than 100 countries
through both indirect and direct sales channels. The Company's indirect
sales channels, those in which the Company does not invoice the end-user,
include industrial distributors, catalog houses, automotive warehouses and
electrical wholesalers. The Company's direct sales channels include both
the Company's internal sales force, which the Company has in Western Europe,
Canada, Japan and Singapore and independent manufacturer's representatives
located in the U.S. and many international markets. Direct and indirect
sales channels typically serve different customers in the same geographic
areas.
The Company generally uses indirect distribution for its hand-held service
tools. The Company has found that this distribution channel is more
effective for hand-held tools because the end-users purchasing these tools
often do not require ongoing product support or specific instructions on
tool applications.
The Company uses its direct sales channels primarily for its benchtop test
instruments. These products are generally more technically complex products
which may require a greater amount of direct contact with the customer to
close or support a sale. Direct sales channels are also effective for 1)
those markets in which a substantial knowledge of the end-user's business is
required, such as among potential customers for the LANMeter, and 2) those
geographic areas which do not have fully developed indirect distribution
channels or where the customer still expects to purchase hand-held service
tools through a direct sales force. In May 1995, the Company shifted all of
its direct sales responsibilities in the U.S. from an internal sales force
to manufacturer's representatives. There are currently 64 manufacturer's
representatives selling the Company's products in the U.S.
The Company's marketing effort consists principally of advertising in trade
publications, appearing at trade shows, and to a lesser extent, utilizing
direct mail campaigns.
SUPPLIERS
The Company generally uses standard parts and assemblies available from a
number of suppliers. However, some components are only available from a
single source. The Company has not experienced significant problems in
obtaining sole-source components but typically carries extra inventory of
any critical sole-sourced components. Fluke works closely with its
suppliers in an effort to ensure a continuous supply even during difficult
allocation times. The Company is not aware of any facts which would result
in a reduction, interruption or termination in the supply of its sole-
sourced components.
PATENTS AND TRADEMARKS
The Company regards elements of its products as proprietary and relies on a
combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures, license agreements and other intellectual
property protection methods to protect its proprietary technology. The
Company holds or has pending United States and foreign patents to protect
product designs, processes and techniques for the duration of their value to
the Company. No significant patents have been formally upheld in court and
no representation is made as to the validity or the degree of protection
afforded by any patent. While the Company considers its existing and
pending patents to be important and expects to defend and to continue to
apply for patents with respect to any significant developments it regards as
patentable, it does not consider its business as dependent to any material
extent upon any one or more of such patents, nor would its present business
be materially adversely affected if any of the patents were held invalid.
The Company also owns trademarks, copyrights and proprietary information,
which are considered by the Company to have significant value.
SEASONAL TRENDS AND WORKING CAPITAL REQUIREMENTS
While the Company is subject to minor seasonality effects associated with
conducting business in various regions of the world, the impact of these
seasonal trends is immaterial to the Company as a whole. The Company does
not have any extraordinary working capital requirements.
CUSTOMERS
The Company's customers are generally involved in the installation, service,
repair, or calibration of electronic or electrical equipment. They are also
involved in research and development activities.
No one customer accounted for more than five percent of the Company's sales
in fiscal years 1996, 1995 or 1994.
BACKLOG
The Company's backlog of unfilled orders amounted to $31.7 million as of
April 26, 1996 and $45.1 million as of April 28, 1995. The Company expects
to satisfy nearly all such unfilled orders in fiscal 1997. The backlog
consists of many different customer orders with no one customer being a
material component.
COMPETITION
The market for electronic test tools is widely fragmented, consisting of a
large number of companies, generally focused on one or a few products or
markets. Fluke maintains a broad product offering targeted to many
different applications and markets. The Company believes that its products
compete principally on the basis of performance, service and warranty, and
to a lesser extent, price. While there are numerous firms engaged in the
production of electronic test tools, no single company competes with the
Company across a substantial portion of its markets. It does, however, have
competitors that are substantially larger than the Company and have greater
financial resources.
RESEARCH AND DEVELOPMENT
The Company's research activities are directed toward the development of new
products that will complement and expand the present product line, and
toward the creation of new manufacturing techniques. Research and
development expense was $38.7 million for the year ended April 26, 1996,
which was 9.4 percent of the Company's fiscal 1996 revenues. Research and
development expense was $37.7 million for the year ended April 28, 1995 and
$34.9 million for the year ended April 29, 1994, which were 10.0 and 9.8
percent of the Company's total revenues, respectively. No research
contracts are obtained from customers, nor does the Company conduct any
research work under government development contracts.
ENVIRONMENTAL CONTROLS
The Company does not anticipate any material effects upon its capital
expenditures, earnings or competitive position as a result of compliance
with federal, state and local provisions regulating the discharge of
materials into the environment or otherwise relating to the protection of
the environment.
EMPLOYEES
The Company had 2,489 full-time employees as of April 26, 1996.
FOREIGN OPERATIONS AND EXPORT SALES
Information related to foreign operations and export sales is incorporated
herein by reference to Note 11 of the Consolidated Financial Statements on
page 50 of the Company's 1996 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this report.
The Company has significant revenues from outside of the United States which
increase the complexity and risk to the Company. These risks include
increased exposure to foreign currency fluctuations and the potential
economic and political impacts from doing business in foreign countries
including changes in labor and tax laws, import and export controls and
changes in governmental policies.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers, who serve at the pleasure of the Board of Directors
of the Company, as of July 8, 1996, are as follows:
WILLIAM G. PARZYBOK, JR.
Mr. Parzybok, age 54, has been Chairman of the Board, Chief Executive
Officer and a Director of the Company since 1991. He previously had been
employed for 22 years by the Hewlett-Packard Company where his most recent
position was Vice President and General Manager of Engineering Applications
Group from 1988 to 1991. Mr. Parzybok serves on the Executive Committee of
the Board. He is also a Director of PENWEST, Ltd.
GEORGE M. WINN
Mr. Winn, age 52, has been President, Chief Operating Officer and a Director
of the Company since 1982. He previously served as Chief Executive Officer
of the Company from 1987 to 1991. Mr. Winn serves on the Executive
Committee of the Board.
RICHARD W. VAN SAUN
Mr. Van Saun, age 58, has been a Senior Vice President of the Company and
General Manager of the Service Tools Division since 1994. He previously
served as Senior Vice President and Group Manager of the Diagnostic Tools
Division from 1992 to 1994 and as Vice President and Group Manager of the
Service Equipment Group from 1986 to 1992.
RONALD R. WAMBOLT
Mr. Wambolt, age 61, has been a Senior Vice President of the Company and
Director of Worldwide Marketing, Sales and Service since 1995. He
previously served as Senior Vice President and Director of Worldwide Sales
and Service from 1991 to 1995 and Senior Vice President and Director of
Woldwide Sales from 1987 to 1991.
WILLIAM R. HOFFMAN
Mr. Hoffman, age 60, has served as Vice President and General Manager of the
Verification Tools Division of the Company since May 1996. He previously
served as Vice President and Manager of Corporate Services and also General
Manager of Calibration for the Verification Tools Division from 1992 to
1996. He served as Vice President of Marketing Services and the Philips T&M
Group from 1991 to 1992, and as Vice President of the Company and Group
Manager of the Philips T&M Group from 1987 to 1991.
ELIZABETH J. HUEBNER
Ms. Huebner, age 38, has served as Vice President, Chief Financial Officer
of the Company since March 1996. She previously served as Vice President -
Finance, of the Western Region of AT&T Wireless Services from 1991 to 1996
and as Director of Financial Systems, Corporate from 1990 to 1991.
DAVID E. KATRI
Mr. Katri, age 46, has served as Vice President, Corporate Marketing since
1995. He previously served as a Vice President of the Company and General
Manager of the Verification Tools Division from 1992 to 1995. He also
served as Vice President of the Company and Group Manager for the
Manufacturing/R&D Group from 1991 to 1992.
DOUGLAS G. MCKNIGHT
Mr. McKnight, age 47, has served as Vice President, General Counsel of the
Company since 1986 and as Corporate Secretary since 1983.
PATRICK J. O'HARA
Mr. O'Hara, age 43, has been Vice President, Human Resources and Facilities
Manager of the Company since 1994. He previously served as Deputy Director
of Human Resources at the Los Alamos National Laboratory from 1993 to 1994,
and prior to that, as Site Human Resources Manager of the T.J. Watson
Research Center of IBM Corporation from 1990 to 1993.
BARRY L. ROWAN
Mr. Rowan, age 39, has been Vice President and General Manager of the Fluke
Networks Division since May, 1996. He previously served as Vice President
and General Manager of the Verification Tools Division since 1995 and as
Vice President and Chief Financial Officer of the Company since 1992. He
previously had been employed by Comlinear Corporation where he served as
President from 1989 to 1991.
JOHN R. SMITH
Mr. Smith, age 55, has been Vice President, Treasurer of the Company since
1987.
ITEM 2 - PROPERTIES
The Company owns approximately 161 acres of real estate near Everett,
Washington, the site of its corporate headquarters and U.S. manufacturing,
warehousing and distribution facilities. These facilities consist of
approximately 480,000 square feet, 200,000 square feet and three smaller
facilities totaling 57,100 square feet. The Company also owns a 25,000
square foot sales and service facility situated on 1.5 acres in Paramus, New
Jersey and a 27,000 square foot sales and service facility situated on 4.8
acres in Palatine, Illinois. All facilities owned by the Company are
insured at their estimated replacement cost.
The Company leases a 138,400 square foot engineering and manufacturing
facility located in The Netherlands, which could be duplicated, if
necessary, with some disruption to operations. The Company has
approximately 163,000 square feet of additional leased facilities throughout
the world which are utilized for sales and service. The Company believes
that its existing facilities are in good condition and are suitable and
adequate for its business.
ITEM 3 - LEGAL PROCEEDINGS
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated herein by reference to
Stock Price Information on page 56 of the Company's 1996 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this report.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference to
the Financial Summary on pages 54 and 55 of the Company's 1996 Annual Report
to Stockholders, a copy of which is filed as Exhibit 13 to this report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference to
pages 30 through 33 of the Company's 1996 Annual Report to Stockholders, a
copy of which is filed as Exhibit 13 to this report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference to
pages 34 through 52 and the Selected Quarterly Financial Data (unaudited) on
page 56 of the Company's 1996 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS OF THE REGISTRANT
The information required by this Item relating to Directors is incorporated
herein by reference to pages 4 through 6 of the Company's proxy statement
dated July 18, 1996, to be filed with the Securities and Exchange Commission
pursuant to Section 14(a) of the Securities Exchange Act of 1934.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
pages 7 through 13 of the Company's proxy statement dated July 18, 1996, to
be filed with the Securities and Exchange Commission pursuant to Section
14(a) of the Securities Exchange Act of 1934.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
pages 2 and 3 of the Company's proxy statement dated July 18, 1996, to be
filed with the Securities and Exchange Commission pursuant to Section 14(a)
of the Securities Exchange Act of 1934.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
page 10 of the Company's proxy statement dated July 18, 1996, to be filed
with the Securities and Exchange Commission pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements of the Company
The following financial statements of Fluke Corporation and Subsidiaries are
incorporated herein by reference to pages 34 through 56 of the Company's
1996 Annual Report to Stockholders, a copy of which is filed as Exhibit 13
to this report.
1. Consolidated Balance Sheets as of April 26, 1996 and April 28, 1995.
2. Consolidated Statements of Income for the years ended April 26, 1996,
April 28, 1995 and April 29, 1994.
3. Consolidated Statements of Cash Flows for the years ended April 26,
1996, April 28, 1995 and April 29, 1994.
4. Consolidated Statements of Stockholders' Equity for the years ended
April 26, 1996, April 28, 1995 and April 29, 1994.
5. Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedule
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Company described in Item 14
(a)(1):
Schedule II Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are not
required or are not applicable, or because the information is furnished
elsewhere in the financial statements or the notes thereto.
(a)(3) Index to Exhibits
Exhibit Page No.
No. Exhibit Sequential
Numbering System
3. Articles of Incorporation and Bylaws.
3.1 Restated copy of Articles of Incorporation as amended on August
11, 1993 (incorporated by reference to Exhibit 3.1 of the
Company's Form 10-K Report for the Fiscal Year ended April 29,
1994).
3.2 Conformed Copy of Bylaws as amended through February 1, 1996.
4. Instruments Defining the Rights of Security Holders, Including
Indentures.
4.1 Stockholders Rights Plan (incorporated by reference to the
Company's Form 8A Report dated July 11, 1988), the First
Amendment to the Stockholders Rights Plan (incorporated by
reference to the Company's Form 8A Report dated May 2, 1989)
and the Second Amendment to the Stockholders Rights Plan
(incorporated by reference to the Company's Form 8A report
dated February 15, 1990).
10. Material Contracts
10.1 1990 Stock Incentive Plan of the Company (incorporated by
reference to Exhibit 10.11 of the Company's Form 10-K Report
for the Fiscal Year ended September 27, 1991).
10.2 Stock Option Plan for Outside Directors (incorporated by
reference to Exhibit 10.12 of the Company's Form 10-K Report
for the Fiscal Year ended September 27, 1991).
10.3 Employment Agreement dated December 12, 1995 between the
Company and William G. Parzybok, Jr.
10.4 Employment Agreement dated December 12, 1995 between the
Company and George M. Winn.
10.5 Employment Agreement dated December 12, 1995 between the
Company and Ronald R. Wambolt.
10.6 Employment Agreement dated December 12, 1995 between the
Company and Richard W. Van Saun.
10.7 Change of Control Agreement dated September 5, 1991 between the
Company and John R. Smith. Other executive officers of the
Company have identical change of control agreements with the
Company (incorporated by reference to Exhibit 10.12 of the
Company's Form 10-K Report for the Fiscal Year ended April 30,
1993).
10.8 Annual Variable Compensation Policy (incorporated by
reference to Exhibit 10.17 of the Company's Form 10-K Report
for the Fiscal Year ended April 30, 1993).
10.9 Purchase Agreement between the Company and Philips Electronics
N.V. dated February 26, 1993 (incorporated by reference to
Exhibit 10.18 of the Company's Form 10-K Report for the Fiscal
Year ended April 30, 1993).
10.10 Stock Purchase Agreement between the Company and Philips
Electronics N.V. dated May 26, 1993 (incorporated by reference
to Exhibit 10.19 of the Company's Form 10-K Report for the
Fiscal Year ended April 30, 1993).
10.11 Fluke Corporation 1988 Stock Incentive Plan of the Company as
amended on June 10, 1993 and approved by stockholders on September 29,
1993 (incorporated by reference to Exhibit 10.11 of the Company's
Form 10-K Report for the Fiscal Year ended April 29, 1994).
10.12 Deferred Compensation Plan for Directors of Fluke Corporation
as amended on April 29, 1994 (incorporated by reference to
Exhibit 10.12 of the Company's Form 10-K Report for the Fiscal
Year ended April 29, 1994).
10.13 Fluke Corporation Supplemental Retirement Income Plan as
amended on June 22, 1994 (incorporated by reference to Exhibit
10.13 of the Company's Form 10-K Report for the Fiscal Year
ended April 29, 1994).
10.14 Fluke Corporation Executive Deferred Compensation Plan as amended
on April 25, 1996.
11 Computation of Earnings Per Share.
13 1996 Annual Report to Stockholders.
21 Subsidiaries.
23.1 Consent of Ernst & Young LLP, independent auditors, dated
July 19, 1996.
Item 14 (b)Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
Company's Fiscal Year ended April 26, 1996.
Item 14 (c)Exhibits: See "Index to Exhibits" at Item 14(a)(3) above.
Item 14 (d)Financial Statement Schedules: Schedules required to be
filed in response to this portion of Item 14 are listed above in Item
14 (a)(2).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FLUKE CORPORATION
(Registrant)
/s/ George M. Winn President
George M. Winn Chief Operating Officer July 18, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ William G. Parzybok, Jr. Chairman of the Board July 18, 1996
William G. Parzybok, Jr. Chief Executive Officer
/s/ George M. Winn President, Chief Operating July 18, 1996
George M. Winn Officer and Director
/s/ Elizabeth J. Huebner Vice President July 18, 1996
Elizabeth J. Huebner Chief Financial Officer
/s/ John R. Smith Vice President, Treasurer July 18, 1996
John R. Smith Chief Accounting Officer
/s/ Philip M. Condit Director July 18, 1996
Philip M. Condit
/s/ John D. Durbin Director July 18, 1996
John D. Durbin
/s/ David L. Fluke Director July 18, 1996
David L. Fluke
/s/ John M. Fluke, Jr. Director July 18, 1996
John M. Fluke, Jr.
/s/ Robert S. Miller, Jr. Director July 18, 1996
Robert S. Miller, Jr.
/s/ Sally G. Narodick Director July 18, 1996
Sally G. Narodick
/s/ William H. Neukom Director July 18, 1996
William H. Neukom
/s/ N. Stewart Rogers Director July 18, 1996
N. Stewart Rogers
/s/ James E. Warjone Director July 18, 1996
James E. Warjone
<TABLE>
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
<F1>
Column C
Column A Column B Additions Column D Column F
Balance at Charged to Balance at
Beginning Costs and <F2> End of
Classification of Period Expense Deductions Period
<S> <C> <C> <C> <C>
Year ended April 29, 1994:
Allowance for Doubtful
Accounts Receivable $ 476 $440 $330 $586
Year ended April 28, 1995:
Allowance for Doubtful
Accounts Receivable $ 586 $820 $265 $1,141
Year ended April 26, 1996:
Allowance for Doubtful
Accounts Receivable $1,141 $ 98 $135 $1,104
<FN>
<F1> Column C(2) has been omitted because the answer would be none.
<F2> Write-off of uncollectible accounts receivable less recoveries.
</TABLE>
AMENDED AND RESTATED
BYLAWS
OF
FLUKE CORPORATION
(A corporation incorporated under
the laws of the State of Washington)
SECTION 1
Stockholders and Stockholders' Meetings
1.1 Annual Meeting. The annual meeting of the stockholders of the
corporation for the election of Directors and for the transaction of
such other business as may properly come before the meeting shall be
held each year at the principal office of the corporation, 6920 Seaway
Boulevard, Everett, WA 98203 or at some other place, either within or
without the State of Washington as designated by the Board of Director
("the Board"), on the second Wednesday of September at 5 p.m (or if such
specified day is a legal holiday, then on the next business day at the
same time), or on such other day and time as may be set by the Board.
1.2 New Business. At an annual meeting of stockholders, only such
new business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting (a) by, or at
the direction of, the Board or (b) by any stockholder of the corporation
who complies with the notice procedures set forth in this Section 1.2.
For a proposal to be properly brought before an annual meeting by
a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received at,
the principal office of the corporation not less than 70 days prior to
the scheduled annual meeting, regardless of any postponements, deferrals
or adjournments of that meeting to a later date; provided, however,
that, if less than 80 days' notice or prior public disclosure of the
date of the scheduled annual meeting is given or made, notice by the
stockholder to be timely must be so delivered or received not later than
the close of business on the 10th day following the earlier of the day
on which such notice of the date of the scheduled annual meeting was
mailed or the day on which such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting
(a) a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business and any
other stockholders known by such stockholder to be supporting such
proposal, (c) the class and number of shares of stock of the corporation
which are beneficially owned by the stockholder on the date of such
stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such
stockholder notice, and (d) any financial interest of the stockholder in
such proposal.
The Board may reject any stockholder proposal not timely made in
accordance with the terms of this Section 1.2. If the Board, or a
designated committee thereof, determines that the information provided
in a stockholder's notice does not satisfy the informational
requirements of this Section 1.2 in any material respect, the Secretary
shall promptly notify such stockholder of the deficiency in the notice.
The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of
time, not to exceed five days from the date such deficiency notice is
given to the stockholder, as the Board or such committee thereof shall
reasonably determine. If the deficiency is not cured within such
period, or if the Board or such committee thereof determines that the
additional information provided by the stockholder, together with
information previously provided, does not satisfy the requirements of
this Section 1.2 in any material respect, then the Board may reject such
stockholder's proposal.
The Secretary shall notify a stockholder in writing whether such
stockholder's proposal has been made in accordance with the time and
informational requirements of this Section 1.2. Notwithstanding the
procedure set forth in this Section 1.2, if neither the Board nor such
committee thereof makes a determination as to the validity of any
stockholder proposal, the presiding officer of the annual meeting shall
determine and declare at the annual meeting whether the stockholder
proposal was made in accordance with the terms of this Section 1.2. If
the presiding officer determines that a stockholder proposal was made in
accordance with the terms of this Section 1.2, ballots shall be provided
for use at the meeting with respect to any such proposal. If the
presiding officer determines that a stockholder proposal was not made in
accordance with the terms of this Section 1.2, such proposal shall not
be acted upon at the annual meeting.
In addition to the notice procedures of this Section 1.2,
stockholder proposals may be ruled out of order if the subject matter of
the proposal is beyond the authority of stockholders as a matter of law,
is unclear or is inappropriate for stockholder consideration.
1.3 Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called at any time by the Board, to be held
at such date, time and place as the Board shall prescribe. Upon the
request of the Board, it shall be the duty of the Secretary to deliver
notice of such special meeting of the stockholders within thirty (30)
days after the receipt of said request. If said Secretary shall neglect
or refuse to deliver such notice, the Board may do so.
1.4 Notice of Meetings. Written notice stating the date, time and
place of the annual stockholders' meeting and, in the case of a special
stockholders' meeting, the purpose or purposes for which the meeting is
called, shall be delivered within the period prescribed by the
Washington Business Corporation Act either personally or by mail, by or
at the direction of the Secretary, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail addressed to
the stockholder at his or her address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid.
1.5 Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment
of any dividend, or in order to make a determination of stockholders for
the payment of any distribution, the allotment of rights, the conversion
or exchange of any securities by their terms or any other proper
purpose, the Board may fix in advance a date as the record date for any
such determination of stockholders. Such record date shall not be more
than seventy (70) days and, in case of a meeting of stockholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination is to be taken.
If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or
stockholders entitled to receive payment of a dividend, the date on
which notice of the meeting is mailed or the date on which the
resolution of the Board declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section 1.5, such
determination shall apply to any adjournment thereof, unless the Board
chooses to establish a new record date or if the adjournment is more
than one hundred twenty (120) days after the date of the original
meeting in which case the Board must establish a new record date.
1.6 List of Stockholders. At least ten (10) days before each
stockholders' meeting, the Secretary or the agent having charge of the
stock transfer books of the corporation shall compile a complete list of
the stockholders entitled to vote at such meeting or adjournment
thereof, arranged in alphabetical order, with the address of each
stockholder and the number of shares owned by each stockholder. This
list shall be kept at the principal office of the corporation for ten
(10) days prior to the meeting, and shall be kept open at such meeting,
for the inspection of any stockholder or any stockholder's agent.
1.7 Quorum. The holders of a majority of the shares entitled to vote
at a meeting, present in person or by proxy, shall constitute a quorum
of stockholders for the transaction of business and the act of a
majority of the shares present in person or by proxy at a meeting at
which there is a quorum, shall be the act of the corporation, except as
otherwise provided by these Bylaws, the Articles of Incorporation, or
the Washington Business Corporation Act.
1.8 Adjourned Meetings. Whether for failure to obtain a quorum or
otherwise, an adjournment or adjournments of any stockholders' meeting
may be taken to such date, time and place as the majority of those
present may determine. Notice need not be given of the new date, time
and place if the announcement of such information is made at such
meeting before adjournment. However if a new record date is set pursuant
to Section 1.5, notice of the adjourned meeting must be given to
stockholders as of the new record date.
1.9 Proxies. The holder of any proxy for a stockholder shall present
evidence to the Secretary of his or her appointment by an instrument in
writing signed by the stockholder or by his or her duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from
the date of its execution unless otherwise provided in the proxy.
Revocation of a stockholder's proxy shall not be effective until written
notice thereof has actually been received by the Secretary prior to the
start of the meeting.
SECTION 2
Board of Directors
2.1 Number and Qualification. The business affairs and property of
the corporation shall be managed under the direction of a Board of
Directors, the number of members of which shall be eleven.
2.2 Election -Term of Office. Directors shall hold office for the
term set forth in this Section 2.2, and until their respective
successors are elected and qualified, unless removed in accordance with
the Articles of Incorporation and the Washington Business Corporation
Act. When the Board shall consist of fewer than nine members, each
Director shall hold office until the next succeeding annual meeting of
stockholders. When the Board shall consist of nine or more members, the
Directors shall be divided into three classes, each class to be as
nearly equal in number as possible, the term of office of Directors of
the first class to expire at the first annual meeting of stockholders
after their election, that of the second class to expire at the second
annual meeting after their election, and that of the third class to
expire at the third annual meeting after their election. At each annual
meeting after such classification, the number of Directors equal to the
number of the class whose term expires at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting. In
the event of failure to elect Directors at any annual stockholders'
meeting, or in the event of failure to hold any annual stockholders'
meeting as provided by these Bylaws, Directors may be elected at a
special meeting of the stockholders called for that purpose.
2.3 Director Nominations. Nominations of candidates for election as
Directors at any meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board or (b) by any stockholder entitled
to vote at such meeting. Only persons nominated in accordance with the
procedures set forth in this Section 2.3 shall be eligible for election
as Directors at a stockholders' meeting.
Nominations, other than those made by, or at the direction of,
the Board, shall be made pursuant to timely notice in writing to the
Secretary as set forth in this Section 2.3. To be timely a
stockholder's notice shall be delivered to, or mailed and received at,
the principal office of the corporation not less than 70 days nor more
than 90 days prior to the date of the scheduled stockholder meeting,
regardless of postponements, deferrals, or adjournments of that meeting
to a later date; provided, however, that if less than 80 days' notice or
prior public disclosure of the date of the scheduled meeting is given or
made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the 10th day following
the earlier of the day on which such notice of the date of the scheduled
meeting was mailed or the day on which such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as
a Director and as to the stockholder giving the notice (i) the name,
age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and
number of shares of stock of the corporation which are beneficially
owned by such person on the date of such stockholder notice and (iv) any
other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for
election as Directors, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and any other stockholders known by such
stockholder to be supporting such nominees and (ii) the class and number
of shares of stock of the corporation which are beneficially owned by
such stockholder on the date of such stockholder notice and by any other
stockholders known by such stockholder to be supporting such nominees on
the date of such stockholder notice. At the request of the Board, any
person nominated by, or at the direction of, the Board for election as a
Director at a stockholder meeting shall furnish to the Secretary that
information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee.
No person shall be elected as a Director of the corporation
unless nominated in accordance with the procedures set forth in this
Section 2.3. Ballots bearing the names of all the persons who have been
nominated for election as Directors at a stockholder meeting in
accordance with the procedures set forth in this Section 2.3 shall be
provided for use at the stockholder meeting.
The Board, or a designated committee thereof, may reject any
nomination by a stockholder not timely made in accordance with the
requirements of this Section 2.3. If the Board, or a designated
committee thereof, determines that the information provided in a
stockholder's notice does not satisfy the informational requirements of
this Section 2.3 in any material respect, the Secretary shall promptly
notify such stockholder of the deficiency in the notice. The
stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of
time, not to exceed five (5) days from the date such deficiency notice
is given to the stockholder, as the Board or such committee thereof
shall reasonably determine. If the deficiency is not cured within such
period, or if the Board or such committee thereof reasonably determines
that the additional information provided by the stockholder, together
with information previously provided, does not satisfy the requirements
of this Section 2.3 in any material respect, then the Board may reject
such stockholder's nomination.
The Secretary shall notify a stockholder in writing whether such
stockholder's director nomination has been made in accordance with the
time and information requirements of this Section 2.3. Notwithstanding
the procedure set forth in this Section 2.3, if neither the Board nor
such committee thereof makes a determination as to the validity of any
nominations by a stockholder, the presiding officer of the meeting shall
determine and declare at the meeting whether a nomination was made in
accordance with the terms of this Section 2.3. If the presiding officer
determines that a nomination was made in accordance with the terms of
this Section 2.3, ballots shall be provided for use at the meeting with
respect to such nominee. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Section
2.3, the defective nomination shall be disregarded.
2.4 Vacancies. Except as otherwise provided by the Washington
Business Corporation Act, vacancies in the Board, whether caused by
resignation, death, retirement, disqualification, removal or otherwise,
may be filled for the remainder of the term by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the
Board, except that Directors elected to fill vacancies occurring through
an increase in the number of Directors shall serve until the next
election of Directors by the stockholders.
2.5 Quorum and Voting. At any meeting of the Board, the presence in
person of a majority of the authorized number of Directors shall
constitute a quorum for the transaction of business. If a quorum is
present, the act of a majority of the Directors present at such meeting
shall be the act of the Board except as may be otherwise specifically
provided by these Bylaws, the Articles of Incorporation or the
Washington Business Corporation Act.
2.6 Annual Meeting. The first meeting of each newly elected Board
shall be known as the annual meeting thereof, and shall be held
immediately after the annual stockholders' meeting or any special
stockholders' meeting at which a Board is elected. Said meeting shall
be held at the same place as such stockholders' meeting unless some
other place shall be specified by resolution of the Board. It shall be
the duty of the Board at their annual meeting to elect the officers of
the corporation.
2.7 Regular Meetings. Regular meetings of the Board, or any
committee thereof, shall be held at such date, time and place as shall
from time to time be fixed by resolution of the Board.
2.8 Special Meetings. Special meetings of the Board may be held at
any place at any time whenever called by the Chairman of the Board and
Chief Executive Officer, the President and Chief Operating Officer, any
Vice President, the Secretary or the Treasurer, or any two or more
Directors.
2.9 Notice of Meetings. No notice of the annual meeting of the Board
shall be required. No notice of any regular Board or committee meeting
need be given, if the date, time and place thereof shall have been fixed
by resolution of the Board. Oral or written notice of the date, time and
place of regular meetings not fixed by Board resolution or special
meetings of the Board or committees thereof shall be given by the
Secretary, or by the person calling the meeting, at least two days prior
to the time of the meeting. Notice of any meeting of the Board may be
waived in writing by any Director at any time, either before or after
such meeting, and attendance at such meeting in person shall constitute
a waiver of notice except where a Director attends for the express
purpose of objecting to the transaction of any business because the
meeting was not lawfully convened.
2.10 Directors' Action Without a Meeting. Any action which could be
properly taken at a meeting of the Board or committee thereof, may be
taken without such a meeting if one or more written consents setting
forth the action so taken shall be signed by all the Directors, or all
of the members of the committee, as the case may be.
2.11 Committees of the Board. The Board, by resolutions adopted by a
majority of the entire Board, may designate from among its members an
Executive Committee and one or more other committees. Each such
committee may exercise the authority of the Board to the extent provided
in such resolution and any subsequent resolutions pertaining thereto and
adopted in like manner, provided that the authority of each such
committee shall be subject to the limitations set forth in the
Washington Business Corporation Act. Such committees shall keep minutes
of their proceedings and make regular reports to the Board.
2.12 Telephone Meetings. Members of the Board or any committee
thereof may participate in a meeting of such Board or committee by means
of a conference telephone or similar communications equipment by which
all directors participating in the meeting can hear each other during
the meeting. A director participating by such means is deemed to be
present in person at such meeting.
2.13 Compensation. Directors shall be paid their expenses, if any,
incurred in attending meetings of the Board or of any committee thereof,
a fixed fee for attendance at each Board or committee meeting, a fixed
annual retainer, any combination of the above, or such other
consideration as may be authorized by a majority of the entire Board
from time to time. Such payment does not preclude any Director from
serving the corporation in any other capacity and receiving compensation
therefor.
2.14 Rights Agreement. Notwithstanding any of the foregoing, any
action stated in the Rights Agreement between this corporation and the
First National Bank of Boston dated as of July 11, 1988, as such
agreement may be amended from time to time (the "Rights Agreement") to
be taken by the Board after a Person has become an Acquiring Person
shall require the presence in office of Continuing Directors and the
concurrence of a majority of the Continuing Directors. In connection
with any action stated in the Rights Agreement to be taken solely by the
Continuing Directors, the Continuing Directors shall constitute and have
the full authority of a committee of the Board. Capitalized terms in
this paragraph shall have the meaning indicated in the Rights Agreement.
SECTION 3
Officers
3.1 Officers Enumerated - Election. The officers of the corporation
shall be a Chairman of the Board and Chief Executive Officer, a
President and Chief Operating Officer, one or more Vice Presidents, a
Secretary and a Treasurer (together with one or more Assistant
Secretaries and Assistant Treasurers if such are desired by the Board),
all of whom shall be elected by the Board, to hold office at the
pleasure of the Board.
3.2 Qualifications. None of the officers of the corporation need be
a director. Any two or more corporate offices may be held by the same
person, except the offices of President and Secretary.
3.3 The Chairman of the Board and Chief Executive Officer. The
Chairman of the Board and Chief Executive Officer ("the Chairman") shall
preside at all meetings of the Board and of the stockholders, shall
report to and consult with the Board and shall perform such other duties
as the Board may from time to time prescribe.
3.4 The President and Chief Operating Officer. In the absence of the
Chairman, the President and Chief Operating Officer ("the President")
shall preside at meetings of the Board and of the stockholders and shall
perform such other duties as the Board may from time to time prescribe.
3.5 The Vice President. The Vice President shall act as President in
the absence or disability of the President and shall perform such other
duties as the Board, the Chairman and/or the President may from time to
time prescribe.
3.6 The Secretary. The Secretary, personally or with the assistance
of others, shall keep records of the proceedings of the Directors and
stockholders; attest all certificates of stock in the name of the
corporation; keep the corporate seal and affix the same to certificates
of stock and other proper documents; keep a record of the issuance of
certificates of stock and the transfers of the same; and perform such
other duties as the Board, the Chairman and/or the President may from
time to time prescribe.
3.7 The Treasurer. The Treasurer shall have the care and custody,
and be responsible for, all funds and securities of the corporation, and
shall cause to be kept regular books of account. The Treasurer shall
cause to be deposited all such funds and securities in the name of the
corporation and shall perform such other duties as the Board, the
Chairman and/or the President may from time to time prescribe.
3.8 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board at any regular or special meeting.
3.9 Removal. Any officer or agent may be removed by action of the
Board at any time, with or without cause, but such removal shall be
without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of
itself create any contract rights.
3.10 Other Officers and Agents. The Board may appoint such other
officers and agents as it shall deem necessary or expedient, who shall
hold their office for such terms, and shall exercise such powers and
perform such duties, as shall be determined from time to time by the
Board.
SECTION 4
Shares Certificates and Their Transfer
4.1 Issuance of Shares. No shares of the corporation shall be issued
unless authorized by the Board or by an authorized committee thereof
which is specifically empowered to do so.
4.2 Share Certificates. Share certificates shall be issued in
numerical order, and each stockholder shall be entitled to a certificate
signed, either manually or in facsimile, by the Chairman of the Board,
President or a Vice President, and by the Secretary or an Assistant
Secretary, and sealed, either manually or in facsimile, with the
corporate seal.
4.3 Transfers. Shares may be transferred by delivery of the
certificate, accompanied either by an assignment in writing on the back
of the certificate, or by a written power of attorney to sell, assign
and transfer the same, signed by the record holder of the certificate.
Except as otherwise specially provided by these Bylaws, no shares of
stock shall be transferred on the books of the corporation until the
outstanding certificate has been surrendered to the corporation.
4.4 Loss or Destruction of Certificates. In the event of the loss or
destruction of any certificate, a new certificate may be issued in lieu
thereof upon satisfactory proof of such loss or destruction, and upon
the giving of security against loss to the corporation by bond,
indemnity or otherwise, to the extent deemed necessary by the Board or
the Secretary or Treasurer.
SECTION 5
Books and Records
5.1 Records of Meetings. The corporation shall keep as permanent
records, minutes of all Board and stockholder meetings, a record of all
Board actions taken by consent, and a record of all actions taken by a
committee of the Board exercising the authority of the Board on behalf
of the corporation.
5.2 Accounting Records. The corporation shall maintain appropriate
accounting records.
5.3 Stockholder Records. The corporation or its agent shall maintain
a record of its stockholders which includes the names and addresses of
all stockholders and the number and class of shares held by each.
5.4 Principal Office Records. The corporation shall maintain the
following records at its principal office:
a) the Articles of Incorporation and all amendments to them
currently in effect;
b) the Bylaws and all amendments to them currently in effect;
c) the minutes of all stockholders' meetings for the past three
years;
d) the consolidated balance sheets and income statements for the
past three years;
e) all written communications to the stockholders for the last
three years;
f) a list of the names and business addresses of the current
Directors and officers; and
g) the most recent annual report delivered to the Washington
Secretary of State.
5.5 Inspection of Records by Stockholders. A stockholder of the
corporation is entitled to inspect and copy, during regular business
hours, the records described in Section 5.4 if the stockholder gives the
corporation written notice of the stockholder's demand at least five
business days before the date that the stockholder wishes to inspect and
copy. Other corporate records may be available to be inspected and
copied by stockholders if such demand is made in good faith and for a
proper purpose and complies with the requirements of the Washington
Business Corporation Act.
SECTION 6
Fiscal Year
The fiscal year of the corporation shall be a 52/53 week fiscal
year ending on the last Friday in April.
SECTION 7
Corporate Seal
The corporate seal of the corporation shall consist of the name of
the corporation, the state of its incorporation and the year of its
incorporation.
SECTION 8
Amendment of Bylaws
Except as provided in the Articles of Incorporation, these Bylaws
may be adopted, altered, amended or repealed or new Bylaws enacted only:
(i) upon receiving the affirmative vote of a majority of the entire
Board and of a majority of the Continuing Directors (as defined in the
Articles of Incorporation), voting separately and as a subclass of
Directors; or (ii) at any annual meeting of the stockholders, if notice
thereof is contained in the notice of such meeting, (or at any special
meeting thereof duly called for that purpose) by the affirmative vote of
the holders of eighty percent (80%) of the voting power of the
outstanding shares of Common Stock, in addition to any other vote
required for such action by law or the provisions of any other class or
series of stock of the corporation.
SECTION 9
Indemnification of Directors and Officers
9.1 Right to Indemnification. Subject to Section 9.2, each person
who was or is made a party or is threatened to be made a party to or is
involved (including, without limitation, as a witness) in any
threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director
or officer of the corporation or who, while a director or officer of the
corporation, is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, other enterprise, or employee benefit
plan, whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other assigned
capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the corporation to the fullest
extent permitted by applicable law, as then in effect, without the
requirement of any further approval or finding by the stockholders, the
Board, or independent legal counsel, against all expense, liability and
loss (including attorneys' fees, costs, judgments, fines, ERISA excise
taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of his or her heirs,
executors and administrators.
9.2 Indemnification Exclusions. Notwithstanding Section 9.1, no
indemnification shall be provided hereunder to any such person (a) to
the extent that such indemnification would be prohibited by the
Washington Business Corporation Act or other applicable law as then in
effect, or, (b) except as provided in Section 9.4, in connection with a
proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized by the Board.
9.3 Advancement of Expenses. The right to indemnification conferred
in this Section 9 shall include the right to be paid by the corporation
the expenses incurred in defending any such proceeding in advance of its
final disposition, except where the Board shall have adopted a
resolution expressly disapproving such advancement of expenses;
provided, however, that the payment of such expenses in advance of the
final disposition of a proceeding shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Section or otherwise.
9.4 Right to Bring Suit. If a claim under Section 9.1 is not paid in
full by the corporation within sixty days after a written claim has been
received by the corporation, or if a claim for expenses incurred in
defending a proceeding in advance of its final disposition authorized
under Section 9.3 is not paid within twenty days after a written claim
has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, to the extent successful in whole or in part,
the claimant shall be entitled to be paid also the expense of
prosecuting such claim. The claimant shall be presumed to be entitled
to indemnification hereunder upon submission of a written claim (and, in
an action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition, where the required
undertaking has been tendered to the corporation), and thereafter the
corporation shall have the burden of proof to overcome the presumption
that the claimant is not so entitled. It shall be a defense to any such
that the claimant has not met the standards of conduct which make it
permissible hereunder or under the Washington Business Corporation Act
for the corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the corporation.
9.5 Nonexclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Articles of Incorporation or the Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
9.6 Indemnification of Employees and Agents. The corporation may, by
action of its Board from time to time, provide indemnification and pay
expenses in advance of the final disposition of a proceeding to
employees and agents of the corporation on the same terms and with the
same scope and effect as set out in the provisions of this Section with
respect to the indemnification and advancement of expenses of directors
and officers of the corporation or pursuant to rights granted pursuant
to, or provided by, the Washington Business Corporation Act or on such
other terms as the Board may deem proper.
9.7 Insurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or who, while a director, officer,
employee or agent of the corporation, is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense,
liability or loss under the Washington Business Corporation Act. The
corporation may enter into contracts with any director or officer of the
corporation in furtherance of the provisions of this Section and may
create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in this Section 9.
9.8 No Diminishment of Rights. This Section 9 may be altered or
amended as provided in Section 8, at any time, but no such amendment
shall have the effect of diminishing the rights of any person who is or
was an officer or director as to any acts or omissions taken or omitted
to be taken prior to the effective date of such amendment.
9.9 Contract Rights. The rights conferred by this Section 9 shall be
deemed to be contract rights between the corporation and each person who
is or was a director or officer. The corporation expressly intends each
such person to rely on the rights conferred hereby in performing his or
her respective duties on behalf of the corporation.
Revised - February 1, 1996
<TABLE>
Exhibit 11 COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION>
Year ended Year ended Year ended
April 26, April 28, April 29,
1996 1995 1994
<S> <C> <C> <C>
Shares issued at beginning
of period 7,898,674 8,807,391 8,807,391
Less repurchased shares at
beginning of period --- (908,701) (2,464,936)
Shares outstanding at
beginning of period 7,898,674 7,898,690 6,342,455
Net issuance (forfeiture)
of shares under stock award
plans, weighted average 122,772 (104,444) 5,208
Shares issued for
acquisition, weighted average --- --- 1,000,000
Shares issued upon conversion
of preferred shares,
weighted average --- --- 538,144
Weighted average shares
outstanding 8,021,446 7,794,246 7,885,807
Assumed exercise of stock
options, weighted average
of incremental shares 263,705 198,558 145,889
Average shares and common
share equivalents
outstanding 8,285,151 7,992,804 8,031,696
Earnings per share based on
weighted average shares
and common share equivalents
outstanding $ 2.58 $ 1.86 $ 1.10
Net Income (in thousands) $21,343 $14,901 $8,800
</TABLE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FINANCIAL RESULTS 1996 VS 1995
All years referenced below are for the Company's fiscal years which end on the
last Friday of April. 1996 ended with revenues exceeding $400 million for the
first time in the Company's history. 1996 revenues of $414 million were 8
percent higher than the revenues of $382 million in 1995. Growth in
international revenues was responsible for the overall growth as revenues from
international markets increased 16 percent after conversion to U.S. dollars.
Revenues in the United States decreased 2 percent.
The growth in international revenues was led by countries outside of Europe
such as The People's Republic of China, South Korea, Brazil, India, Taiwan,
Thailand and Singapore. The significant revenue increase in these countries
led to a 26 percent growth in revenues in countries outside Europe and the
United States. Asian markets have provided significant growth over the last
few years. It is expected that opportunities for growth in many of the Asian
markets will continue for the foreseeable future. In order to capitalize on
these opportunities the Company is making investments in several countries.
The Company formed a joint venture in May 1996 which will sell the Company's
products to the Korean market. The joint venture, known as Fluke Korea Co.,
Ltd., will be staffed with personnel from the two representative organizations
that have been successfully selling the Company's products in Korea. The
Company's revenues in South Korea have been growing rapidly over the last few
years and this investment is necessary to capture future opportunities. In
addition, the Company opened two representative offices in May 1996, one in
the city of Chengdu in The People's Republic of China and one in Malaysia.
These two investments will provide a more focused effort in these two
important markets. The Company continues to look for ways to strengthen its
international sales efforts.
European revenues increased 12 percent in 1996 over 1995, of which 8 percent
was a result of stronger European currencies. The softening economies of many
of the European countries have contributed to the moderate growth in local
currency revenue in Europe. Although overall growth has been moderate, many
of the products introduced in the last two years have been selling well in
Europe. Spain, Finland, Sweden and Italy were countries that had relatively
good growth in revenues in 1996 over 1995. Beginning January 1996, the
European Union required that all electrical instruments sold within Europe
have a `CE' mark, which indicates compliance with certain electromagnetic
emission and susceptibility regulations. The Company modified its products to
conform to the `CE' requirements by the January 1, 1996 deadline.
The Company's revenues in the United States have been relatively flat in the
last two years, with a 2 percent decrease in revenues in 1996 from 1995. The
decline in revenues in 1996 can be attributed to several factors. The
continuing introduction of products that are more effectively sold through
indirect sales channels such as distributors, dealers, catalog houses, etc.,
caused the Company's direct business to be reduced to a level that could no
longer be handled efficiently by a direct sales force exclusively dedicated to
Fluke products. Therefore, effective at the beginning of fiscal 1996, the
Company converted the selling responsibility of its direct sales force in the
United States to independent manufacturing representatives. Those employees
impacted by the transition were either transferred to positions supporting
indirect sales channels, hired by the representative organizations or left the
Company. 1996 was a transition year for the new sales organization which
contributed to the lack of growth in the United States. The cost of the
transition was recorded in 1995. The Company continues to face competitive
challenges throughout the world, including the distribution channels in the
U.S. which are experiencing an increased level of competition. In 1996, the
Company responded by refocusing its marketing functions and by new product
introductions. The Company believes its 1997 marketing efforts and new
product introductions will lead to future revenue growth in the United States.
The 8 percent increase in the Company's revenues during 1996 was led by
significant growth in products which test computer networks. The growth in
these products, particularly in international markets, and the future
potential in this market has led management to create a new Fluke Networks
division to focus resources and raise the awareness of network products.
Current network product offerings include the Fluke DSP-100 LAN CableMeter
which tests cable used in computer networks and the Fluke 685 Enterprise
LanMeter which tests the networks themselves. These tools are instrumental to
people who install and maintain computer networks.
Subsequent to the end of 1996, the Company completed the acquisition of Forte'
Networks, Inc. (Forte'). Forte' designs products that test computer networks.
Most of the Fluke product offerings in network troubleshooting have been
designed and produced by Forte'. The Company formerly had exclusive rights to
the Forte' products and this acquisition brings the design, marketing,
manufacturing and selling organizations together to better meet the needs of
the customer. The Company also expects to realize an improvement in gross
margin on these network products as a result of this transaction. The
acquisition was completed through a merger and an exchange of shares and will
be treated as a pooling-of-interests combination for accounting purposes. For
more information see Note 3, Subsequent Event, in the Notes to the Financial
Statements on page 42.
The Company's calibration products also experienced good revenue growth,
again, primarily in the international markets. The movement throughout the
world to comply with ISO 9000 requirements has been one reason for the
increased calibration revenues.
At April 26, 1996 the Company had order backlog of $32 million which was a
reduction from $45 million at April 28, 1995. The backlog at April 28, 1995
was higher than normal due to some government orders received late in 1995 and
some product delivery delays in a product line. The reduction in 1996 leaves
the backlog at a level that is appropriate for meeting customer delivery
requirements.
As indicated above, the Company has significant operations overseas and the
financial results are therefore impacted by movements in foreign currencies.
In addition to the impact of currency movements, international operations
increase the complexity and risk to the Company. These risks include
increased exposure to the risk of foreign currency fluctuations, changes in
labor and tax laws, import and export controls and changes in governmental
policies. The following table highlights the approximate currency effect on
key items in the statements of income:
<TABLE>
(In thousands)
<CAPTION>
For the For the
Year Year Variance Variance
Ended Ended from from
April 26, 1996 April 28, 1995 Variance Currency Operations
<S> <C> <C> <C> <C> <C>
Revenues $413,525 $382,066 8% 3% 5%
Cost of Goods Sold 196,721 185,873 6% 3% 3%
Gross Margin 216,804 196,193 11% 3% 8%
Operating Expenses 183,044 172,008 6% 3% 3%
Operating Income 33,760 24,185 40% -1% 41%
</TABLE>
Gross Margin as a percent of revenues improved from 51 percent in 1995 to 52
percent in 1996. This improvement can be partially explained because the
Company's new products are generating higher margins than many of the older
products and because of the higher percentage of international revenues which
generate higher margins than revenues in the United States.
Operating expenses increased 6 percent in 1996 over 1995. Marketing and
administrative expense increased 7 percent and research and development
expense increased 3 percent. At the beginning of 1996 the Company reorganized
its marketing function to bring most of the marketing personnel into one
organization instead of disbursed in the different product divisions. The new
marketing group is organized along the markets to which the Company sells
instead of along product lines, which should provide a better coordination of
marketing programs. As a result, in 1996 there was a more direct focus on
selling to specific customer groups which included producing several market
specific catalogs instead of one general catalog, increased advertising to
specific market segments and increased sales support for the indirect sales
channels. This contributed to the increase in marketing and administrative
expenses in 1996 over 1995.
Operating income increased 40 percent in 1996 over 1995. This increase was
generated through the introduction of successful higher margin products while
maintaining control over the growth in operating expenses.
The effective annual tax rate decreased from 38.0 percent in 1995 to 36.5
percent in 1996. The decrease in the rate is primarily a result of improved
profitability in selected European countries in 1996 over 1995.
Net income increased 43 percent in 1996 over 1995. This improvement, as
discussed above, reflects the improvement in gross margin and continued
control over operating expenses.
FINANCIAL RESULTS 1995 VS 1994
The financial results in 1995 showed improvement over 1994. Revenues of $382
million were up 7 percent over revenues of $358 million in 1994.
International revenues, after conversion to U.S. dollars, were up 13 percent
in 1995, while revenues in the United States were down less than one percent.
The increase in international revenues in 1995, as was the case in 1996, were
led by a 30 percent increase in Asian countries. Countries contributing to
this growth were South Korea, Singapore, Japan and Taiwan. Revenues in Europe
increased 9 percent in 1995 over 1994.
Contributing to the flat revenues in the United States was a price increase at
the beginning of fiscal 1995 which caused some movement of business to 1994,
ahead of the price increase. There was no significant price increase at the
beginning of fiscal 1996.
The table below highlights the approximate effect of currency movements on key
items in the statements of income:
<TABLE>
(In thousands)
<CAPTION>
For the For the
Year Year Variance Variance
Ended Ended from from
April 28, 1995 April 29,1994 Variance Currency Operations
<S> <C> <C> <C> <C> <C>
Revenues $382,066 $357,904 7% 3% 4%
Cost of Goods Sold 185,873 182,475 2% 3% -1%
Gross Margin 196,193 175,429 12% 3% 9%
Operating Expenses 172,008 161,040 7% 3% 4%
Operating Income 24,185 14,389 68% 3% 65%
</TABLE>
Gross margin as a percentage of revenues improved from 49 percent in 1994 to
51 percent in 1995. This improvement is attributed primarily to increased
factory utilization in 1995 over 1994 and the mix of higher margin new
products. Also contributing to the improvement was the shipment of products
in 1994 which were acquired at a higher cost prior to the acquisition of the
Philips test and measurement business. The acquisition is described in Note
2, Acquisition of European Operations, in the Notes to the Financial
Statements on page 41. Gross margin increased 12 percent on the 7 percent
increase in revenues.
Operating expenses increased 7 percent in 1995 over 1994. Approximately 3
percent of the increase was due to the weakening U.S. dollar against the
currencies in countries where the Company has foreign operations. Marketing
and administrative expense increased 7 percent and research and development
expense increased 8 percent in 1995 over 1994. The increase in marketing and
administrative expense was due to several items including higher commission
expense from the sale of the local area network (LAN) products, higher
reserves for bad debts and increased legal costs related to the protection of
intellectual property. Also contributing to the increase in marketing and
administrative expenses was the Company's conversion of selling responsibility
from its Fluke direct sales force in the United States to independent
manufacturing representatives. This change was effective at the beginning of
fiscal 1996; however, the cost of the transition was recorded in fiscal 1995.
Research and development expense increased due to a continued high level of
investment in new products in 1995.
The effective annual tax rate increased from 37.5 percent in 1994 to 38.0
percent in 1995. Although the average statutory rate in Europe is close to
the U.S. statutory rate of 35.0 percent, losses in some of the acquired
country operations with no offsetting benefit caused the effective rate to
exceed the statutory rate.
Net income and earnings per share both increased 69 percent in 1995 over 1994.
This increase resulted from the 12 percent increase in gross margin while
expenses only increased 7 percent. The Company's emphasis on revenue growth
through new products while controlling expenses and improving factory
efficiencies continued in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The cash position of the Company continues to remain strong as cash generated
from operating activities provided $30.8 million of cash flow in 1996. The
Company expects that cash generated from operations will be sufficient to fund
working capital and capital expenditure requirements in the foreseeable
future.
The Company maintains committed and uncommitted lines of credit totaling $118
million. The borrowings outstanding at April 26, 1996 and at April 28, 1995
are for working capital requirements in the European operations. These
borrowings have been paid down, and the remaining balance is expected to be
repaid, with cash generated from the European operations.
The Company made capital expenditures of $12 million in 1996, $14 million in
1995 and $13 million in 1994. Capital expenditures consist primarily of
manufacturing and research and development equipment.
The current ratio was 3.5 to 1 at April 26, 1996 and 3.1 to 1 at April 28,
1995. The increase in the current ratio was caused primarily by an increase
in current assets, including cash, inventories and prepaid expenses.
The Company increased its quarterly cash dividend from $0.14 to $0.15 per
share. The Company has increased the dividend each year since the cash
dividends were initiated in 1989, with the exception of the short transition
period in 1993. In June 1996 the Company continued this trend by declaring a
$0.16 per share dividend for the first quarter of fiscal 1997. The dividend
will be paid on August 16, 1996 to shareholders of record as of July 26, 1996.
The Company paid $4.7 million in cash dividends in 1996.
The Company has a program to hedge some of its foreign exchange exposure using
forward exchange contracts. The contracts cannot be speculative and are
limited to actual transaction exposure. The Company does not currently use
any other form of derivatives in managing its financial risk.
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except shares and per share amounts)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 34,609 $ 28,880
Accounts receivable (less allowances:
1996-$1,104; 1995-$1,141) 69,060 77,222
Inventories 59,053 53,908
Deferred income taxes 15,062 15,159
Prepaid expenses 15,540 7,556
Total Current Assets 193,324 182,725
Property, Plant and Equipment
Land 5,801 5,979
Buildings 46,152 47,235
Machinery and equipment 110,977 103,968
Construction in progress 1,804 2,298
164,734 159,480
Less accumulated depreciation (106,783) (97,611)
Net Property, Plant and Equipment 57,951 61,869
Goodwill and Intangible Assets 16,528 23,033
Other Assets 8,285 7,895
Total Assets $276,088 $275,522
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 15,772 $ 17,080
Accrued liabilities 37,622 38,733
Income taxes payable 2,178 3,307
Current maturities of long-term
obligations 180 230
Total Current Liabilities 55,752 59,350
Long-Term Obligations 7,098 21,613
Deferred Income Taxes 10,585 9,409
Other Liabilities 10,593 9,870
Total Liabilities 84,028 100,242
Stockholders' Equity
Preferred stock, $0.25 par value
(authorized 2,000,000 shares) --- ---
Common stock, $0.25 par value
(authorized 20,000,000 shares, issued
shares, 8,075,765 in 1996 and 7,898,674
in 1995) 2,019 1,975
Additional paid-in capital 65,195 59,861
Retained earnings 123,609 107,089
Cumulative translation adjustment 1,237 6,355
Total Stockholders' Equity 192,060 175,280
Total Liabilities and Stockholders' Equity $276,088 $275,522
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except shares and per share amounts)
<CAPTION>
For the For the For the
year ended year ended year ended
April April April
26, 1996 28, 1995 29, 1994
<S> <C> <C> <C>
Revenues $413,525 $382,066 $357,904
Cost of Goods Sold 196,721 185,873 182,475
Gross Margin 216,804 196,193 175,429
Operating Expenses
Marketing and administrative 144,309 134,343 126,088
Research and development 38,735 37,665 34,952
Total Operating Expenses 183,044 172,008 161,040
Operating Income 33,760 24,185 14,389
Nonoperating Expenses (Income)
Interest expense 1,395 1,435 1,529
Other (1,247) (1,284) (1,220)
Total Nonoperating Expenses 148 151 309
Income Before Income Taxes 33,612 24,034 14,080
Provision for Income Taxes 12,269 9,133 5,280
Net Income $ 21,343 $ 14,901 $ 8,800
Earnings Per Share $ 2.58 $ 1.86 $ 1.10
Average Shares and Share Equivalents
Outstanding 8,285,151 7,992,804 8,031,696
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April April April
26, 1996 28, 1995 29, 1994
<S> <C> <C> <C>
Operating Activities
Net income $ 21,343 $14,901 $ 8,800
Items not affecting cash:
Depreciation and amortization 15,483 16,042 17,071
Deferred income tax 777 (982) 2,381
Accrued pension expense (1,734) 1,583 (1,162)
Stock awards 131 189 376
Loss (gain) on disposal of property,
plant and equipment 109 (251) 242
Net change in:
Accounts receivable 5,992 (1,016) (45,023)
Inventories (7,637) 4,049 4,580
Prepaid expenses (4,992) 3,093 (2,356)
Accounts payable (560) (4,319) 12,998
Accrued liabilities 168 18 5,791
Accrued liabilities related to
restructuring --- (497) 892
Income taxes payable 1,137 4,505 394
Other assets and liabilities 590 (1,804) 2,023
Net Cash Provided By Operating
Activities 30,807 35,511 7,007
Investing Activities
Additions to property, plant and equipment (12,391) (14,123) (13,050)
Proceeds from disposal of property,
plant and equipment 2,446 1,774 180
Purchase of Philips test and measurement
business --- --- (26,056)
Net Cash Used By Investing Activities (9,945) (12,349) (38,926)
Financing Activities
Proceeds from short-term debt --- --- 2,329
Payments on short-term debt --- --- (2,329)
Proceeds from long-term obligations --- 24,113 47,879
Payments on long-term obligations (13,351) (20,067) (33,023)
Repurchase of common stock --- (4,579) ---
Cash dividends paid (4,718) (4,287) (3,970)
Proceeds from stock options 3,493 2,800 222
Net Cash Provided (Used) By
Financing Activities (14,576) (2,020) 11,108
Effect of Foreign Currency Exchange Rates
on Cash and Cash Equivalents (557) 1,218 2,916
Net Increase (Decrease) In Cash and Cash
Equivalents 5,729 22,360 (17,895)
Cash and Cash Equivalents at Beginning
of Year 28,880 6,520 24,415
Cash and Cash Equivalents at End of
Year $ 34,609 $28,880 $ 6,520
Supplemental Cash Flow Information:
Income taxes paid $ 12,309 $ 5,809 $ 5,142
Interest paid $ 1,420 $ 1,409 $ 1,529
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except shares)
<CAPTION>
Number of Par Par
Common Value of Value of Additional
Shares Preferred Common Paid-In
Outstanding Stock Stock Capital
<S> <C> <C> <C> <C>
Balance, April 30, 1993 6,342,455 $ 20 $2,202 $96,072
Net income
Net forfeiture of shares under stock award plans (5,109) 145
Vesting of 17,117 shares under stock award plans
Issuance of shares for acquisition 1,000,000 (1,450)
Conversion of preferred shares 538,144 (20) (13,361)
Cash dividends declared
Income tax benefit from stock plans 30
Exercise of stock options 23,200 (355)
Net translation adjustment
Balance, April 29, 1994 7,898,690 --- $2,202 $81,081
Net income
Net forfeiture of shares under stock award plans (934) 3
Vesting of 9,524 shares under stock award plans
Repurchase of common shares (150,000)
Cash dividends declared
Income tax benefit from stock plans 35
Exercise of stock options 150,918 26 1,588
Net translation adjustment
Cancellation of repurchased shares (253) (22,701)
Balance, April 28, 1995 7,898,674 --- $1,975 $60,006
Net income
Net grant of shares under stock award plans 1,915 75
Vesting of 4,786 shares under stock award plans
Cash dividends declared
Income tax benefit from stock plans 1,787
Exercise of stock options 175,176 44 3,449
Net translation adjustment
Balance, April 26, 1996 8,075,765 --- $2,019 $65,317
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<In thousands except shares)
<CAPTION>
Repurchased
and Cumulative Total
Retained Nonvested Translation Stockholders'
Earnings Shares Adjustment Equity
<S> <C> <C> <C> <C>
Balance, April 30, 1993 $91,856 $(54,963) $ --- $135,187
Net income 8,800 8,800
Net forfeiture of shares under stock award plans (145) ---
Vesting of 17,117 shares under stock award plans 352 352
Issuance of shares for acquisition 20,894 19,444
Conversion of preferred shares 13,381 ---
Cash dividends declared (4,103) (4,103)
Income tax benefit from stock award plans 30
Exercise of stock options 577 222
Net translation adjustment (2,103) (2,103)
Balance, April 29, 1994 $96,553 $(19,904) $(2,103) $157,829
Net income 14,901 14,901
Net forfeiture of shares under stock award plans (3) ---
Vesting of 9,524 shares under stock award plans 201 201
Repurchase of common shares (4,579) (4,579)
Cash dividends declared (4,365) (4,365)
Income tax benefit from stock award plans 35
Exercise of stock options 1,186 2,800
Net translation adjustment 8,458 8,458
Cancellation of repurchased shares 22,954 ---
Balance, April 28, 1995 $107,089 $ (145) $ 6,355 $175,280
Net income 21,343 21,343
Net grant of shares under stock award plans (75) ---
Vesting of 4,786 shares under stock award plans 98 98
Cash dividends declared (4,823) (4,823)
Income tax benefit from stock award plans 1,787
Exercise of stock options 3,493
Net translation adjustment (5,118) (5,118)
Balance, April 26, 1996 $123,609 $ (122) $ 1,237 $192,060
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PERIOD. Fluke Corporation utilizes a 52/53-week fiscal year ending
on the last Friday in April.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
NATURE OF OPERATIONS. The Company is in a single line of business, the
manufacturing and selling of electronic test tools. This single line of
business is primarily made up of two product categories: handheld service
tools and benchtop test instruments, with handheld service tools slightly
larger based on revenues. The Company currently markets its products in more
than 100 countries through both indirect and direct sales channels, with
indirect distribution generally used for handheld service tools and direct
sales channels generally used for benchtop test instruments.
REVENUE RECOGNITION. Revenue is recognized at the time product is shipped or
service is rendered to an unaffiliated customer. Revenue from service
contracts is recognized ratably over the lives of the contracts.
TRANSLATION OF FOREIGN CURRENCIES. The local currency is deemed to be the
functional currency in most of the Company's foreign operations. In these
operations, translation gains and losses resulting from converting the local
financial statements to U.S. dollar financial statements are recorded in the
Cumulative Translation Adjustment account in the equity section of the balance
sheet. In the remaining foreign operations, the U.S. dollar is deemed to be
the functional currency. In these operations, translation gains or losses are
included in the statements of income.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include cash on hand and
highly liquid, short-term investments with an original maturity of less than
three months at the time of acquisition.
INVENTORIES. Inventories are valued at the lower of cost or market with cost
being currently adjusted standard cost, which approximates cost on a first-in,
first-out basis.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment, including
improvements and major renewals, are stated at cost. Maintenance and repairs
are expensed as incurred. Depreciation is calculated over the estimated
useful lives of the related assets on the straight-line basis for financial
statement purposes, while an accelerated method is generally used for income
tax purposes.
INCOME TAXES. The provision for income taxes is computed on pretax income
reported in the financial statements. The provision differs from income taxes
currently payable because certain items of income and expense are recognized
in different periods for financial statement and tax return purposes.
Deferred income taxes have been recorded using the liability method in
recognition of these temporary differences. The Company has provided for U.S.
and foreign taxes on all of the undistributed earnings of its foreign
subsidiaries that are expected to be repatriated.
EARNINGS PER SHARE. Earnings per share is based on the weighted average
number of common shares and share equivalents outstanding during the fiscal
year. Stock options are considered common stock equivalents and their
dilutive effect is included in the earnings per share calculation.
GOODWILL AND INTANGIBLES. Excess cost over the fair value of net assets
acquired (goodwill) is generally amortized on a straight-line basis over 20
years. Intangible assets are generally amortized over 5 years.
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets consist of intangible
assets, goodwill and certain capital assets. The carrying value of these
assets is regularly reviewed to verify they are valued properly. If the facts
and circumstances suggest that the value has been impaired, the carrying value
of the assets will be reduced appropriately.
STOCK-BASED COMPENSATION. The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation."; effective for fiscal years beginning after December 15,
1995. Under Statement No. 123, stock-based compensation expense is measured
using either the intrinsic value method, as prescribed by Accounting
Principles Board Opinion No. 25, or the fair value method described in
Statement No. 123. Companies choosing the intrinsic value method will be
required to disclose in the footnotes to the financial statements the pro
forma impact of the fair value method on net income and earnings per share.
The Company plans to implement Statement No. 123 in 1997 using the intrinsic
value method.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Note 2. ACQUISITION OF EUROPEAN OPERATIONS
On May 26, 1993, the Company completed the acquisition of the test and
measurement business of Philips Electronics N.V. of the Netherlands (Philips)
with an effective date of May 1, 1993.
The Company acquired manufacturing operations in the Netherlands, engineering
groups in the Netherlands and Germany and sales and service operations in
fourteen European countries. The headquarters of the Company's Diagnostic
Tools Division is in Almelo, the Netherlands. The division is responsible for
several major products including ScopeMeter test tools, oscilloscopes, and
function generators. The European sales and service headquarters are located
in Eindhoven, the Netherlands.
The purchase price for the Philips test and measurement business was
approximately $41.8 million in cash and stock. The stock component consisted
of one million shares of the Company's common stock, which were issued from
repurchased shares.
As part of the acquisition, the Company entered into service agreements and
facility leases with Philips related to the European operations. The Company
paid Philips $8.9 million in 1996, $10.5 million in 1995 and $18.3 million in
1994 for such services and facilities lease rent. In addition, the Company
purchased $18.5 million in 1996, $19.8 million in 1995 and $16.5 million in
1994 of component parts and finished goods from Philips.
Note 3. SUBSEQUENT EVENT
On June 26, 1996, Forte' Networks, Inc. (Forte') was acquired and merged into
the Company. The Company issued 577,190 shares of Fluke common stock in
exchange for the Forte' shares. Forte' has designed and supplied certain
network troubleshooting tools that the Company has sold since 1993. The
transaction was accounted for as a pooling of interest, and accordingly,
historical financial data in future reports will be restated to include Forte'
data. Following are the unaudited pro forma results of the combined company
as if the merger had taken place prior to 1994:
<TABLE>
(In thousands except per share amounts)
<CAPTION>
For the For the For the
Year ended Year ended Year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Revenues $413,525 $382,066 $357,904
Net Income <F1> $ 23,704 $ 16,787 $ 8,628
Earnings Per Share <F1> $ 2.67 $ 1.96 $ 1.00
<FN>
<F1> Prior to the merger Forte' operated under sub-chapter S of the Internal
Revenue Code. Forte's taxable income was allocated to its shareholders and no
tax provision was recorded in Forte' statements of income. Therefore, the pro
forma net income and earnings per share do not include a tax provision on
Forte' income.
</FN>
</TABLE>
<TABLE>
Note 4. INVENTORIES
(In thousands)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
Finished goods $20,947 $17,483
Work-in-process 9,463 10,818
Purchased parts and materials 28,643 25,607
Total Inventories $59,053 $53,908
</TABLE>
<TABLE>
Note 5. ACCRUED LIABILITIES
(In thousands)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
Compensation payable $11,098 $11,674
Accrued expenses 13,298 14,180
Unearned service revenue 2,355 3,009
Other taxes payable 5,436 6,056
Profit-sharing bonus payable 1,853 1,265
Dividends payable 1,211 1,106
Other items 2,371 1,443
Total Accrued Liabilities $37,622 $38,733
</TABLE>
Note 6. GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price over the fair market
value of the net assets acquired in the purchase of the European operations
from Philips. The goodwill is being amortized on a straight-line basis over
twenty years. The Company owns intangible assets, most of which were also
acquired from Philips as part of the acquisition. These intangible assets are
being amortized over five years. Amortization expense is recorded in marketing
and administrative expense. Cumulative amortization was $8.3 million at April
26, 1996 and $6.0 million at April 28, 1995.
A reconciliation of goodwill and intangible assets, net of
accumulated amortization, is provided below:
<TABLE>
(In thousands)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
Balance at beginning of year $23,033 $24,995
Amortization expense (2,815) (2,764)
Adjustment related to changes to
deferred tax asset valuation
allowance<F1> (2,626) (1,925)
Translation adjustment (1,064) 2,727
Balance at end of year $16,528 $23,033
<FN>
<F1> This adjustment is explained in Note 7, Income Taxes.
</FN>
</TABLE>
Note 7. INCOME TAXES
For financial reporting purposes, income before income taxes is as follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
U.S. $20,067 $13,017 $13,681
Foreign 13,545 11,017 399
Income before income taxes $33,612 $24,034 $14,080
</TABLE>
The provision for income taxes is as follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Current taxes on income:
U.S. $ 5,883 $ 5,239 $1,791
Foreign 5,113 5,687 986
10,996 10,926 2,777
Deferred income taxes 1,273 (1,793) 2,503
Provision for income taxes $12,269 $ 9,133 $5,280
</TABLE>
Significant components of the Company's deferred tax
assets and liabilities are as follows:
<TABLE>
(In thousands)
<CAPTION>
April 26,1996 April 28,1995
<S> <C> <C>
Deferred Tax Assets:
Accrued employee benefit expenses $ 3,200 $2,525
Inventory adjustments 5,265 5,329
Net operating loss carryforwards 22,591 25,591
Product warranty accruals 681 721
Other items, net 658 619
Total Deferred Tax Assets 32,395 34,785
Valuation reserve (17,333) (19,626)
Net Deferred Tax Assets $ 15,062 $15,159
Deferred Tax Liabilities:
Fixed asset basis differences $ 5,349 $5,701
Pension 3,562 1,578
Intangible assets 1,108 1,870
Other items, net 566 260
Total Deferred Tax Liabilities $ 10,585 $9,409
</TABLE>
The deferred tax asset valuation reserves are primarily related to deferred
tax assets of foreign operations, including Dutch net operating loss (NOL)
carryforwards acquired in connection with the Philips acquisition. The
acquired Dutch NOLs have an unlimited carryover period. A substantial portion
of these NOLs were provided for with a valuation allowance at the time of the
acquisition. The tax benefit from adjusting the valuation allowance of the
acquired NOLs is recorded as a reduction of goodwill. Reductions in goodwill
for NOL benefit were $2,626,000 in 1996 and $1,925,000 in 1995.
A reconciliation from the U.S. statutory rate to the effective tax rate is as
follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
Apr. 26, 1996 Apr. 28, 1995 Apr. 29, 1994
Amt Pct Amt Pct Amt Pct
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rate $11,765 35.0% $8,412 35.0% $4,928 35.0%
Foreign tax greater
than U.S. statutory rate 503 1.5 847 3.5 1,528 10.8
Utilization of foreign tax
credits (542) (1.6) (35) (0.1) (1,538)(10.9)
Foreign Sales Corporation tax
benefit (554) (1.6) (436) (1.8) (321) (2.3)
State taxes, net of federal
benefit 326 0.9 211 0.8 222 1.6
Nondeductible goodwill 264 0.8 302 1.3 360 2.6
Other items, net 507 1.5 (168) (0.7) 101 0.7
$12,269 36.5% $9,133 38.0% $5,280 37.5%
</TABLE>
Note 8. EMPLOYEE BENEFIT PLANS
The expense related to employee benefit plans is as follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Pension Plan, U.S. $1,444 $1,170 $1,147
Pension Plans, Foreign 1,111 1,281 1,519
Profit-sharing Retirement Plan 745 639 652
Profit-sharing Bonus Plan 3,695 2,064 1,296
Other Benefit Plans 618 760 813
Total Employee Benefit Plans $7,613 $5,914 $5,427
</TABLE>
PENSION PLAN, U.S. The Company's U.S. pension plan includes all U.S.
employees with a minimum of one year of service. Pension benefits are based
upon years of service with the Company and the highest consecutive sixty
months' average compensation earned. The Company's funding policy is to
contribute annually the amount required by ERISA.
Net periodic U.S. pension cost is as follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Service cost $ 1,899 $1,990 $ 1,917
Interest cost 3,260 2,955 2,939
Return on plan assets (6,682) (3,873) (2,590)
Net amortization and deferral 2,967 98 (1,119)
Net periodic pension cost $1,444 $1,170 $ 1,147
</TABLE>
The funding status of the plan is as follows:
<TABLE>
(In thousands)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
Vested benefit obligation $34,786 $29,069
Accumulated benefit obligation 35,711 29,640
Projected benefit obligation 44,911 37,754
Fair market value of plan assets 43,814 36,299
Projected benefit obligation in excess
of plan assets 1,097 1,455
Prior service cost 476 486
Unrecognized net loss (10,007) (5,589)
Unrecognized net transition asset 413 952
Prepaid pension asset $ (8,021) $(2,696)
</TABLE>
For purposes of calculating the funding status of the plan, the weighted
average discount rate was 8.0 percent in 1996, 8.8 percent in 1995 and 8.0
percent in 1994. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
varied by age group and ranged from 4.3 to 5.6 percent in 1996 and 1995 and
from 3.6 to 4.9 percent in 1994.
The expected long-term rate of return on plan assets was 9.5 percent in 1996
and 1995 and 10.8 percent in 1994. For purposes of calculating the net
periodic pension cost, the actuarial assumptions utilized are the actuarial
assumptions in place at the end of the previous fiscal year (e.g., the fiscal
1996 net periodic pension cost was based upon the 1995 actuarial assumptions).
Upon adoption of Statement of Financial Accounting Standards No. 87 (SFAS 87),
"Accounting for Pensions" in 1988, the plan had an excess of plan assets,
including accrued contributions, over projected benefit obligations (net
transition asset) of $5.0 million. The net transition asset is being
amortized over a period of 9.3 years.
All of the plan's assets are stated at fair market value and consist primarily
of common stock, fixed income securities and cash equivalents.
PENSION PLANS, FOREIGN. The Company has various pension plans covering its
foreign employees. Most of these plans are defined contribution plans and are
fully funded. The expense for these plans was $355,000 in 1996 and $427,000
in 1995 and $620,000 in 1994. The remaining plans qualify for accounting
under the rules of SFAS 87. The tables below include only those international
pension plans which qualify for SFAS 87 treatment.
Net periodic pension expense of foreign plans under SFAS 87 is as follows:
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Service cost $ 746 $ 780 $ 792
Interest cost 1,307 1,101 1,000
Return on plan assets (1,251) (1,015) (893)
Net amortization and deferral (46) (12) ---
Net periodic pension cost $ 756 $ 854 $ 899
</TABLE>
The funding status of the plans is as follows:
<TABLE>
(In thousands)
<CAPTION>
April 26, 1996 April 28, 1995
<S> <C> <C>
Vested benefit obligation $15,160 $12,498
Accumulated benefit obligation $13,818 $13,279
Projected benefit obligation $21,202 $19,616
Fair market value of plan assets 19,509 19,653
Projected benefit obligation in
excess of (less than) plan assets 1,693 (37)
Unrecognized net gain 141 2,558
Accrued pension liability $ 1,834 $ 2,521
</TABLE>
The weighted average discount rate varied from 6.5 percent in 1996, and varied
from 7.0 percent to 7.5 percent in 1995 and 6.5 percent to 7.0 percent in
1994. The rate of increase in future compensation levels used in determining
the actuarial present values of the projected benefit obligation varied from
3.0 percent to 3.5 percent in 1996 and from 3.0 percent to 5.0 percent in 1995
and 1994. The expected long-term rate of return on plan assets was 7.0
percent in 1996 and 6.5 percent in 1995.
PROFIT-SHARING RETIREMENT PLAN. The Company has a profit-sharing retirement
plan for all U.S. employees, which provides immediate eligibility and vesting.
The Company matches the employee's salary deferrals under section 401(k) of
the Internal Revenue Code, subject to certain profitability and dollar limits.
PROFIT-SHARING BONUS PLAN. The Company has a profit-sharing bonus plan, which
generally provides semi-annual cash payments to certain employees. The amount
of each eligible employee's bonus is dependent upon their base salary in
relation to the total base salary of all eligible employees and the operating
performance of the Company.
OTHER BENEFIT PLANS. The Company has various other employee cash and stock
award plans designed to recognize and compensate key employees for
performance.
The long-term liabilities of these benefit plans constitute the major portion
of Other Liabilities on the Balance Sheet.
Note 9. STOCKHOLDERS' EQUITY
REPURCHASED SHARES. On March 10, 1995, repurchased shares of the Company
totaling 1,011,937 were canceled and retired. Repurchased shares had been
used to fund stock award and stock option plans.
PREFERRED STOCK. There are 2,000,000 shares of preferred stock authorized, of
which 250,000 shares have been designated Series A Convertible Preferred
Stock. On May 26, 1993, as part of the purchase of the European operations
from Philips, the 78,462 shares of Series A Convertible Preferred Stock, which
were owned by Philips, were converted into 538,144 shares of common stock.
The conversion rate was established in the original preferred stock agreement.
There were no shares of preferred stock outstanding at April 26, 1996 or April
28, 1995.
STOCK PURCHASE PLAN. The Company has a voluntary employee stock purchase plan
for eligible employees. The Company's contribution is 25 percent of the
amount invested by the employee, plus all commissions and brokerage fees. The
Company's expenses related to the plan were $497,000 in 1996, $473,000 in 1995
and $433,000 in 1994.
DIVIDENDS. The Company declared cash dividends of $0.60 per share in 1996,
$0.56 per share in 1995 and $0.52 per share in 1994.
STOCKHOLDER RIGHTS PLAN. The Company has a Stockholder Rights Plan and issues
one Right for each outstanding share of common stock. The Rights become
exercisable only if a person or group (an "Acquiring Person") has acquired, or
obtained the right to acquire, 25 percent or more of the outstanding shares of
common stock of the Company or following the commencement of a tender or
exchange offer for acquiring such same percentage. In the event that a person
or group becomes an Acquiring Person, each Right, upon exercise, will entitle
its holder (except for an Acquiring Person) to receive common stock of the
Company (or, in certain circumstances, cash, property or other securities of
the Company) or of any company with which the Company shall have entered into
certain transactions having a value equal to two times the exercise price of
the Right. In addition, under certain circumstances, the Continuing Directors
can require that each Right (other than Rights held by an Acquiring Person) be
exchanged for one share of common stock. The Company may redeem the Rights
for $0.01 per Right at any time before they become exercisable. The Rights do
not entitle their holders to any voting or dividend rights and, at least until
they become exercisable, have no dilutive effect on the earnings of the
Company. The plan was adopted to encourage a prospective acquirer of the
Company to negotiate acquisition terms with the Board of Directors, including
the Continuing Directors, to assure that the terms are in the best interests
of the stockholders of the Company.
STOCK OPTIONS. The Company has a 1988 and a 1990 Stock Incentive Plan. Stock
options granted under the 1990 plan and those granted after 1989 under the
1988 plan are nonqualified stock options exercisable 40 percent after one
year, 30 percent after three years and 30 percent after five years and expire
ten years from the date of grant. In addition, the Company has a Stock Option
Plan for outside Directors, which was authorized in 1990 and annually grants
nonqualified stock options to the Company's outside Directors. Grants under
this plan and those made in 1988 and 1989 under the 1988 Stock Incentive Plan
are exercisable after one year and expire ten years from the date of grant.
All options are granted at the market value on the date of grant, and,
accordingly no compensation expense has been recorded. The Company makes no
charge to income in connection with stock options. Shares reserved for
issuance under these stock option plans totaled 2,185,000 shares at April 26,
1996, April 28, 1995 and April 29, 1994, of which 637,270 shares, 900,380
shares and 1,018,550 shares, respectively, were available for options to be
granted in the future.
<TABLE>
<CAPTION>
Total Options Price Range
<S> <C> <C>
Balance,
April 30, 1993 (269,300 options exercisable) 886,700 $11.88 to $30.75
Granted 246,300 $22.44 to $28.19
Terminated (26,950) $11.88 to $30.75
Exercised (23,200) $11.88 to $20.38
Balance,
April 29, 1994 (460,500 options exercisable) 1,082,850 $11.88 to $30.75
Granted 145,300 $28.50 to $40.38
Terminated (27,130) $22.44 to $30.75
Exercised (154,900) $11.88 to $30.75
Balance,
April 28, 1995 (532,000 options exercisable) 1,046,120 $11.88 to $40.38
Granted 280,950 $32.63 to $39.94
Terminated (17,840) $11.88 to $40.38
Exercised (179,520) $11.88 to $30.75
Balance,
April 26, 1996 (463,010 options exercisable) 1,129,710 $11.88 to $40.38
</TABLE>
Note 10. FINANCING AND COMMITMENTS
The Company has $53.8 million of committed, noncollateralized revolving lines
of credit. The $53.8 million lines of credit include a $30.0 million facility
used for corporate working capital requirements and a $23.8 million facility
to finance the working capital requirements of the European operations. The
committed lines of credit contain certain working capital and other minimum
financial covenants. The Company is in compliance with all covenants on its
lines of credit. Under the $30.0 million revolving line, which was renewed
until 1999, there was zero outstanding at April 26, 1996 and at April 28,
1995. Under the $23.8 million line, there was $7.1 million outstanding at
April 26, 1996 and $21.4 million outstanding at April 28, 1995. The interest
rates on these borrowings were 3.2 percent to 10.3 percent in 1996 and 5.2
percent to 11.0 percent in 1995.
Approximate required aggregate principal payments of all long-term debt will
be as follows: 1998 - $7.1 million.
The Company has $64.0 million in uncommitted lines of credit. There was no
debt outstanding under these lines at April 26, 1996 and April 28, 1995.
Long-term obligations include capital lease obligations.
The Company's operating lease expense, including leases with a term of less
than one year, was $7.5 million in 1996, $7.7 million in 1995 and $6.9 million
in 1994. The principal leases are for various sales offices, storage
facilities, data processing equipment and automobiles. Most facility leases
have escalation clauses to cover increases in direct lease expenses. Below is
a schedule of future minimum lease payments under operating leases that have
initial noncancelable lease terms in excess of one year as of April 26, 1996:
<TABLE>
(In thousands)
<CAPTION>
Fiscal Year Facilities Equipment Total
<S> <C> <C> <C>
1997 $4,913 $1,731 $6,644
1998 3,093 834 3,927
1999 728 252 980
2000 471 20 491
2001 347 8 355
$ 9,552 $2,845 $12,397
</TABLE>
Note 11. OPERATIONS BY GEOGRAPHIC AREAS
The Company is engaged in one line of business, the manufacturing and selling
of electronic test tools. In the schedule below, revenues, income before
income taxes and assets are reported based on the location of the Company's
facilities. Intercompany transfers of products and services are made at arm's
length between the various geographic areas.
<TABLE>
(In thousands)
<CAPTION>
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
<S> <C> <C> <C>
Revenues:
United States:
Sales to
unaffiliated customers $164,023 $167,566 $168,230
Export sales 44,956 34,419 28,410
Interarea transfers 67,073 55,090 45,133
276,052 257,075 241,773
Europe:
Sales to
unaffiliated customers 166,551 148,902 136,820
Interarea transfers 30,432 32,620 24,952
196,983 181,522 161,772
Other areas:
Sales to
unaffiliated customers 37,995 31,179 24,444
Eliminations (97,505) (87,710) (70,085)
Consolidated revenues $413,525 $382,066 $357,904
Income before income taxes:
United States $ 27,967 $ 20,571 $ 20,699
Europe 10,698 7,538 228
Other 4,016 4,316 1,158
Corporate expense and
eliminations (9,069) (8,391) (8,005)
Consolidated income before
income taxes $ 33,612 $ 24,034 $ 14,080
Assets:
United States $166,969 $149,975 $141,014
Europe 100,456 112,783 108,129
Other 12,513 15,201 10,977
Eliminations (3,850) (2,437) (14,518)
Consolidated assets $276,088 $275,522 $245,602
</TABLE>
Note 12. FINANCIAL INSTRUMENTS
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade receivables. As of April 26,
1996, the Company had no significant concentrations of credit risk due to a
large and diversified customer base spanning vast geographic areas.
The Company is subject to transaction exposures that arise from foreign
exchange movements between the dates foreign exchange transactions are
recorded and the date they are consummated. The Company's exposure to foreign
currency movements is somewhat mitigated through naturally offsetting currency
positions. Remaining exposure is partially reduced through the purchase of
foreign exchange contracts. At April 26, 1996, the Company had foreign
exchange contracts for various foreign currencies totaling $6.9 million.
Note 13. CONTINGENCIES
The Company is subject to various pending and threatened legal actions that
arise in the normal course of business. In the opinion of management,
liabilities arising from these claims, if any, will not have a material effect
on the Company.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
Fluke Corporation
Everett, Washington
We have audited the accompanying consolidated balance sheets of Fluke
Corporation and subsidiaries as of April 26, 1996 and April 28, 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended April 26, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Fluke Corporation and subsidiaries at April 26, 1996 and April 28,
1995 and the consolidated results of their operations and their cash flows for
each of the three years in the period ended April 26, 1996 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
June 3, 1996
REPORT OF MANAGEMENT
The management of Fluke Corporation (the Company) is responsible for the
preparation and integrity of the Company's consolidated financial statements
and related financial information. The statements have been prepared in
conformity with generally accepted accounting principles and include the best
estimates and judgments of management.
The Company maintains a system of internal control, which is designed to
safeguard the Company's assets and ensure that transactions are recorded in
accordance with Company policies. The Company's internal audit program is an
important part of this control.
The Audit Committee of the Board of Directors is responsible for reviewing and
approving the Company's consolidated financial statements, the system of
internal accounting controls and the selection of independent auditors. The
Audit Committee, which is comprised entirely of outside Directors, has
unrestricted access to both internal and external auditors.
George M. Winn John R. Smith
President, Vice President,
Chief Operating Officer Treasurer
<TABLE>
FINANCIAL SUMMARY
(In thousands except shares and per share amounts)
<CAPTION>
For the<F4>
seven
For the For the For the months
year ended year ended year ended ended
April April April April
26, 1996 28, 1995 29, 1994 30, 1993
<S> <C> <C> <C> <C>
Revenues $413,525 $382,066 $357,904 $132,139
Cost of goods sold $196,721 $185,873 $182,475 $ 72,167
Gross margin $216,804 $196,193 $175,429 $ 59,972
Restructuring --- --- --- ---
Total operating expenses
excluding restructuring $183,044 $172,008 $161,040 $ 56,657
Operating income $ 33,760 $ 24,185 $ 14,389 $ 3,315
Income before income taxes and
cumulative effect of changes
in accounting principles $ 33,612 $ 24,034 $ 14,080 $ 3,957
Cumulative effect of changes in
accounting principles <F2> --- --- --- $ 3,902
Net income $ 21,343 $ 14,901 $ 8,800 $ 6,743
Average shares and share
equivalents outstanding 8,285,151 7,992,804 8,031,696 7,069,463
Income before cumulative effect of
changes in accounting principles
per share $ 2.58 $ 1.86 $ 1.10 $ 0.40
Cumulative effect of changes in
accounting principles per share <F2> --- --- --- $ 0.55
Earnings per share $ 2.58 $ 1.86 $ 1.10 $ 0.95
Net income as a percentage of revenues 5.16% 3.90% 2.46% 5.10%
Cash dividends declared per share $ 0.60 $ 0.56 $ 0.52 $ 0.26
Total assets $276,088 $275,522 $245,602 $172,087
Total stockholders' equity $192,060 $175,280 $157,829 $135,187
Long-term obligations $ 7,098 $ 21,613 $ 14,712 $ 34
Long-term interest expense $ 1,248 $ 1,423 $ 1,327 $ 12
Pro forma net income <F1> $ 21,343 $ 14,901 $ 8,800 $ 4,320
Pro forma earnings per share <F1> $ 2.58 $ 1.86 $ 1.10 $ 0.61
</TABLE>
<TABLE>
FINANCIAL SUMMARY
In thousands except shares and per share amounts
<CAPTION>
For the For the
year ended year ended
September September
25, 1992 27, 1991
<S> <C> <C>
Revenues $271,819 $239,651
Cost of goods sold $149,776 $129,095
Gross margin $122,043 $110,556
Restructuring --- $ 10,800<F3>
Total operating expenses
excluding restructuring $101,712 $ 97,264
Operating income $ 20,331 $ 2,492
Income before income taxes and
cumulative effect of changes
in accounting principles $ 21,186 $ 3,441
Cumulative effect of changes in
accounting principles <F2> --- ---
Net income $ 15,204 $ 3,205
Average shares and share
equivalents outstanding 7,033,695 6,943,941
Income before cumulative effect of
changes in accounting principles
per share $ 2.16 $ 0.46
Cumulative effect of changes in
accounting principles per share <F2> --- ---
Earnings per share $ 2.16 $ 0.46
Net income as a percentage of revenues 5.59% 1.34%
Cash dividends declared per share $ 0.48 $ 0.40
Total assets $175,806 $165,826
Total stockholders' equity $129,464 $116,265
Long-term obligations $ 391 $ 154
Long-term interest expense $ 31 $ 28
Pro forma net income <F1> $ 14,938 $ 3,156
Pro forma earnings per share <F1> $ 2.12 $ 0.45
<FN>
<F1> The Company changed the method of applying overhead costs related to
inventory in 1993. Pro forma data is presented assuming the change in
accounting for inventory is applied retroactively.
<F2> The effect of the change in accounting for inventories ($2.4 million net
of income tax), explained above in Footnote 1 and the adoption of Statement of
Financial Accounting Standards Number 109, "Accounting for Income Taxes" ($1.5
million), were recorded as cumulative changes in accounting principles.
<F3> In 1991 the Company accrued restructuring costs of $10.8 million. The
restructuring charge included inventory write-offs, fixed asset write-offs and
personnel costs.
<F4> In 1993 the Company changed its fiscal year-end from the last Friday in
September to the last Friday in April. Fiscal 1993 was a seven-month
transition period ended April 30, 1993.
</TABLE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands except per share amounts)
<CAPTION>
<F1>
Gross Net Earnings Dividends
Revenues Margin Income Per Share Per Share
<S> <C> <C> <C> <C> <C>
Fiscal 1996:
1st Quarter $ 98,714 $ 51,327 $ 4,126 $0.50 $0.15
2nd Quarter 102,872 52,784 5,089 0.61 0.15
3rd Quarter 105,701 54,833 5,981 0.72 0.15
4th Quarter 106,238 57,860 6,147 0.74 0.15
Total $413,525 $216,804 $21,343 $2.58 $0.60
Fiscal 1995:
1st Quarter $ 86,000 $ 42,822 $ 2,401 $0.30 $0.14
2nd Quarter 91,569 46,205 3,162 0.40 0.14
3rd Quarter 99,090 50,894 4,225 0.53 0.14
4th Quarter 105,407 56,272 5,113 0.63 0.14
Total $382,066 $196,193 $14,901 $1.86 $0.56
<FN>
<F1> The sum of the earnings per share on a quarterly basis will not
necessarily equal the earnings per share reported for the year since
the average shares and share equivalents outstanding used in the earnings
per share computation changes throughout the year.
</TABLE>
<TABLE>
STOCK PRICE INFORMATION
<CAPTION>
1996 1995
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 42 1/2 37 5/8 32 27 3/4
2nd Quarter 41 35 1/2 31 28
3rd Quarter 37 3/4 32 30 3/4 27 1/2
4th Quarter 39 5/8 34 1/4 40 5/8 29 3/8
</TABLE>
Fluke Corporation stock is traded on the New York Stock Exchange. Quarterly
cash dividends of $0.15 per share were paid in 1996, $0.14 per share in 1995
and $0.13 per share in 1994. The number of stockholders of record at April
26, 1996 was 1,682.
<TABLE>
Exhibit 21
SUBSIDIARIES
The Company owns or controls the common stock (the only class authorized) of
the following subsidiaries:
<CAPTION>
Percentage of State or Country
Name of Corporation Ownership of Incorporation
<S> <C> <C>
Fluke International Corporation 100 <F1> Washington
Fluke Deutschland GmbH 100 <F2> Germany
Fluke Electronics Canada, Inc. 100 <F2> Canada
Fluke Foreign Sales Corporation 100 <F2> Guam
Fluke Holland B.V. 100 <F2> <F3> The Netherlands
Fluke Singapore Pte. Ltd. 100 <F2> Singapore
K. K. Fluke 100 <F2> Japan
Fluke Europe B.V. 100 <F2> The Netherlands
Fluke Osterreich GmbH 100 <F4> Austria
Fluke Belgium N.V./S.A. 100 <F4> Belgium
Fluke Danmark A.S. 100 <F4> Denmark
Fluke Finland Oy 100 <F4> Finland
Fluke France S.A. 100 <F4> France
Fluke Italia S.r.l. 100 <F4> Italy
Fluke Norge A/S 100 <F4> Norway
Fluke Iberica S.L. 100 <F4> Spain
Fluke Sverige AB 100 <F4> Sweden
Fluke Switzerland AG 100 <F4> Switzerland
Fluke U.K. Ltd. 100 <F4> United Kingdom
Fluke Holding B.V. 100 <F4> The Netherlands
Fluke Industrial B.V. 100 <F5> The Netherlands
Fluke Nederland B.V. 100 <F5> The Netherlands
<FN>
<F1> Owned by Fluke Corporation
<F2> Owned by Fluke International Corporation
<F3> Not active but remains incorporated
<F4> Owned by Fluke Europe B.V.
<F5> Owned by Fluke Holding B.V.
</TABLE>
The accounts of these subsidiaries are included in the accompanying
consolidated financial statements.
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Fluke Corporation of our report dated June 3, 1996, included in
the 1996 Annual Report to Shareholders of Fluke Corporation.
Our audit also included the financial statement schedule of Fluke
Corporation listed in Item 14(a). This schedule is the responsibility
of Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements, (Form S-8 No. 33-20968) pertaining to the Company's Stock
Purchase Plan, (Form S-8 No. 2-81389) pertaining to the Company's 1988
Stock Option Plan, (Form S-8 No. 33-38507) pertaining to the Company's
1990 Stock Incentive Plan, and (Form S-8 No. 33-38506) pertaining to the
Company's Stock Option Plan for Outside Directors of our report dated
June 3, 1996, with respect to the consolidated financial statements
incorporated herein by reference and our report included in the
preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Fluke Corporation.
Seattle, Washington ERNST & YOUNG LLP
July 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Income Statement and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-26-1996
<PERIOD-START> APR-29-1995
<PERIOD-END> APR-26-1996
<CASH> 34,609<F1>
<SECURITIES> 0
<RECEIVABLES> 70,164
<ALLOWANCES> 1,104
<INVENTORY> 59,053
<CURRENT-ASSETS> 193,324
<PP&E> 164,734
<DEPRECIATION> 106,783
<TOTAL-ASSETS> 276,088
<CURRENT-LIABILITIES> 55,752
<BONDS> 0
0
0
<COMMON> 2,019
<OTHER-SE> 190,041
<TOTAL-LIABILITY-AND-EQUITY> 276,088
<SALES> 413,525
<TOTAL-REVENUES> 413,525
<CGS> 196,721
<TOTAL-COSTS> 183,044
<OTHER-EXPENSES> (1,247)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,395
<INCOME-PRETAX> 33,612
<INCOME-TAX> 12,269
<INCOME-CONTINUING> 21,343
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,343
<EPS-PRIMARY> 2.58
<EPS-DILUTED> 2.58
<FN>
<F1>All dollar amounts in this column are in thousands except
per share amounts.
</FN>
</TABLE>
FLUKE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective January 1, 1996
Plan as amended April 25, 1996.
TABLE OF CONTENTS
PAGE
ARTICLE I_PURPOSE; EFFECTIVE DATE.....................................1
ARTICLE II_DEFINITIONS................................................1
2.1 Account...........................................................1
2.2 Beneficiary.......................................................1
2.3 Board.............................................................1
2.4 Change in Control.................................................1
2.5 Committee.........................................................2
2.6 Company...........................................................2
2.7 Compensation......................................................2
2.8 Deferral Period...................................................2
2.9 Determination Date................................................2
2.10 Discretionary Contributions......................................3
2.11 Earnings.........................................................3
2.12 Investment Index.................................................3
2.13 Participant......................................................3
2.14 Participation Agreement..........................................3
2.15 Plan.............................................................3
2.16 Retirement.......................................................3
2.17 Subaccount.......................................................3
2.18 Termination......................................................4
ARTICLE III_PARTICIPATION AND DEFERRALS...............................4
3.1 Eligibility and Participation.....................................4
3.2 Form of Deferral..................................................4
3.3 Limitations on Deferrals..........................................4
3.4 Termination of Employment.........................................5
3.5 Continuation of Deferral Amount...................................5
ARTICLE IV_DEFERRED COMPENSATION ACCOUNT..............................5
4.1 Account...........................................................5
4.2 Selection of Investment Index.....................................5
4.3 Timing of Credits; Withholding....................................5
4.4 Determination of Accounts and Subaccounts.........................6
4.5 Vesting of Accounts...............................................6
4.6 Statement of Accounts.............................................6
ARTICLE V_PLAN BENEFITS...............................................6
5.1 Early Withdrawals.................................................6
5.2 Accelerated Distribution..........................................7
5.3 Termination of Employment.........................................7
5.4 Form of Benefits..................................................7
5.5 Pension Restoration Benefit.......................................8
5.6 Withholding; Payroll Taxes........................................9
5.7 Valuation.........................................................9
5.8 Covered Employee..................................................9
5.9 Payment to Guardian...............................................9
ARTICLE VI_BENEFICIARY DESIGNATION....................................9
6.1 Beneficiary Designation...........................................9
6.2 Amendments.......................................................10
6.3 Change in Marital Status.........................................10
6.4 No Beneficiary Designation.......................................10
TABLE OF CONTENTS
PAGE
ARTICLE VII_ADMINISTRATION...........................................11
7.1 Committee; Duties................................................11
7.2 Agents...........................................................11
7.3 Binding Effect of Decisions......................................11
7.4 Indemnity of Committee...........................................11
ARTICLE VIII_CLAIMS PROCEDURE........................................11
8.1 Claim............................................................11
8.2 Denial of Claim..................................................11
8.3 Review of Claim..................................................12
8.4 Final Decision...................................................12
ARTICLE IX_AMENDMENT AND TERMINATION OF PLAN.........................12
9.1 Amendment........................................................12
9.2 Company's Right to Terminate.....................................12
ARTICLE X_MISCELLANEOUS..............................................13
10.1 Unfunded Plan...................................................13
10.2 Unsecured General Creditor......................................13
10.3 Trust Fund......................................................13
10.4 Nonassignability................................................14
10.5 Not a Contract of Employment....................................14
10.6 Governing Law...................................................14
10.7 Validity........................................................14
10.8 Notice..........................................................14
10.9 Successors......................................................14
APPENDIX A...........................................................21
Investment Indices...................................................21
FLUKE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I_PURPOSE; EFFECTIVE DATE
The purpose of this Executive Deferred Compensation Plan is to
provide current tax planning opportunities as well as supplemental funds
for retirement or death for certain employees of the Company. It is in-
tended that the Plan will aid in attracting and retaining employees of
exceptional ability by providing them with these benefits. The Plan
shall be effective as of January 1, 1996.
ARTICLE II_DEFINITIONS
Whenever used in this document, the following terms shall have the
meanings set forth in this Article unless a contrary or different mean-
ing is expressly provided:
2.1 Account
"Account" means the device used by the Company to measure the
amounts to be paid to a Participant under the Plan. Each Account shall
consist of one (1) or more Subaccounts.
2.2 Beneficiary
"Beneficiary" means the person, persons or entity entitled under
Article VI to receive any Plan benefits payable after a Participant's
death.
2.3 Board
"Board" means the Board of Directors of the Company.
2.4 Change in Control
A "Change in Control" shall be deemed to occur:
(a) Upon the date the Company is informed by receiving a re-
port on Schedule 13D of the Exchange Act or similar report that
any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), together with such person's Affiliates and Associates as
defined in Rule 12b-2 of the Exchange Act, is or has become the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act;
provided, that a person shall not be deemed to beneficially own
securities acquired pursuant to the Employee Stock Purchase Plan
of the Company or other plans generally applicable to employees,
officers or Directors of the Company), directly or indirectly, of
securities of the Company representing twenty-five percent (25%)
or more of the combined voting power of the Company's then out-
standing securities, except that there will not be a Change in
Control as the result of an acquisition of securities by the Com-
pany, which by reducing the number of shares outstanding, in-
creases the proportionate number of shares beneficially owned by
any person to twenty-five percent (25%) or more of the securities
of the Company then outstanding; provided, however, that if a per-
son becomes the beneficial owner of twenty-five percent (25%) or
more of the securities of the Company then outstanding by reason
of share purchases by the Company and shall, after such share pur-
chases by the Company, become the beneficial owner of any addi-
tional securities of the Company, then a Change in Control will
occur unless such person disposes of such additional securities of
the Company within ten (10) days; or
(b) Upon the first purchase of the Company's Common Stock pur-
suant to a tender or exchange offer (other than a tender or ex-
change offer made by the Company) seeking to acquire securities
representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities; or
(c) Upon the first date on which Continuing Directors, as de-
fined in Article VI of the Company's Articles of Incorporation,
cease for any reason to constitute at least a majority of the
Board of Directors; or
(d) Upon the date the Company is merged or consolidated with
another corporation and as a result of such merger or consolida-
tion less than seventy-five percent (75%) of the outstanding vot-
ing securities of the surviving or resulting corporation shall
then be owned in the aggregate by the former stockholders of the
Company; or
(e) Upon the date the Company transfers substantially all of
its assets to another corporation which is not a wholly-owned sub-
sidiary of the Company.
2.5 Committee
"Committee" means the committee appointed by the Board to adminis-
ter the Plan pursuant to Article VII.
2.6 Company
"Company" means Fluke Corporation, a Washington corporation and
any subsidiary or affiliate of the Company designated by the Board.
2.7 Compensation
"Compensation" means base salary, annual variable compensation,
and profit sharing bonuses paid in cash. Income from the exercise of
stock options or the vesting of restricted stock, the amount of "gross-
up" of expense items, and other items that the Committee determines
should be excluded for administrative convenience, shall be excluded
from Compensation and shall not be eligible to be deferred.
2.8 Deferral Period
"Deferral Period" means the twelve (12) month period ending Decem-
ber 31.
2.9 Determination Date
"Determination Date" means the last day of each calendar month.
2.10 Discretionary Contributions
"Discretionary Contributions" means the contributions made by the
Company to the Plan. The amount of Discretionary Contributions to the
Plan for each Participant for any calendar year shall be such amount as
determined by the Board in its sole discretion. The Board may impose a
vesting schedule of its design on any Discretionary Contributions, and
communicate such schedule in writing to affected Participants.
2.11 Earnings
"Earnings" for each Subaccount means the rate of growth credited or
debited to the Subaccount on each Determination Date in a calendar year,
which shall be credited or debited at the rates described in the defini-
tion of Investment Index in Section 2.12. "Earnings" for an Account
shall mean the aggregate Earnings for each Subaccount making up the Ac-
count.
2.12 Investment Index
"Investment Index" means each index selected by a Participant to
be used as an earnings index pursuant to Article IV. Each Investment In-
dex shall be a phantom investment fund, which shall be credited with
earnings (whether a gain or a loss) at the same rate as the Moody's Cor-
porate Bond Yield Index or the Standard & Poor's 500 Index, or such
other similar indices as the Committee may select from time to time and
shown in Appendix A attached.
2.13 Participant
"Participant" means any individual eligible under Section 3.1 who
has elected to defer Compensation under this Plan.
2.14 Participation Agreement
"Participation Agreement" means the agreement submitted by a Par-
ticipant to the Committee prior to the beginning of a Deferral Period,
subject to 3.1(c), specifying the amount to be deferred for such Defer-
ral Period.
2.15 Plan
"Plan" means this Executive Deferred Compensation Plan as amended
from time to time.
2.16 Retirement
"Retirement" means either early retirement or normal retirement as
defined by the Fluke Corporation Pension Plan.
2.17 Subaccount
"Subaccount" means the device used by the Company to measure and
determine the amount of deferrals and Discretionary Contributions allo-
cated to each Subaccount Index selected by the Participant, and the
Earnings allocated thereon.
2.18 Termination
"Termination" means leaving employment with the Company prior to
Retirement.
ARTICLE III_PARTICIPATION AND DEFERRALS
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan shall
be limited to those employees who are corporate officers or mem-
bers of the senior management team as determined by the Board from
time to time.
(b) Participation. An eligible individual may elect to par-
ticipate in the Plan with respect to any Deferral Period by sub-
mitting a Participation Agreement to the Committee by the December
15 immediately preceding the beginning of the Deferral Period.
(c) Part-Year Participation. When an individual first becomes
eligible to participate during a Deferral Period, a Participation
Agreement may be submitted to the Committee no later than thirty
(30) days after the Committee notifies the individual of eligibil-
ity to participate. Such Participation Agreement will be effective
only with regard to Compensation earned following submission to
the Committee.
(d) Change in Employment Status. If a Participant is no
longer an officer or a member of the senior management team, the
current elected deferral shall be continued to the end of the De-
ferral Period but no new Participation Agreements may be made by
such Participant. All account balances shall remain in the Plan
until they are distributed under the terms of Article V.
3.2 Form of Deferral
A Participant may elect a deferral in the Participation Agreement
as follows:
(a) A deferral shall be a portion of the Compensation payable
by the Company to the Participant during the Deferral Period.
(b) The amount to be deferred shall be stated as a percentage,
a dollar amount, or a percentage or a stated amount above a dollar
amount, not to exceed the maximums and not to be less than the
minimums described in Section 3.3.
3.3 Limitations on Deferrals
The following limitations shall apply to deferrals:
(a) Maximum. The maximum percentage of Compensation deferred
shall be twenty-five percent (25%) for salary and one-hundred per-
cent (100%) for annual variable compensation and profit-sharing
bonuses.
(b) Minimum. The minimum deferral amount shall be a two thou-
sand dollar ($2,000) annual deferral. There shall be no minimum
annual variable compensation and profit-sharing bonus deferral re-
quirement if the Participant has concurrently elected a salary de-
ferral that meets the minimum requirement.
(c) Changes in Minimum or Maximum. The Committee may change
the minimum or maximum deferral amounts from time to time by giv-
ing written notice to all Participants. No such change may affect
the amount of deferral specified in a Participation Agreement made
prior to the Committee's action.
3.4 Termination of Employment
If a Participant terminates employment with the Company prior to
the end of the Deferral Period, the Deferral Period shall end at the
date of termination.
3.5 Continuation of Deferral Amount
Once a Participant has filed a Participation Agreement, the
elected deferral amount shall remain in effect for the applicable Defer-
ral Period. The election shall be irrevocable except as provided in Sec-
tions 5.1(b), relating to a financial hardship, and 5.4, relating to ac-
celerated distribution.
ARTICLE IV_DEFERRED COMPENSATION ACCOUNT
4.1 Account
The amounts deferred by a Participant under the Plan, any Discre-
tionary Contributions, and Earnings shall be credited to the Partici-
pant's Account. Separate Subaccounts shall be maintained to reflect In-
vestment Index selections. The Account and Subaccounts shall be
bookkeeping devices utilized for the sole purpose of determining the
benefits payable under the Plan and shall not constitute a separate fund
of assets.
4.2 Selection of Investment Index
(a) At the time a Participant elects a deferral for a Deferral
Period, the Participant shall also select the Investment Index or
Indices in which the Participant wishes to have the combined
amount of both deferrals and/or Discretionary Contributions deemed
invested. The Participant may select any combination of one (1) or
more of the Investment Indices as long as at least ten percent
(10%) is credited to each of the Investment Indices selected.
(b) At the time the Participant selects the Investment In-
dex(es) for new deferrals and Discretionary Contributions, the
Participant may also elect a different allocation among Investment
Funds for current Account balances.
4.3 Timing of Credits; Withholding
A Participant's deferred Compensation shall be credited to the Ac-
count and Subaccounts at the time it would have been payable to the Par-
ticipant. Any withholding of taxes or other amounts with respect to de-
ferred Compensation (and Discretionary Contributions) that is required
by state, federal or local law shall be withheld from the Participant's
corresponding nondeferred Compensation.
4.4 Determination of Accounts and Subaccounts
Each Participant's Account and Subaccount(s) as of each Determina-
tion Date shall consist of the balance of the Account and Subaccount(s)
as of the immediately preceding Determination Date, adjusted as follows:
(a) New Deferrals. The Account and Subaccount(s) shall be in-
creased by any deferred Compensation credited since such Determi-
nation Date.
(b) Discretionary Contributions. The Account and Subac-
count(s) shall be increased by Discretionary Contributions, if
any, credited since such Determination Date.
(c) Distributions. The Account and Subaccount(s) shall be re-
duced by any benefits distributed to the Participant since such
Determination Date.
(d) Earnings. The Account and Subaccount(s) shall be in-
creased or decreased by the Earnings credited on the average daily
balance in the Account and each Subaccount since such Determina-
tion Date.
4.5 Vesting of Accounts
Except as otherwise provided in Section 5.4, each Participant
shall be one hundred percent (100%) vested at all times in the amounts
credited to such Participant's Account, Subaccount and Earnings thereon,
for amounts attributable to deferrals. Discretionary Contributions and
earnings thereon shall vest as set forth by the Board when such contri-
butions are made.
4.6 Statement of Accounts
The Committee shall give to each Participant a statement showing
the balances in the Participant's Account and Subaccount(s) on a quar-
terly basis and at such other times as may be determined by the Commit-
tee.
ARTICLE V_PLAN BENEFITS
5.1 Early Withdrawals
A Participant's Account may be distributed to the Participant be-
fore termination of employment as follows:
(a) Election for In-Service Withdrawal. A Participant may
elect in a Participation Agreement to withdraw all or any portion
of the amount deferred by that Participation Agreement as of a
date specified in the election. Such date shall not be sooner than
five (5) years after the date the Deferral Period commences. Earn-
ings and Discretionary Contributions may not be withdrawn. For
Accounts tracked at the Standard and Poor's 500 Index or such
similar index, the distribution shall be the lesser of 100% of de-
ferrals or the Account balance.
(b) Financial Hardship. Upon a finding that a Participant or
Beneficiary has suffered a financial hardship, the Committee may,
at a Participant's or Beneficiary's request but in its sole dis-
cretion:
(I) Suspend in whole or in part a Participant's deferral
commitment; and/or
(ii) Make distributions from the Participant's Account.
A "financial hardship" means an unanticipated emergency that is
caused by an event beyond the control of the Participant or Bene-
ficiary and that would result in severe financial hardship to the
individual if a suspension or distribution were not permitted. In
no event shall declining earnings rates be considered a financial
hardship. Any distribution approved by the Committee shall be lim-
ited to the amount necessary to meet the emergency. Distributions
shall be made from Participant deferrals only.
If a Participant receives a hardship distribution, no addi-
tional deferrals shall be made by the Participant for the remain-
der of the calendar year in which withdrawal is made and for the
immediately succeeding calendar year.
(c) Form of Payment. The amount payable under this section
shall be paid in a lump sum within sixty (60) days following re-
ceipt of the request and shall be charged to the Participant's Ac-
count as a distribution.
5.2 Accelerated Distribution
Notwithstanding any other provision of the Plan, a Participant
shall be entitled to receive, upon written request to the Committee, a
lump-sum distribution of all or a portion of the vested Account balance,
subject to the following:
(a) Penalty. Ten percent (10%) of the Account shall be for-
feited and ninety percent (90%) of the Account shall be paid to
the Participant.
(b) Suspension of Participation. A Participant who receives a
distribution under this section will be prohibited from deferring
for the rest of the current calendar year and for the immediately
succeeding calendar year.
The Account balance shall be as of the Determination Date nearest
to the date on which the Committee receives the written request. The
amount payable under this section shall be paid in a lump sum within
sixty (60) days following the receipt of the Participant's written re-
quest by the Committee.
5.3 Termination of Employment
If a Participant terminates employment with the Company for any
reason, including death or disability, the Company shall pay to the Par-
ticipant (or the Participant's Beneficiary, in case of death) benefits
equal to the balance in the vested Account on the valuation date pursu-
ant to Section 5.7.
5.4 Form of Benefits
Except as provided below, benefits payable as a result of
death, Termination, or Retirement shall be paid in the form
elected by the Participant prior to the beginning of each Deferral
Period or as elected pursuant to Subsection (c) below. The Par-
ticipant may elect a different form of benefit payment for pay-
ments made due to death, Termination or Retirement.
(a) Alternative Forms. Alternative forms of benefit payment
shall be:
(i) A lump-sum amount which is equal to the applicable Ac-
count balance.
(ii) Equal monthly installments of the Account amortized
over a period of up to one hundred twenty (120) months. Earn-
ings on the unpaid balance shall continue to be credited to
Subaccounts at the appropriate Investment Fund rate.
(b) Small Amounts. Notwithstanding the form elected, if the
Participant's total Account is five thousand dollars ($5,000) or
less on the valuation date, the benefit shall be paid in a lump
sum.
(c) Change in Form of Benefits. A Participant may elect to
change the form of benefit payment permitted under Section 5.3 at
any time up to twelve (12) months before the date benefit payments
commence. Any changes made to the form of benefit payment within
twelve (12) months of the date benefit payments commence will not
be valid.
(d) Following a Change in Control. In the event of a Change
in Control each Participant's Account will be maintained for the
benefit of that Participant and the Account shall be paid out as
elected by the Participant.
5.5 Pension Restoration Benefit
If the Company maintains a tax-qualified pension plan, and the
pension plan provides benefits determined under a formula that is based
on total cash compensation, a Participant in this Plan may receive a
smaller benefit under the pension plan as a result of electing deferrals
under this Plan.
(a) Calculation of Restoration Benefits. In addition to the
benefits payable under Paragraph 5.2 above, the Company shall pay
to any Participant whose pension plan benefit is not restored un-
der any other employee or executive benefit plan maintained by the
Company, a benefit payment equal to the excess of (ii) over (i) as
follows:
(i) The actuarial equivalent lump-sum present value of the
retirement income (or death benefit) payable (either immedi-
ately or deferred) under the Pension Plan; and
(ii) The actuarial equivalent lump-sum present value of
the retirement income (or death benefit) that would have been
payable under the pension plan if Participant had made no de-
ferral elections in any calendar year under this Plan.
(iii) The actuarial equivalent lump-sum present values
shall be calculated in the same manner and using the same fac-
tors as are used to calculate lump-sum distributions under the
pension plan.
(b) Payment of Restoration Benefit. The amount payable under
this section shall be paid in a lump sum.
5.6 Withholding; Payroll Taxes
The Company shall withhold from payments hereunder any taxes re-
quired to be withheld from such payments under federal, state or local
law. A Beneficiary, however, may elect not to have withholding of fed-
eral income tax pursuant to Section 3405 of the Internal Revenue Code,
or any successor provision thereto.
5.7 Valuation
For Accounts tracking the Moody's Index or such similar index, the
last day of the month in which termination has occurred shall be the
valuation date. For Accounts tracking the Standard and Poor's 500 Index
or such similar index the valuation date shall be the date of termina-
tion. The amount of a lump-sum payment shall be based on the value of
the Participant's vested Account on the valuation date. Except as pro-
vided in Section 5.8, payments shall be made or commence within six-
ty (60) days after the valuation date.
5.8 Covered Employee
Notwithstanding Section 5.6, if any portion of a payment in a cal-
endar year would be disallowed as a deduction to the Company because the
Participant is an employee for that calendar year subject to Section
162(m) (the 1 million dollar limitation on compensation deduction) of
the Internal Revenue Code, that portion shall instead be paid in the im-
mediately following calendar year, by Janu ary 30. This section does not
apply to early withdrawals under Section 5.1 or accelerated distribution
under Section 5.4.
5.9 Payment to Guardian
If a distribution is payable to a minor or a person declared incom-
petent or to a person incapable of handling the disposition of property,
the Committee may direct payment to the guardian, legal representative,
or person having the care and custody of such minor, incompetent, or
person. The Committee may require proof of incompetency, minority, inca-
pacity or guardianship as it may deem appropriate prior to distribution.
Such distribution shall completely discharge the Committee from all li-
ability with respect to such benefit.
ARTICLE VI_BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to designate
one (1) or more persons or an entity as Beneficiary (both primary as
well as secondary) to whom benefits under this Plan shall be paid in the
event of a Participant's death prior to complete distribution of the
Participant's Account. Each Beneficiary designation shall be in a writ-
ten form prescribed by the Committee and will be effective only when
filed with the Committee during the Participant's life-time. Designation
by a married Participant of a Beneficiary other than the Participant's
spouse shall not be effective unless the spouse executes a written con-
sent that acknowledges the effect of the designation and is witnessed by
a notary public, or the consent cannot be obtained because the spouse
cannot be located.
6.2 Amendments
Except as provided below, any nonspousal designation of Benefici-
ary may be changed by a Participant without the consent of such Benefi-
ciary by the filing of a new designation with the Committee. The filing
of a new designation shall cancel all designations previously filed.
6.3 Change in Marital Status
If the Participant's marital status changes after the Participant
has designated a Beneficiary, the following shall apply:
(a) If the Participant is married at death but was unmarried
when the designation was made, the designation shall be void and
subject to Section 6.4 unless the spouse has consented to it in
the manner prescribed above.
(b) If the Participant is unmarried at death but was married
when the designation was made:
(i) The designation shall be void and subject to Section
6.4 if the spouse was named as Beneficiary, and
(ii) The designation shall remain valid if a nonspouse
Beneficiary was named.
(c) If the Participant was married when the designation was
made and is married to a different spouse at death, the designa-
tion shall be void and subject to Section 6.4 unless the new
spouse has consented to it in the manner prescribed above.
6.4 No Beneficiary Designation
If any Participant fails to designate a Beneficiary in the manner
provided above, or if the Beneficiary designated by a deceased Partici-
pant dies before the Participant or before complete distribution of the
Participant's benefits, the Participant's Beneficiary shall be the per-
son in the first of the following classes in which there is a survivor:
(a) The Participant's surviving spouse;
(b) The Participant's children in equal shares, except that if
any of the children predeceases the Participant but leaves issue
surviving, then such issue shall take by right of representation
the share the parent would have taken if living;
(c) The Participant's estate.
ARTICLE VII_ADMINISTRATION
7.1 Committee; Duties
This Plan shall be administered by the Committee, which shall in-
clude the Vice President General Counsel, Vice President Treasurer, and
the Vice President Human Resources. The Committee shall have the author-
ity to make, amend, interpret and enforce all appropriate rules and
regulations for the administration of the Plan and decide or resolve any
and all questions, including interpretations of the Plan, as may arise
in such administration. A majority vote of the Committee members shall
control any decision. Members of the Committee may be Participants under
this Plan.
7.2 Agents
The Committee may, from time to time, delegate all necessary ad-
ministrative duties to the Manager, Employee Benefits, employ agents and
delegate to them such duties as it sees fit and consult with counsel who
may be counsel to the Company.
7.3 Binding Effect of Decisions
The decision or action of the Committee with respect to any ques-
tion arising out of or in connection with the administration, interpre-
tation and application of the Plan and the rules and regulations promul-
gated hereunder shall be final, conclusive and binding upon all persons
having any interest in the Plan.
7.4 Indemnity of Committee
The Company shall indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability
arising from any action or failure to act with respect to this Plan on
account of such person's service on the Committee, except in the case of
gross negligence or willful misconduct.
ARTICLE VIII_CLAIMS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or
ruling under the Plan, or requesting information under the Plan shall
present the request in writing to the Committee, which shall respond in
writing as soon as practicable.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial
shall state:
(a) The reasons for denial, with specific reference to the
Plan provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not re-
ceived a response within thirty (30) days may request review by notice
given in writing to the Committee. The claim or request shall be re-
viewed by the Committee which may, but shall not be required to, grant
the claimant a hearing. On review, the claimant may have representation,
examine pertinent documents, and submit issues and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60)
days. If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall
be one hundred twenty (120) days. The decision shall be in writing and
shall state the reasons and the relevant Plan provisions. All decisions
on review shall be final and bind all parties concerned.
ARTICLE IX_AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment
The Board may at any time amend the Plan by written instrument,
notice of which shall be given to all Participants and to Beneficiaries
receiving installment payments, subject to the following:
(a) Preservation of Account Balance. No amendment shall re-
duce the amount accrued in any Account to the date such notice of
the amendment is given.
9.2 Company's Right to Terminate
The Board may at any time partially or completely terminate the
Plan if, in its judgment, the tax, accounting or other effects of the
continuance of the Plan, or potential payments thereunder would not be
in the best interests of the Company.
(a) Partial Termination. The Board may partially terminate
the Plan by instructing the Committee not to accept any additional
Participation Agreements. If such a partial termination occurs,
the Plan shall continue to operate and be effective with regard to
Participation Agreements entered into prior to the effective date
of such partial termination.
(b) Complete Termination. The Board may completely terminate
the Plan by instructing the Committee not to accept any additional
Participation Agreements, and by terminating all ongoing Partici-
pation Agreements. If such a complete termination occurs, the Plan
shall cease to operate and the Company shall pay out each Account.
Unless the Committee determines otherwise, payment shall be made
as a lump sum or in equal monthly installments over the following
period, based on the Account Balance:
Account Balance Payout Period
$50,000 or less Lump Sum
More than $50,000 but less than $250,000 3 Years
$250,000 or more 5 Years
Earnings at the appropriate rate shall continue to be credited on
the unpaid balance in each Account.
The Company reserves the right to pay each Account in a lump sum,
notwithstanding the above schedule.
ARTICLE X_MISCELLANEOUS
10.1 Unfunded Plan
This Plan is an unfunded plan maintained primarily to provide de-
ferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301
and 401 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and therefore is exempt from the provisions of Parts
2, 3 and 4 of Title I of ERISA. Accordingly, the Board may terminate the
Plan and make no further benefit payments or remove certain employees as
Participants if it is determined by the United States Department of La-
bor, a court of competent jurisdiction, or an opinion of counsel that
the Plan constitutes an employee pension benefit plan within the meaning
of Section 3(2) of ERISA (as currently in effect or hereafter amended)
which is not so exempt.
10.2 Unsecured General Creditor
Participants and their Beneficiaries, heirs, successors, and as-
signs shall have no secured legal or equitable rights, interest or
claims in any property or assets of the Company, nor shall they be Bene-
ficiaries of, or have any rights, claims or interests in any life insur-
ance policies, annuity contracts or the proceeds therefrom owned or
which may be acquired by the Company. Except as provided in Section
10.3, such policies, annuity contracts or other assets of the Company
shall not be held under any trust for the benefit of Participants, their
Beneficiaries, heirs, successors or assigns, or held in any way as col-
lateral security for the fulfilling of the obligations of the Company
under this Plan. Any and all of the Company's assets and policies shall
be, and remain, the general, unpledged, unrestricted assets of the Com-
pany. The Company's obligation under the Plan shall be that of an un-
funded and unsecured promise to pay money in the future.
10.3 Trust Fund
At its discretion, the Company may establish one (1) or more
trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of benefits owed under the Plan. Although such
a trust shall be irrevocable, its assets shall be held for payment of
all the Company's general creditors in the event of insolvency. To the
extent any benefits provided under the Plan are paid from any such
trust, the Company shall have no further obligation to pay them. If not
paid from the trust, such benefits shall remain the obligation of the
Company. Notwithstanding the existence of such a trust, it is intended
that the Plan be unfunded for tax purposes and for purposes of Title I
of ERISA.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or other-
wise encumber, transfer, hypothecate or convey in advance of actual re-
ceipt the amounts, if any, payable hereunder, or any part thereof, which
are, and all rights to which are, expressly declared to be unassignable
and nontransferable. No part of the amounts payable shall, prior to ac-
tual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Partici-
pant or any other person, nor be transferable by operation of law in the
event of a Participant's or any other person's bankruptcy or insolvency.
10.5 Not a Contract of Employment
This Plan shall not constitute a contract of employment between
the Company and the Participant. Nothing in this Plan shall give a Par-
ticipant the right to be retained in the service of the Company or to
interfere with the right of the Company to discipline or discharge a
Participant at any time.
10.6 Governing Law
The provisions of this Plan shall be construed and interpreted ac-
cording to the laws of the State of Washington, except as preempted by
federal law.
10.7 Validity
In case any provision of this Plan shall be held illegal or inva-
lid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal and invalid provision had never been inserted herein.
10.8 Notice
Any notice required or permitted under the Plan shall be suffi-
cient if in writing and hand delivered or sent by registered or certi-
fied mail. Such notice shall be deemed as given as of the date of deliv-
ery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification. Mailed notice
to the Committee shall be directed to the Company's address. Mailed no-
tice to a Participant or Beneficiary shall be directed to the individ-
ual's last known address in the Company's records.
10.9 Successors
The provisions of this Plan shall bind and inure to the benefit of
the Company and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Company, and succes-
sors of any such corporation or other business entity.
Date Signed: FLUKE CORPORATION
April 25,1996 By:/s/Douglas G. McKnight
Douglas G. McKnight
Vice President, General Counsel
APPENDIX A
Investment Indices
Effective January 1, 1996, the Investment Indices available to Partici-
pants in the Fluke Corporation Executive Deferred Compensation Plan
shall be the following:
Moody's Corporate Bond Yield Index
The Moody's Corporate Bond Yield Index as published monthly by Moody's
Investors Service Inc. This index is an arithmetic average of represen-
tative industrial and public utility bonds having ratings of AAA, AA, A
and BAA.
Standard & Poor's 500 Index
An index measuring large company stock total return, which includes the
500 largest stocks in terms of stock market value in the United States,
under which returns are market-value-weighted, dividends are considered
reinvested and no management fees are subtracted out.
The Committee reserves the right to change these indices from time to
time.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 12, 1995, between
Fluke Corporation, a Washington corporation ("the Company"), and William
G. Parzybok, Jr. ("Employee"), and supersedes the employment agreement
dated September 5, 1991.
1. Employment
(a) The Company hereby employs Employee to render services to
the Company in an executive capacity as Chairman of the Board and
Chief Executive Officer of the Company. This Agreement is
cancelable by action of the Board upon 3 years notice, unless such
employment is sooner terminated as hereinafter provided. Employee
currently serves as a member of the Company's Board of Directors
(the "Board") and the Company commits to continue nominating
Employee for election to the position of Director during the
period of employment under this Agreement.
(b) Employee hereby accepts employment under this Agreement and
agrees to devote his best efforts and substantially full time,
attention and energy to the Business, as defined below. For
purposes of this Agreement, "Business" shall mean those activities
in which the Company or any affiliated company (i.e., any
corporation or other business entity, or entities, that now or
hereafter directly or indirectly controls, is controlled by, or is
under common control with, the Company) is permitted to and does
engage from time to time during the period of employment under
this Agreement.
(c) The Company through the Board shall retain full direction
and control of the manner, means and methods by which Employee
performs the services for which he is employed hereunder, provided
that Employee's duties and responsibilities shall be of
substantially the same character as, or equivalent to, those
performed by a Chairman of the Board and Chief Executive Officer.
2. Compensation
(a) Base Salary - During the period of employment under this
Agreement, Employee shall be paid an annual base salary payable
in bi-weekly installments in an amount equal to the greater of (i)
$390,000 or (ii) such greater amount as the Board may from time to
time determine. Employee's base salary shall be reviewed by the
Board at least annually and will be adjusted as appropriate and
consistent with Employee's position and performance.
Nevertheless, if there is a base salary reduction for all of the
Company's other executive officers, Employee's base salary may be
reduced but only in an amount not to exceed the average percentage
reduction that is applied to all the Company's other executive
officers and in no case shall be reduced below $250,000.
(b) Variable Compensation - During the period of employment
under this Agreement, Employee shall be eligible for an annual
cash bonus under a plan or comparable arrangement of equivalent
economic value providing him with a potential bonus of not less
than 60% of base salary in the event that performance standards
established by the Board are met.
(c) Non-Qualified Stock Option Plan - During the period of
employment under this Agreement, Employee shall participate in a
Non-Qualified Stock Option Plan or comparable arrangement of
equivalent economic value providing him with an annual grant of
stock options. The number of option shares shall be based upon a
competitive target range of shares established through the
evaluation of competitive survey data and may be adjusted by a
maximum of plus or minus 50% based upon his individual
contribution to the Company. As of the date of this Agreement,
the current range of competitive stock options for the Employee is
15,750 - 26,250 shares.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - During the period of employment under this
Agreement, Employee shall participate in the Supplemental
Retirement Income and Pre-Retirement Death Benefit Plan or in a
comparable arrangement of equivalent economic value.
(e) Other Plans - Employee shall be entitled to be granted
benefits under any other incentive or special compensation plans
that are made generally available to the Company's executive
officers in accordance with the terms, conditions and procedures
under such plans.
(f) Fringe Benefits - Employee shall be entitled to all fringe
benefits that the Company makes generally available to other
executive officers, from time to time. The current fringe
benefits include, by way of example, the following:
(I) health and dental insurance
(ii) production bonus
(iii) retirement program
- defined benefit plan
- defined contribution plan
(iv) company car
(v) financial planning reimbursement
(vi) physical exam reimbursement
Without in any way limiting the foregoing, it is understood
that the Company shall provide Employee with certain additional
benefits in view of Employee's executive position and his status
in the business and financial community, without regard to whether
or not such benefits are provided to other Employees. The level
and nature of the fringe benefits that are provided shall, in
general, be no less than those benefits in place at the signing of
this Agreement.
(g) Business Expense Reimbursement - Employee shall be
reimbursed by the Company for reasonable travel and other business
expenses incurred by Employee in the performance of his duties
under this Agreement in accordance with the general policy of the
Company as set and maintained by the Board.
(h) Net Economic Benefits - Notwithstanding Sections 2(b)
through 2(g), the Board or appropriate Board Committee shall
nonetheless retain complete discretion with respect to the
adoption, modification, termination or substitution of any
compensation plans referred to in such Sections. Benefits
provided to Employee under this Agreement shall not, however, be
reduced by the Company except pursuant to Section 2(a) without
compensating adjustments being made so that the same approximate
net economic benefits will be received by the Employee.
(i) Withholding - The Company shall be entitled to withhold from
compensation such amounts on account of payroll taxes, income
taxes and other similar matters as are required to be withheld by
applicable law, rule or regulation of any appropriate governmental
authority.
3. Employee's Business Activities
During the period of employment under this Agreement, Employee may
serve as a member of the board of directors of other companies and
engage in other outside activities of his choice, provided that Employee
provides written notice to the Board of each significant outside
activity prior to engaging in such activity and receives approval of the
Board, which approval shall not be unreasonably withheld. Employee may
not, however, render services to or invest in any business competitive
with any existing or contemplated business of the Company except that
Employee may make personal investments in securities listed on a
national securities exchange or quoted in the Over-the-Counter Market
listing of the Wall Street Journal. A material breach of this Agreement
will be deemed to have occurred if a violation of this Section is not
cured within 30 days after written notification by the Board.
4. Termination by Company
(a) For Cause - Notwithstanding anything herein to the contrary,
the Board without liability may give Notice of Termination (as
defined in Section 10) to Employee for cause at any time. The
Company shall not be liable to Employee for any salary or other
sums hereunder which have not accrued before the Date of
Termination (as defined in Section 11). For purposes of this
Agreement, the Company shall have "cause" to terminate Employee's
Employee to substantially perform his duties with the Company
(other than any such failure resulting from Employee's disability
as defined in Section 8), after a written demand for substantial
performance is delivered to Employee by the Board which
specifically identifies the manner in which the Board believes the
Employee has not substantially performed his duties, and provided
that the Company shall provide Employee reasonable opportunity
(not less than two weeks) to cure such conduct, or (ii) the
willful engaging by Employee in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this
paragraph, no act, or failure to act, on Employee's part shall be
considered "willful" unless done, or omitted to be done, by
Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the
Company.
(b) Without Cause - Notwithstanding anything herein to the
contrary, the Board may give Notice of Termination to Employee for
any reason without cause at any time. Employee's sole remedy for
such termination shall be the Severance Benefits set forth in
Section 7 of this Agreement. For the purposes of this Agreement,
a termination without cause shall occur upon any of the following
events:
(i) a reduction by the Company of the Employee's
compensation, as defined in Section 2, in a manner not
permitted by Section 2; or
(ii) a material reduction in the level or nature of
Employee's status, title, position, authority or
responsibility as Chairman of the Board and Chief Executive
Officer of the Company; or
(iii) the Employee is not elected to serve on the Board of
Directors of the Company; or
(iv) the Company's requirement that the Employee be based
somewhere other than where the Employee's office is
currently located or within a 50 mile radius of such
location; or
(v) the Company's requirement that the Employee travel
Company business to an extent substantially in excess of the
business travel obligations currently required by the
Company; or
(vi) the Company materially breaches this Agreement; or
(vii) a Change of Control of the Company as defined in
Section 9.
In the case of subparagraphs (i) through (vi), the Employee
shall give the Company written notice specifically identifying the
unsatisfactory nature of such reduction, assignment or breach, and
providing a reasonable opportunity (not to exceed two weeks) for
cure. If no cure shall be effected, Employee may by Notice of
Termination elect to treat such action as a termination without
cause. No such notice is required in the case of subparagraph
(vii).
5. Termination by Employee
In the event of Employee's voluntary termination which shall
include retirement pursuant to the Company's retirement program, the
Company shall not be liable to Employee for any salary or other sums
payable hereunder other than those which have accrued before the Date of
Termination except that the following benefits shall be provided as
follows:
(a) Pension Bridge Period - The Company will keep the Employee
on the payroll as a one hour per month employee for a bridging
period if such bridging period, which may not exceed 18 months,
allows the Employee to qualify for early retirement (minimum age
55 and 15 years of service) or normal retirement (age 65) pursuant
to the terms of the Company's defined benefit Pension Plan.
(b) Health and Dental Coverage - If the Employee can qualify for
early retirement (minimum age 55 and 15 years of service) or
normal retirement (age 65) pursuant to the terms of the Company's
defined benefit Pension Plan at the time of voluntary termination
(including the bridging period if utilized under paragraph (a)
above), the Company will pay the Employee's and Employee spouse's
health and dental insurance coverage until age 65 or until
Medicare-eligible, whichever occurs first. Other qualified
dependent health and dental coverage will be made available to the
Employee at Company cost.
(c) Stock Option Choice - The Company will give the Employee the
choice of having all outstanding stock options (i) become
immediately exercisable and have a term of one year in which to
exercise such options, or (ii) remain subject to all of the
original terms of the stock option agreements including the
expiration term of the option and any exercisability limitations.
6. Benefits Coverage Period
The Benefits Coverage Period for purposes of this Agreement shall
be defined as 36 months unless the Board has previously given notice of
cancellation to the Employee pursuant to Section 1(a) in which case the
number of months shall be reduced from 36 months by each whole month
from the date of the notice of cancellation to the Date of Termination.
In no case shall the Benefits Coverage Period be reduced below 12
months.
7. Severance Benefits
In the event of the termination (including death or disability as
defined in Section 8) of Employee's employment hereunder, other than
pursuant to Sections 4(a) or 5, the Company agrees to pay Employee (or
his beneficiary) the Severance Benefits defined in this Section.
Employee has no obligation to mitigate Severance Benefits paid under
this Agreement but if the Employee accepts employment while receiving
Severance Benefits hereunder, any Severance Benefits under Section 7(b)
which exceed one year of annual cash compensation will be reduced by the
actual cash compensation received by Employee from his new employer.
Such repayment of cash compensation by the Employee to the Company would
only relate to cash compensation by the Employee beginning in the
thirteenth month after the Date of Termination during concurrent monthly
periods and ending at the end of the Benefits Coverage Period. No such
reduction is applicable if the termination is pursuant to a Change of
Control.
(a) Variable Compensation - Variable compensation shall be paid
before the Date of Termination in an amount equal to 60% of base
salary as prorated based upon the number of days in the
performance period or periods up to and including the Date of
Termination divided by the total number of days in the performance
period or periods.
(b) Cash Compensation - The Company shall pay to the Employee
before the Date of Termination a lump sum amount in cash equal to
three times the Employee's annual cash compensation, unless the
Benefits Coverage Period is less than 36 months in which case the
lump sum amount would be reduced by multiplying such lump sum
amount by a fraction in which the numerator is the Benefits
Coverage Period and the denominator is 36. Annual cash
compensation for purposes of this Agreement shall be the average
cash compensation paid to or accrued for the Employee which is
attributable to the last three complete fiscal years prior to the
Date of Termination and would include but is not limited to base
salary, variable compensation and the production bonus.
(c) Non-Qualified Stock Option Plan - Subject to the terms of
any Non-Qualified Stock Option Plan adopted by the Company,
Employee will have the right to exercise any such stock options
for the Benefits Coverage Period. In the case of a Change of
Control where the Company is not the surviving entity, the
Employee shall at the Date of Termination be given the choice to
either accept replacement stock options of the surviving entity or
receive a lump sum payment in cash equal to the gain (the
difference between the fair market value of the stock of the
Company at the Date of Termination and the exercise price of the
stock options) as if the Employee had exercised his stock options
at the Date of Termination.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - A full annual contribution shall be made to the
Supplemental Retirement Income and Pre-Retirement Death Benefit
Plan or comparable plan in the year of termination and upon the
Employee's request the full balance in the Employee's account
shall be paid in a lump sum at the Date of Termination.
(e) Fringe Benefits
(i) health, dental, and life insurance - Coverage shall
continue for the Benefits Coverage Period. If the Employee
accepts a job with another company during the Benefits
Coverage Period, the Company may reduce coverage under this
subparagraph to the extent that the Employee is receiving
comparable coverages. Term life insurance comparable to the
pre-retirement death benefit payable under the Supplemental
Retirement Income and Pre-Retirement Death Benefit Plan
shall be provided to the Employee for the Benefits Coverage
Period.
(ii) accrued production bonus - The bonus will cease to
accrue as of the Date of Termination. The accrued bonus
shall be paid at the Date of Termination in an amount equal
to the same percentage of base salary utilized in the
payment of the production bonus for the immediately
preceding semi-annual production bonus period as prorated
based upon the number of days in the production bonus period
up to and including the Date of Termination divided by the
total number of days in the production bonus period.
(iii) defined benefit plan - Benefits will cease to accrue
as of the Date of Termination. The defined benefit plan
will pay the accrued benefit pursuant to the terms of the
defined benefit plan document and the Company will pay a
lump sum benefit at the Date of Termination equal to the
difference between the lump sum value of the accrued
retirement benefit as of the Date of Termination and the
lump sum value of the accrued retirement benefit as if the
Employee had continued to accrue benefits for the Benefits
Coverage Period, assuming no change in the Employee's
compensation were to occur following the Date of
Termination. The lump sum value of the accrued retirement
benefits shall be computed utilizing the actuarial
assumptions and interest rate assumptions pursuant to the
Company's defined benefit pension plan at the Date of
Termination.
(iv) defined contribution plan - Benefits will cease to
accrue as of the Date of Termination. The defined
contribution plan will pay the accrued benefit pursuant to
the terms of the defined contribution plan document and the
Company will pay a lump sum amount at the Date of
Termination equal to $500 for each year or partial year for
the Benefits Coverage Period.
(f) Elections - All choices or options for payment must be made
in writing by the Employee and delivered to the Corporate
Secretary within 10 days after Notice of Termination.
(g) Escrow - Upon the occurrence of an Anticipated Change in
Control of the Company, and upon Employee's written request, the
Company shall within two business days deposit in an escrow
account with a financial institution reasonably acceptable to
Employee (the "Escrow Agent"), an amount equal to the maximum
severance benefits payable by the Company as a lump sum under this
Section 7 (assuming an election in Section 7(c) to receive a lump
sum payment in cash), to hold as security for the Company's
obligations under this Agreement. Employee and the Company agree
to execute the Escrow Agent's standard form of escrow agreement
providing that benefits in the event of any dispute will be paid
in accordance with a determination made under Section 17(b) of
this Agreement. As used in this Agreement, an "Anticipated Change
in Control" shall be deemed to occur if an event takes place which
indicates a reasonable probability that a Change of Control as
defined in Section 9 is likely to occur.
If the Anticipated Change in Control occurs but within a
reasonable time a Change of Control does not take place, the
escrowed funds shall be repaid and released to the Company upon
written notice to the Escrow Agent by the Company and Employee.
If a Change of Control occurs, the Escrow Agent shall immediately
pay all the escrowed funds to the Employee except in the case
where the Employee chooses to exercise his election under Section
7(c) to receive replacement stock options, the escrowed funds
representing the lump sum payment in cash of the stock options
shall be returned to the Company.
8. Disability
Termination by the Company of employment based on "Disability"
shall mean termination because of the Employee's absence from duties
with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of incapacity due to physical or mental
illness. During any period that the Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness, he shall continue to receive his full base salary at the rate
then in effect and incentive compensation payable with respect to such
period until his employment is terminated for Disability, provided that,
after such termination, the Employee in addition to the severance
benefits of Section 7 shall be entitled to such other benefits as would
otherwise be due to him under any long-term disability insurance or
other coverage provided by the Company. If the Company so requests, the
Employee shall be examined by a doctor of his choosing and shall submit
to an examination by a doctor of the Company's choosing, and each doctor
shall certify whether the Employee's failure to perform his duties is
due to physical or mental illness. If the doctors of the Employee and
the Company do not agree, then the two doctors shall jointly select a
third doctor whose determination shall be accepted by both parties. All
costs associated with the doctors' certifications shall be borne by the
Company.
9. Change of Control
For purposes of this Agreement, a Change of Control shall be
deemed to occur:
(a) upon the date the Company is informed by receiving a report
on Schedule 13D of the Exchange Act or similar report that any
person (as such term is used in sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended ["the Exchange Act"]),
together with such person's Affiliates and Associates as defined
in Rule 12b-2 of the Exchange Act, is or has become the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act;
provided, that a person shall not be deemed to beneficially own
securities acquired pursuant to the Employee Stock Purchase Plan
of the Company or other plans generally applicable to employees,
officers or Directors of the Company), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities, except
that there will not be a Change of Control as the result of an
acquisition of securities by the Company, which by reducing the
number of shares outstanding, increases the proportionate number
of shares beneficially owned by any person to 25% or more of the
securities of the Company then outstanding; provided, however,
that if a person becomes the beneficial owner of 25% or more of
the securities of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by
the Company, become the beneficial owner of any additional
securities of the Company, then a Change of Control will occur
unless such person disposes of such additional securities of the
Company within 10 days, or
(b) upon the first purchase of the Company's Common Stock
pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company) seeking to acquire securities
representing 25% or more of the combined voting power of the
Company's then outstanding securities, or
(c) upon the first date on which Continuing Directors, as
defined in Article VI of the Company's Articles of Incorporation,
cease for any reason to constitute at least a majority of the
Board of Directors, or
(d) the Company is merged or consolidated with another
corporation and as a result of such merger or consolidation less
than 75% of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the
former stockholders of the Company, or
(e) the Company transfers substantially all of its assets to
another corporation which is not a wholly owned subsidiary of the
Company.
10. Notice of Termination
Any purported termination by the Company or by the Employee shall
be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated. In the case of a
termination resulting from a Change of Control, no such Notice of
Termination is required.
11. Date of Termination
"Date of Termination" shall mean (a) if employment is to be
terminated for Disability, thirty (30) days after Notice of Termination
is given, (b) if employment is to be terminated by the Company for
Cause, the date on which a Notice of Termination is given, (c) if
employment is to be terminated as a result of a Change of Control, the
date of occurrence of such Change of Control, and (d) if employment is
to be terminated by the Employee or by the Company for any other reason,
the date specified in the Notice of Termination, which shall be a date
no earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been agreed to by the
party receiving the Notice of Termination either in advance of, or
after, receiving such Notice of Termination. Notwithstanding anything
in the foregoing to the contrary, if the party receiving the Notice of
Termination has not previously agreed to the termination, then within
thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination may notify the other party that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of
the parties or by the arbitrators in a proceeding as provided in Section
17(b) hereof.
12. Payment Obligations Absolute
The Company's obligations to pay the Employee the compensation and
to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, any set-off (except that the Company shall be
entitled to withhold from compensation such amounts on account of
payroll taxes, income taxes and other similar matters as are required to
be withheld by applicable law, rule or regulation of any appropriate
governmental authority), counterclaim, recoupment, defense or other
right which the Company or any of its subsidiaries may have against him.
All amounts payable by the Company hereunder shall be paid without
notice or demand. Except as expressly provided herein, the Company
waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this
Agreement in whole or in part.
13. Non-Competition
During the Benefits Coverage Period, Employee agrees that he will
not, directly or indirectly, as principal, agent, owner, employee, or
otherwise engage in direct and substantial competition with the Company
in the United States. The Employee may request in writing a
determination by the Board that a proposed occupation will not
constitute direct and substantial competition with the Company and such
determination shall not be unreasonably withheld. Direct and
substantial competition with the Company shall be limited to what would
be competitive at the Date of Termination. This section shall not apply
to a termination resulting from a Change of Control.
14. Assignment and Transfer
Employee's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, and any purported
assignment, transfer, or delegation shall be void. Employee's rights
hereunder shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, sell,
assign, pledge, encumber or charge the same shall be void.
15. Insurance and Indemnity
(a) During Period of Employment - The Company shall, to the
extent permitted by law, include Employee during his period of
employment under a directors and officers liability insurance
policy maintained for its directors and officers, with coverage at
least as favorable to Employee in amount and every other material
respect as the coverage of other directors and officers covered
thereby. The Company shall indemnify and hold the Employee
harmless to the fullest extent authorized by the Company's
Articles of Incorporation and Bylaws and no less favorable than
the Company's other executive officers.
(b) After Termination of Employment - The Company's obligation
to provide insurance and indemnify Employee under this Section 15
shall survive expiration or termination of this Agreement with
respect to proceedings or threatened proceedings based on acts or
omissions of Employee occurring during Employee's employment with
the Company or with any affiliated company. Such obligations
shall be binding upon the Company's successors and assigns and
shall inure to the benefit of Employee's heirs and personal
representatives.
16. Confidential Information
The Employee shall not at any time during the period of his
employment or thereafter, except as required in the course of his
employment with the Company or as authorized in writing by the Board of
Directors of the Company, directly or indirectly use, disclose,
disseminate, or reproduce any Confidential Information. All notes,
notebooks, memoranda and similar repositories of information ("Items")
containing or relating in any way to Confidential Information shall be
the property of the Company. All such Items made or compiled by
Employee or made available to Employee during Employee's employment with
the Company, including all copies thereof, shall be delivered to the
Company by Employee upon termination of his employment with the Company
or at any other time upon request of the Company. "Confidential
Information" means information not generally known relating to the
business of the Company or any third parties that is contributed to,
developed by, disclosed to, or known to Employee in his course of
employment by the Company, including but not limited to customer lists,
specifications, data, research, test procedures and results, know-how,
services used, and information regarding past, present, and prospective
plans and methods of purchasing, accounting, engineering, business,
marketing, merchandising, selling and servicing used by the Company.
17. Miscellaneous
(a) Governing Law - This Agreement shall be governed by and
construed according to the laws of the State of Washington.
(b) Dispute Resolution - The parties agree to work together in
good faith to resolve any dispute arising under this Agreement,
and to explore resolution of the dispute through methods of
alternative dispute resolution. If the parties are unable to
resolve a dispute, it shall be settled by arbitration in Seattle,
Washington, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect. However, if
an event takes place which indicates a reasonable probability that
a Change of Control as defined in Section 9 is likely to occur, or
a Change of Control as defined in Section 9 occurs, Employee may
proceed with litigation without any necessity of pursuing
arbitration or alternative dispute resolution. Additionally, if
both parties agree that neither arbitration nor any other method
of alternative dispute resolution is suitable to resolve the
dispute, they may proceed with litigation. Judgment upon any
award may be entered in any court having jurisdiction over the
subject matter of the dispute. Notwithstanding the pendency of
any such dispute or controversy, the Company will continue to pay
Employee his full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base
salary and continued participation in all compensation, benefit
and insurance plans in which Employee was participating when the
notice giving rise to the dispute was given), until the dispute is
finally resolved.
(c) Attorneys Fees - In the event any suit or proceeding is
instituted by one party against the other arising out of this
Agreement, the prevailing party shall be entitled to recover its
attorneys fees and expenses of litigation or arbitration.
(d) Rights Cumulative - The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy
by either party hereto (or by its successor), whether pursuant to
this Agreement or to law, shall not preclude or waive its right to
exercise any or all other rights and remedies. The rights and
remedies herein are cumulative to any other rights the parties
hereto may have by law, statute, ordinance, or otherwise.
(e) Nonwaiver - No failure or neglect of either party hereto in
any instance to exercise any right, power, or privilege hereunder
or under law shall constitute a waiver of any other right, power,
or privilege or of the same right, power, or privilege in any
other instance. All waivers by either party hereto must be
contained in a written instrument signed by the party to be
charged and, in the case of the Company, by a duly authorized
officer other than Employee.
(f) Entire Agreement - This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
written or oral agreements between them respecting the subject
matter hereof between the parties hereto. There are no
representations, agreements, arrangements, or understandings, oral
or written, between and among the parties hereto relating to the
subject matter hereof which are not fully expressed herein.
(g) Amendment - This Agreement may be amended only by a writing
signed by Employee and by a duly authorized representative of the
Company other than Employee.
(h) Severability - If any term, provision, covenant, or
condition of this Agreement, or the application thereof to any
person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such term, provision, covenant, or
condition as applied to other persons, places and circumstances
shall remain in full force and effect.
(i) Headings - The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect
in construing or interpreting this Agreement.
(j) Notices - Any notice, request, consent, or approval required
or permitted to be given under this Agreement or pursuant to law
shall be sufficient if in writing, and personally delivered to
Employee or by registered or certified mail to Employee's
residence (as noted in the Company's records), or if personally
delivered to the Company's Corporate Secretary at the Company's
principal office, as the case may be.
(k) Parachute Payment Limitation - Notwithstanding any other
provisions of this Agreement, if any severance benefits under
Section 7 of this Agreement are characterized as "Excess Parachute
Payments" under Section 280G of the Internal Revenue Code of 1986
(the "Code"), then the following rules shall apply:
(i) The Company shall compute the net value to the
Employee of all such severance benefits after reduction for the excise
taxes imposed by Code Section 4999 and for any normal income taxes that
would be imposed on Employee if such severance benefits constituted
Employee's sole taxable income.
(ii) The Company shall next compute the maximum amount of
severance benefits that can be provided without any benefits being
characterized as Excess Parachute Payments and reduce the result by the
amount of any normal income taxes that would be imposed on Employee if
such reduced severance benefits constituted Employee's sole taxable
income.
If the result derived in subparagraph (i) is greater than the
result derived in subparagraph (ii), then the Company shall pay
Employee the full amount of severance benefits without reduction.
If the result derived from subparagraph (i) is not greater than
the result derived in subparagraph (ii), then the Company shall
pay the Employee the maximum amount of severance benefits that can
be provided without any benefits being characterized as Excess
Parachute Payments.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
this 3rd day of January, 1996.
COMPANY: EMPLOYEE:
FLUKE CORPORATION
/s/Douglas G. McKnight /s/William G. Parzybok, Jr.
Officer William G. Parzybok, Jr.
Vice President, General Counsel
Title
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 12, 1995, between
Fluke Corporation, a Washington corporation ("the Company"), and George
M. Winn ("Employee"), and supersedes the employment agreement dated
September 5, 1991.
1. Employment
(a) The Company hereby employs Employee to render services to
the Company in an executive capacity as President and Chief Operating
Officer of the Company. This Agreement is cancelable by action of the
Board upon 3 years notice, unless such employment is sooner terminated
as hereinafter provided. Employee currently serves as a member of the
Company's Board of Directors (the "Board") and the Company commits to
continue nominating Employee for election to the position of Director
during the period of employment under this Agreement.
(b) Employee hereby accepts employment under this Agreement and
agree to the Business, as defined below. For purposes of this
Agreement, "Business" shall mean those activities in which the Company
or any affiliated company (i.e., any corporation or other business
entity, or entities, that now or hereafter directly or indirectly
controls, is controlled by, or is under common control with, the
Company) is permitted to and does engage from time to time during the
period of employment under this Agreement.
(c) The Company through the Board shall retain full direction
and control of the manner, means and methods by which Employee performs
the services for which he is employed hereunder, provided that
Employee's duties and responsibilities shall be of substantially the
same character as, or equivalent to, those performed by a President and
Chief Operating Officer.
2. Compensation
(a) Base Salary - During the period of employment under this
Agreement, Employee shall be paid an annual base salary payable in bi-
weekly installments in an amount equal to the greater of (i) $322,000 or
(ii) such greater amount as the Board may from time to time determine.
Employee's base salary shall be reviewed by the Board at least annually
and will be adjusted as appropriate and consistent with Employee's
position and performance. Nevertheless, if there is a base salary
reduction for all of the Company's other executive officers, Employee's
base salary may be reduced but only in an amount not to exceed the
average percentage reduction that is applied to all the Company's other
executive officers and in no case shall be reduced below $246,000.
(b) Variable Compensation - During the period of employment
under this Agreement, Employee shall be eligible for an annual cash
bonus under a plan or comparable arrangement of equivalent economic
value providing him with a potential bonus of not less than 50% of base
salary in the event that performance standards established by the Board
are met.
(c) Non-Qualified Stock Option Plan - During the period of
employment under this Agreement, Employee shall participate in a Non-
Qualifie Stock Option Plan or comparable arrangement of equivalent
economic value providing him with an annual grant of stock options. The
number of option shares shall be based upon a competitive target range
of shares established through the evaluation of competitive survey data
and may be adjusted by a maximum of plus or minus 50% based upon his
individual contribution to the Company. As of the date of this
Agreement, the current range of competitive stock options for the
Employee is 15,750 - 26,250 shares.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - During the period of employment under this Agreement,
Employee shall participate in the Supplemental Retirement Income and
Pre-Retirement Death Benefit Plan or in a comparable arrangement of
equivalent economic value.
(e) Other Plans - Employee shall be entitled to be granted
benefits under any other incentive or special compensation plans that
are made generally available to the Company's executive officers in
accordance with the terms, conditions and procedures under such plans.
(f) Fringe Benefits - Employee shall be entitled to all fringe
benefits that the Company makes generally available to other executive
officers, from time to time. The current fringe benefits include, by
way of example, the following:
(i) health and dental insurance
(ii) production bonus
(iii) retirement program
- defined benefit plan
- defined contribution plan
(iv) company car
(v) financial planning reimbursement
(vi) physical exam reimbursement
Without in any way limiting the foregoing, it is understood that
the Company shall provide Employee with certain additional benefits in
view of Employee's executive position and his status in the business and
financial community, without regard to whether or not such benefits are
provided to other Employees. The level and nature of the fringe
benefits that are provided shall, in general, be no less than those
benefits in place at the signing of this Agreement.
(g) Business Expense Reimbursement - Employee shall be
reimbursed by the Company for reasonable travel and other business
expenses incurred by Employee in the performance of his duties under
this Agreement in accordance with the general policy of the Company as
set and maintained by the Board.
(h) Net Economic Benefits - Notwithstanding Sections 2(b)
through 2(g), the Board or appropriate Board Committee shall nonetheless
retain complete discretion with respect to the adoption, modification,
termination or substitution of any compensation plans referred to in
such Sections. Benefits provided to Employee under this Agreement shall
not, however, be reduced by the Company except pursuant to Section 2(a)
without compensating adjustments being made so that the same approximate
net economic benefits will be received by the Employee.
(i) Withholding - The Company shall be entitled to withhold from
compensation such amounts on account of payroll taxes, income
taxes and other similar matters as are required to be withheld by
applicable law, rule or regulation of any appropriate governmental
authority.
3. Employee's Business Activities
During the period of employment under this Agreement, Employee may
serve as a member of the board of directors of other companies and
engage in other outside activities of his choice, provided that Employee
provides written notice to the Board of each significant outside
activity prior to engaging in such activity and receives approval of the
Board, which approval shall not be unreasonably withheld. Employee may
not, however, render services to or invest in any business competitive
with any existing or contemplated business of the Company except that
Employee may make personal investments in securities listed on a
national securities exchange or quoted in the Over-the-Counter Market
listing of the Wall Street Journal. A material breach of this Agreement
will be deemed to have occurred if a violation of this Section is not
cured within 30 days after written notification by the Board.
4. Termination by Company
(a) For Cause - Notwithstanding anything herein to the contrary,
the Board without liability may give Notice of Termination (as defined
in Section 10) to Employee for cause at any time. The Company shall not
be liable to Employee for any salary or other sums hereunder which have
not accrued before the Date of Termination (as defined in Section 11).
For purposes of this Agreement, the Company shall have "cause" to
terminate Employee's employment hereunder upon (i) the willful and
continued failure of Employee to substantially perform his duties with
the Company (other than any such failure resulting from Employee's
disability as defined in Section 8), after a written demand for
substantial performance is delivered to Employee by the Board which
specifically identifies the manner in which the Board believes the
Employee has not substantially performed his duties, and provided that
the Company shall provide Employee reasonable opportunity (not less than
two weeks) to cure such conduct, or (ii) the willful engaging by
Employee in gross misconduct materially and demonstrably injurious to
the Company. For purposes of this paragraph, no act, or failure to act,
on Employee's part shall be considered "willful" unless done, or omitted
to be done, by Employee not in good faith and without reasonable belief
that Employee's action or omission was in the best interest of the
Company.
(b) Without Cause - Notwithstanding anything herein to the
contrary, the Board may give Notice of Termination to Employee for any
reason without cause at any time. Employee's sole remedy for such
termination shall be the Severance Benefits set forth in Section 7 of
this Agreement. For the purposes of this Agreement, a termination
without cause shall occur upon any of the following events:
(i) a reduction by the Company of the Employee's
compensation, as defined in Section 2, in a manner not
permitted by Section 2; or
(ii) a material reduction in the level or nature of
Employee's status, title, position, authority or
responsibility as President and Chief Operating
Officer of the Company; or
(iii) the Employee is not elected to serve on the Board of
Directors of the Company; or
(iv) the Company's requirement that the Employee be based
somewhere other than where the Employee's office is
currently located or within a 50 mile radius of such
location; or
(v) the Company's requirement that the Employee travel on
Company business to an extent substantially in excess
of the business travel obligations currently required
by the Company; or
(vi) the Company materially breaches this Agreement; or
(vii) a Change of Control of the Company as defined in
Section 9.
In the case of subparagraphs (i) through (vi), the Employee shall
give the Company written notice specifically identifying the
unsatisfactory nature of such reduction, assignment or breach, and
providing a reasonable opportunity (not to exceed two weeks) for cure.
If no cure shall be effected, Employee may by Notice of Termination
elect to treat such action as a termination without cause. No such
notice is required in the case of subparagraph (vii).
5. Termination by Employee
In the event of Employee's voluntary termination which shall
include retirement pursuant to the Company's retirement program, the
Company shall not be liable to Employee for any salary or other sums
payable hereunder other than those which have accrued before the Date of
Termination except that the following benefits shall be provided as
follows:
(a) Pension Bridge Period - The Company will keep the Employee
on the payroll as a one hour per month employee for a bridging period if
such bridging period, which may not exceed 18 months, allows the
Employee to qualify for early retirement (minimum age 55 and 15 years of
service) or normal retirement (age 65) pursuant to the terms of the
Company's defined benefit Pension Plan.
(b) Health and Dental Coverage - If the Employee can qualify for
early retirement (minimum age 55 and 15 years of service) or normal
retirement (age 65) pursuant to the terms of the Company's defined
benefit Pension Plan at the time of voluntary termination (including the
bridging period if utilized under paragraph (a) above), the Company will
pay the Employee's and Employee spouse's health and dental insurance
coverage until age 65 or until Medicare-eligible, whichever occurs
first. Other qualified dependent health and dental coverage will be
made available to the Employee at Company cost.
(c) Stock Option Choice - The Company will give the Employee the
choice of having all outstanding stock options (i) become immediately
exercisable and have a term of one year in which to exercise such
options, or (ii) remain subject to all of the original terms of the
stock option agreements including the expiration term of the option and
any exercisability limitations.
6. Benefits Coverage Period
The Benefits Coverage Period for purposes of this Agreement shall
be defined as 36 months unless the Board has previously given notice of
cancellation to the Employee pursuant to Section 1(a) in which case the
number of months shall be reduced from 36 months by each whole month
from the date of the notice of cancellation to the Date of Termination.
In no case shall the Benefits Coverage Period be reduced below 12
months.
7. Severance Benefits
In the event of the termination (including death or disability as
defined in Section 8) of Employee's employment hereunder, other than
pursuant to Sections 4(a) or 5, the Company agrees to pay Employee (or
his beneficiary) the Severance Benefits defined in this Section.
Employee has no obligation to mitigate Severance Benefits paid under
this Agreement but if the Employee accepts employment while receiving
Severance Benefits hereunder, any Severance Benefits under Section 7(b)
which exceed one year of annual cash compensation will be reduced by the
actual cash compensation received by Employee from his new employer.
Such repayment of cash compensation by the Employee to the Company would
only relate to cash compensation by the Employee beginning in the
thirteenth month after the Date of Termination during concurrent monthly
periods and ending at the end of the Benefits Coverage Period. No such
reduction is applicable if the termination is pursuant to a Change of
Control.
(a) Variable Compensation - Variable compensation shall be paid
before the Date of Termination in an amount equal to 50% of base salary
as prorated based upon the number of days in the performance period or
periods up to and including the Date of Termination divided by the total
number of days in the performance period or periods.
(b) Cash Compensation - The Company shall pay to the Employee
before the Date of Termination a lump sum amount in cash equal to three
times the Employee's annual cash compensation, unless the Benefits
Coverage Period is less than 36 months in which case the lump sum amount
would be reduced by multiplying such lump sum amount by a fraction in
which the numerator is the Benefits Coverage Period and the denominator
is 36. Annual cash compensation for purposes of this Agreement shall be
the average cash compensation paid to or accrued for the Employee which
is attributable to the last three complete fiscal years prior to the
Date of Termination and would include but is not limited to base salary,
variable compensation and the production bonus.
(c) Non-Qualified Stock Option Plan - Subject to the terms of
any Non-Qualified Stock Option Plan adopted by the Company, Employee
will have the right to exercise any such stock options for the Benefits
Coverage Period. In the case of a Change of Control where the Company
is not the surviving entity, the Employee shall at the Date of
Termination be give the choice to either accept replacement stock
options of the surviving entity or receive a lump sum payment in cash
equal to the gain (the difference between the fair market value of the
stock of the Company at the Date of Termination and the exercise price
of the stock options) as if the Employee had exercised his stock options
at the Date of Termination.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - A full annual contribution shall be made to the
Supplemental Retirement Income and Pre-Retirement Death Benefit Plan or
comparable plan in the year of termination and upon the Employee's
request the full balance in the Employee's account shall be paid in a
lump sum at the Date of Termination.
(e) Fringe Benefits
(i) health, dental, and life insurance - Coverage shall
continue for the Benefits Coverage Period. If the Employee
accepts a job with another company during the Benefits Coverage
Period, the Company may reduce coverage under this subparagraph to
the extent that the Employee is receiving comparable coverages.
Term life insurance comparable to the pre-retirement death benefit
payable under the Supplemental Retirement Income and Pre-
Retirement Death Benefit Plan shall be provided to the Employee
for the Benefits Coverage Period.
(ii) accrued production bonus - The bonus will cease to
accrue as of the Date of Termination. The accrued bonus shall be
paid at the Date of Termination in an amount equal to the same
percentage of base salary utilized in the payment of the
production bonus for the immediately preceding semi-annual
production bonus period as prorated based upon the number of days
in the production bonus period up to and including the Date of
Termination divided by the total number of days in the production
bonus period.
(iii) defined benefit plan - Benefits will cease to accrue
as of the Date of Termination. The defined benefit plan will pay
the accrued benefit pursuant to the terms of the defined benefit
plan document and the Company will pay a lump sum benefit at the
Date of Termination equal to the difference between the lump sum
value of the accrued retirement benefit as of the Date of
Termination and the lump sum value of the accrued retirement
benefit as if the Employee had continued to accrue benefits for
the Benefits Coverage Period, assuming no change in the Employee's
compensation were to occur following the Date of Termination. The
lump sum value of the accrued retirement benefits shall be
computed utilizing the actuarial assumptions and interest rate
assumptions pursuant to the Company's defined benefit pension plan
at the Date of Termination.
(iv)defined contribution plan - Benefits will cease to
accrue as of the Date of Termination. The defined contribution
plan will pay the accrued benefit pursuant to the terms of the
defined contribution plan document and the Company will pay a lump
sum amount at the Date of Termination equal to $500 for each year
or partial year for the Benefits Coverage Period.
(f) Elections - All choices or options for payment must be made in
writing by the Employee and delivered to the Corporate Secretary within
10 days after Notice of Termination.
(g) Escrow - Upon the occurrence of an Anticipated Change in
Control of the Company, and upon Employee's written request, the Company
shall within two business days deposit in an escrow account with a
financial institution reasonably acceptable to Employee (the "Escrow
Agent"), an amount equal to the maximum severance benefits payable by
the Company as a lump sum under this Section 7 (assuming an election in
Section 7(c) to receive a lump sum payment in cash), to hold as security
for the Company's obligations under this Agreement. Employee and the
Company agree to execute the Escrow Agent's standard form of escrow
agreement providing that benefits in the event of any dispute will be
paid in accordance with a determination made under Section 17(b) of this
Agreement. As used in this Agreement, an "Anticipated Change in
Control" shall be deemed to occur if an event takes place which
indicates a reasonable probability that a Change of Control as defined
in Section 9 is likely to occur.
If the Anticipated Change in Control occurs but within a
reasonable time a Change of Control does not take place, the escrowed
funds shall be repaid and released to the Company upon written notice to
the Escrow Agent by the Company and Employee. If a Change of Control
occurs, the Escrow Agent shall immediately pay all the escrowed funds to
the Employee except in the case where the Employee chooses to exercise
his election under Section 7(c) to receive replacement stock options the
escrowed funds representing the lump sum payment in cash of the stock
options shall be returned to the Company.
8. Disability
Termination by the Company of employment based on "Disability"
shall mean termination because of the Employee's absence from duties
with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of incapacity due to physical or mental
illness. During any period that the Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness, he shall continue to receive his full base salary at the rate
then in effect and incentive compensation payable with respect to such
period until his employment is terminated for Disability, provided that,
after such termination, the Employee in addition to the severance
benefits of Section 7 shall be entitled to such other benefits as would
otherwise be due to him under any long-term disability insurance or
other coverage provided by the Company. If the Company so requests, the
Employee shall be examined by a doctor of his choosing and shall submit
to an examination by a doctor of the Company's choosing, and each doctor
shall certify whether the Employee's failure to perform his duties is
due to physical or mental illness. If the doctors of the Employee and
the Company do not agree, then the two doctors shall jointly select a
third doctor whose determination shall be accepted by both parties. All
costs associated with the doctors' certifications shall be borne by the
Company.
9. Change of Control
For purposes of this Agreement, a Change of Control shall be
deemed to occur:
(a) upon the date the Company is informed by receiving a report
on Schedule 13D of the Exchange Act or similar report that any person
(as such term is used in sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ["the Exchange Act"]), together with
such person's Affiliates and Associates as defined in Rule 12b-2 of the
Exchange Act, is or has become the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act; provided, that a person shall not be
deemed to beneficially own securities acquired pursuant to the Employee
Stock Purchase Plan of the Company or other plans generally applicable
to employees, officers or Directors of the Company), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities,
except that there will not be a Change of Control as the result of an
acquisition of securities by the Company, which by reducing the number
of shares outstanding, increases the proportionate number of shares
beneficially owned by any person to 25% or more of the securities of the
Company then outstanding; provided, however, that if a person becomes
the beneficial owner of 25% or more of the securities of the Company
then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the beneficial owner
of any additional securities of the Company, then a Change of Control
will occur unless such person disposes of such additional securities of
the Company within 10 days, or
(b)upon the first purchase of the Company's Common Stock pursuant
to a tender or exchange offer (other than a tender or exchange offer
made by the Company) seeking to acquire securities representing 25% or
more of the combined voting power of the Company's then outstanding
securities, or
(c)upon the first date on which Continuing Directors, as defined
in Article VI of the Company's Articles of Incorporation, cease for any
reason to constitute at least a majority of the Board of Directors, or
(d)the Company is merged or consolidated with another corporation
and as a result of such merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting corporation
shall then be owned in the aggregate by the former stockholders of the
Company, or
(e)the Company transfers substantially all of its assets to
another corporation which is not a wholly owned subsidiary of the
Company.
10. Notice of Termination
Any purported termination by the Company or by the Employee shall
be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated. In the case of a
termination resulting from a Change of Control, no such Notice of
Termination is required.
11. Date of Termination
"Date of Termination" shall mean (a) if employment is to be
terminated for Disability, thirty (30) days after Notice of Termination
is given, (b) if employment is to be terminated by the Company for
Cause, the date on which a Notice of Termination is given, (c) if
employment is to be terminated as a result of a Change of Control, the
date of occurrence of such Change of Control, and (d) if employment is
to be terminated by the Employee or by the Company for any other reason,
the date specified in the Notice of Termination, which shall be a date
no earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been agreed to by the
party receiving the Notice of Termination either in advance of, or
after, receiving such Notice of Termination. Notwithstanding anything
in the foregoing to the contrary, if the party receiving the Notice of
Termination has not previously agreed to the termination, then within
thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination may notify the other party that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of
the parties or by the arbitrators in a proceeding as provided in Section
17(b) hereof.
12. Payment Obligations Absolute
The Company's obligations to pay the Employee the compensation and
to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, any set-off (except that the Company shall be
entitled to withhold from compensation such amounts on account of
payroll taxes, income taxes and other similar matters as are required to
be withheld by applicable law, rule or regulation of any appropriate
governmental authority), counterclaim, recoupment, defense or other
right which the Company or any of its subsidiaries may have against him.
All amounts payable by the Company hereunder shall be paid without
notice or demand. Except as expressly provided herein, the Company
waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this
Agreement in whole or in part.
13. Non-Competition
During the Benefits Coverage Period, Employee agrees that he will
not, directly or indirectly, as principal, agent, owner, employee, or
otherwise engage in direct and substantial competition with the Company
in the United States. The Employee may request in writing a
determination by the Board that a proposed occupation will not
constitute direct and substantial competition with the Company and such
determination shall not be unreasonably withheld. Direct and
substantial competition with the Company shall be limited to what would
be competitive at the Date of Termination. This section shall not apply
to a termination resulting from a Change of Control.
14. Assignment and Transfer
Employee's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, and any purported
assignment, transfer, or delegation shall be void. Employee's rights
hereunder shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, sell,
assign, pledge, encumber or charge the same shall be void.
15. Insurance and Indemnity
(a) During Period of Employment - The Company shall, to the
extent permitted by law, include Employee during his period of
employment under a directors and officers liability insurance policy
maintained for its directors and officers, with coverage at least as
favorable to Employee in amount and every other material respect as the
coverage of other directors and officers covered thereby. The Company
shall indemnify and hold the Employee harmless to the fullest extent
authorized by the Company's Articles of Incorporation and Bylaws and no
less favorable than the Company's other executive officers.
(b) After Termination of Employment - The Company's obligation
to provide insurance and indemnify Employee under this Section 15 shall
survive expiration or termination of this Agreement with respect to
proceedings or threatened proceedings based on acts or omissions of
Employee occurring during Employee's employment with the Company or with
any affiliated company. Such obligations shall be binding upon the
Company's successors and assigns and shall inure to the benefit of
Employee's heirs and personal representatives.
16. Confidential Information
The Employee shall not at any time during the period of his
employment or thereafter, except as required in the course of his
employment with the Company or as authorized in writing by the Board of
Directors of the Company, directly or indirectly use, disclose,
disseminate, or reproduce any Confidential Information. All notes,
notebooks, memoranda and similar repositories of information ("Items")
containing or relating in any way to Confidential Information shall be
the property of the Company. All such Items made or compiled by
Employee or made available to Employee during Employee's employment with
the Company, including all copies thereof, shall be delivered to the
Company by Employee upon termination of his employment with the Company
or at any other time upon request of the Company. "Confidential
Information" means information not generally known relating to the
business of the Company or any third parties that is contributed to,
developed by, disclosed to, or known to Employee in his course of
employment by the Company, including but not limited to customer lists,
specifications, data, research, test procedures and results, know-how,
services used, and information regarding past, present, and prospective
plans and methods of purchasing, accounting, engineering, business,
marketing, merchandising, selling and servicing used by the Company.
17. Miscellaneous
(a) Governing Law - This Agreement shall be governed by and
construed according to the laws of the State of Washington.
(b) Dispute Resolution - The parties agree to work together in
good faith to resolve any dispute arising under this Agreement, and to
explore resolution of the dispute through methods of alternative dispute
resolution. If the parties are unable to resolve a dispute, it shall be
settled by arbitration in Seattle, Washington, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
then in effect. However, if an event takes place which indicates a
reasonable probability that a Change of Control as defined in Section 9
is likely to occur, or a Change of Control as defined in Section 9
occurs, Employee may proceed with litigation without any necessity of
pursuing arbitration or alternative dispute resolution. Additionally,
if both parties agree that neither arbitration nor any other method of
alternative dispute resolution is suitable to resolve the dispute, they
may proceed with litigation. Judgment upon any award may be entered in
any court having jurisdiction over the subject matter of the dispute.
Notwithstanding the pendency of any such dispute or controversy, the
Company will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary and continued participation in all compensation,
benefit and insurance plans in which Employee was participating when the
notice giving rise to the dispute was given), until the dispute is
finally resolved.
(c) Attorneys Fees - In the event any suit or proceeding is
instituted by one party against the other arising out of this Agreement,
the prevailing party shall be entitled to recover its attorneys fees and
expenses of litigation or arbitration.
(d) Rights Cumulative - The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by
either party hereto (or by its successor), whether pursuant to this
Agreement or to law, shall not preclude or waive its right to exercise
any or all other rights and remedies. The rights and remedies herein
are cumulative to any other rights the parties hereto may have by law,
statute, ordinance, or otherwise.
(e) Nonwaiver - No failure or neglect of either party hereto in
any instance to exercise any right, power, or privilege hereunder or
under law shall constitute a waiver of any other right, power, or
privilege or of the same right, power, or privilege in any other
instance. All waivers by either party hereto must be contained in a
written instrument signed by the party to be charged and, in the case of
the Company, by a duly authorized officer other than Employee.
(f) Entire Agreement - This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
written or oral agreements between them respecting the subject matter
hereof between the parties hereto. There are no representations,
agreements, arrangements, or understandings, oral or written, between
and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein.
(g) Amendment - This Agreement may be amended only by a writing
signed by Employee and by a duly authorized representative of the
Company other than Employee.
(h) Severability - If any term, provision, covenant, or
condition of this Agreement, or the application thereof to any person,
place or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable, or void, the remainder of
this Agreement and such term, provision, covenant, or condition as
applied to other persons, places and circumstances shall remain in full
force and effect.
(i) Headings - The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement.
(j) Notices - Any notice, request, consent, or approval required
or permitted to be given under this Agreement or pursuant to law shall
be sufficient if in writing, and personally delivered to Employee or by
registered or certified mail to Employee's residence (as noted in the
Company's records), or if personally delivered to the Company's
Corporate Secretary at the Company's principal office, as the case may
be.
(k) Parachute Payment Limitation - Notwithstanding any other
provisions of this Agreement, if any severance benefits under Section 7
of this Agreement are characterized as "Excess Parachute Payments" under
Section 280G of the Internal Revenue Code of 1986 (the "Code"), then the
following rules shall apply:
(i) The Company shall compute the net value to the
Employee of all such severance benefits after reduction for the
excise taxes imposed by Code Section 4999 and for any normal
income taxes that would be imposed on Employee if such severance
benefits constituted Employee's sole taxable income.
(ii) The Company shall next compute the maximum amount of
severance benefits that can be provided without any benefits being
characterized as Excess Parachute Payments and reduce the result
by the amount of any normal income taxes that would be imposed on
Employee if such reduced severance benefits constituted Employee's
sole taxable income.
If the result derived in subparagraph (i) is greater than the
result derived in subparagraph (ii), then the Company shall pay Employee
the full amount of severance benefits without reduction. If the result
derived from subparagraph (i) is not greater than the result derived in
subparagraph (ii), then the Company shall pay the Employee the maximum
amount of severance benefits that can be provided without any benefits
being characterized as Excess Parachute Payments.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
this 22nd day of December, 1995.
COMPANY: EMPLOYEE:
FLUKE CORPORATION
/s/Douglas G. McKnight /s/George M. Winn
Officer George M. Winn
Vice President, General Counsel
Title
1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 12, 1995, between
Fluke Corporation, a Washington corporation ("the Company"), and Ronald
R. Wambolt ("Employee"), and supersedes the employment agreement dated
September 5, 1991.
1. Employment
(a) The Company hereby employs Employee to render services to
the Company in his current executive capacity as Senior Vice President,
Worldwide Marketing, Sales & Service of the Company or in such other
comparable capacity as Employee may be subsequently assigned. This
Agreement is cancelable by action of the Board upon 3 years notice,
unless such employment is sooner terminated as hereinafter provided.
(b) Employee hereby accepts employment under this Agreement and
agrees to devote his best efforts and substantially full time, attention
and energy to the Business, as defined below. For purposes of this
Agreement, "Business" shall mean those activities in which the Company
or any affiliated company (i.e., any corporation or other business
entity, or entities, that now or hereafter directly or indirectly
controls, is controlled by, or is under common control with, the
Company) is permitted to and does engage from time to time during the
period of employment under this Agreement.
(c) The Company through the Board shall retain full direction
and control of the manner, means and methods by which Employee performs
the services for which he is employed hereunder, provided that
Employee's duties and responsibilities shall be of substantially the
same character as, or equivalent to, those performed by a Senior Vice
President.
2. Compensation
(a) Base Salary - During the period of employment under this
Agreement, Employee shall be paid an annual base salary payable in bi-
weekly installments in an amount equal to the greater of (i) $184,000 or
(ii) such greater amount as the Board may from time to time determine.
Employee's base salary shall be reviewed by the Board at least annually
and will be adjusted as appropriate and consistent with Employee's
position and performance. Nevertheless, if there is a base salary
reduction for all of the Company's other executive officers, Employee's
base salary may be reduced but only in an amount not to exceed the
average percentage reduction that is applied to all the Company's other
executive officers and in no case shall be reduced below $134,000.
(b) Variable Compensation - During the period of employment
under this Agreement, Employee shall be eligible for an annual cash
bonus under a plan or comparable arrangement of equivalent economic
value providing him with a potential bonus of not less than 45% of base
salary in the event that performance standards established by the Board
are met.
(c) Non-Qualified Stock Option Plan - During the period of
employment under this Agreement, Employee shall participate in a Non-
Qualified Stock Option Plan or comparable arrangement of equivalent
economic value providing him with an annual grant of stock options. The
number of option shares shall be based upon a competitive target range
of shares established through the evaluation of competitive survey data
and may be adjusted by a maximum of plus or minus 50% based upon his
individual contribution to the Company. As of the date of this
Agreement, the current range of competitive stock options for the
Employee is 5,250 - 8,750 shares.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - During the period of employment under this Agreement,
Employee shall participate in the Supplemental Retirement Income and
Pre-Retirement Death Benefit Plan or in a comparable arrangement of
equivalent economic value.
(e) Other Plans - Employee shall be entitled to be granted
benefits under any other incentive or special compensation plans that
are made generally available to the Company's executive officers in
accordance with the terms, conditions and procedures under such plans.
(f) Fringe Benefits - Employee shall be entitled to all fringe
benefits that the Company makes generally available to other executive
officers, from time to time. The current fringe benefits include, by
way of example, the following:
(i) health and dental insurance
(ii) production bonus
(iii) retirement program
- defined benefit plan
- defined contribution plan
(iv) company car
(v) financial planning reimbursement
(vi) physical exam reimbursement
Without in any way limiting the foregoing, it is understood that
the Company shall provide Employee with certain additional benefits in
view of Employee's executive position and his status in the business and
financial community, without regard to whether or not such benefits are
provided to other Employees. The level and nature of the fringe
benefits that are provided shall, in general, be no less than those
benefits in place at the signing of this Agreement.
(g) Business Expense Reimbursement - Employee shall be
reimbursed by the Company for reasonable travel and other business
expenses incurred by Employee in the performance of his duties under
this Agreement in accordance with the general policy of the Company as
set and maintained by the Board.
(h) Net Economic Benefits - Notwithstanding Sections 2(b)
through 2(g), the Board or appropriate Board Committee shall nonetheless
retain complete discretion with respect to the adoption, modification,
termination or substitution of any compensation plans referred to in
such Sections. Benefits provided to Employee under this Agreement shall
not, however, be reduced by the Company except pursuant to Section 2(a)
without compensating adjustments being made so that the same approximate
net economic benefits will be received by the Employee.
(i) Withholding - The Company shall be entitled to withhold from
compensation such amounts on account of payroll taxes, income taxes and
other similar matters as are required to be withheld by applicable law,
rule or regulation of any appropriate governmental authority.
3. Employee's Business Activities
During the period of employment under this Agreement, Employee may
serve as a member of the board of directors of other companies and
engage in other outside activities of his choice, provided that Employee
provides written notice to the Board of each significant outside
activity prior to engaging in such activity and receives approval of the
Board, which approval shall not be unreasonably withheld. Employee may
not, however, render services to or invest in any business competitive
with any existing or contemplated business of the Company except that
Employee may make personal investments in securities listed on a
national securities exchange or quoted in the Over-the-Counter Market
listing of the Wall Street Journal. A material breach of this Agreement
will be deemed to have occurred if a violation of this Section is not
cured within 30 days after written notification by the Board.
4. Termination by Company
(a) For Cause - Notwithstanding anything herein to the contrary,
the Board without liability may give Notice of Termination (as defined
in Section 10) to Employee for cause at any time. The Company shall not
be liable to Employee for any salary or other sums hereunder which have
not accrued before the Date of Termination (as defined in Section 11).
For purposes of this Agreement, the Company shall have "cause" to
terminate Employee's employment hereunder upon (i) the willful and
continued failure of Employee to substantially perform his duties with
the Company (other than any such failure resulting from Employee's
disability as defined in Section 8), after a written demand for
substantial performance is delivered to Employee by the Board which
specifically identifies the manner in which the Board believes the
Employee has not substantially performed his duties, and provided that
the Company shall provide Employee reasonable opportunity (not less than
two weeks) to cure such conduct, or (ii) the willful engaging by
Employee in gross misconduct materially and demonstrably injurious to
the Company. For purposes of this paragraph, no act, or failure to act,
on Employee's part shall be considered "willful" unless done, or omitted
to be done, by Employee not in good faith and without reasonable belief
that Employee's action or omission was in the best interest of the
Company.
(b) Without Cause - Notwithstanding anything herein to the
contrary, the Board may give Notice of Termination to Employee for any
reason without cause at any time. Employee's sole remedy for such
termination shall be the Severance Benefits set forth in Section 7 of
this Agreement. For the purposes of this Agreement, a termination
without cause shall occur upon any of the following events:
(i)a reduction by the Company of the Employee's
compensation, asdefined in Section 2, in a manner not
permitted by Section 2; or
(ii)a material reduction in the level or nature of
Employee's status, title, position, authority or
responsibility as a Senior Vice President of the Company;
or
(iii)the Company's requirement that the Employee be based
somewhere other than where the Employee's office is
currently located or within a 50 mile radius of such
location; or
(iv)the Company's requirement that the Employee travel on
Company business to an extent substantially in excess of
the business travel obligations currently required by the
Company; or
(v)the Company materially breaches this Agreement; or
(vi)a Change of Control of the Company as defined in Section
9.
In the case of subparagraphs (i) through (v), the Employee shall
give the Company written notice specifically identifying the
unsatisfactory nature of such reduction, assignment or breach, and
providing a reasonable opportunity (not to exceed two weeks) for cure.
If no cure shall be effected, Employee may by Notice of Termination
elect to treat such action as a termination without cause. No such
notice is required in the case of subparagraph (vi).
5. Termination by Employee
In the event of Employee's voluntary termination which shall include
retirement pursuant to the Company's retirement program, the Company
shall not be liable to Employee for any salary or other sums payable
hereunder other than those which have accrued before the Date of
Termination.
6. Benefits Coverage Period
The Benefits Coverage Period for purposes of this Agreement shall
be defined as 36 months unless the Board has previously given notice of
cancellation to the Employee pursuant to Section 1(a) in which case the
number of months shall be reduced from 36 months by each whole month
from the date of the notice of cancellation to the Date of Termination.
In no case shall the Benefits Coverage Period be reduced below 12
months.
7. Severance Benefits
In the event of the termination (including death or disability as
defined in Section 8) of Employee's employment hereunder, other than
pursuant to Sections 4(a) or 5, the Company agrees to pay Employee (or
his beneficiary) the Severance Benefits defined in this Section.
Employee has no obligation to mitigate Severance Benefits paid under
this Agreement but if the Employee accepts employment while receiving
Severance Benefits hereunder, any Severance Benefits under Section 7(b)
which exceed one year of annual cash compensation will be reduced by the
actual cash compensation received by Employee from his new employer.
Such repayment of cash compensation by the Employee to the Company would
only relate to cash compensation by the Employee beginning in the
thirteenth month after the Date of Termination during concurrent monthly
periods and ending at the end of the Benefits Coverage Period. No such
reduction is applicable if the termination is pursuant to a Change of
Control.
(a) Variable Compensation - Variable compensation shall be paid
before the Date of Termination in an amount equal to 45% of base salary
as prorated based upon the number of days in the performance period or
periods up to and including the Date of Termination divided by the total
number of days in the performance period or periods.
(b) Cash Compensation - The Company shall pay to the Employee
before the Date of Termination a lump sum amount in cash equal to three
times the Employee's annual cash compensation, unless the Benefits
Coverage Period is less than 36 months in which case the lump sum amount
would be reduced by multiplying such lump sum amount by a fraction in
which the numerator is the Benefits Coverage Period and the denominator
is 36. Annual cash compensation for purposes of this Agreement shall be
the average cash compensation paid to or accrued for the Employee which
is attributable to the last three complete fiscal years prior to the
Date of Termination and would include but is not limited to base salary,
variable compensation and the production bonus.
(c) Non-Qualified Stock Option Plan - Subject to the terms of
any Non-Qualified Stock Option Plan adopted by the Company, Employee
will have the right to exercise any such stock options for the Benefits
Coverage Period. In the case of a Change of Control where the Company
is not the surviving entity, the Employee shall at the Date of
Termination be given the choice to either accept replacement stock
options of the surviving entity or receive a lump sum payment in cash
equal to the gain (the difference between the fair market value of the
stock of the Company at the Date of Termination and the exercise price
of the stock options) as if the Employee had exercised his stock options
at the Date of Termination.
(d) Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan - A full annual contribution shall be made to the
Supplemental Retirement Income and Pre-Retirement Death Benefit Plan or
comparable plan in the year of termination and upon the Employee's
request the full balance in the Employee's account shall be paid in a
lump sum at the Date of Termination.
(e) Fringe Benefits
(i) health, dental, and life insurance - Coverage shall
continue for the Benefits Coverage Period. If the Employee
accepts a job with another company during the Benefits
Coverage Period, the Company may reduce coverage under this
subparagraph to the extent that the Employee is receiving
comparable coverages. Term life insurance comparable to
the pre-retirement death benefit payable under the
Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan shall be provided to the Employee for the
Benefits Coverage Period.
(ii) accrued production bonus - The bonus will cease to
accrue as of the Date of Termination. The accrued bonus
shall be paid at the Date of Termination in an amount equal
to the same percentage of base salary utilized in the
payment of the production bonus for the immediately
preceding semi-annual production bonus period as prorated
based upon the number of days in the production bonus
period up to and including the Date of Termination divided
by the total number of days in the production bonus period.
(iii) defined benefit plan - Benefits will cease to accrue
as of the Date of Termination. The defined benefit plan
will pay the accrued benefit pursuant to the terms of the
defined benefit plan document and the Company will pay a
lump sum benefit at the Date of Termination equal to the
difference between the lump sum value of the accrued
retirement benefit as of the Date of Termination and the
lump sum value of the accrued retirement benefit as if the
Employee had continued to accrue benefits for the Benefits
Coverage Period, assuming no change in the Employee's
compensation were to occur following the Date of
Termination. The lump sum value of the accrued retirement
benefits shall be computed utilizing the actuarial
assumptions and interest rate assumptions pursuant to the
Company's defined benefit pension plan at the Date of
Termination.
(iv) defined contribution plan - Benefits will cease to
accrue as of the Date of Termination. The defined
contribution plan will pay the accrued benefit pursuant to
the terms of the defined contribution plan document and the
Company will pay a lump sum amount at the Date of
Termination equal to $500 for each year or partial year for
the Benefits Coverage Period.
(f) Elections - All choices or options for payment must be made
in writing by the Employee and delivered to the Corporate Secretary
within 10 days after Notice of Termination.
(g) Escrow - Upon the occurrence of an Anticipated Change in
Control of the Company, and upon Employee's written request, the Company
shall within two business days deposit in an escrow account with a
financial institution reasonably acceptable to Employee (the "Escrow
Agent"), an amount equal to the maximum severance benefits payable by
the Company as a lump sum under this Section 7 (assuming an election in
Section 7(c) to receive a lump sum payment in cash), to hold as security
for the Company's obligations under this Agreement. Employee and the
Company agree to execute the Escrow Agent's standard form of escrow
agreement providing that benefits in the event of any dispute will be
paid in accordance with a determination made under Section 17(b) of this
Agreement. As used in this Agreement, an "Anticipated Change in
Control" shall be deemed to occur if an event takes place which
indicates a reasonable probability that a Change of Control as defined
in Section 9 is likely to occur.
If the Anticipated Change in Control occurs but within a reasonable time
a Change of Control does not take place, the escrowed funds shall be
repaid and released to the Company upon written notice to the Escrow
Agent by the Company and Employee. If a Change of Control occurs, the
Escrow Agent shall immediately pay all the escrowed funds to the
Employee except in the case where the Employee chooses to exercise his
election under Section 7(c) to receive replacement stock options, the
escrowed funds representing the lump sum payment in cash of the stock
options shall be returned to the Company.
8. Disability
Termination by the Company of employment based on "Disability"
shall mean termination because of the Employee's absence from duties
with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of incapacity due to physical or mental
illness. During any period that the Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness, he shall continue to receive his full base salary at the rate
then in effect and incentive compensation payable with respect to such
period until his employment is terminated for Disability, provided that,
after such termination, the Employee in addition to the severance
benefits of Section 7 shall be entitled to such other benefits as would
otherwise be due to him under any long-term disability insurance or
other coverage provided by the Company. If the Company so requests, the
Employee shall be examined by a doctor of his choosing and shall submit
to an examination by a doctor of the Company's choosing, and each doctor
shall certify whether the Employee's failure to perform his duties is
due to physical or mental illness. If the doctors of the Employee and
the Company do not agree, then the two doctors shall jointly select a
third doctor whose determination shall be accepted by both parties. All
costs associated with the doctors' certifications shall be borne by the
Company.
9. Change of Control
For purposes of this Agreement, a Change of Control shall be deemed
to occur:
(a) upon the date the Company is informed by receiving a report
on Schedule 13D of the Exchange Act or similar report that any person
(as such term is used in sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ["the Exchange Act"]), together with
such person's Affiliates and Associates as defined in Rule 12b-2 of the
Exchange Act, is or has become the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act; provided, that a person shall not be
deemed to beneficially own securities acquired pursuant to the Employee
Stock Purchase Plan of the Company or other plans generally applicable
to employees, officers or Directors of the Company), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities,
except that there will not be a Change of Control as the result of an
acquisition of securities by the Company, which by reducing the number
of shares outstanding, increases the proportionate number of shares
beneficially owned by any person to 25% or more of the securities of the
Company then outstanding; provided, however, that if a person becomes
the beneficial owner of 25% or more of the securities of the Company
then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the beneficial owner
of any additional securities of the Company, then a Change of Control
will occur unless such person disposes of such additional securities of
the Company within 10 days, or
(b) upon the first purchase of the Company's Common Stock
pursuant to a tender or exchange offer (other than a tender or exchange
offer made by the Company) seeking to acquire securities representing
25% or more of the combined voting power of the Company's then
outstanding securities, or
(c) upon the first date on which Continuing Directors, as
defined in Article VI of the Company's Articles of Incorporation, cease
for any reason to constitute at least a majority of the Board of
Directors, or
(d) the Company is merged or consolidated with another
corporation and as a result of such merger or consolidation less than
75% of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former
stockholders of the Company, or
(e) the Company transfers substantially all of its assets to
another corporation which is not a wholly owned subsidiary of the
Company.
10. Notice of Termination
Any purported termination by the Company or by the Employee shall
be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated. In the case of a
termination resulting from a Change of Control, no such Notice of
Termination is required.
11. Date of Termination
"Date of Termination" shall mean (a) if employment is to be
terminated for Disability, thirty (30) days after Notice of Termination
is given, (b) if employment is to be terminated by the Company for
Cause, the date on which a Notice of Termination is given, (c) if
employment is to be terminated as a result of a Change of Control, the
date of occurrence of such Change of Control, and (d) if employment is
to be terminated by the Employee or by the Company for any other reason,
the date specified in the Notice of Termination, which shall be a date
no earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been agreed to by the
party receiving the Notice of Termination either in advance of, or
after, receiving such Notice of Termination. Notwithstanding anything
in the foregoing to the contrary, if the party receiving the Notice of
Termination has not previously agreed to the termination, then within
thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination may notify the other party that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of
the parties or by the arbitrators in a proceeding as provided in Section
17(b) hereof.
12. Payment Obligations Absolute
The Company's obligations to pay the Employee the compensation and
to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, any set-off (except that the Company shall be
entitled to withhold from compensation such amounts on account of
payroll taxes, income taxes and other similar matters as are required to
be withheld by applicable law, rule or regulation of any appropriate
governmental authority), counterclaim, recoupment, defense or other
right which the Company or any of its subsidiaries may have against him.
All amounts payable by the Company hereunder shall be paid without
notice or demand. Except as expressly provided herein, the Company
waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this
Agreement in whole or in part.
13. Non-Competition
During the Benefits Coverage Period, Employee agrees that he will
not, directly or indirectly, as principal, agent, owner, employee, or
otherwise engage in direct and substantial competition with the Company
in the United States. The Employee may request in writing a
determination by the Board that a proposed occupation will not
constitute direct and substantial competition with the Company and such
determination shall not be unreasonably withheld. Direct and
substantial competition with the Company shall be limited to what would
be competitive at the Date of Termination. This section shall not apply
to a termination resulting from a Change of Control.
14. Assignment and Transfer
Employee's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, and any purported
assignment, transfer, or delegation shall be void. Employee's rights
hereunder shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, sell,
assign, pledge, encumber or charge the same shall be void.
15. Insurance and Indemnity
(a) During Period of Employment - The Company shall, to the
extent permitted by law, include Employee during his period of
employment under a directors and officers liability insurance policy
maintained for its directors and officers, with coverage at least as
favorable to Employee in amount and every other material respect as the
coverage of other directors and officers covered thereby. The Company
shall indemnify and hold the Employee harmless to the fullest extent
authorized by the Company's Articles of Incorporation and Bylaws and no
less favorable than the Company's other executive officers.
(b) After Termination of Employment - The Company's obligation
to provide insurance and indemnify Employee under this Section 15 shall
survive expiration or termination of this Agreement with respect to
proceedings or threatened proceedings based on acts or omissions of
Employee occurring during Employee's employment with the Company or with
any affiliated company. Such obligations shall be binding upon the
Company's successors and assigns and shall inure to the benefit of
Employee's heirs and personal representatives.
16. Confidential Information
The Employee shall not at any time during the period of his
employment or thereafter, except as required in the course of his
employment with the Company or as authorized in writing by the Board of
Directors of the Company, directly or indirectly use, disclose,
disseminate, or reproduce any Confidential Information. All notes,
notebooks, memoranda and similar repositories of information ("Items")
containing or relating in any way to Confidential Information shall be
the property of the Company. All such Items made or compiled by
Employee or made available to Employee during Employee's employment with
the Company, including all copies thereof, shall be delivered to the
Company by Employee upon termination of his employment with the Company
or at any other time upon request of the Company. "Confidential
Information" means information not generally known relating to the
business of the Company or any third parties that is contributed to,
developed by, disclosed to, or known to Employee in his course of
employment by the Company, including but not limited to customer lists,
specifications, data, research, test procedures and results, know-how,
services used, and information regarding past, present, and prospective
plans and methods of purchasing, accounting, engineering, business,
marketing, merchandising, selling and servicing used by the Company.
17. Miscellaneous
(a) Governing Law - This Agreement shall be governed by and
construed according to the laws of the State of Washington.
(b) Dispute Resolution - The parties agree to work together in
good faith to resolve any dispute arising under this Agreement, and to
explore resolution of the dispute through methods of alternative dispute
resolution. If the parties are unable to resolve a dispute, it shall be
settled by arbitration in Seattle, Washington, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
then in effect. However, if an event takes place which indicates a
reasonable probability that a Change of Control as defined in Section 9
is likely to occur, or a Change of Control as defined in Section 9
occurs, Employee may proceed with litigation without any necessity of
pursuing arbitration or alternative dispute resolution. Additionally,
if both parties agree that neither arbitration nor any other method of
alternative dispute resolution is suitable to resolve the dispute, they
may proceed with litigation. Judgment upon any award may be entered in
any court having jurisdiction over the subject matter of the dispute.
Notwithstanding the pendency of any such dispute or controversy, the
Company will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary and continued participation in all compensation,
benefit and insurance plans in which Employee was participating when the
notice giving rise to the dispute was given), until the dispute is
finally resolved.
(c) Attorneys Fees - In the event any suit or proceeding is
instituted by one party against the other arising out of this Agreement,
the prevailing party shall be entitled to recover its attorneys fees and
expenses of litigation or arbitration.
(d) Rights Cumulative - The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by
either party hereto (or by its successor), whether pursuant to this
Agreement or to law, shall not preclude or waive its right to exercise
any or all other rights and remedies. The rights and remedies herein
are cumulative to any other rights the parties hereto may have by law,
statute, ordinance, or otherwise.
(e) Nonwaiver - No failure or neglect of either party hereto in
any instance to exercise any right, power, or privilege hereunder or
under law shall constitute a waiver of any other right, power, or
privilege or of the same right, power, or privilege in any other
instance. All waivers by either party hereto must be contained in a
written instrument signed by the party to be charged and, in the case of
the Company, by a duly authorized officer other than Employee.
(f) Entire Agreement - This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
written or oral agreements between them respecting the subject matter
hereof between the parties hereto. There are no representations,
agreements, arrangements, or understandings, oral or written, between
and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein.
(g) Amendment - This Agreement may be amended only by a writing
signed by Employee and by a duly authorized representative of the
Company other than Employee.
(h) Severability - If any term, provision, covenant, or
condition of this Agreement, or the application thereof to any person,
place or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable, or void, the remainder of
this Agreement and such term, provision, covenant, or condition as
applied to other persons, places and circumstances shall remain in full
force and effect.
(i) Headings - The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement.
(j) Notices - Any notice, request, consent, or approval required
or permitted to be given under this Agreement or pursuant to law shall
be sufficient if in writing, and personally delivered to Employee or by
registered or certified mail to Employee's residence (as noted in the
Company's records), or if personally delivered to the Company's
Corporate Secretary at the Company's principal office, as the case may
be.
(k) Parachute Payment Limitation - Notwithstanding any other
provisions of this Agreement, if any severance benefits under Section 7
of this Agreement are characterized as "Excess Parachute Payments" under
Section 280G of the Internal Revenue Code of 1986 (the "Code"), then the
following rules shall apply:
(i) The Company shall compute the net value to the
Employee of all such severance benefits after reduction for
the excise taxes imposed by Code Section 4999 and for any
normal income taxes that would be imposed on Employee if
such severance benefits constituted Employee's sole taxable
income.
(ii) The Company shall next compute the maximum amount of
severance benefits that can be provided without any
benefits being characterized as Excess Parachute Payments
and reduce the result by the amount of any normal income
taxes that would be imposed on Employee if such reduced
severance benefits constituted Employee's sole taxable
income.
If the result derived in subparagraph (i) is greater than the
result derived in subparagraph (ii), then the Company shall pay Employee
the full amount of severance benefits without reduction. If the result
derived from subparagraph (i) is not greater than the result derived in
subparagraph (ii), then the Company shall pay the Employee the maximum
amount of severance benefits that can be provided without any benefits
being characterized as Excess Parachute Payments.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
this 3rd day of January, 1996.
COMPANY: EMPLOYEE:
FLUKE CORPORATION
/s/Douglas G. McKnight /s/Ronald R. Wambolt
Officer Ronald R. Wambolt
Vice President, General Counsel
Title
2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 12, 1995, between
Fluke Corporation, a Washington corporation ("the Company"), and Richard
W. Van Saun ("Employee"), and supersedes the employment agreement dated
September 5, 1991.
1.Employment
(a) The Company hereby employs Employee to render services to the
Company in his current executive capacity as Senior Vice President,
General Manager, Service Tools Division of the Company or in such other
comparable capacity as Employee may be subsequently assigned. This
Agreement is cancelable by action of the Board upon 3 years notice,
unless such employment is sooner terminated as hereinafter provided.
(b) Employee hereby accepts employment under this Agreement and agrees
to devote his best efforts and substantially full time, attention and
energy to the Business, as defined below. For purposes of this
Agreement, "Business" shall mean those activities in which the Company
or any affiliated company (i.e., any corporation or other business
entity, or entities, that now or hereafter directly or indirectly
controls, is controlled by, or is under common control with, the
Company) is permitted to and does engage from time to time during the
period of employment under this Agreement.
(c) The Company through the Board shall retain full direction and
control of the manner, means and methods by which Employee performs the
services for which he is employed hereunder, provided that Employee's
duties and responsibilities shall be of substantially the same character
as, or equivalent to, those performed by a Senior Vice President.
2. Compensation
(a) Base Salary - During the period of employment under this
Agreement, Employee shall be paid an annual base salary payable in bi-
weekly installments in an amount equal to the greater of (i) $184,000 or
(ii) such greater amount as the Board may from time to time determine.
Employee's base salary shall be reviewed by the Board at least annually
and will be adjusted as appropriate and consistent with Employee's
position and performance. Nevertheless, if there is a base salary
reduction for all of the Company's other executive officers, Employee's
base salary may be reduced but only in an amount not to exceed the
average percentage reduction that is applied to all the Company's other
executive officers and in no case shall be reduced below $128,000.
(b) Variable Compensation - During the period of employment under
this Agreement, Employee shall be eligible for an annual cash bonus
under a plan or comparable arrangement of equivalent economic value
providing him with a potential bonus of not less than 45% of base salary
in the event that performance standards established by the Board are
met.
(c) Non-Qualified Stock Option Plan - During the period of employment
under this Agreement, Employee shall participate in a Non-Qualified
Stock Option Plan or comparable arrangement of equivalent economic value
providing him with an annual grant of stock options. The number of
option shares shall be based upon a competitive target range of shares
established through the evaluation of competitive survey data and may be
adjusted by a maximum of plus or minus 50% based upon his individual
contribution to the Company. As of the date of this Agreement, the
current range of competitive stock options for the Employee is 5,250 -
8,750 shares.
(d) Supplemental Retirement Income and Pre-Retirement Death Benefit
Plan - During the period of employment under this Agreement, Employee
shall participate in the Supplemental Retirement Income and Pre-
Retirement Death Benefit Plan or in a comparable arrangement of
equivalent economic value.
(e) Other Plans - Employee shall be entitled to be granted benefits
under any other incentive or special compensation plans that are made
generally available to the Company's executive officers in accordance
with the terms, conditions and procedures under such plans.
(f) Fringe Benefits - Employee shall be entitled to all fringe
benefits that the Company makes generally available to other executive
officers, from time to time. The current fringe benefits include, by
way of example, the following:
(i) health and dental insurance
(ii) production bonus
(iii) retirement program
- defined benefit plan
- defined contribution plan
(iv) company car
(v) financial planning reimbursement
(vi) physical exam reimbursement
Without in any way limiting the foregoing, it is understood that
the Company shall provide Employee with certain additional benefits in
view of Employee's executive position and his status in the business and
financial community, without regard to whether or not such benefits are
provided to other Employees. The level and nature of the fringe
benefits that are provided shall, in general, be no less than those
benefits in place at the signing of this Agreement.
(g) Business Expense Reimbursement - Employee shall be reimbursed by
the Company for reasonable travel and other business expenses incurred
by Employee in the performance of his duties under this Agreement in
accordance with the general policy of the Company as set and maintained
by the Board.
(h) Net Economic Benefits - Notwithstanding Sections 2(b) through
2(g), the Board or appropriate Board Committee shall nonetheless retain
complete discretion with respect to the adoption, modification,
termination or substitution of any compensation plans referred to in
such Sections. Benefits provided to Employee under this Agreement shall
not, however, be reduced by the Company except pursuant to Section 2(a)
without compensating adjustments being made so that the same approximate
net economic benefits will be received by the Employee.
(i) Withholding - The Company shall be entitled to withhold from
compensation such amounts on account of payroll taxes, income taxes and
other similar matters as are required to be withheld by applicable law,
rule or regulation of any appropriate governmental authority.
3. Employee's Business Activities
During the period of employment under this Agreement, Employee may
serve as a member of the board of directors of other companies and
engage in other outside activities of his choice, provided that Employee
provides written notice to the Board of each significant outside
activity prior to engaging in such activity and receives approval of the
Board, which approval shall not be unreasonably withheld. Employee may
not, however, render services to or invest in any business competitive
with any existing or contemplated business of the Company except that
Employee may make personal investments in securities listed on a
national securities exchange or quoted in the Over-the-Counter Market
listing of the Wall Street Journal. A material breach of this Agreement
will be deemed to have occurred if a violation of this Section is not
cured within 30 days after written notification by the Board.
4. Termination by Company
(a) For Cause - Notwithstanding anything herein to the contrary, the
Board without liability may give Notice of Termination (as defined in
Section 10) to Employee for cause at any time. The Company shall not be
liable to Employee for any salary or other sums hereunder which have not
accrued before the Date of Termination (as defined in Section 11). For
purposes of this Agreement, the Company shall have "cause" to terminate
Employee's employment hereunder upon (i) the willful and continued
failure of Employee to substantially perform his duties with the Company
(other than any such failure resulting from Employee's disability as
defined in Section 8), after a written demand for substantial
performance is delivered to Employee by the Board which specifically
identifies the manner in which the Board believes the Employee has not
substantially performed his duties, and provided that the Company shall
provide Employee reasonable opportunity (not less than two weeks) to
cure such conduct, or (ii) the willful engaging by Employee in gross
misconduct materially and demonstrably injurious to the Company. For
purposes of this paragraph, no act, or failure to act, on Employee's
part shall be considered "willful" unless done, or omitted to be done,
by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company.
(b) Without Cause - Notwithstanding anything herein to the contrary,
the Board may give Notice of Termination to Employee for any reason
without cause at any time. Employee's sole remedy for such termination
shall be the Severance Benefits set forth in Section 7 of this
Agreement. For the purposes of this Agreement, a termination without
cause shall occur upon any of the following events:
(i) a reduction by the Company of the Employee's compensation,
as defined in Section 2, in a manner not permitted by Section 2;
or
(ii) a material reduction in the level or nature of Employee's
status, title, position, authority or responsibility as a Senior
Vice President of the Company; or
(iii) the Company's requirement that the Employee be based
somewhere other than where the Employee's office is currently
located or within a 50 mile radius of such location; or
(iv) the Company's requirement that the Employee travel on
Company business to an extent substantially in excess of the
business travel obligations currently required by the Company; or
(v) the Company materially breaches this Agreement; or
(vi) a Change of Control of the Company as defined in Section 9.
In the case of subparagraphs (i) through (v), the Employee shall
give the Company written notice specifically identifying the
unsatisfactory nature of such reduction, assignment or breach, and
providing a reasonable opportunity (not to exceed two weeks) for cure.
If no cure shall be effected, Employee may by Notice of Termination
elect to treat such action as a termination without cause. No such
notice is required in the case of subparagraph (vi).
5. Termination by Employee
In the event of Employee's voluntary termination which shall
include retirement pursuant to the Company's retirement program, the
Company shall not be liable to Employee for any salary or other sums
payable hereunder other than those which have accrued before the Date of
Termination.
6. Benefits Coverage Period
The Benefits Coverage Period for purposes of this Agreement shall
be defined as 36 months unless the Board has previously given notice of
cancellation to the Employee pursuant to Section 1(a) in which case the
number of months shall be reduced from 36 months by each whole month
from the date of the notice of cancellation to the Date of Termination.
In no case shall the Benefits Coverage Period be reduced below 12
months.
7. Severance Benefits
In the event of the termination (including death or disability as
defined in Section 8) of Employee's employment hereunder, other than
pursuant to Sections 4(a) or 5, the Company agrees to pay Employee (or
his beneficiary) the Severance Benefits defined in this Section.
Employee has no obligation to mitigate Severance Benefits paid under
this Agreement but if the Employee accepts employment while receiving
Severance Benefits hereunder, any Severance Benefits under Section 7(b)
which exceed one year of annual cash compensation will be reduced by the
actual cash compensation received by Employee from his new employer.
Such repayment of cash compensation by the Employee to the Company would
only relate to cash compensation by the Employee beginning in the
thirteenth month after the Date of Termination during concurrent monthly
periods and ending at the end of the Benefits Coverage Period. No such
reduction is applicable if the termination is pursuant to a Change of
Control.
(a) Variable Compensation - Variable compensation shall be paid before
the Date of Termination in an amount equal to 45% of base salary as
prorated based upon the number of days in the performance period or
periods up to and including the Date of Termination divided by the total
number of days in the performance period or periods.
(b) Cash Compensation - The Company shall pay to the Employee before
the Date of Termination a lump sum amount in cash equal to three times
the Employee's annual cash compensation, unless the Benefits Coverage
Period is less than 36 months in which case the lump sum amount would be
reduced by multiplying such lump sum amount by a fraction in which the
numerator is the Benefits Coverage Period and the denominator is 36.
Annual cash compensation for purposes of this Agreement shall be the
average cash compensation paid to or accrued for the Employee which is
attributable to the last three complete fiscal years prior to the Date
of Termination and would include but is not limited to base salary,
variable compensation and the production bonus.
(c) Non-Qualified Stock Option Plan - Subject to the terms of any Non-
Qualified Stock Option Plan adopted by the Company, Employee will have
the right to exercise any such stock options for the Benefits Coverage
Period. In the case of a Change of Control where the Company is not the
surviving entity, the Employee shall at the Date of Termination be given
the choice to either accept replacement stock options of the surviving
entity or receive a lump sum payment in cash equal to the gain (the
difference between the fair market value of the stock of the Company at
the Date of Termination and the exercise price of the stock options) as
if the Employee had exercised his stock options at the Date of
Termination.
(d) Supplemental Retirement Income and Pre-Retirement Death Benefit
Plan - A full annual contribution shall be made to the Supplemental
Retirement Income and Pre-Retirement Death Benefit Plan or comparable
plan in the year of termination and upon the Employee's request the full
balance in the Employee's account shall be paid in a lump sum at the
Date of Termination.
(e) Fringe Benefits
(i) health, dental, and life insurance - Coverage shall continue
for the Benefits Coverage Period. If the Employee accepts a job
with another company during the Benefits Coverage Period, the
Company may reduce coverage under this subparagraph to the extent
that the Employee is receiving comparable coverages. Term life
insurance comparable to the pre-retirement death benefit payable
under the Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan shall be provided to the Employee for the Benefits
Coverage Period.
(ii) accrued production bonus - The bonus will cease to accrue as
of the Date of Termination. The accrued bonus shall be paid at
the Date of Termination in an amount equal to the same percentage
of base salary utilized in the payment of the production bonus for
the immediately preceding semi-annual production bonus period as
prorated based upon the number of days in the production bonus
period up to and including the Date of Termination divided by the
total number of days in the production bonus period.
(iii) defined benefit plan - Benefits will cease to accrue as of
the Date of Termination. The defined benefit plan will pay the
accrued benefit pursuant to the terms of the defined benefit plan
document and the Company will pay a lump sum benefit at the Date
of Termination equal to the difference between the lump sum value
of the accrued retirement benefit as of the Date of Termination
and the lump sum value of the accrued retirement benefit as if the
Employee had continued to accrue benefits for the Benefits
Coverage Period, assuming no change in the Employee's compensation
were to occur following the Date of Termination. The lump sum
value of the accrued retirement benefits shall be computed
utilizing the actuarial assumptions and interest rate assumptions
pursuant to the Company's defined benefit pension plan at the Date
of Termination.
(iv) defined contribution plan - Benefits will cease to accrue as
of the Date of Termination. The defined contribution plan will
pay the accrued benefit pursuant to the terms of the defined
contribution plan document and the Company will pay a lump sum
amount at the Date of Termination equal to $500 for each year or
partial year for the Benefits Coverage Period.
(f) Elections - All choices or options for payment must be made in
writing by the Employee and delivered to the Corporate Secretary within
10 days after Notice of Termination.
(g) Escrow - Upon the occurrence of an Anticipated Change in Control
of the Company, and upon Employee's written request, the Company shall
within two business days deposit in an escrow account with a financial
institution reasonably acceptable to Employee (the "Escrow Agent"), an
amount equal to the maximum severance benefits payable by the Company as
a lump sum under this Section 7 (assuming an election in Section 7(c) to
receive a lump sum payment in cash), to hold as security for the
Company's obligations under this Agreement. Employee and the Company
agree to execute the Escrow Agent's standard form of escrow agreement
providing that benefits in the event of any dispute will be paid in
accordance with a determination made under Section 17(b) of this
Agreement. As used in this Agreement, an "Anticipated Change in
Control" shall be deemed to occur if an event takes place which
indicates a reasonable probability that a Change of Control as defined
in Section 9 is likely to occur.
If the Anticipated Change in Control occurs but within a
reasonable time a Change of Control does not take place, the escrowed
funds shall be repaid and released to the Company upon written notice to
the Escrow Agent by the Company and Employee. If a Change of Control
occurs, the Escrow Agent shall immediately pay all the escrowed funds to
the Employee except in the case where the Employee chooses to exercise
his election under Section 7(c) to receive replacement stock options,
the escrowed funds representing the lump sum payment in cash of the
stock options shall be returned to the Company.
8. Disability
Termination by the Company of employment based on "Disability"
shall mean termination because of the Employee's absence from duties
with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of incapacity due to physical or mental
illness. During any period that the Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness, he shall continue to receive his full base salary at the rate
then in effect and incentive compensation payable with respect to such
period until his employment is terminated for Disability, provided that,
after such termination, the Employee in addition to the severance
benefits of Section 7 shall be entitled to such other benefits as would
otherwise be due to him under any long-term disability insurance or
other coverage provided by the Company. If the Company so requests, the
Employee shall be examined by a doctor of his choosing and shall submit
to an examination by a doctor of the Company's choosing, and each doctor
shall certify whether the Employee's failure to perform his duties is
due to physical or mental illness. If the doctors of the Employee and
the Company do not agree, then the two doctors shall jointly select a
third doctor whose determination shall be accepted by both parties. All
costs associated with the doctors' certifications shall be borne by the
Company.
9. Change of Control
For purposes of this Agreement, a Change of Control shall be
deemed to occur:
(a) upon the date the Company is informed by receiving a report on
Schedule 13D of the Exchange Act or similar report that any person (as
such term is used in sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ["the Exchange Act"]), together with
such person's Affiliates and Associates as defined in Rule 12b-2 of the
Exchange Act, is or has become the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act; provided, that a person shall not be
deemed to beneficially own securities acquired pursuant to the Employee
Stock Purchase Plan of the Company or other plans generally applicable
to employees, officers or Directors of the Company), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities,
except that there will not be a Change of Control as the result of an
acquisition of securities by the Company, which by reducing the number
of shares outstanding, increases the proportionate number of shares
beneficially owned by any person to 25% or more of the securities of the
Company then outstanding; provided, however, that if a person becomes
the beneficial owner of 25% or more of the securities of the Company
then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the beneficial owner
of any additional securities of the Company, then a Change of Control
will occur unless such person disposes of such additional securities of
the Company within 10 days, or
(b) upon the first purchase of the Company's Common Stock pursuant to
a tender or exchange offer (other than a tender or exchange offer made
by the Company) seeking to acquire securities representing 25% or more
of the combined voting power of the Company's then outstanding
securities, or
(c) upon the first date on which Continuing Directors, as defined in
Article VI of the Company's Articles of Incorporation, cease for any
reason to constitute at least a majority of the Board of Directors, or
(d) the Company is merged or consolidated with another corporation and
as a result of such merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting corporation
shall then be owned in the aggregate by the former stockholders of the
Company, or
(e) the Company transfers substantially all of its assets to another
corporation which is not a wholly owned subsidiary of the Company.
10. Notice of Termination
Any purported termination by the Company or by the Employee shall
be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated. In the case of a
termination resulting from a Change of Control, no such Notice of
Termination is required.
11. Date of Termination
"Date of Termination" shall mean (a) if employment is to be
terminated for Disability, thirty (30) days after Notice of Termination
is given, (b) if employment is to be terminated by the Company for
Cause, the date on which a Notice of Termination is given, (c) if
employment is to be terminated as a result of a Change of Control, the
date of occurrence of such Change of Control, and (d) if employment is
to be terminated by the Employee or by the Company for any other reason,
the date specified in the Notice of Termination, which shall be a date
no earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been agreed to by the
party receiving the Notice of Termination either in advance of, or
after, receiving such Notice of Termination. Notwithstanding anything
in the foregoing to the contrary, if the party receiving the Notice of
Termination has not previously agreed to the termination, then within
thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination may notify the other party that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of
the parties or by the arbitrators in a proceeding as provided in Section
17(b) hereof.
12. Payment Obligations Absolute
The Company's obligations to pay the Employee the compensation and
to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, any set-off (except that the Company shall be
entitled to withhold from compensation such amounts on account of
payroll taxes, income taxes and other similar matters as are required to
be withheld by applicable law, rule or regulation of any appropriate
governmental authority), counterclaim, recoupment, defense or other
right which the Company or any of its subsidiaries may have against him.
All amounts payable by the Company hereunder shall be paid without
notice or demand. Except as expressly provided herein, the Company
waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this
Agreement in whole or in part.
13. Non-Competition
During the Benefits Coverage Period, Employee agrees that he will
not, directly or indirectly, as principal, agent, owner, employee, or
otherwise engage in direct and substantial competition with the Company
in the United States. The Employee may request in writing a
determination by the Board that a proposed occupation will not
constitute direct and substantial competition with the Company and such
determination shall not be unreasonably withheld. Direct and
substantial competition with the Company shall be limited to what would
be competitive at the Date of Termination. This section shall not apply
to a termination resulting from a Change of Control.
14. Assignment and Transfer
Employee's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, and any purported
assignment, transfer, or delegation shall be void. Employee's rights
hereunder shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, sell,
assign, pledge, encumber or charge the same shall be void.
15. Insurance and Indemnity
(a) During Period of Employment - The Company shall, to the extent
permitted by law, include Employee during his period of employment under
a directors and officers liability insurance policy maintained for its
directors and officers, with coverage at least as favorable to Employee
in amount and every other material respect as the coverage of other
directors and officers covered thereby. The Company shall indemnify and
hold the Employee harmless to the fullest extent authorized by the
Company's Articles of Incorporation and Bylaws and no less favorable
than the Company's other executive officers.
(b) After Termination of Employment - The Company's obligation to
provide insurance and indemnify Employee under this Section 15 shall
survive expiration or termination of this Agreement with respect to
proceedings or threatened proceedings based on acts or omissions of
Employee occurring during Employee's employment with the Company or with
any affiliated company. Such obligations shall be binding upon the
Company's successors and assigns and shall inure to the benefit of
Employee's heirs and personal representatives.
16. Confidential Information
The Employee shall not at any time during the period of his
employment or thereafter, except as required in the course of his
employment with the Company or as authorized in writing by the Board of
Directors of the Company, directly or indirectly use, disclose,
disseminate, or reproduce any Confidential Information. All notes,
notebooks, memoranda and similar repositories of information ("Items")
containing or relating in any way to Confidential Information shall be
the property of the Company. All such Items made or compiled by
Employee or made available to Employee during Employee's employment with
the Company, including all copies thereof, shall be delivered to the
Company by Employee upon termination of his employment with the Company
or at any other time upon request of the Company. "Confidential
Information" means information not generally known relating to the
business of the Company or any third parties that is contributed to,
developed by, disclosed to, or known to Employee in his course of
employment by the Company, including but not limited to customer lists,
specifications, data, research, test procedures and results, know-how,
services used, and information regarding past, present, and prospective
plans and methods of purchasing, accounting, engineering, business,
marketing, merchandising, selling and servicing used by the Company.
17. Miscellaneous
(a) Governing Law - This Agreement shall be governed by and construed
according to the laws of the State of Washington.
(b) Dispute Resolution - The parties agree to work together in good
faith to resolve any dispute arising under this Agreement, and to
explore resolution of the dispute through methods of alternative dispute
resolution. If the parties are unable to resolve a dispute, it shall be
settled by arbitration in Seattle, Washington, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
then in effect. However, if an event takes place which indicates a
reasonable probability that a Change of Control as defined in Section 9
is likely to occur, or a Change of Control as defined in Section 9
occurs, Employee may proceed with litigation without any necessity of
pursuing arbitration or alternative dispute resolution. Additionally,
if both parties agree that neither arbitration nor any other method of
alternative dispute resolution is suitable to resolve the dispute, they
may proceed with litigation. Judgment upon any award may be entered in
any court having jurisdiction over the subject matter of the dispute.
Notwithstanding the pendency of any such dispute or controversy, the
Company will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary and continued participation in all compensation,
benefit and insurance plans in which Employee was participating when the
notice giving rise to the dispute was given), until the dispute is
finally resolved.
(c) Attorneys Fees - In the event any suit or proceeding is instituted
by one party against the other arising out of this Agreement, the
prevailing party shall be entitled to recover its attorneys fees and
expenses of litigation or arbitration.
(d) Rights Cumulative - The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by
either party hereto (or by its successor), whether pursuant to this
Agreement or to law, shall not preclude or waive its right to exercise
any or all other rights and remedies. The rights and remedies herein
are cumulative to any other rights the parties hereto may have by law,
statute, ordinance, or otherwise.
(e) Nonwaiver - No failure or neglect of either party hereto in any
instance to exercise any right, power, or privilege hereunder or under
law shall constitute a waiver of any other right, power, or privilege or
of the same right, power, or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument
signed by the party to be charged and, in the case of the Company, by a
duly authorized officer other than Employee.
(f) Entire Agreement - This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
written or oral agreements between them respecting the subject matter
hereof between the parties hereto. There are no representations,
agreements, arrangements, or understandings, oral or written, between
and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein.
(g) Amendment - This Agreement may be amended only by a writing signed
by Employee and by a duly authorized representative of the Company other
than Employee.
(h) Severability - If any term, provision, covenant, or condition of
this Agreement, or the application thereof to any person, place or
circumstance, shall be held by a court of competent jurisdiction to be
invalid, unenforceable, or void, the remainder of this Agreement and
such term, provision, covenant, or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
(i) Headings - The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement.
(j) Notices - Any notice, request, consent, or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and personally delivered to Employee or by
registered or certified mail to Employee's residence (as noted in the
Company's records), or if personally delivered to the Company's
Corporate Secretary at the Company's principal office, as the case may
be.
(k) Parachute Payment Limitation - Notwithstanding any other
provisions of this Agreement, if any severance benefits under Section 7
of this Agreement are characterized as "Excess Parachute Payments" under
Section 280G of the Internal Revenue Code of 1986 (the "Code"), then the
following rules shall apply:
(i) The Company shall compute the net value to the Employee of
all such severance benefits after reduction for the excise taxes
imposed by Code Section 4999 and for any normal income taxes that
would be imposed on Employee if such severance benefits
constituted Employee's sole taxable income.
(ii) The Company shall next compute the maximum amount of
severance benefits that can be provided without any benefits being
characterized as Excess Parachute Payments and reduce the result
by the amount of any normal income taxes that would be imposed on
Employee if such reduced severance benefits constituted Employee's
sole taxable income.
If the result derived in subparagraph (i) is greater than the
result derived in subparagraph (ii), then the Company shall pay Employee
the full amount of severance benefits without reduction. If the result
derived from subparagraph (i) is not greater than the result derived in
subparagraph (ii), then the Company shall pay the Employee the maximum
amount of severance benefits that can be provided without any benefits
being characterized as Excess Parachute Payments.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
this 4th day of January, 1996.
COMPANY: EMPLOYEE
FLUKE CORPORATION
/s/Douglas G. McKnight /s/Richard W. Van Saun
Officer Richard W. Van Saun
Vice President, General Counsel
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