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 25, 1997.
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)
(425) 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 7, 1997, there were 9,117,229 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 $ 453 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 25, 1997
(only the portions listed in this report) Parts I and II
2. Proxy Statement dated July 17, 1997
(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, and electrical maintenance. The Company also manufactures and
markets traditional bench test and measurement instruments, such as
bench oscilloscopes.
In 1997, the Company completed two acquisitions. Both acquisitions were
tax free reorganizations and were accounted for under the pooling-of-
interest method of accounting. In June 1996, Forte Networks, Inc.
(Forte) was acquired and merged into the Company. The Company issued
577,190 shares of Fluke Corporation common stock in exchange for all the
Forte shares. Prior to the merger Forte operated under Sub-chapter S of
the Internal Revenue Code. Forte was primarily engaged in the design of
instruments used to test computer networks.
In February 1997, the Company completed the acquisition of DeskNet
Systems, Inc. (DeskNet). Fluke issued 305,424 shares of Fluke
Corporation common stock in exchange for all the DeskNet shares.
DeskNet was primarily engaged in the design and manufacture of wide-area
Asynchronous Transfer Mode(ATM) network analysis tools.
PRODUCTS AND SERVICES
PRODUCTS
The Company is in a single line of business, the manufacture and sale 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 150 product models with over 1,300
options and accessories. These products are divided into two product
classes: handheld service tools and bench 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 sales
channels. Representative products include handheld digital multimeters,
ScopeMeter test tools, and network testers.
Bench 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 signal
generators.
Handheld service tools were approximately 64 percent of revenues in
1997, 57 percent in 1996, and 55 percent in 1995. Bench test
instruments were approximately 28 percent of the Company's revenues in
1997, 34 percent in 1996 and 36 percent in 1995. 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
1997.
Industrial ScopeMeter (registered trademark) 123 test tool is a handheld
instrument that integrates oscilloscope, multimeter and "paperless"
recorder functions, providing solutions for troubleshooting machinery,
instrumentation, and control and power systems.
Fiber Optic Test Family of Products includes the fiber optic meter
accessory which, in conjunction with a fiber optic source, can be used
with a standard digital multimeter (DMM) or DSP-100 LAN Cablemeter for
troubleshooting fiber optic cable systems across a broad range of high-
speed voice and data transmission applications and markets from
industrial, electrical to telecommunications, data communications (LAN)
networks and cable television.
160 Series Multi-Function Counters are handheld instruments that combine
the accuracy of a top performance frequency counter and a wideband
digital voltmeter with the visual waveform information of an
oscilloscope.
Fluke 12B Digital Multimeter (DMM) is a low cost digital multimeter
which adds capabilities to the standard Fluke 12 Digital Multimeter,
including a rotary dial.
Fluke 7-300 and 7-600 Electrical Testers are low cost electrical testers
that are ideal for testing basic electrical parameters. The 7-300 can
measure up to 300 volts ac and the 7-600 can measure up to 600 volts ac.
VoltAlert (trademark) Voltage Detector is a pocket-sized ac line voltage
indicator which indicates if voltage is present by touching the tip to
an outlet or cord.
Fluke 18 Digital Multimeter is an automotive version of Fluke's low-cost
line of DMM's.
741/743 Documenting Process Calibrators with new pressure modules are
rugged, handheld tools for the calibration and troubleshooting of a
broad range of process control instrumentation.
OneTouch Network Assistant, a handheld tool for both 10 and 100 Mbps
Ethernet networks, uses an icon-based interface and a touch sensitive
screen to make verifying network connections and diagnosing network
problems simple for front-line support technicians and Help Desk staff.
Fluke 54100 Video Signal Generator and Fluke 54200 TV Signal Generator
are designed for use in the development and production departments of
television and related video equipment manufacturers, as well as service
centers for these types of equipment.
5500A-SC600 is a plug-in module that fits inside the 5500A Multi-Product
Calibrator adding the functions necessary to fully calibrate all digital
and analog oscilloscopes with bandwidths up to 600 Mhz.
DSP-2000 Digital Cable Analyzer (trademark) tester is an addition to the
DSP Series cable testers which delivers the same speed and accuracy as
the DSP-100 and adds an automatic fault isolation capability that
analyzes marginal and failed cabling links with the touch of a button.
The DSP-2000 Cable Analyzer can resolve network problems caused by
defects in a cabling plant and is the tool for maintaining and
installing high-speed networks on Cat 5 or Class D cabling
installations.
Fluke 5720 Multi-Function Calibrator is a high performance calibrator
capable of calibrating up to 8 1/2 digit system digital multimeters. It
can be interfaced with a computer via either RS232 or IEEE-488
interfaces.
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 sales channels for its hand-held
service tools. The Company has found that these channels are 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 bench 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 sales 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 29 manufacturer's representatives selling the
Company's products in the U.S.
The Company signed an alliance agreement with Hewlett-Packard Company
(HP) in April 1997. Under the terms of this agreement the Company will
utilize a limited number of its distributors to sell certain HP products
in the U.S. HP will sell selected Fluke products in the U.S. through
its HP Direct program. The alliance is expected to provide incremental
revenue growth for both companies. The alliance will be expanded to
chosen international markets over the next few years.
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 1997, 1996 or 1995.
BACKLOG
The Company's backlog of unfilled orders amounted to $28.1 million at
April 25, 1997 and $31.7 million at April 26, 1996. The Company expects
to satisfy nearly all such unfilled orders in fiscal 1998. 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 $41.2 million for the year ended April 25, 1997,
which was 9.6 percent of the Company's fiscal 1997 revenues. Research
and development expense was $41.0 million for the year ended April 26,
1996 and $39.2 million for the year ended April 28, 1995, which were 9.9
and 10.3 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 2,525 full-time employees as of April 25, 1997.
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 1997 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 7, 1997, are as follows:
WILLIAM G. PARZYBOK, JR.
Mr. Parzybok, age 55, 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 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.
DAVID E. KATRI
Mr. Katri, age 47, became President, Chief Operating Officer of the
Company in April, 1997. He was Executive Vice President, Chief
Operating Officer from November, 1996 to April, 1997. He previously
served as Vice President, Corporate Marketing from 1995 to November,
1996; as a Vice President of the Company and General Manager of the
Verification Tools Division from 1992 to 1995; and as Vice President of
the Company and Group Manager of the Manufacturing/R&D Group from 1991
to 1992. Mr. Katri serves on the Executive Committee of the Board.
BARRY L. ROWAN
Mr. Rowan, age 40, has been a Senior Vice President and General Manager
of the Fluke Networks Division since 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.
RICHARD W. VAN SAUN
Mr. Van Saun, age 60, has been a Senior Vice President of the Company
and Group Manager of the Industrial Group since December, 1996. He
previously served as Senior Vice President of the Company and Group
Manager of the Service Tools Division from 1994 until 1996, 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.
MICHAEL J. ADAMS
Mr. Adams, age 50, has served as Vice President, Manufacturing of the
Company since December, 1996. He previously served as Operations
Manager for the Service Tools Division from 1993 until 1996 and as
Operations Manager for the Manufacturing/R&D Group from 1986 until 1993.
JAMES L. CAVORETTO
Mr. Cavoretto, age 51, has served as Vice President and General Manager
of the Service Tools Division of the Company since December, 1996. He
previously served as Engineering and Operations Manager for the
Verification Tools and Fluke Networks Divisions in 1996, as Engineering
and Operations Manager for the Verification Tools Division from 1995
until 1996 and as Engineering Manager for the Verification Tools
Division from 1992 until 1995.
LINDA S. CHEEVER
Ms. Cheever, age 50, has served as Vice President and General Manager of
Intercon Operations of the Company since December, 1996. She previously
served as General Manager, Intercon Operations from 1993 until 1996 and
as Intercontinental Sales Manager from 1992 until 1993.
WILLIAM E. DUNN
Mr. Dunn, age 52, has served as Vice President and General Manager of
U.S. Sales and Worldwide Customer Support Services of the Company since
December, 1996. He previously served as U.S. National Sales Manager in
1996, as U.S. Sales Manager for LAN Tools and Instrumentation from 1995
until 1996 and as Business Unit Manager for both the Data Acquisition
and Board Test Business Units from 1992 until 1995.
WILLIAM R. HOFFMAN
Mr. Hoffman, age 61, has served as Vice President and General Manager of
the Verification Tools Division of the Company since 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 also served as Vice President of
Marketing Services and the Philips T&M Group from 1991 to 1992.
ELIZABETH J. HUEBNER
Ms. Huebner, age 39, 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.
DOUGLAS G. MCKNIGHT
Mr. McKnight, age 48, has served as Vice President, General Counsel of
the Company since 1986 and as Corporate Secretary since 1983.
CRAIG T.J. MILLER
Mr. Miller, age 47, has served as Vice President, Marketing, Industrial
Group of the Company since December, 1996. He previously served as
Marketing Manager for the Industrial/Electrical Market Segment in 1996,
as Marketing Manager for the Service Tools Division from 1995 until
1996, as European Marketing Manager from 1994 until 1995 and as
International Sales and Marketing Manager from 1992 until 1994.
PATRICK J. O'HARA
Mr. O'Hara, age 44, has been Vice President, Human Resources and
Facilities 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.
ITEM 2 - PROPERTIES
The Company owns approximately 167 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 two buildings of approximately 480,000 square feet
and 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 will be vacating the facilities in Paramus and Palatine in
fiscal 1998 and will be placing the buildings for sale.
The Company leases a 144,200 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 243,900 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 57 of the Company's 1997
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
1997 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 28 through 31 of the Company's 1997 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 32 through 51 and the Selected Quarterly Financial
Data (unaudited) on page 56 of the Company's 1997 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 3 through 5 of the Company's
proxy statement dated July 17, 1997, 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 17, 1997, 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
17, 1997, 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
Not applicable.
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 32 through 57 of the
Company's 1997 Annual Report to Stockholders, a copy of which is filed
as Exhibit 13 to this report.
1. Consolidated Balance Sheets as of April 25, 1997 and April 26, 1996.
2. Consolidated Statements of Income for the years ended April 25,
1997, April 26, 1996 and April 28, 1995.
3. Consolidated Statements of Cash Flows for the years ended April 25,
1997, April 26, 1996 and April 28, 1995.
4. Consolidated Statements of Stockholders' Equity for the years ended
April 25, 1997, April 26, 1996 and April 28, 1995.
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 April 25,1997.
4. Instruments Defining the Rights of Security Holders, Including
Indentures.
4.1 Stockholders Rights Plan as amended and restated April 25, 1997.
10. Material Contracts
10.1 1990 Stock Incentive Plan of the Company as amended on December
10, 1996.
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 (incorporated by reference to Exhibit 10.4 of the
Company's Form 10-K Report for the Fiscal Year ended April 26, 1996).
10.5 Employment Agreement dated December 12, 1995 between the Company
and Richard W. Van Saun (incorporated by reference to Exhibit 10.6 of
the Company's Form 10-K Report for the Fiscal Year ended April 26,
1996).
10.6 Change of Control Agreement dated December 11, 1996 between the
Company and David E. Katri. Barry L. Rowan has an identical change of
control agreement with the Company.
10.7 Change of Control Agreement dated September 5, 1991 between the
Company and Douglas G. McKnight. Other executive officers of the
Company have identical change of control agreements with the Company.
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 Fluke Corporation 1988 Stock Incentive Plan of the Company as
amended on December 10, 1996.
10.10 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).
10.11 Fluke Corporation Supplemental Retirement Income Plan as amended
on December 11, 1996.
10.12 Fluke Corporation Executive Deferred Compensation Plan as amended
on December 11, 1996.
11 Computation of Earnings Per Share.
13 1997 Annual Report to Stockholders.
21 Subsidiaries.
23.1 Consent of Ernst & Young LLP, independent auditors.
Item 14 (b)Reports on Form 8-K.
Report on Form 8-K, dated February 10, 1997, was filed on February 10,
1997 reporting the press release regarding the third quarter of fiscal
1997 operating results and the acquisition of DeskNet Systems, Inc.
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/ David E. Katri President
David E. Katri Chief Operating Officer July 17, 1997
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 17, 1997
William G. Parzybok, Jr. Chief Executive Officer
/s/ David E Katri President, Chief Operating July 17, 1997
David E Katri Officer and Director
/s/ Elizabeth J. Huebner Vice President July 17, 1997
Elizabeth J. Huebner Chief Financial Officer
/s/ Laurence C. Leslie Corporate Controller July 17, 1997
Laurence C. Leslie
/s/ Philip M. Condit Director July 17, 1997
Philip M. Condit
/s/ John D. Durbin Director July 17, 1997
John D. Durbin
/s/ David L. Fluke Director July 17, 1997
David L. Fluke
/s/ John M. Fluke, Jr. Director July 17, 1997
John M. Fluke, Jr.
/s/ Robert S. Miller, Jr. Director July 17, 1997
Robert S. Miller, Jr.
/s/ Sally G. Narodick Director July 17, 1997
Sally G. Narodick
/s/ William H. Neukom Director July 17, 1997
William H. Neukom
/s/ N. Stewart Rogers Director July 17, 1997
N. Stewart Rogers
/s/ James E. Warjone Director July 17, 1997
James E. Warjone
/s/ George M. Winn Director July 17, 1997
George M. Winn
<TABLE>
Schedule II
FLUKE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
<F1>
Column C
Column A Column B Additions Column D Column E
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 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
Year ended April 25, 1997:
Allowance for Doubtful
Accounts Receivable $1,104 $166 $380 $891
<FN>
<F1> Column C(2) has been omitted because the answer would be none.
<F2> Write-off of uncollectible accounts receivable less recoveries.
</FN>
</TABLE>
AMENDED AND RESTATED PRIVATE
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 Directors
("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 twelve.
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 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
Continental Stock Trust & Transfer Company 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, and
a Secretary (together with one or more Assistant Secretaries 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 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board at any regular or special meeting.
3.8 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.
3.9 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.
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 - April 25, 1997
FLUKE CORPORATION
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Rights Agent
Rights Agreement
Dated originally as of July 11, 1988
As amended and restated on April 25, 1997
TABLE OF CONTENTS
Page
Section 1. Certain Definitions ........................................1
Section 2. Appointment of Rights Agent ................................4
Section 3. Issue of Right Certificates ................................4
Section 4. Form of Right Certificates .................................5
Section 5. Countersignature and Registration ..........................5
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen
Right Certificates..........................................6
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights ..................................6
Section 8. Cancellation and Destruction of
Right Certificates..........................................7
Section 9. Reservation and Availability of
Common Shares ..............................................8
Section 10.Common Shares Record Date ..................................8
Section 11.Adjustment of Purchase Price, Number
of Shares or Number of Rights ..............................9
Section 12.Certificate of Adjusted Purchase
Price or Number of Shares..................................14
Section 13.Consolidation, Merger or Sale or
Transfer of Assets or Earning Power........................15
Section 14.Fractional Rights and Fractional
Shares.....................................................17
Section 15.Rights of Action ..........................................18
Section 16.Agreement of Right Holders ................................18
Section 17.Right Certificate Holder Not Deemed
a Stockholder..............................................18
Section 18.Concerning the Rights Agent ...............................19
Section 19.Merger or Consolidation or Change of
Name of Rights Agent ......................................19
Section 20.Duties of Rights Agent ....................................20
Section 21.Change of Rights Agent ....................................21
Section 22.Issuance of New Right Certificates ........................22
Section 23.Redemption ................................................22
Section 24.Exchange ..................................................23
Section 25.Notice of Certain Events ..................................24
Section 26.Notices ...................................................25
Section 27.Supplements and Amendments ................................25
Section 28.Determination and Actions by the Board of Directors, etc...25
Section 29.Successors ................................................26
Section 30.Benefits of this Agreement ................................26
Section 31.Severability ..............................................26
Section 32.Governing Law..............................................26
Section 33.Counterparts ..............................................26
Section 34.Descriptive Headings ......................................27
Exhibit A Form of Right Certificate ................................A-1
Exhibit B Summary of Shareholder Rights Agreement...................B-1
RIGHTS AGREEMENT
Agreement, dated as of July 11, 1988, between Fluke Corporation, a
Washington corporation (the "Company"), and Continental Stock Transfer &
Trust Company, (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one right (a "Right") for each Common Share (as hereinafter
defined) of the Company outstanding as of the close of business on July
22, 1988 (the "Record Date"), each Right representing the right to
purchase one Common Share, upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance
of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date, the Exchange Date and the Final Expiration
Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial owner of 25% or more of the Common Shares then outstanding,
but shall not include the Company, any Subsidiary of the Company or any
employee benefit plan of the Company or any Subsidiary of the Company,
or any entity holding Common Shares for or pursuant to the terms of any
such plan. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to 25% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person becomes the Beneficial
Owner of 25% or more of the Common Shares 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 Common Shares of the Company, then such Person shall be
deemed to be an "Acquiring Person", unless such Person disposes of such
additional Common Shares prior to a Distribution Date.
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to
a bona fide public offering of securities), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such person in
response to a public proxy or consent solicitation made pursuant to, and
in accordance with, the applicable rules and regulations of the Exchange
Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(iii) which are beneficially owned, directly or indirectly by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for
the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section l(d)(ii)(B)) or disposing of any
securities of the Company; or
(iv) notwithstanding subparagraphs (d)(i), (ii), or (iii) above, a
Person shall not be deemed to beneficially own securities acquired
pursuant to the Employee Stock Purchase Plan of the Company or any other
plans generally applicable to employees, officers, or Directors of the
Company.
(e) "Board of Directors" shall mean the Board of Directors of the
Company; provided, that after such time as any Person has become an
Acquiring Person, any action stated herein to be taken by the Board of
Directors shall require the presence in office of Continuing Directors
and the concurrence of a majority of the Continuing Directors.
(f) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in The Commonwealth of
Massachusetts are authorized or obligated by law or executive order to
close.
(g) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next
succeeding Business Day.
(h) "Common Shares" when used with reference to the Company shall mean
the shares of common stock, par value $.25 per share, of the Company and
shall include shares of common stock which holders of other securities
(other than options, warrants or other rights to acquire shares) would
receive assuming they had converted such securities immediately before
any Record Date, Distribution Date, Exchange Date, Final Expiration
Date, Redemption Date, or Share Acquisition Date or other dates, events
or times at which pursuant to this Agreement the number of outstanding
Common Shares is to be determined or the rights of holders of Common
Shares are affected. References to certificates of, or holders of,
Common Shares shall include the certificates or holders of securities
convertible into Common Shares. The Board of Directors in connection
with the authorization and issuance of new securities convertible into
Common Shares (other than Series A Convertible Preferred Shares) shall
have the authority to modify, limit or deny the issuance of Rights to
the holders of such securities. "Common Shares" when used with reference
to any Person other than the Company shall mean the capital stock with
the greatest Voting Power, or the equity securities or other equity
interest having power to control or direct the management of such Person
or, if such other Person is a Subsidiary of another Person, of the
Person or Persons which ultimately control such first mentioned Person
and which has issued and outstanding such capital stock, equity
securities or equity interests.
(i) "Continuing Director" shall have the meaning set forth in Article
VI of the Company's Articles of Incorporation as of the date of this
Agreement. Any action, matter or question which is to be determined by
the Continuing Directors shall be determined by a majority of the
Continuing Directors who shall constitute and have the full authority of
a committee of the Board of Directors.
(j) "Current Value" shall have the meaning set forth in Section 11(a)
(iv) hereof.
(k) "Distribution Date" shall mean (i) the earlier of the tenth day
after the Share Acquisition Date, or the tenth day after the date of the
commencement (determined in accordance with Rule 14d-2 under the
Exchange Act) by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan) of a tender or exchange offer
the consummation of which would result in any Person becoming the
Beneficial Owner of Common Shares aggregating 25% or more of the then
outstanding Common Shares, or (ii) such later date as may be fixed by a
majority vote of the Board of Directors from time to time by notice to
the Rights Agent and publicly announced by the Company.
(l) "Exchange Act" shall have the meaning set forth in Section l(c)
hereof.
(m) "Exchange Date" shall have the meaning set forth in Section 24(b)
hereof.
(n) "Final Expiration Date" shall have the meaning set forth in Section
7 hereof.
(o) "Permitted Offer" shall have the meaning set forth in Section 11(a)
(iii).
(p) "Person" shall mean any individual, firm, partnership, corporation
or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(q) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(r) "Purchase Price" shall have the meaning set forth in Section 4
hereof.
(s) "Security" shall have the meaning set forth in Section 11(d)
hereof.
(t) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(u) "Share Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that a Person has
become an Acquiring Person.
(v) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the Voting Power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person, or which is otherwise controlled by such Person.
(w) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(x) "Voting Power" shall mean the voting power of all securities of the
Company or other Person then outstanding generally entitled to vote for
the election of directors of the Company or other Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in
accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates
for Common Shares registered in the names of the holders thereof and not
by separate Right Certificates, and (y) the Rights (and the right to
receive Right Certificates therefor) will be transferable only in
connection with the transfer of the underlying Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested, send) by
first class, insured, postage prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit A hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter the
Company will send a copy of a Summary of Rights, in substantially the
form of Exhibit B hereto (the "Summary of Rights"), by first class,
postage prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution
Date (or earlier redemption, expiration or termination of the Rights),
the Rights will be evidenced by such certificates registered in the
names of the holders thereof. Until the Distribution Date (or earlier
redemption, expiration, exchange or termination of the Rights), the
surrender for transfer of any certificate for Common Shares outstanding
on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Rights shall be issued in respect of all Common Shares that become
outstanding (whether originally issued or from the Company's treasury or
upon transfer or exchange) after the Record Date but prior to the
earlier of the Distribution Date or the Final Expiration Date or, in
certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates issued for Common Shares that shall
become outstanding or shall be transferred or exchanged after the Record
Date but prior to the earlier of the Distribution Date or the Final
Expiration Date shall also be deemed to be certificates for Rights, and
shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in the Rights Agreement between Fluke
Corporation (the "Company") and Continental Stock Transfer & Trust
Company, dated as of July 11, 1988 (as amended from time to time, the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive
offices of the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of written request therefore. As
described in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person (as defined in the Rights Agreement) shall
become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common
Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event that the
Company purchases or acquires any Common Shares after the Record Date
but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common
Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Common Shares and of assignment to be
printed on the reverse thereof) shall be substantially the same as
Exhibit A hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon
as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or automated quotation system through
which the Rights are quoted, or to conform to usage. Subject to the
earlier redemption, exchange or termination, the Right Certificates
shall entitle the holders thereof to purchase such number of Common
Shares as shall be set forth therein at the price per share set forth
therein (the "Purchase Price"), but the number of such shares and the
Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its President, or any Vice
President, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested
by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for
any purpose unless countersigned. In case any officer of the Company who
shall have signed any of the Right Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the
person who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the
Company to sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an
officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates
and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate.
Subject to the provisions of Section 14 hereof, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close
of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates (other than
Right Certificates representing Rights that have become void pursuant to
Section 11(a) (ii) hereof or that have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged
for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of Common Shares as the
Right Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Right Certificate or Right Certificates
shall make such request in writing delivered to the Rights Agent, and
shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office of the Rights
Agent designated for such purpose. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a
Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate of like tenor to
the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7 . Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole
or part at any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the
Purchase Price for each Common Share (or such other number of shares or
other securities or consideration) as to which the Rights are exercised,
at or prior to the earliest of (i) the Close of Business on July 22,
1998 (the "Final Expiration Date"), (ii) the consummation of a
transaction contemplated by Section 13(d) hereof, (iii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iv) the time at which such Rights are exchanged
as provided in Section 24 hereof.
(b) The Purchase Price for each Common Share pursuant to the exercise
of a Right shall initially be $60.00, and shall be subject to adjustment
from time to time as provided in Sections 11 and 13 hereof and shall be
payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied
by payment of the Purchase Price for the shares (or other securities or
property) to be purchased and an amount equal to any applicable transfer
tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof by certified check, cashier's check,
bank draft or money order payable to the order of the Company, the
Rights Agent shall thereupon, subject to Section 20(j), promptly (I) (A)
requisition from any transfer agent of the Common Shares certificates
for the number of Common Shares to be purchased the Company hereby
irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depository agent depository
receipts representing such number of Common Shares as are to be
purchased (in which case certificates for the Common Shares represented
by such receipts shall be deposited by the transfer agent with the
depository agent) and the Company hereby directs the depository agent to
comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depository receipts, cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder and
(iv) when appropriate, after receipt, deliver such cash to or upon the
order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder
of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, if an
Acquiring Person or an Associate or Affiliate of an Acquiring Person
engages in or there occurs one or more of the transactions set forth in
Section 13(a) on or after the time the Acquiring Person became such,
then any Rights that are or were on or after the earlier of the
Distribution Date or the Share Acquisition Date beneficially owned by an
Acquiring Person or any Associate or Affiliate thereof shall become void
with respect to the rights provided under Section 13(a) and any holder
of such Rights shall thereafter have no right to exercise such Rights
under the provisions of Section 13(a).
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless the certificate
contained in the appropriate form of election to purchase set forth on
the reverse side of the Rights Certificate surrendered for such exercise
shall have been properly completed and duly executed by the registered
holder thereof and the Company shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the
provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired
by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the Company, or
shall, at the written request of the Company, destroy such canceled
Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
Section 9. Reservation and Availability of Common Shares. The Company
covenants and agrees that it shall take all action necessary to comply
with Sections 11(a) (iv) and 24(c) hereof.
If the Common Shares (or other securities issuable upon the exercise of
the Rights) are listed on any national securities exchange, the Company
shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares (or other securities) reserved for
such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Common Shares (and/or other
securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly
authorized and issued and, with respect to Common Shares or other
securities, fully paid and non assessable.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right
Certificates or of any Common Shares (or other securities delivered)
upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depository receipts for the
Common Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue
or to deliver any certificates or depository receipts for Common Shares
upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at
the time of surrender) or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Share Acquisition Date, a registration
statement under the Act, with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of
the Act the rules and regulations thereunder) until the date of the
expiration of the exercisability of the Rights provided by Section 11(a)
(ii). The Company will also take such action as may be appropriate under
the blue sky laws of the various states.
Section 10. Common Shares Record Date. Each person in whose name any
certificate for Common Shares is issued upon the exercise of Rights (or
other securities) shall for all purposes be deemed to have become the
holder of record of the Common Shares (or other securities) represented
thereby on, and such certificate shall be dated, the date upon which the
Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was
made; provided, however, that if the date of such surrender and payment
is a date upon which the Common Shares (or other securities) transfer
books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the Common Shares
transfer books of the Company are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Common Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of
any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares (C) combine
the outstanding Common Shares into a smaller number of Common Shares or
(D) issue any shares of its capital stock in a reclassification of the
Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such date and at a
time when the Common Shares transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both
Section 11(a) (i) and Section 11(a) (ii) the adjustment provided for in
this Section 11(a) (i) shall be in addition to, and shall be made prior
to any adjustment required pursuant to Section 11(a) (ii).
(ii) (A) Subject to Section 24 of this Agreement, in the event any
Person shall become an Acquiring Person (other than through an
acquisition described in subparagraph (iii) of this paragraph (a)), then
each holder of a Right shall, for a period of 60 days after the later of
the occurrence of any such event and the effective date of an
appropriate registration statement pursuant to Section 9 (plus any
period during which the exercise of the Rights has been suspended
pursuant to Section 11(a) (iv) or 24(c) hereof), have a right to
receive, upon exercise thereof on and after the Distribution Date at the
then current Purchase Price in accordance with the terms of this
Agreement, such number of Common Shares of the Company as shall equal
the result obtained by (x) multiplying the then current Purchase Price
by the then number of Common Shares for which a Right is then
exercisable and dividing that product by (y) 50% of the current market
price per share of Common Shares (determined pursuant to Section 11(d))
on the date of the occurrence of the event set forth in this
subparagraph (ii); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a) (ii). In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any action which would eliminate or diminish the benefits
intended to be afforded by the Rights, other than as specifically
provided for herein.
(B) Notwithstanding anything in this Agreement to the contrary, from and
after the time any Person becomes an Acquiring Person, any Rights
beneficially owned by (i) such Acquiring Person or an Associate or
Affiliate of such Acquiring Person, (ii) a transferee of such Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person became such, or (iii) a transferee of such
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person's becoming
such and receives such Rights pursuant to either (A) a transfer (whether
or not for consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person, or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Continuing Directors have determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect the avoidance
of this Section 11(a) (ii), shall become null and void without any
further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable
efforts to insure that the provisions of this Section 11(a) (ii) are
complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder. No Right Certificate shall be
issued pursuant to Section 3 that represents Rights beneficially owned
by an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights
to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence
shall be canceled.
(iii) The right to buy Common Shares of the Company pursuant to
subparagraph (ii) of this paragraph (a) shall not arise as a result of
any Person becoming an Acquiring Person through a purchase of Common
Shares pursuant to a tender or exchange offer for all outstanding Common
Shares made in the manner prescribed by Section 14(d) of the Exchange
Act and the rules and regulations promulgated thereunder; provided,
however, that such tender or exchange offer occurs at a time when
Continuing Directors are in office and the Continuing Directors then in
office have determined that the offer is in the best interest of the
Company and its stockholders (such offer shall be hereinafter defined to
be a "Permitted Offer").
(iv) In the event that there shall not be sufficient Common Share.
authorized and available to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company shall
either take such action as may be necessary to authorize additional
Common Shares for issuance upon exercise of the Rights or alternatively,
at the option of a majority of the Board of Directors, with respect to
each Right (A) pay cash in an amount equal to the Purchase Price, in
lieu of, issuing Common Shares and requiring payment therefore, or (B)
issue debt or equity securities or a combination thereof, having a value
equal to the Current Value of the Common Shares (as defined
hereinafter), where the value of such securities shall be determined by
a nationally recognized investment banking firm selected by the Board of
Directors, and require the payment of the Purchase Price, or (C) deliver
any combination of cash, property, Common Shares and/or other securities
having a value equal to the Current Value, and require payment of all or
any requisite portions of the Purchase Price. The Current Value shall be
the product of the current market price per share of Common Shares
(determined pursuant to Section 11(d) on the date of the occurrence of
the event described above in subparagraph (ii)) multiplied by the number
of Common Shares for-which the Right otherwise would be exercisable if
there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (A), (B)
or (C) of the proviso of this Section 11(a) (iv), the Board of Directors
may temporarily suspend the exercisability of the Rights for a period of
up to 60 days following the date on which the event described in Section
11(a) (ii) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of
distribution to be made pursuant to the above provision and to determine
the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares entitling
them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares (or securities
convertible into Common Shares) at a price per Common Share (or having a
conversion price per share, if a security convertible into Common
Shares) less than the then current market price per share of the Common
Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Common Shares outstanding on such record date plus the number of Common
Shares which the aggregate offering price of the total number of Common
Shares to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such
current market price and the denominator of which shall be the number of
Common Shares outstanding on such record date plus the number of
additional Common Shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may
be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent. Common Shares
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in
the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in
effect had such record date not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares "including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than cash dividends that have been
approved by the Board of Directors in amounts that do not exceed
retained earnings of the Company or dividends payable in Common Shares)
or subscription rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such record
date shall be determined by subtracting from the Purchase Price in
effect immediately prior to such record date the fair market value (as
determined in good faith by the Board of Directors, whose determination
shall be described in a statement filed with and binding on the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants
distributable in respect of one Common Share; provided, however, that in
no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital
stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect had such record date not been fixed.
(d) For the purpose of any computation under Section 11(d), the
"current market price" per share of any security (a "Security" for the
purpose of this Section 11(d)) on any date shall be deemed to be the
average of the daily closing prices per share (or other trading unit) of
such Security for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however,
that in the event that the current market price per share of the
Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible
into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current market price
per share shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the American Stock Exchange or, if the
Security is not listed or admitted to trading on the American Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Security is listed or admitted
to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over the
counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system
then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors. If on any such date no market maker
is making a market in the Security, the fair value of such Security on
such date as determined reasonably and with good faith by the Continuing
Directors shall be used and shall be binding on the Rights Agent. The
term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Security is not publicly held or not so listed or
traded "current market price" per share shall mean the fair value per
share determined reasonably and with good faith to the holders of Rights
by the Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
thousandth of a Common Share, other share or security as the case may
be. Notwithstanding the first sentence of this Section 11(e) any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) the
holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Common
Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in Section 11(a) through
(c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with
respect to the Common Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of Common Shares (calculated to the nearest thousandth of a
share) obtained by (i) multiplying (x) the number of Common Shares
covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares purchasable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of Common Shares
for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at
least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the amount of Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the
Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Common Shares issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of Common Shares which were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Common Shares
issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
non assessable Common Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date of the Common Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise
over and above the Common Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11,
as and to the extent that it in its sole discretion shall determine to
be advisable in order that any consolidation or subdivision of the
Common Shares, issuance wholly for cash of any Common Shares at less
than the current market price, issuance wholly for cash of Common Shares
or securities which by their terms are convertible into or exchangeable
for Common Shares, dividends on Common Shares payable in Common Shares
or issuance of rights, options or warrants referred to hereinabove in
Section 11, hereafter made by the Company to holders of its Common
Shares shall not be taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the date of this
Agreement and prior to the Distribution Date (i) declare or pay any
dividend on the Common Shares payable in Common Shares, (ii) subdivide
the outstanding Common Shares, (iii) combine the outstanding Common
Shares into a smaller number of shares, or (iv) issue any shares of its
capital stock in a reclassification of the outstanding Common Shares, or
issued or delivered thereafter but prior to the Distribution Date, the
number of Rights associated with each Common Share then outstanding
shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Shares following any
such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Shares immediately prior to
such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of
Common Shares outstanding immediately following the occurrence of such
event.
(o) The exercise of Rights under Section 11(a) (ii) shall only result
in the loss of rights under Section 11(a) (ii) to the extent so
exercised and shall not otherwise affect the rights represented by the
Rights under this Rights Agreement, including the rights represented by
Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent
for the Common Shares or the Common Shares a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge
of any such adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Share Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and
into, any other Person, (y) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger (other than in the
case of either transaction described in (x) or (y), a merger or
consolidation which would result in all of the Voting Power represented
by the securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the Voting
Power represented by the securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such
merger or consolidation), or (z) the Company shall sell, mortgage or
otherwise transfer (or one or more of its Subsidiaries shall sell,
mortgage or otherwise transfer), in one or more transactions, assets or
earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other
Person, then, and in each such case, proper provision shall have been
made pursuant to subsection (e) below so that (i) following the
Distribution Date, each holder of a Right, subject to Section 7(e),
shall have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement,
such number of shares of freely traceable Common Shares of the Principal
Party (as hereinafter defined), free and clear of liens, rights of call
or first refusal, encumbrances or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of Common Shares for which a Right is then
exercisable (without taking into account any adjustment previously made
pursuant to Section 11(a) (ii) hereof) and dividing that product by (2)
50% of the current market price per share of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer;
(ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all
of the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation
as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to
its Common Shares thereafter deliverable upon the exercise of the
Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (x) or (y) of the first
sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in such
merger or consolidation, and if no securities are so issued, the Person
that is the other party to the merger or consolidation (including, if
applicable, the Company if it is the surviving corporation); and
(ii) in the case of any transaction described in (z) of the first
sentence in Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions; provided, however, that in any such
case, (1) if the Common Shares of such Person are not at such time and
have not been continuously over the preceding twelve month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall
refer to such other Person; (2) in case such Person is a Subsidiary,
directly or indirectly, or Affiliate of more than one Person, the Common
Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer
of the Common Shares having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above
shall apply to each of the chains of ownership having an interest in
such joint venture as if such party were a "Subsidiary" of both or all
of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Shares that have not been
issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the
Company and each Principal Party and each other Person who may become a
Principal Party as a result of such consolidation, merger, sale or
transfer shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or
transfer of assets mentioned in paragraph (a) of this Section 13, the
Principal Party at its own expense will:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, will use its best efforts to cause
such registration statement to become effective as soon as practicable
after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the Final Expiration
Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
material respects with the requirements for registration on Form 10
under the Exchange Act. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or
other transfers. The rights under this Section 13 shall be in addition
to the rights to exercise Rights and adjustments under Section 11(a)
(ii) and shall survive any exercise thereunder.
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if: (i) such transaction is consummated
with a Person or Persons who acquired Common Shares pursuant to a
Permitted Offer (or a wholly owned Subsidiary of any such Person or
Persons); (ii) the price per share of Common Shares offered in such
transaction is not less than the price per share of Common Shares paid
to all holders of Common Shares whose shares were purchased pursuant to
such Permitted Offer; and (iii) the form of consideration being offered
to the remaining holders of Common Shares pursuant to such transaction
is the same as the form of consideration paid pursuant to such Permitted
Offer. Upon consummation of any such transaction contemplated by this
subsection (d), all Rights hereunder shall expire.
(e) After the Share Acquisition Date, the Company covenants and agrees
that it shall not (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer to, in one or more transactions, assets or
earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries taken as a whole, any other Person,
if at the time of or after such consolidation, merger or sale there are
any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding, agreements in effect or any other
action taken which would diminish or otherwise eliminate the benefits
intended to be afforded by the Rights. The Company shall not consummate
any such consolidation, merger or sale unless prior thereto the Company
and such other Person shall have executed and delivered to the Rights
Agent a supplemental agreement evidencing compliance with this
subsection.
(f) The Company covenants and agrees that, after the Share Acquisition
Date, it will not, except as permitted by Section 24 or Section 27
hereof, take any action the purpose or effect of which is to diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(n) or to
distribute Right Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior
to the date on which such fractional Rights would have been otherwise
issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the American
Stock Exchange or, if the Rights are not listed or admitted to trading
on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights
are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked
prices in the over the counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market
in the Rights selected by the Continuing Directors. If on any such date
no such market maker is making a market in the Rights the fair value of
the Rights on such date as determined in good faith by the Continuing
Directors shall be used.
(b) The Company shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares. In lieu of fractional Common Shares,
the Company may pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of one Common
Share. For purposes of this Section 14(b), the current market value of a
Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d) hereof) for the Trading
Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, except those rights of action vested in the Rights Agent, are
vested in the respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the
consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares),
may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the
Company to enforce or otherwise act in respect of, his right to exercise
the Rights evidenced by such Right Certificate in the manner provided in
such Right Certificate and in this Agreement; provided, that any such
suit alleging that a modification to this Agreement was contrary to the
terms hereof must be brought within six (6) months after any publication
by the Company of such modification. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person
subject to, this Agreement. Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees,
incurred by them in any good faith action to enforce the provisions of
this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 17. Right Certificate Bolder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Common
Shares or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in
reliance upon any Right Certificate or certificate for the Common Shares
or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the stock transfer or corporate trust business
of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section
21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case
at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under
its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates
either in its prior name or in its changed name; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following
terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed
by any one of the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or
in any Right Certificate; nor shall it be responsible for any change in
the exercisability of the Rights (including the Rights becoming void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for
in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it
by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any Common Shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any
Common Shares will, when issued, be validly authorized and issued, fully
paid and non assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from any one of the President, any Vice-President, the Secretary or the
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while
waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted
by the Rights Agent under this Rights Agreement and the date on and/or
after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by,
or omission of, the Rights Agent in accordance with a proposal included
in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after
the date any such officer of the Company actually receives such
application, unless any such officer shall have consented in writing to
an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying
the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
Securities of the Company or become interested in any transaction in
which the Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company resulting
from any such act, default, neglect or misconduct, provided reasonable
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of
its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be,
has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without first
consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares by registered or certified
mail, and to the holders of the Right Certificates by first class mail.
The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the
Common Shares by registered or certified mail, and to the holders of the
Right Certificates by first class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of 30 days after giving notice
of such removal or after it has been notified in writing of such
resignation or incapacity by resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall with such notice, submit
his Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the
laws of the United States or of any state of the United States, which is
authorized under such laws to exercise corporate trust or stock transfer
powers, satisfies all applicable requirements of any national exchange
on which the Common Shares or Rights are listed, is subject to
supervision or examination by federal or state authority and has at the
time of appointment as Rights Agent a combined capital of at least
$50,000,000. After appointment the Rights Agent shall be vested with the
same powers, duties and responsibilities as if it had been or named as
Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to successor Rights Agent any property
at the time held hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment Company shall file
notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares, and mail a notice in writing to the
registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing
Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or
kind or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of
this Agreement.
Section 23. Redemption.
(a) The Rights may be redeemed by action of the Board of Directors
pursuant to subsection (b) of this Section 23 and shall not be redeemed
in any other manner.
(b) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
after the Distribution Date (or, if the Distribution Date shall have
occurred prior to the Record Date, the Close of Business on the tenth
day following the Record Date), or (ii) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company may,
at its option, pay the Redemption Price in Common Shares (based on the
"current market value", as defined in Section 11(d) hereof, of the
Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to subsection (b)
of this Section 23, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any
such redemption; provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights pursuant to subsection (b), the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the
Redemption Price will be made.
(d) The Company may, at its option, discharge all of its obligations
with respect to the Rights by (i) issuing a press release announcing the
manner of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at their last
addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer
Agent of the Common Shares, and upon such action, all outstanding Rights
Certificates shall be null and void without any further action by the
Company.
Section 24. Exchange.
(a) Subject to subsection (c) below, the Company may, at its option, by
majority vote of the Board of Directors, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio
being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
any such Subsidiary, or any entity holding Common Shares for or pursuant
to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more
of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 (such date, the "Exchange Date") and without any
further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(i) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
authorized and available to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall
either take such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights or alternatively,
at the option of a majority of the Board of Directors, with respect to
each Right (A) pay cash in an amount equal to the Purchase Price, in
lieu of issuing Common Shares in exchange therefore, or (B) issue debt
or equity securities or a combination thereof, having a value equal to
the Current Value of the Common Shares (as defined hereinafter)
exchangeable for each such Right, where the value of such securities
shall be determined by a nationally recognized investment banking firm
selected by the Board of Directors by majority vote of the Board of
Directors, or (C) deliver any combination of cash, property, Common
Shares and/or other securities having a value equal to the Current Value
in exchange for each Right. The Current Value shall be the product of
the current market price per share of Common Shares (determined pursuant
to Section 11(d) on the date of the occurrence of the event described
above in subparagraph (a)) multiplied by the number of Common Shares for
which the Right otherwise would be exchangeable if there were sufficient
shares available. To the extent that the Company determines that some
action need be taken pursuant to clauses (A), (B) or (C) of the proviso
of this Section 24(c), the Board of Directors may by majority vote of
the Board of Directors temporarily suspend the exercisability of the
Rights for a period of up to 60 days following the date on which the
event described in Section 24(a) shall have occurred, in order to seek
any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above
provision and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence Fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to
the registered holders of the Right Certificates with regard to which
such fractional Common Shares would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole
Common Share. For the purposes of this subsection (d), the current
market value of a whole Common Share shall be the closing price of a
Common Share (as determined pursuant to the second sentence of Section
11(d) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable
in stock of any class to the holders of its Common Shares or to make any
other distribution to the holders of its Common Shares (other than a
regular quarterly cash dividend out of earnings or retained earnings of
the Company), (ii) to offer to the holders of its Common Shares rights
or warrants to subscribe for or to purchase any additional Common Shares
or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Common Shares
(other than a reclassification involving only the subdivision of
outstanding Common Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of 50% of more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to, any other
Person, or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for
the purposes of such stock dividend, or distribution of rights or
warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of the
Common Shares, if any such date is to be fixed, and such notice shall be
so given in the case of any action covered by clause (i) or (ii) above
at least 20 days prior to the record date for determining holders of the
Common Shares for purposes of such action, and in the case of any such
other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of
the Common Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) of this Agreement
shall occur, then the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, in accordance with Section
26 hereof, a notice of the occurrence of such event, which notice shall
describe the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if
delivered or if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as
follows:
Fluke Corporation
6920 Seaway Boulevard
Everett, WA 98203
Attention: Vice President, General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if delivered or if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing
with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by first-class mail postage
prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any
holders of Right Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein or to make any other
provisions which the Company may deem necessary or desirable and which
shall be consistent with, and for the purpose of fulfilling, the
objectives of the Board of Directors in adopting this Agreement, any
such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; provided, however, that from and after
such time as any Person becomes an Acquiring Person, this Agreement
shall not be amended in any manner which would adversely affect the
interests of the holders of Rights. Upon the delivery of a certificate
from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment
unless the Rights Agent shall have determined in good faith that such
supplement or amendment would adversely affect its interests under this
Agreement. Prior to the Distribution Date, the interests of the holders
of Rights shall be deemed coincident with the interests of the holders
of Common Shares.
Section 28. Determination and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding Common
Shares or any other securities of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule
13d3(d)(1)(i) of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement; provided, however, 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. The Continuing Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of
this Agreement (including a determination to redeem or not redeem the
Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause
(y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties, and (y) not subject the Board to any
liability to the holders of the Rights Certificates.
Section 29. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares)
any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of
the State of Washington and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State except for
Sections 18, 19, 20 and 21 hereof which for all purposes shall be
governed by and construed under the laws of the State of New York.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above
written.
Attest: FLUKE CORPORATION
a Washington corporation
By By
Title: Corporate Secretary Title: President
Attest: CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By By
Title: Account Manager Title: Vice President
Exhibit A
Form of Right Certificate
Certificate No. R- Rights
NOT EXERCISABLE AFTER JULY 22, 1998 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON, OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
FLUKE CORPORATION
This certifies that , or registered assigns,
is the registered owner of the number of Rights set forth above, each of
which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of July 11, 1988 (the
"Rights Agreement"), between Fluke Corporation, a Washington corporation
(the "Company"), and Continental Stock Transfer & Trust Company (the
"Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and
prior to 5:00 P.M., New York time, on July 22, 1998 at the office of the
Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one share of common stock, par value $.25 per
share (the "Common Shares"), of the Company, at a purchase price of
$60.00 per Common Share (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to
Purchase and Certificate duly executed. The number of Rights evidenced
by this Right Certificate (and the number of Common Shares which may be
purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of , based
on the Common Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number
of Common Shares which may be purchased upon the exercise of the rights
evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the
holders of the Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices of the Company and the above
mentioned offices of the Rights Agent and are also available upon
written request to the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a
like aggregate number of Common Shares as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised
(other than pursuant to Section 11(a) (ii) of the Rights Agreement) in
part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole
Rights not exercised. If this Right Certificate shall be exercised in
whole or in part pursuant to Section 11(a) (ii) of the Rights Agreement,
the holder shall be entitled to receive this Rights Certificate duly
marked to indicate that such exercise has occurred as set forth in the
Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged by the Company in whole
or in part for Common Shares or other consideration as determined by the
Company.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Common
Share or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate
shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of 19 .
ATTEST: FLUKE CORPORATION
By By
Countersigned: CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By By
Authorized Officer
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and
transfers unto .
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: , 19
Signature
Signature Guaranteed
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement).
Signature
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To FLUKE CORPORATION:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the shares of Common
Stock (or such other securities of the Company) issuable upon the
exercise of the Rights and requests that a certificate for such shares
be issued in the name of and delivered to:
(Please insert social security or other identifying number)
No.
(Please print name and address)
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to the Rights Agreement shall be
returned to the undersigned unless such person requests that the Rights
Certificate be registered in the name of and delivered to:
Please insert social security or other identifying number (complete only
if Rights Certificate is to be registered in a name other than the
undersigned)
(Please print name and address )
Dated: , 19
Signature
Signature Guaranteed
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an
Acquiring Person, or an Affiliate or Associate of any such Acquiring
Person (as such terms as defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold assigned and
transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person.
Date: , 19
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights
Certificate other than pursuant to Section 11(a)(ii) of the
Rights Agreement.)
To : FLUKE CORPORATION:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Common Shares
issuable upon the exercise of such Rights and requests that certificates
for such Common Shares be issued in the name of:
Please insert social security or other identifying number
No.
(Please print name and address of transferee)
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to the Rights Agreement shall be
returned to the undersigned unless such person requests that the Rights
Certificate be registered in the name of and delivered to:
Please insert social security or other identifying number
No.
(Please print name and address of transferee)
Dated: ,19
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or
and Affiliate or Associate thereof (as defined in the Rights Agreement).
Signature
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) The Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Acquiring Person (as
such terms as defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the - Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person.
Date: ,19
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is
not completed, the Company and the Rights Agent will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) and such Assignment or Election to Purchase will not
be honored.
Exhibit B
SUMMARY OF SHAREHOLDER RIGHTS
AGREEMENT
FLUKE CORPORATION
On July 11, 1988, Fluke Corporation (the "Company") declared a dividend
of one right ("Right") for each outstanding share of Fluke Corporation
common stock and the shares of common stock issuable upon the conversion
of other securities ("Common Shares"), payable to shareholders of record
as of July 22, 1988.
Initially, the Rights will be represented by the Company's Common Share
certificates and will automatically be transferred with and only with
the Company's Common Shares. At some future "Distribution Date," the
Rights could become exercisable and could at the same time begin trading
separately from the Common Shares. Separate Rights certificates would be
mailed to holders of record as of the Distribution Date.
A "Distribution Date" would occur on the tenth day after (1) a person
or group ("Acquiring Person") has acquired 25% or more of the Company's
Common Shares or has commenced a tender or exchange offer which could
result in the acquisition of 25% or more of the Common Shares or (2)
such later date as might be fixed by a majority of the Company's
"Continuing Directors" (members of the Board of Directors who are not
affiliated with the Acquiring Person).
Upon the Distribution Date each Right will entitle the holder to
purchase one Common Share for $60.00. In the event that an Acquiring
Person gains control of 25% or more of the Common Shares, (1) any Rights
held by that person or related persons will be void, and (2) for a
period of at least 60 days, all other Rights holders may purchase Common
Shares having a market value of $120.00 at half the then-current price.
For example, if the average price of the Common Shares for the 30
trading days prior to the announcement of the existence of the Acquiring
Person was $20.00 per Common Share, then each Right holder would be
entitled to purchase 6 additional Common Shares (total market value
$120.00 for $60.00).
If the Company engages in a merger or other business combination with
or transfers more than 50% of its assets or earning power to another
entity (Acquiring Entity) after public announcement that a person or
group has acquired 25% of the Common Shares, each Right not held by the
Acquiring Person or related persons will entitle its holder to purchase
$120.00 worth of the Acquiring Entity's Stock for $60.00, unless the
Acquiring Entity has acquired its Common Shares in a tender or exchange
offer deemed by the Continuing Directors to be in the best interest of
the Company and its shareholders.
While an Acquiring Person controls 25% but before such person has
acquired 50% of the Common Shares, a majority of the Continuing
Directors may cause an exchange of all or part of the Rights (except
those owned by an Acquiring Person) for Common Shares at an exchange
ratio of one Common Share for each Right. The exercise or exchange of
Rights for Common Shares is subject to availability of a sufficient
number of authorized but unissued Common Shares. If the required number
of shares is not authorized, the Company may authorize the issuance of
cash, debt, stock or combinations thereof in exchange for the Rights.
Outstanding Rights may in no event be exercised if a majority of the
Continuing Directors determines that a particular tender or exchange
offer is in the best interest of the Company and its shareholders.
Furthermore, the exercise price payable, the number of Common Shares,
and other securities or property issuable upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution
resulting from (1) a stock dividend on, or subdivision, combination or
reclassification of the Common Shares, or (2) the issuance of certain
rights or warrants to subscribe for or purchase the Common Shares or
securities that are convertible into Common Shares at less than
then-current market price, or (3) a distribution to the Company's
shareholders of evidence of indebtedness or assets (excluding cash
dividends paid out of retained earnings or dividends payable in Common
Shares) or other subscription rights or warrants.
The Company may redeem unexercised Rights for a price of $0.01 per
Right at any time prior to the earlier of their expiration date or 5:00
p.m. New York time on the tenth day following the Distribution Date. The
redemption price may be paid in cash, Common Shares, or any other form
of consideration deemed appropriate by the Continuing Directors. A
majority vote of the Continuing Directors is required to authorize
redemption of the Rights.
The Rights will expire 5:00 p.m. New York time on July 22, 1998 if they
have not been exchanged or redeemed by the Company as described above,
unless the expiration date is extended by the Board of Directors.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights, except that once any
person becomes an Acquiring Person, no amendment may adversely affect
the interests of other Rights holders. At no time will the Rights have
any voting rights.
The distribution of the Rights is not a taxable event for the Company
or its stockholders under the federal income tax laws, and the
distribution of Right Certificates would not of itself create a tax
liability. After such physical distribution, the Rights would be treated
for tax purposes as capital assets in the hands of most stockholders the
tax basis of each Right would be an allocable part of the tax basis of
the stock to which the Right was originally attached, and the holding
period of each Right would relate back to the holding period of the
stock.
When the Rights become exercisable rights to purchase or be exchanged
for additional Company Common Shares, holders probably would not have a
taxable event. However, if the Rights become rights to purchase an
Acquiring Entity's common stock or to receive cash, debt securities or
Company stock that is not considered "common stock" under section 305 of
the Internal Revenue Code of 1986, holders probably would be taxed even
if their Rights were not exercised or exchanged. The redemption of the
Rights for cash would be a taxable event.
The Rights might be treated as "boot" in a tax-free reorganization
involving the Company. If so, their market value would be taxable and
the Company might be precluded from undertaking certain forms of
tax-free reorganization. If the Company has a net operating loss
carryover on the Distribution Date, the distribution of the Rights and
subsequent transactions relating to the Rights could limit the loss.
The Rights have certain anti-takeover effects. They may cause
substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors, but they will
not interfere with any merger or other business combination where the
acquiring party is willing to negotiate with the Board of Directors and
the Board of Directors determines the transaction is in the best
interest of the Company and its shareholders. In addition, the Rights
will not preclude a proxy contest.
The description and terms of the Rights are set forth in full in a
Rights Agreement between the Company and Continental Stock Transfer &
Trust Company. A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A dated July 11, 1988. A copy of the Rights
Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
FLUKE CORPORATION
1990 STOCK INCENTIVE PLAN
Section 1
Purposes
1.1 The purpose of the Fluke Corporation 1990 Stock Incentive Plan
(Plan) is to promote the interests of Fluke Corporation (Company) and its
stockholders by strengthening its ability to attract and retain
employees and other persons providing significant services to the Company
and its subsidiaries by furnishing suitable recognition of their ability
and industry to contribute materially to the success of the Company. The
Plan provides for the grant of stock options, restricted stock grants,
and/or stock appreciation rights in accordance with the terms and
conditions set forth below.
Section 2
Definitions
2.1 Unless otherwise required by the context, the following terms when
used in the Plan shall have the meanings set forth in this section 2.1:
(a) Board: The Board of Directors of the Company.
(b) Change of Control: As used in this Plan, a Change of Control shall
be deemed to occur (i) 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
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, (ii) 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
(iii) 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.
(c) Code: The Internal Revenue Code of 1986, as amended and in effect
from time to time, and the temporary or final regulations of the
Secretary of the Treasury adopted pursuant to the Code.
(d) Committee: The Compensation Committee of the Board of Directors.
(e) Common Stock: The Common Stock of the Company, $.25 par value.
(f) Exchange Act: The Securities Exchange Act of 1934, as amended.
(g) Fair Market Value: As applied to a specific date, Fair Market Value
shall be deemed to be the mean between the highest and lowest quoted
selling prices at which the Company's Common Stock was sold on such date
as reported in the New York Stock Exchange Composite Transactions by The
Wall Street Journal on such date or such other report as the Committee
may select, or if no Company Common Stock was traded on such date, on the
next preceding day on which the Company Common Stock was so traded.
Notwithstanding the foregoing, upon the exercise, during the thirty (30)
day period following a Change of Control, of a stock appreciation right
which is granted in connection with a nonqualified option, Fair Market
Value on the date of exercise shall be deemed to be the greater of (i)
the highest price per share of the Company Common Stock as reported in
the New York Stock Exchange Composite Transactions by The Wall Street
Journal or such other report as the Committee may select during the sixty
(60) day period ending on the day preceding the date of exercise of the
stock appreciation right, or (ii) if the Change of Control is one
described in Clause (ii) of section 2.1(b) or a transaction described in
Section 5.2(b), the highest price per share paid for the Company's Common
Stock in connection with such Change of Control.
(h) Incentive Stock Option: An Option which meets the requirements of an
Incentive Stock Option as defined in Section 422A of the Code, as in
effect at the time of grant of such option, or any statutory provision
that may hereafter replace such section.
(i) Option Price: The price per share of Common Stock at which an option
is exercisable.
(j) Participant: An individual who is selected by the Committee to
participate in the Plan pursuant to Section 4.
(k) Permanent Disability: A Participant shall be deemed to have become
permanently disabled for purposes of this Plan if the Committee shall
find upon the basis of medical evidence satisfactory to it that the
Participant is totally disabled, whether due to physical or mental
condition, so as to be prevented from engaging in further comparable
employment by the Company or any of its subsidiaries and that such
disability will be permanent and continuous during the remainder of his
life.
(l) Nonqualified Option: Options which do not meet the requirements of
an Incentive Stock Option as defined in Section 422A of the Code.
(m) Subsidiary: An entity that is designated by the Committee as a
subsidiary for purposes of this Plan and that is a corporation (or other
form of business association that is treated as a corporation for tax
purposes) of which shares (or other ownership interests) having more than
50% of the voting power are owned or controlled, directly or indirectly,
by the Company so as to qualify as a "subsidiary corporation" (within the
meaning of Code Section 425(f)).
Section 3
Administration
3.1 The Plan shall be administered by the Compensation Committee of the
Board. No person shall serve as a member of the Committee unless at the
time of his appointment and service he shall be a "disinterested person,"
as defined in Rule 16b-3 of the General Rules and Regulations under the
Exchange Act or any successor Act then in effect.
3.2 The Committee shall have full authority to construe and interpret
the Plan, to establish, amend and rescind rules and regulations relating
to the Plan, to select persons eligible to participate in the Plan, to
grant options, restricted stock, and/or stock appreciation rights
thereunder, to administer the Plan, to make recommendations to the Board,
to take all such steps and make all such determinations in connection
with the Plan and the options, restricted stock, and/or stock
appreciation rights granted thereunder as it may deem necessary or
advisable, which determination shall be final and binding upon all
Participants.
Section 4
Eligibility
4.1 To be eligible for selection by the Committee to participate in the
Plan, an individual must be an employee or other person providing
significant services to the Company, or of any Subsidiary, as of the date
on which the Committee grants to such individual an option, restricted
stock, or stock appreciation right, and who in the judgment of the
Committee holds a position of responsibility and is able to contribute
substantially to the Company's continued success, provided that officers
and Directors are not eligible under the terms of this Plan. Each chosen
individual to whom a stock option, restricted stock grant, or stock
appreciation right is granted is hereinafter referred to as a
"Participant".
Section 5
Shares Available and Certain Adjustments
5.1 Subject to section 5.2(a) hereof, the maximum number of shares for
which stock options, restricted stock grants, and stock appreciation
rights may at any time be granted under the Plan is 635,000 shares of
Common Stock, from shares repurchased by the Company or out of the
authorized but unissued shares of the Company, or partly out of each, as
shall be determined by the Board of Directors. Upon the expiration,
cancellation or termination in whole or in part of (a) unexercised
options, (b) restricted stock grants reverting to the Company, (c) shares
of Common Stock covered by an option, or portion thereof, which are
surrendered upon exercise of a stock appreciation right, and (d)
unexercised stock appreciation rights, shares of Common Stock which were
subject thereto shall again be available under the Plan.
5.2(a) In the event of any change in the Common Stock through
reorganization, recapitalization, reclassification, stock dividend of ten
percent or greater, stock split, amendment to the Articles of
Incorporation of the Company, or reverse stock split, the Board shall
make an appropriate and proportionate adjustment in the number of shares
of Common Stock subject to an option, without any change in the aggregate
purchase price of the shares subject to an option, but with corresponding
adjustment to the exercise price per share and in the number of shares
covered by outstanding stock appreciation rights.
(b) Upon the effective date of a merger, consolidation or plan of
exchange (other than a merger, consolidation or plan of exchange
involving the Company in which the holders of voting securities of the
Company immediately prior to such transaction own at least 50% of the
voting power of the outstanding securities of the surviving corporation
or a parent of the surviving corporation after such transaction), or a
sale of all or substantially all the assets of the Company, or a
liquidation or dissolution of the Company, the Plan and any option and
stock appreciation right ("SAR") theretofore granted hereunder shall
terminate, unless provisions be made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of
options and SARs theretofore granted, or the substitution for such
options and SARs of new options and new SARs covering the shares of a
successor corporation, or a parent, affiliate or subsidiary thereof, with
appropriate adjustments as to number and kind of shares and prices
thereof, in which event the Plan and the options and SARs granted under
it, or the new options and new SARs substituted therefor, shall continue
in the manner and under the terms so provided.
(c) If provision is not made pursuant to the preceding section 5.2(b) in
connection with such a transaction for the continuance of the Plan and
for the assumption of options and SARs, or the substitution for such
options and SARs of new options and new SARs covering the shares of a
successor employer corporation or a parent, affiliate or subsidiary
thereof, then each Participant under the Plan shall be entitled, prior to
the effective date of any such transaction, to purchase the full number
of shares under the option which the Participant otherwise would have
been entitled to purchase during the remaining term of such option, and
to exercise any SAR for the full number of shares under the SAR to which
the Participant otherwise would have been entitled to acquire upon such
exercise during the remaining term of such SAR, without regard to any
limitation on exercise which may be contained therein.
(d) Upon the occurrence of a Change of Control (unless the Board shall
consist of a majority of Continuing Directors, as defined in Article VI
of the Company's Articles of Incorporation, and the Board shall determine
otherwise by notice to Participants prior to or within 30 days after such
Change of Control), all outstanding options and SARs shall become
immediately exercisable in full for the remainder of their terms, and the
transferability restrictions on all outstanding restricted stock grants
shall automatically lapse.
Adjustments under this Article shall be made by the Board, whose
determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding, and conclusive. No fractional share of
Common Stock shall be issued under the Plan or any such adjustment.
Section 6
Grant of Options
6.1 Options may be granted in such number and at such times during the
term of this Plan as the Committee shall determine, taking into account
the duties of the respective individuals, their present and potential
contributions to the success of the Company, and such other factors as
the Committee shall deem relevant in accomplishing the purposes of the
Plan. The granting of an option shall take place when the Committee by
resolution, written consent or other appropriate action determines to
grant such an option to a particular Participant at a particular price.
Each option shall be evidenced by a written instrument delivered by or on
behalf of the Company containing provisions not inconsistent with the
Plan and such other or additional terms as the Committee may approve.
6.2 An option granted under the Plan may be either an Incentive Stock
Option or a Nonqualified Option, as designated by the Committee and as
indicated in the option agreement.
Section 7
Terms and Conditions of Options
7.1 Each provision of the Plan and each Incentive Stock Option granted
hereunder shall be construed so that such option shall qualify as an
Incentive Stock Option, and any provision thereof that cannot be so
construed shall be disregarded. Incentive Stock Options, in addition to
complying with the other provisions of the Plan relating to options
generally, shall be subject to the following conditions:
(a) Only employees other than officers or Directors of the Company, or of
any Subsidiary are eligible to be granted Incentive Stock Options.
(b) Except as provided in paragraph (c), the option price of the
Incentive Stock Options shall be 100% of the Fair Market Value of the
stock on the date of grant.
(c) An employee must not, at the time an Incentive Stock Option is
granted, own stock representing more than ten percent of the voting power
of all classes of stock of the Company or of a Subsidiary. This
requirement is deemed waived if (i) the Option Price of the Incentive
Stock Option to be granted is at least 110% of the Fair Market Value of
the stock subject to the option, determined at the time the option is
granted, and (ii) the option is not exercisable more than five years from
the date the option is granted.
(d) The aggregate Fair Market Value (determined at the time of the grant
of the option) of the stock with respect to which Incentive Stock Options
are exercisable for the first time by an employee during any calendar
year may not exceed $100,000.
(e) Any other terms and conditions will be added which the Committee
determines, upon advice of counsel, must be imposed for the option to be
an Incentive Stock Option.
7.2 Except as otherwise provided in section 7.1, all Incentive Stock
Options and Nonqualified Options under the Plan shall be granted subject
to the following terms and conditions:
(a) The option price per share shall be determined by the Committee at
the time of grant. The option price may be more or less than or equal to
the fair market value of the shares covered by the option on the date the
option is granted, and the option price may fluctuate based on criteria
determined by the Committee, provided that in no event shall the exercise
price be less than 50 percent of the fair market value of the shares on
the date of grant.
(b) Options shall be exercisable at such time and under such conditions
as set forth in the option grant, but in no event shall any Incentive
Stock Option be exercisable later than the 10th anniversary of the date
of its grant and unless otherwise expressly provided therein, no option
shall extend for more than 10 years.
(c) Shares of Common Stock covered by an option may be purchased at one
time or in such installments over the balance of the option period as may
be provided in the option grant. Any shares not purchased on the
applicable installment date may be purchased at one time or in such
installments over the balance of the option period as may be provided in
the option grant. Any shares not purchased on the applicable installment
date may be purchased thereafter at any time prior to the final
expiration of the option. To the extent that the right to purchase
shares has accrued thereunder, options may be exercised from time to time
by written notice to the Corporate Secretary of the Company stating the
number of shares with respect to which the option is being exercised.
(d) The purchase price of shares of Common Stock covered by an option
and any related taxes to be withheld, if applicable, shall be paid in
full to the Company upon the exercise of the option either (i) in cash or
check, or (ii) by delivery at Fair Market Value, of Common Stock already
owned by the Participant, or any combination of cash and Common Stock.
The Fair Market Value of such Common Stock as delivered shall be valued
as of the day prior to delivery. A Participant shall have none of the
rights of a stockholder until the shares of Common Stock are issued to
him.
(e) The Committee shall determine, with respect to each option, the
nature and extent of the restrictions, if any, to be imposed on the
shares of Common Stock which may be purchased thereunder including, but
not limited to, restrictions on the transferability of such shares
acquired through the exercise of such options for such periods as the
Committee may determine and, further, that in the event a Participant's
employment by the Company, or a Subsidiary, terminates during the period
in which such shares are nontransferable, the Participant shall be
required to sell such shares back to the Company at such prices as the
Committee may specify in the option.
(f) During a Participant's lifetime, the option may be exercisable only
by him and options shall not be transferable, other than by will or the
laws of descent and distribution. In the event of death of a
Participant, the option may be exercisable only by the Participant's
legal representative or beneficiaries, as provided in section 7.2(j).
(g) Upon the termination of a Participant's service for any reason other
than retirement, Permanent Disability or death, any option held by such
Participant shall be exercisable only to the extent that it was then
exercisable (unless the Committee shall determine in a particular case
that specific limitations and restrictions of the option shall not
apply), and such option shall expire, unless it sooner expires under
Section 7.2(b) or its terms, three (3) months after termination of
service, unless extended by special action of the Committee. Leaves of
absence for such periods and purposes conforming to the personnel policy
of the Company, or of its Subsidiaries as applicable, shall not be deemed
terminations or interruptions of employment. In case of an Incentive
Stock Option, a leave of absence of no more than ninety (90) days (or, if
longer, where a Participant's right to reinstatement by the Company is
guaranteed by statute or by contract) approved in writing by the Board of
Directors shall not be deemed a termination of a Participant's employment
with or contract to provide services to the Company.
(h) Upon the termination of a Participant's service due to retirement,
any option held by such Participant shall become exercisable in full
(unless the Committee shall determine otherwise), and such option shall
expire, unless it sooner expires under Section 7.2(b) or its terms,
twelve (12) months after such Participant's retirement from the Company
or any Subsidiary (three (3) months if the option is an Incentive Stock
Option).
(i) Upon the termination of a Participant's service due to Permanent
Disability, any option held by such Participant shall become exercisable
in full (unless the Committee shall determine otherwise), and such option
shall expire, unless it sooner expires under Section 7.2(b) or its terms,
twelve (12) months after such termination of service.
(j) Upon the death of a Participant, whether during his period of service
or during the twelve (12) month period or the three (3) month period, as
the case may be, referred to in section 7.2(h) or 7.2(i), any option held
by such Participant shall become exercisable in full (unless the
Committee shall determine otherwise), and such option shall expire,
unless it sooner expires under Section 7.2(b) or its terms, twelve (12)
months after the date of his death.
Section 8
Stock Appreciation Rights
8.1 The Committee may grant stock appreciation rights to any Participant
in connection with any options granted under the Plan, either at the time
of the grant of such option or at any time thereafter during the term of
the option. Such stock appreciation rights shall cover the same shares
covered by the options (or such lesser number of shares of Common Stock
as the Committee may determine) and shall, except as provided in section
8.3 hereof, be subject to the same terms and conditions as the related
options including without limitation Section 5.2 of this Plan, and such
further terms and conditions not inconsistent with the Plan as shall from
time to time be determined by the Committee.
8.2 Each stock appreciation right shall entitle the holder of the
related option to surrender to the Company unexercised the related
option, or any portion thereof, and to receive from the Company in
exchange therefor an amount equal to the excess of the Fair Market Value
of one share of Common Stock on the date the right is exercised over the
Option Price per share times the number of shares covered by the option,
or portion thereof, which is surrendered. Payment shall be made in
shares of Common Stock valued at Fair Market Value as of the date the
right is exercised rounded up to next full share. Stock appreciation
rights may be exercised from time to time upon actual receipt by the
Company of written notice stating the number of shares of Common Stock
with respect to which the stock appreciation right is being exercised.
8.3 (a)The right of a Participant to exercise a stock appreciation right
shall be canceled if and to the extent the related option is exercised.
To the extent that a stock appreciation right is exercised, the related
option shall be deemed to have been surrendered, unexercised.
(b) A holder of stock appreciation rights shall have none of the rights
of a stockholder until shares of Common Stock are issued to him pursuant
to his exercise of such rights.
Section 9
Restricted Stock Grants
9.1 The Committee may make grants of restricted stock in such number and
at such times as the Committee shall determine. The Committee may make
restricted stock grants to any Participant. The restricted stock grants
shall take place when the Committee by resolution, written consent or
other appropriate action, establishes a restricted stock grant date, the
Participants who will receive such grants, and the number of granted
shares for each Participant.
9.2 Stock certificates representing the number of restricted shares
granted to each Participant shall be issued as soon as practical after
the date of grant and delivered to each Participant, and each
Participant, by accepting delivery of the shares, agrees to be bound by
the terms of the grant as determined by the Committee. Such shares shall
bear a legend restricting transferability in accordance with the terms of
the grant. After the date of grant, any stock splits or stock dividends
paid on the shares would be granted subject to the same transferability
restrictions as the underlying shares upon which they were paid. Shares
subject to restrictions under the Plan may not be sold, given, assigned,
pledged, levied upon, nor may the shares or any interest in the shares be
transferred in any fashion. Any attempt to so transfer the shares or any
interest shall be void, and shall subject the shares to return to the
Company.
9.3 Restrictions on the shares will lapse over a period of time or in
compliance with the conditions as established by the Committee or
pursuant to any waiver of conditions by the Committee. The Committee
shall establish a procedure for the removal of the legend from
certificates representing shares no longer subject to the restrictions.
9.4 Restrictions shall automatically lapse upon the retirement, death,
or Permanent Disability of a Participant.
9.5 If a Participant's service with the Company or any of its
subsidiaries is terminated for any reason (other than retirement, death
or Permanent Disability), any shares still subject to the restrictions
must be returned to the Company unless the Committee expressly waives the
return provision for such Participant. A leave of absence approved in
writing by the Committee shall not constitute a termination of service.
Cash paid in lieu of fractional shares and cash dividends paid upon
shares granted under this Plan shall not be subject to any
transferability restrictions or reversion to the Company.
Section 10
Regulatory Approvals and Listing
10.1 The Committee shall have the right to require that each Participant
or other person who shall exercise an option, receive a restricted stock
grant, or exercise a stock appreciation right under the Plan, and each
person into whose name shares of Common Stock shall be issued pursuant to
the exercise of an option, restricted stock grant or stock appreciation
right represent and agree that any and all shares of Common Stock
purchased pursuant to this Plan are being purchased for investment and
not with a view to the distribution or resale thereof and that such
shares will not be sold except in accordance with such restrictions or
limitations as may be set forth in the option. This section 10.1 shall
be inoperative during any period of time when the Company has obtained
all necessary or advisable approvals from governmental agencies and has
completed all necessary or advisable registrations or other
qualifications of shares of Common Stock as to which options may from
time to time be granted as contemplated in section 10.2 hereof.
10.2 No shares shall be issued and delivered upon exercise of any option
or stock appreciation right unless and until, in the opinion of counsel
for the Company, any applicable registration requirements of the
Securities Act of 1933, as amended, any applicable listing requirements
of any national securities exchange on which stock of the same class is
then listed, and any other requirements of law or of any regulatory
bodies having jurisdiction over such issuance and delivery, shall have
been fully complied with.
Section 11
Term of Plan
11.1 Options, restricted stock grants and stock appreciation rights may
be granted pursuant to the Plan from time to time within the period
commencing with and ending ten years after the adoption of the Plan by
the Board of Directors. Options and stock appreciation rights
theretofore granted may extend beyond that date and the terms and
conditions of the Plan shall continue to apply thereto and to shares of
Common Stock acquired upon exercise thereof.
Section 12
General Provisions
12.1 Nothing contained in the Plan, or in any option, restricted stock
grant or stock appreciation right granted pursuant to the Plan, shall
confer upon any employee any right with respect to continuance of
employment by the Company or a Subsidiary, nor interfere in any way with
the right of the Company or a Subsidiary to terminate the employment of
such employee at any time with or without assigning any reason therefor.
12.2 Appropriate provision shall be made for all taxes including any tax
imposed by Code Section 4999, required to be withheld in connection with
options, restricted stock grants and stock appreciation rights and the
exercise thereof under the applicable laws or regulations of any
governmental authority, whether federal, state or local and whether
domestic or foreign. The Company may withhold such taxes or may require
a Participant to pay such taxes in connection with such grant or
exercise.
Section 13
Amendment, Termination or Discontinuance of the Plan
13.1 The Committee may from time to time make such amendments to the
Plan as it may deem proper and in the best interest of the Company
without further approval of the Board of Directors, including, but not
limited to, any amendment necessary to ensure that the Company may obtain
any regulatory approval referred to in section 10 hereof; provided,
however, that no change in any option, restricted stock grant or stock
appreciation right theretofore granted may be made without the consent of
the Participant which would impair the right of the Participant to
acquire or retain Common Stock which he may have acquired as a result of
the Plan.
13.2 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of the Company's Common
Stock not at the time subject to option or grant. Termination shall not
affect any right to repurchase shares or the forfeitability of shares
issued under the Plan.
Amended as of December 10, 1996
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 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 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 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.
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
CHANGE OF CONTROL AGREEMENT
This Agreement is entered into as of December 11, 1996 between Fluke
Corporation (the "Company") and David E. Katri ("Employee") and
supersedes the Change of Control Agreement dated September 5, 1991.
SECTION 1
Purpose
The Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders. In this connection, the
Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that
such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management to their assigned duties without
distraction in circumstances arising from the possibility of a Change of
Control of the Company.
This Agreement sets forth the severance benefits which the Company
agrees will be provided in the event the Employee's employment with the
Company is terminated subsequent to a "Change of Control" of the Company
under the circumstances described below.
SECTION 2
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) upon the date 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) upon the date the Company transfers substantially all of its assets
to another corporation which is not a wholly owned subsidiary of the
Company.
SECTION 3
Agreement to Provide Services
As valid consideration for entering into this Agreement, Employee
agrees to continue providing services to the Company in his current
executive capacity during any attempted or actual Change of Control.
SECTION 4
Term of the Agreement
This Agreement shall commence on the date hereof and shall continue in
effect until December 31, 1997; provided, however, that commencing on
January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless
at least 90 days prior to such January 1 date, the Company gives notice
that this Agreement shall not be extended; and provided, further, that
this Agreement shall continue in effect for a period of twenty-four (24)
months beyond the term provided herein if a Change of Control of the
Company, as defined in Section 2 hereof, shall have occurred during such
term. The Company may not give notice that this Agreement will not be
extended if an Anticipated Change in Control as defined in Section 6 has
occurred.
This Agreement shall automatically terminate and shall be deemed to
have been terminated prior to a Change of Control if the Employee or a
group of persons including the Employee, directly or indirectly,
initiates or causes the Change of Control.
SECTION 5
Termination Prior to a Change of Control
Nothing in this Agreement shall limit the Company's ability to
terminate the Employee, with or without Cause, prior to a Change of
Control. This Agreement will be immediately terminated upon any
termination of the employment relationship between the Company and the
Employee including death, disability or retirement prior to a Change of
Control.
SECTION 6
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, an amount equal to the maximum
severance benefits payable as a lump sum under Section 10, to hold as
security for the Company's obligations under this Agreement. Employee
and the Company agree to execute the financial institution'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 16(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 2 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 and
there is a termination pursuant to Section 7, the Escrow Agent shall
immediately pay to the Employee the compensation as established in
Section 10 at the Date of Termination pursuant to Section 9. If a
Change of Control occurs and there is no termination after 24 months
pursuant to Section 7, the escrowed funds shall be repaid and released
to the Company.
SECTION 7
Termination Following a Change of Control
Upon a Change of Control, the Employee shall be entitled to the
benefits provided in Section 10 upon termination of employment with the
Company within 24 months after the Change of Control unless such
termination is:
a) because of the Employee's death, disability or retirement;
b) by the Company for Cause, or
c) by the Employee for other than Good Reason.
For purposes of this Section, the following definitions shall apply:
(i) 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. 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.
(ii) Retirement. Termination by the Employee of employment based on
"Retirement" shall mean termination on the early or normal retirement
date as set forth in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a
Change of Control).
(iii) Cause. Termination by the Company of employment for "Cause" shall
mean termination upon (a) 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, 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 (b) 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.
(iv) Good Reason. Termination by the Employee of employment for "Good
Reason" shall mean termination based on:
a) a material reduction in the level or nature of Employee's status,
title, position, authority or responsibility as an officer of the
Company, as in effect immediately prior to the Change of Control; or
b) a significant reduction by the Company of the Employee's compensation
including benefits plans and fringe benefits, as in effect immediately
prior to the Change of Control; nevertheless, if there is a base salary
reduction for all of the Company's executive officers, Employee's base
salary may be reduced but in an amount not to exceed the average
percentage reduction that is applied to the Company's other executive
officers; or
c) the Company's requirement that the Employee be based somewhere other
than where the Employee's office is located immediately prior to the
Change of Control or within a 50 mile radius of such location; or
d) the Company's requirement that the Employee travel on Company
business to an extent substantially in excess of the business travel
obligations required by the Company immediately prior to the Change of
Control; or
e) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 13 hereof.
SECTION 8
Notice of Termination
Any purported termination by the Company or by the Employee following a
Change of Control 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.
SECTION 9
Date of Termination
"Date of Termination" following a Change of Control 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, and (c) 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 16(b) hereof.
SECTION 10
Compensation Upon Termination or During Disability
(a) During any period following a Change of Control that the Employee
fails to perform his duties as a result of disability, the Employee
shall continue to receive full base salary at the rate then in effect
and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans,
until employment is terminated pursuant to and in accordance with
Sections 7(i) and 9. Thereafter, benefits shall be determined in
accordance with the Plans then in effect.
(b) If employment shall be terminated for Cause following a Change of
Control of the Company, the Company shall pay the Employee full base
salary through the Date of Termination at the rate in effect just prior
to the time a Notice of Termination is given plus any benefits or awards
which pursuant to the terms of any Plans have been earned or become
payable, but which have not yet been paid. Thereupon the Company shall
have no further obligations to the Employee under this Agreement.
(c) If, within twenty-four (24) months after a Change of Control of the
Company shall have occurred, the Employee's employment by the Company
shall be terminated by the Company other than for Cause, Disability or
Retirement or by the Employee for Good Reason based on an event
occurring concurrent with or subsequent to a Change of Control, then, by
no later than the fifth day following the Date of Termination the
Employee shall be entitled to receive the following:
(i) the Company shall pay the Employee's full base salary through the
Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including
both cash and stock components) which pursuant to the terms of any Plans
have been earned or become payable, but which have not yet been paid
(including amounts which previously had been deferred at the Employee's
request);
(ii) as severance pay and in lieu of any further salary for periods
subsequent to the Date of Termination, the Company shall pay to the
Employee in a single payment an amount in cash equal to three times the
Employee's annual cash compensation. Annual cash compensation for
purposes of this Agreement shall be the average cash compensation paid
to or accrued for the Employee the last three complete years prior to
the Change of Control and would include but is not limited to base
salary, variable compensation and production bonus.
(iii) Notwithstanding the terms of any Stock Option Plan adopted by the
Company or any option granted pursuant thereto, Employee will have the
right to exercise any such previously issued stock options for one year
following the Date of Termination.
(iv) A full annual contribution shall be made to the Supplemental
Retirement Income 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.
SECTION 11
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, 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.
SECTION 12
Parachute Payment Limitation
Notwithstanding any other provisions of this Agreement, if any
severance benefits under Section 10 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:
a) 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.
b) 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 a) is greater than the result
derived in subparagraph b), then the Company shall pay Employee the full
amount of severance benefits without reduction. If the result derived
from subparagraph a) is not greater than the result derived in
subparagraph b), 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.
SECTION 13
Successors
Upon the Employees written request, the Company will seek to have any
Successor (as hereinafter defined), by agreement in form and substance
satisfactory to the Employee, assent to the fulfillment by the Company
of its obligations under this Agreement. Failure of the Company to
obtain such assent prior to or at the time a Person becomes a Successor
shall constitute Good Reason for termination by the Employee of
employment and, if a Change of Control of the Company has occurred,
shall entitle the Employee immediately to the benefits provided in
paragraph (c) of Section 10 upon delivery by the Employee of a Notice of
Termination which the Company, by executing this Agreement hereby
assents to. For purposes of this Agreement, "Successor" shall mean any
Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business
directly, by merger or consolidation, or indirectly, by purchase of the
Company's Voting Securities or otherwise.
SECTION 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.
SECTION 15
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.
SECTION 16
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 2
is likely to occur, or a Change in Control as defined in Section 2
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 of 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 of
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. 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.
In witness whereof, the parties hereto have subscribed their names this
20th day of December, 1996.
Fluke Corporation Employee
/s/ Douglas G. McKnight /s/ David E. Katri
V.P., General Counsel
Title
CHANGE OF CONTROL AGREEMENT
This Agreement is entered into as of September 5, 1991 between John
Fluke Mfg. Co., Inc. (the "Company") and Douglas G. McKnight
("Employee") and supersedes the Change of Control Agreement dated May 5,
1990.
1. Purpose
The Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders. In this connection, the
Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that
such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management to their assigned duties without
distraction in circumstances arising from the possibility of a Change of
Control of the Company.
This Agreement sets forth the severance benefits which the Company
agrees will be provided in the event the Employee's employment with the
Company is terminated subsequent to a "Change of Control" of the Company
under the circumstances described below.
2. Change of Control
For purposes of this Agreement, a Change of Control shall be deemed to
occur (i) 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, (ii) 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, (iii) 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, (iv) 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 (v) the Company transfers
substantially all of its assets to another corporation which is not a
wholly owned subsidiary of the Company.
3. Agreement to Provide Services
As valid consideration for entering into this Agreement, Employee
agrees to continue providing services to the Company in his current
executive capacity during any attempted or actual Change of Control.
4. Term of the Agreement
This Agreement shall commence on the date hereof and shall continue in
effect until December 31, 1991; provided, however, that commencing on
January 1, 1992 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless
at least 90 days prior to such January 1 date, the Company gives notice
that this Agreement shall not be extended; and provided, further, that
this Agreement shall continue in effect for a period of twenty-four (24)
months beyond the term provided herein if a Change of Control of the
Company, as defined in Section 2 hereof, shall have occurred during such
term. The Company may not give notice that this Agreement will not be
extended if an Anticipated Change in Control as defined in Section 6 has
occurred.
This Agreement shall automatically terminate and shall be deemed to
have been terminated prior to a Change of Control if the Employee or a
group of persons including the Employee, directly or indirectly,
initiates or causes the Change of Control.
5. Termination Prior to a Change of Control
Nothing in this Agreement shall limit the Company's ability to
terminate the Employee, with or without Cause, prior to a Change of
Control. This Agreement will be immediately terminated upon any
termination of the employment relationship between the Company and the
Employee including death, disability or retirement prior to a Change of
Control.
6. 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, an amount equal to the maximum
severance benefits payable as a lump sum under Section 10, to hold as
security for the Company's obligations under this Agreement. Employee
and the Company agree to execute the financial institution'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 16(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 2 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 and
there is a termination pursuant to Section 7, the Escrow Agent shall
immediately pay to the Employee the compensation as established in
Section 10 at the Date of Termination pursuant to Section 9. If a
Change of Control occurs and there is no termination after 24 months
pursuant to Section 7, the escrowed funds shall be repaid and released
to the Company.
7. Termination Following a Change of Control
Upon a Change of Control, the Employee shall be entitled to the
benefits provided in Section 10 upon termination of employment with the
Company within 24 months after the Change of Control unless such
termination is:
(a) because of the Employee's death, disability or retirement;
(b) by the Company for Cause, or
(c) by the Employee for other than Good Reason.
(i) 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. 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.
(ii) Retirement. Termination by the Employee of employment based on
"Retirement" shall mean termination on the early or normal retirement
date as set forth in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a
Change of Control).
(iii) Cause. Termination by the Company of employment for "Cause" shall
mean termination upon (a) 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, 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 (b) 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.
(iv) Good Reason. Termination by the Employee of employment for "Good
Reason" shall mean termination based on:
(a) a material reduction in the level or nature of Employee's status,
title, position, authority or responsibility as an officer of the
Company, as in effect immediately prior to the Change of Control; or
(b) a significant reduction by the Company of the Employee's
compensation including benefits plans and fringe benefits, as in effect
immediately prior to the Change of Control; nevertheless, if there is a
base salary reduction for all of the Company's executive officers,
Employee's base salary may be reduced but in an amount not to exceed the
average percentage reduction that is applied to the Company's other
executive officers; or
(c) the Company's requirement that the Employee be based somewhere other
than where the Employee's office is located immediately prior to the
Change of Control or within a 50 mile radius of such location; or
(d) the Company's requirement that the Employee travel on Company
business to an extent substantially in excess of the business travel
obligations required by the Company immediately prior to the Change of
Control; or
(e) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 13 hereof.
8. Notice of Termination
Any purported termination by the Company or by the Employee following a
Change of Control 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.
9. Date of Termination
"Date of Termination" following a Change of Control 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, and (c) 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 16(b) hereof.
10. Compensation Upon Termination or During Disability
(a) During any period following a Change of Control that the Employee
fails to perform his duties as a result of disability, the Employee
shall continue to receive full base salary at the rate then in effect
and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans,
until employment is terminated pursuant to and in accordance with
Sections 7(i) and 9. Thereafter, benefits shall be determined in
accordance with the Plans then in effect.
(b) If employment shall be terminated for Cause following a Change of
Control of the Company, the Company shall pay the Employee full base
salary through the Date of Termination at the rate in effect just prior
to the time a Notice of Termination is given plus any benefits or awards
which pursuant to the terms of any Plans have been earned or become
payable, but which have not yet been paid. Thereupon the Company shall
have no further obligations to the Employee under this Agreement.
(c) If, within twenty-four (24) months after a Change of Control of the
Company shall have occurred, the Employee's employment by the Company
shall be terminated by the Company other than for Cause, Disability or
Retirement or by the Employee for Good Reason based on an event
occurring concurrent with or subsequent to a Change of Control, then, by
no later than the fifth day following the Date of Termination the
Employee shall be entitled to receive the following:
(i) the Company shall pay the Employee's full base salary through the
Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including
both cash and stock components) which pursuant to the terms of any Plans
have been earned or become payable, but which have not yet been paid
(including amounts which previously had been deferred at the Employee's
request);
(ii) as severance pay and in lieu of any further salary for periods
subsequent to the Date of Termination, the Company shall pay to the
Employee in a single payment an amount in cash equal to three times the
Employee's annual cash compensation. Annual cash compensation for
purposes of this Agreement shall be the average cash compensation paid
to or accrued for the Employee the last three complete years prior to
the Change of Control and would include but is not limited to base
salary, variable compensation and production bonus.
(iii) All restricted stock issued to the Employee under the Long-Term
Performance Stock Plan as of the Date of Termination shall immediately
vest and the Company shall promptly remove the restrictive legends from
the applicable stock certificates.
(iv) Notwithstanding the terms of any Stock Option Plan adopted by the
Company or any option granted pursuant thereto, Employee will have the
right to exercise any such previously issued stock options for one year
following the Date of Termination.
(v) A full annual contribution shall be made to the Supplemental
Retirement Income 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.
11. 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, 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.
12. Parachute Payment Limitation
Notwithstanding any other provisions of this Agreement, if any
severance benefits under Section 10 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:
(a) 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.
(b) 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 (a) is greater than the result
derived in subparagraph (b), then the Company shall pay Employee the
full amount of severance benefits without reduction. If the result
derived from subparagraph (a) is not greater than the result derived in
subparagraph (b), 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.
13. Successors
Upon the Employees written request, the Company will seek to have any
Successor (as hereinafter defined), by agreement in form and substance
satisfactory to the Employee, assent to the fulfillment by the Company
of its obligations under this Agreement. Failure of the Company to
obtain such assent prior to or at the time a Person becomes a Successor
shall constitute Good Reason for termination by the Employee of
employment and, if a Change of Control of the Company has occurred,
shall entitle the Employee immediately to the benefits provided in
paragraph (c) of Section 10 upon delivery by the Employee of a Notice of
Termination which the Company, by executing this Agreement hereby
assents to. For purposes of this Agreement, "Successor" shall mean any
Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business
directly, by merger or consolidation, or indirectly, by purchase of the
Company's Voting Securities or otherwise.
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. 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.
16. 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 2
is likely to occur, or a Change in Control as defined in Section 2
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 of 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 of
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. 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.
In witness whereof, the parties hereto have subscribed their names this
9th day of September, 1991.
Fluke Corporation Employee
/s/ George M. Winn /s/ Douglas G. McKnight
Its President
FLUKE CORPORATION
1988 STOCK INCENTIVE PLAN
Section 1
Purposes
1.1 The purpose of the Fluke Corporation 1988 Stock Incentive Plan (Plan) is
to promote the interests of Fluke Corporation (Company) and its stockholders
by strengthening its ability to attract and retain officers, employees, and
other persons providing significant services to the Company and its
subsidiaries by furnishing suitable recognition of their ability and industry
to contribute materially to the success of the Company. The Plan provides for
the grant of stock options, restricted stock grants, and/or stock appreciation
rights in accordance with the terms and conditions set forth below.
Section 2
Definitions
2.1 Unless otherwise required by the context, the following terms when used
in the Plan shall have the meanings set forth in this section 2.1:
(a) Board: The Board of Directors of the Company.
(b) Change of Control: As used in this Plan, a Change of Control shall be
deemed to occur (i) 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 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,
(ii) 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 (iii)
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.
(c) Code: The Internal Revenue Code of 1986, as amended and in effect from
time to time, and the temporary or final regulations of the Secretary of the
Treasury adopted pursuant to the Code.
(d) Committee: The Compensation Committee of the Board of Directors.
(e) Common Stock: The Common Stock of the Company, $.25 par value.
(f) Exchange Act: The Securities Exchange Act of 1934, as amended.
(g) Fair Market Value: As applied to a specific date, Fair Market Value shall
be deemed to be the mean between the highest and lowest quoted selling prices
at which the Company's Common Stock was sold on such date as reported in the
New York Stock Exchange Composite Transactions by The Wall Street Journal on
such date or such other report as the Committee may select, or if no Company
Common Stock was traded on such date, on the next preceding day on which the
Company Common Stock was so traded. Notwithstanding the foregoing, upon the
exercise, during the thirty (30) day period following a Change of Control, of
a stock appreciation right which is granted in connection with a nonqualified
option, Fair Market Value on the date of exercise shall be deemed to be the
greater of (i) the highest price per share of the Company Common Stock as
reported in the New York Stock Exchange Composite Transactions by The Wall
Street Journal or such other report as the Committee may select during the
sixty (60) day period ending on the day preceding the date of exercise of the
stock appreciation right, or (ii) if the Change of Control is one described in
Clause (ii) of section 2.1(b) or a transaction described in Section 5.2(b),
the highest price per share paid for the Company's Common Stock in connection
with such Change of Control.
(h) Incentive Stock Option: An Option which meets the requirements of an
Incentive Stock Option as defined in Section 422A of the Code, as in effect at
the time of grant of such option, or any statutory provision that may
hereafter replace such section.
(i) Option Price: The price per share of Common Stock at which an option is
exercisable.
(j) Participant: An individual who is selected by the Committee to
participate in the Plan pursuant to Section 4.
(k) Permanent Disability: A Participant shall be deemed to have become
permanently disabled for purposes of this Plan if the Committee shall find
upon the basis of medical evidence satisfactory to it that the Participant is
totally disabled, whether due to physical or mental condition, so as to be
prevented from engaging in further comparable employment by the Company or any
of its subsidiaries and that such disability will be permanent and continuous
during the remainder of his life.
(l) Nonqualified Option: Options which do not meet the requirements of an
Incentive Stock Option as defined in Section 422A of the Code.
(m) Subsidiary: An entity that is designated by the Committee as a subsidiary
for purposes of this Plan and that is a corporation (or other form of business
association that is treated as a corporation for tax purposes) of which shares
(or other ownership interests) having more than 50% of the voting power are
owned or controlled, directly or indirectly, by the Company so as to qualify
as a "subsidiary corporation" (within the meaning of Code Section 425(f)).
Section 3
Administration
3.1 The Plan shall be administered by the Compensation Committee of the
Board. No person shall serve as a member of the Committee unless at the time
of his appointment and service he shall be a "disinterested person," as
defined in Rule 16b-3 of the General Rules and Regulations under the Exchange
Act or any successor Act then in effect.
3.2 The Committee shall have full authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant
options, restricted stock, and/or stock appreciation rights thereunder, to
administer the Plan, to make recommendations to the Board, to take all such
steps and make all such determinations in connection with the Plan and the
options, restricted stock, and/or stock appreciation rights granted thereunder
as it may deem necessary or advisable, which determination shall be final and
binding upon all Participants.
Section 4
Eligibility
4.1 To be eligible for selection by the Committee to participate in the
Plan, an individual must be an officer, employee, or other person providing
significant services to the Company, or of any Subsidiary, as of the date on
which the Committee grants to such individual an option, restricted stock, or
stock appreciation right, and who in the judgment of the Committee holds a
position of responsibility and is able to contribute substantially to the
Company's continued success, provided that non-employee Directors are not
eligible under the terms of this Plan. Each chosen individual to whom a stock
option, restricted stock grant, or stock appreciation right is granted is
hereinafter referred to as a "Participant".
Section 5
Shares Available and Certain Adjustments
5.1 Subject to section 5.2(a) hereof, the maximum number of shares for which
stock options, restricted stock grants, and stock appreciation rights may at
any time be granted under the Plan is 1,500,000 shares of Common Stock, from
shares repurchased by the Company or out of the authorized but unissued shares
of the Company, or partly out of each, as shall be determined by the Board of
Directors. Upon the expiration, cancellation or termination in whole or in
part of (a) unexercised options, (b) restricted stock grants reverting to the
Company, (c) shares of Common Stock covered by an option, or portion thereof,
which are surrendered upon exercise of a stock appreciation right, and (d)
unexercised stock appreciation rights, shares of Common Stock which were
subject thereto shall again be available under the Plan.
5.2 (a) In the event of any change in the Common Stock through reorganization,
recapitalization, reclassification, stock dividend of ten percent or greater,
stock split, amendment to the Articles of Incorporation of the Company, or
reverse stock split, the Board shall make an appropriate and proportionate
adjustment in the number of shares of Common Stock subject to an option,
without any change in the aggregate purchase price of the shares subject to an
option, but with corresponding adjustment to the exercise price per share and
in the number of shares covered by outstanding stock appreciation rights.
(b) Upon the effective date of a merger, consolidation or plan of exchange
(other than a merger, consolidation or plan of exchange involving the Company
in which the holders of voting securities of the Company immediately prior to
such transaction own at least 50% of the voting power of the outstanding
securities of the surviving corporation or a parent of the surviving
corporation after such transaction), or a sale of all or substantially all the
assets of the Company, or a liquidation or dissolution of the Company, the
Plan and any option and stock appreciation right ("SAR") theretofore granted
hereunder shall terminate, unless provisions be made in writing in connection
with such transaction for the continuance of the Plan and for the assumption
of options and SARs theretofore granted, or the substitution for such options
and SARs of new options and new SARs covering the shares of a successor
corporation, or a parent, affiliate or subsidiary thereof, with appropriate
adjustments as to number and kind of shares and prices thereof, in which event
the Plan and the options and SARs granted under it, or the new options and new
SARs substituted therefor, shall continue in the manner and under the terms so
provided.
(c) If provision is not made pursuant to the preceding section 5.2(b) in
connection with such a transaction for the continuance of the Plan and for the
assumption of options and SARs, or the substitution for such options and SARs
of new options and new SARs covering the shares of a successor employer
corporation or a parent, affiliate or subsidiary thereof, then each
Participant under the Plan shall be entitled, prior to the effective date of
any such transaction, to purchase the full number of shares under the option
which the Participant otherwise would have been entitled to purchase during
the remaining term of such option, and to exercise any SAR for the full number
of shares under the SAR to which the Participant otherwise would have been
entitled to acquire upon such exercise during the remaining term of such SAR,
without regard to any limitation on exercise which may be contained therein.
(d) Upon the occurrence of a Change of Control (unless the Board shall consist
of a majority of Continuing Directors, as defined in Article VI of the
Company's Articles of Incorporation, and the Board shall determine otherwise
by notice to Participants prior to or within 30 days after such Change of
Control), all outstanding options and SARs shall become immediately
exercisable in full for the remainder of their terms, and the transferability
restrictions on all outstanding restricted stock grants shall automatically
lapse.
Adjustments under this section shall be made by the Board, whose determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding, and conclusive. No fractional share of Common Stock shall be issued
under the Plan or any such adjustment.
Section 6
Grant of Options
6.1 Options may be granted in such number and at such times during the term
of this Plan as the Committee shall determine, taking into account the duties
of the respective individuals, their present and potential contributions to
the success of the Company, and such other factors as the Committee shall deem
relevant in accomplishing the purposes of the Plan. The granting of an option
shall take place when the Committee by resolution, written consent or other
appropriate action determines to grant such an option to a particular
Participant at a particular price. Each option shall be evidenced by a
written instrument delivered by or on behalf of the Company containing
provisions not inconsistent with the Plan and such other or additional terms
as the Committee may approve.
6.2 An option granted under the Plan may be either an Incentive Stock Option
or a Nonqualified Option, as designated by the Committee and as indicated in
the option agreement.
Section 7
Terms and Conditions of Options
7.1 Each provision of the Plan and each Incentive Stock Option granted
hereunder shall be construed so that such option shall qualify as an Incentive
Stock Option, and any provision thereof that cannot be so construed shall be
disregarded. Incentive Stock Options, in addition to complying with the other
provisions of the Plan relating to options generally, shall be subject to the
following conditions:
(a) Only officers and other employees of the Company, or of any Subsidiary are
eligible to be granted Incentive Stock Options.
(b) Except as provided in paragraph (c), the option price of the Incentive
Stock Options shall be 100% of the Fair Market Value of the stock on the date
of grant.
(c) An officer or other employee must not, at the time an Incentive Stock
Option is granted, own stock representing more than ten percent of the voting
power of all classes of stock of the Company or of a Subsidiary. This
requirement is deemed waived if (i) the Option Price of the Incentive Stock
Option to be granted is at least 110% of the Fair Market Value of the stock
subject to the option, determined at the time the option is granted, and (ii)
the option is not exercisable more than five years from the date the option is
granted.
(d) The aggregate Fair Market Value (determined at the time of the grant of
the option) of the stock with respect to which Incentive Stock Options are
exercisable for the first time by an officer or other employee during any
calendar year may not exceed $100,000.
(e) Any other terms and conditions will be added which the Committee
determines, upon advice of counsel, must be imposed for the option to be an
Incentive Stock Option.
7.2 Except as otherwise provided in section 7.1, all Incentive Stock Options
and Nonqualified Options under the Plan shall be granted subject to the
following terms and conditions:
(a) The option price per share shall be determined by the Committee at the
time of grant. The option price may be more or less than or equal to the fair
market value of the shares covered by the option on the date the option is
granted, and the option price may fluctuate based on criteria determined by
the Committee, provided that in no event shall the exercise price be less than
50 percent of the fair market value of the shares on the date of grant.
(b) Options shall be exercisable at such time and under such conditions as set
forth in the option grant, but in no event shall any Incentive Stock Option be
exercisable later than the 10th anniversary of the date of its grant and
unless otherwise expressly provided therein, no option shall extend for more
than 10 years.
(c) Shares of Common Stock covered by an option may be purchased at one time
or in such installments over the balance of the option period as may be
provided in the option grant. Any shares not purchased on the applicable
installment date may be purchased at one time or in such installments over the
balance of the option period as may be provided in the option grant. Any
shares not purchased on the applicable installment date may be purchased
thereafter at any time prior to the final expiration of the option. To the
extent that the right to purchase shares has accrued thereunder, options may
be exercised from time to time by written notice to the Corporate Secretary of
the Company stating the number of shares with respect to which the option is
being exercised.
(d) The purchase price of shares of Common Stock covered by an option and any
related taxes to be withheld, if applicable, shall be paid in full to the
Company upon the exercise of the option either (i) in cash or check, or (ii)
by delivery at Fair Market Value, of Common Stock already owned by the
Participant, or any combination of cash and Common Stock. The Fair Market
Value of such Common Stock as delivered shall be valued as of the day prior to
delivery. A Participant shall have none of the rights of a stockholder until
the shares of Common Stock are issued to him.
(e) The Committee shall determine, with respect to each option, the nature and
extent of the restrictions, if any, to be imposed on the shares of Common
Stock which may be purchased thereunder including, but not limited to,
restrictions on the transferability of such shares acquired through the
exercise of such options for such periods as the Committee may determine and,
further, that in the event a Participant's employment by the Company, or a
Subsidiary, terminates during the period in which such shares are
nontransferable, the Participant shall be required to sell such shares back to
the Company at such prices as the Committee may specify in the option.
(f) During a Participant's lifetime, the option may be exercisable only by him
and options shall not be transferable, other than by will or the laws of
descent and distribution. In the event of death of a Participant, the option
may be exercisable only by the Participant's legal representative or
beneficiaries, as provided in section 7.2(j).
(g) Upon the termination of a Participant's service for any reason other than
retirement, Permanent Disability or death, any option held by such Participant
shall be exercisable only to the extent that it was then exercisable (unless
the Committee shall determine in a particular case that specific limitations
and restrictions of the option shall not apply), and such option shall expire,
unless it sooner expires under Section 7.2(b) or its terms, three (3) months
after termination of service, unless extended by special action of the
Committee. Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company, or of its Subsidiaries as applicable, shall
not be deemed terminations or interruptions of employment. In case of an
Incentive Stock Option, a leave of absence of no more than ninety (90) days
(or, if longer, where a Participant's right to reinstatement by the Company is
guaranteed by statute or by contract) approved in writing by the Board of
Directors shall not be deemed a termination of a Participant's employment with
or contract to provide services to the Company.
(h) Upon the termination of a Participant's service due to retirement, any
option held by such Participant shall become exercisable in full (unless the
Committee shall determine otherwise), and such option shall expire, unless it
sooner expires under Section 7.2(b) or its terms, twelve (12) months after
such Participant's retirement from the Company or any Subsidiary (three (3)
months if the option is an Incentive Stock Option).
(i) Upon the termination of a Participant's service due to Permanent
Disability, any option held by such Participant shall become exercisable in
full (unless the Committee shall determine otherwise), and such option shall
expire, unless it sooner expires under Section 7.2(b) or its terms, twelve
(12) months after such termination of service.
(j) Upon the death of a Participant, whether during his period of service or
during the twelve (12) month period or the three (3) month period, as the case
may be, referred to in section 7.2(h) or 7.2(i), any option held by such
Participant shall become exercisable in full (unless the Committee shall
determine otherwise), and such option shall expire, unless it sooner expires
under Section 7.2(b) or its terms, twelve (12) months after the date of his
death.
Section 8
Stock Appreciation Rights
8.1 The Committee may grant stock appreciation rights to any Participant in
connection with any options granted under the Plan, either at the time of the
grant of such option or at any time thereafter during the term of the option.
Such stock appreciation rights shall cover the same shares covered by the
options (or such lesser number of shares of Common Stock as the Committee may
determine) and shall, except as provided in section 8.3 hereof, be subject to
the same terms and conditions as the related options including without
limitation Section 5.2 of this Plan, and such further terms and conditions not
inconsistent with the Plan as shall from time to time be determined by the
Committee.
8.2 Each stock appreciation right shall entitle the holder of the related
option to surrender to the Company unexercised the related option, or any
portion thereof, and to receive from the Company in exchange therefor an
amount equal to the excess of the Fair Market Value of one share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the option, or portion thereof, which is
surrendered. Payment shall be made in shares of Common Stock valued at Fair
Market Value as of the date the right is exercised rounded up to next full
share. Stock appreciation rights may be exercised from time to time upon
actual receipt by the Company of written notice stating the number of shares
of Common Stock with respect to which the stock appreciation right is being
exercised.
8.3 (a) The right of a Participant to exercise a stock appreciation right
shall be canceled if and to the extent the related option is exercised. To
the extent that a stock appreciation right is exercised, the related option
shall be deemed to have been surrendered, unexercised.
(b) A holder of stock appreciation rights shall have none of the rights of a
stockholder until shares of Common Stock are issued to him pursuant to his
exercise of such rights.
Section 9
Restricted Stock Grants
9.1 The Committee may make grants of restricted stock in such number and at
such times as the Committee shall determine. The Committee may make
restricted stock grants to any Participant. The restricted stock grants shall
take place when the Committee by resolution, written consent or other
appropriate action, establishes a restricted stock grant date, the
Participants who will receive such grants, and the number of granted shares
for each Participant.
9.2 Stock certificates representing the number of restricted shares granted
to each Participant shall be issued as soon as practical after the date of
grant and delivered to each Participant, and each Participant, by accepting
delivery of the shares, agrees to be bound by the terms of the grant as
determined by the Committee. Such shares shall bear a legend restricting
transferability in accordance with the terms of the grant. After the date of
grant, any stock splits or stock dividends paid on the shares would be granted
subject to the same transferability restrictions as the underlying shares upon
which they were paid. Shares subject to restrictions under the Plan may not
be sold, given, assigned, pledged, levied upon, nor may the shares or any
interest in the shares be transferred in any fashion. Any attempt to so
transfer the shares or any interest shall be void, and shall subject the
shares to return to the Company.
9.3 Restrictions on the shares will lapse over a period of time or in
compliance with the conditions as established by the Committee or pursuant to
any waiver of conditions by the Committee. The Committee shall establish a
procedure for the removal of the legend from certificates representing shares
no longer subject to the restrictions.
9.4 Restrictions shall automatically lapse upon the retirement, death, or
Permanent Disability of a Participant.
9.5 If a Participant's service with the Company or any of its subsidiaries
is terminated for any reason (other than retirement, death or Permanent
Disability), any shares still subject to the restrictions must be returned to
the Company unless the Committee expressly waives the return provision for
such Participant. A leave of absence approved in writing by the Committee
shall not constitute a termination of service. Cash paid in lieu of
fractional shares and cash dividends paid upon shares granted under this Plan
shall not be subject to any transferability restrictions or reversion to the
Company.
Section 10
Regulatory Approvals and Listing
10.1 The Committee shall have the right to require that each Participant or
other person who shall exercise an option, receive a restricted stock grant,
or exercise a stock appreciation right under the Plan, and each person into
whose name shares of Common Stock shall be issued pursuant to the exercise of
an option, restricted stock grant or stock appreciation right represent and
agree that any and all shares of Common Stock purchased pursuant to this Plan
are being purchased for investment and not with a view to the distribution or
resale thereof and that such shares will not be sold except in accordance with
such restrictions or limitations as may be set forth in the option. This
section 10.1 shall be inoperative during any period of time when the Company
has obtained all necessary or advisable approvals from governmental agencies
and has completed all necessary or advisable registrations or other
qualifications of shares of Common Stock as to which options may from time to
time be granted as contemplated in section 10.2 hereof.
10.2 No shares shall be issued and delivered upon exercise of any option or
stock appreciation right unless and until, in the opinion of counsel for the
Company, any applicable registration requirements of the Securities Act of
1933, as amended, any applicable listing requirements of any national
securities exchange on which stock of the same class is then listed, and any
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery, shall have been fully complied with.
Section 11
Term of Plan
11.1 This Plan shall be void unless it is approved by the stockholders of
the Company within 12 months before or after the date the Plan is adopted by
the Board of Directors. Subject to the foregoing condition, options,
restricted stock grants and stock appreciation rights may be granted pursuant
to the Plan from time to time within the period commencing with and ending ten
years after the earlier of the adoption of the Plan by the Board of Directors
or the approval of the Plan by the stockholders. Options and stock
appreciation rights theretofore granted may extend beyond that date and the
terms and conditions of the Plan shall continue to apply thereto and to shares
of Common Stock acquired upon exercise thereof.
Section 12
General Provisions
12.1 Nothing contained in the Plan, or in any option, restricted stock grant
or stock appreciation right granted pursuant to the Plan, shall confer upon
any employee any right with respect to continuance of employment by the
Company or a Subsidiary, nor interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of such employee at any
time with or without assigning any reason therefor.
12.2 Appropriate provision shall be made for all taxes including any tax
imposed by Code Section 4999, required to be withheld in connection with
options, restricted stock grants and stock appreciation rights and the
exercise thereof under the applicable laws or regulations of any governmental
authority, whether federal, state or local and whether domestic or foreign.
The Company may withhold such taxes or may require a Participant to pay such
taxes in connection with such grant or exercise.
Section 13
Amendment, Termination or Discontinuance of the Plan
13.1 Subject to the Board of Directors and section 13.2, the Committee may
from time to time make such amendments to the Plan as it may deem proper and
in the best interest of the Company without further approval of the Board of
Directors or stockholders of the Company, including, but not limited to, any
amendment necessary to ensure that the Company may obtain any regulatory
approval referred to in section 10 hereof; provided, however, that no change
in any option, restricted stock grant or stock appreciation right theretofore
granted may be made without the consent of the Participant which would impair
the right of the Participant to acquire or retain Common Stock which he may
have acquired as a result of the Plan.
13.2 The Committee and the Board of Directors may not amend the Plan without
the approval of the stockholders of the Company as required by applicable law
to (a) increase the maximum number of shares of the Company subject to the
Plan, except as permitted by section 5.2, (b) extend the period for the
exercise of an option or a stock appreciation right beyond the limit set forth
in section 7.2(b), (c) extend the term of the Plan, (d) reduce the option
price at which options may be granted under the Plan, or (e) change the class
of eligible persons.
13.3 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of the Company's Common Stock
not at the time subject to option or grant. Termination shall not affect any
right to repurchase shares or the forfeitability of shares issued under the
Plan.
Amended as of December 10, 1996
FLUKE CORPORATION
SUPPLEMENTAL RETIREMENT INCOME PLAN
This Agreement is entered into between Fluke Corporation, a Washington
corporation (the "Company"), and each individual listed in the attached
Appendix A (the "Participants"), as amended from time to time pursuant to
Article IV.
Whereas, the Participants are valued employees of the Company, and it is the
desire of the Company to continue the employment of each of the Participants
because of their respective experience, reputation and contacts in the
industry, and knowledge of the affairs of the Company; and
Whereas, the Company wants the Participants to concentrate their efforts on
the development and growth of the Company; and
Whereas, the Company desires the Participants to remain in its service as
consultants and wishes to receive the benefit of their knowledge, experience,
reputation and contacts during their retirement; and
Whereas, the Company is desirous of the Participants retaining a friendly
interest in the business of the Company and not entering into any business
which might be competitive after retirement from active employment; and
Whereas, the Company wants to provide each Participant the financial security
of a competitive level of retirement income; and
Whereas, the Company, in consideration of each Participant's past and current
service and such Participant's agreement to be available after retirement as a
consultant, and not to enter into a competitive business, is willing to offer
the respective Participants a Supplemental Retirement Income Plan; and
Whereas, the Company and the Participants have previously entered into a
Supplemental Retirement Income Plan dated November 14, 1991, which was amended
on June 22, 1994, and it is deemed in the best interests of the Company and
the Participants to amend and restate said Agreement;
Therefore, effective September 11, 1996, the parties agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, the following words shall have the indicated
meaning:
A. Plan - This Supplemental Retirement Income Plan as amended and restated as
of September 11, 1996.
B. Supplemental Retirement Income Fund - The aggregate of the annual
allocations and allocated earnings set aside as a matter of record upon the
books of the Company for purposes of this Plan and representing an unsecured
contractual liability of the Company but not a particular asset or pool of
assets.
C. Participant - An employee or former employee of the Company who has entered
into this Agreement, as amended from time to time, and who has been credited
with an allocated share of an annual allocation by the Company to the
Supplemental Retirement Income Fund.
D. Participant/Beneficiary - A Participant who becomes entitled to a
distribution of such Participant's allocated credits under this Plan due to
retirement or inability to continue gainful employment by reason of sickness
and disability.
E. Beneficiary - One to whom the distributions of allocated credits and/or
life insurance proceeds pursuant to Article VI shall be paid in the event of
the death of a Participant or Participant/Beneficiary.
F. Retirement Date - The last day of the month following the later of: the
date the Participant reaches his fifty-fifth birthday or the date the
Participant retires from employment with the Company.
G. Fiscal Year - The annual accounting period adopted by the Company.
ARTICLE II
Company Contributions
The Company agrees to establish a corporate liability for amounts credited
under the Plan in a manner determined by the Board of Directors of the Company
in its sole discretion, which will adequately provide for the accrual of
Participant benefits at the times, in the amounts and subject to the
conditions hereinafter set forth.
ARTICLE III
Covenants by Participants
Each Participant, individually and not jointly, agrees as follows:
A. During Active Employment. During the period of such Participant's active
employment, to faithfully perform assigned duties to the best of such
Participant's ability and in accordance with directions of the Company; and to
devote to the performance of such duties full time and attention, and not
become associated with or engage in or render service to any other business,
except that such Participant may invest in and have an interest in a
noncompeting business so long as it does not appreciably interfere with such
Participant's active service with the Company.
B. Services During Retirement or Other Termination of Employment. During the
period of a Participant's retirement, or after the termination of employment
with the Company for any reason, to render to the Company such services of an
advisory or consultive nature as the Company may reasonably request so that
the Company may continue to have the benefit of the Participant's experience
and knowledge of the affairs of the Company and reputation and contacts in the
industry. The Participant shall be available for advice and counsel to the
Company at all reasonable times by telephone, letter or in person; provided,
however, a failure to render such service or to give such service or counsel
by reason of illness or other incapacity shall not affect the Participant's
right to receive supplemental retirement income hereunder during any such
period.
C. Noncompetition and Investment During Retirement. During the period of a
Participant's retirement or after the termination of employment with the
Company for any reason, not to become associated with or engage in or render
any service to any other business competitive to the business of the Company
for a period of three (3) years without the prior written approval of the
Company's Board of Directors; provided, however, that this shall not prohibit
the Participant from purchasing stock or other securities of any corporation
and, provided further, that the Participant shall not be prohibited hereunder
from making any investment in a noncompeting business or from becoming a
director of any corporation conducting a noncompeting business.
ARTICLE IV
Eligible Employees
A. Current Eligible Employees. The current eligible employees shall be the
Participants listed in Appendix A.
B. Additional Eligible Employees. Additional employees may be approved from
time to time by the Board of Directors of the Company for eligibility
hereunder as Participants, provided that the Company and each employee
thereafter execute a copy of an agreement to participate in this Plan. Such
additional Participants shall have no interest in allocations already credited
hereunder to other Participants.
C. Removal From List of Eligible Employees. Any present or future Participant
may be removed from the list of employees eligible for participation in this
Plan at any time at the sole discretion of the Board of Directors of the
Company, subject to a Participant's right to allocated amounts already
credited or accrued at the time of such removal.
ARTICLE V
Allocation of Contribution
A. Record Keeping. The Company shall maintain a separate record to which it
shall credit each Participant's annual allocation and allocated earnings
thereon, as defined below, adding the same to the individual Participant's
previously allocated and credited account. At least once each fiscal year the
Company shall furnish each Participant with a statement of such Participant's
current account balance.
B. Participant Allocations.
1.Each Participant's account balance is the aggregate sum of all contributions
credited to such Participant's account which have been authorized by the Board
of Directors in their sole discretion and all allocated earnings thereon.
2.With the fiscal year beginning April 30, 1994, the amount credited annually
on the last day of the fiscal year to each Participant's account shall be:
a) the lesser of twenty-one percent (21%) of the Participant's base salary on
November 1 of such fiscal year, or the annual contribution limitation amount
pursuant to Article VI, section D of the Plan, and
b) the allocated earnings on the Participant's aggregate account balance
during such fiscal year which shall be computed using an assumed interest rate
of one (1) percent over the average three-month Treasury bill rate for the
fiscal year.
3. The amount credited to a Participant's account for the fiscal year during
which the Participant retires shall be prorated based upon the number of days
of participation during the fiscal year.
4. Once a Participant becomes entitled under the provisions of Article VI
hereof to distribution of the credits allocated to such Participant under the
provisions of this Article V, such Participant shall no longer be entitled to
annual allocations for future years, but as a Participant/Beneficiary shall be
entitled to the allocated earnings defined in 2 b) above.
5. For those Participants who retire prior to the end of fiscal 1999, a
calculation of the present value of the Company's pension benefit will be made
as if the maximum amount of annual compensation which could be taken into
account in the computation of pension benefits is $235,840, the maximum level
prior to the enactment of the Revenue Reconciliation Act of 1993. Any
difference between the present value of the actual pension benefit to be paid
and the present value of the pension benefit using the $235,840 limit (the
equalization amount) will be accrued as an additional allocation to the
Participant's account in such Participant's year of retirement. The Company
has increased by 1% the annual allocation to each Participant's account
beginning in fiscal 1995. This additional 1% allocation will be deducted from
any equalization amount paid to a Participant pursuant to this paragraph.
6. The foregoing allocations may be modified for future years at any time at
the sole discretion of the Board of Directors of the Company to meet corporate
objectives.
ARTICLE VI
Distribution of Allocated Credit
A. Conditions
1. Attainment of Retirement Date, Termination of Employment or Disability.
Except as provided in section C.5. of this Article VI, no amounts credited to
a Participant shall be distributed to such Participant or to any other person
or entity on such Participant's behalf or as designated by such Participant to
receive the same unless the Participant shall have reached the Retirement Date
and ceased employment with the Company, died, or become disabled, as herein
provided.
2. Forfeitures. The balance in the Participant's account shall be forfeited
and, if applicable, any distribution or continued distribution of a
Participant's or Participant/Beneficiary's account shall stop if the
Participant or Participant/Beneficiary shall:
a)engage in a business within the three (3) year covenant period (described in
Article III, section C hereof) which, in the opinion of the Board of Directors
of the Company, competes with the Company;
b) be terminated by the Company for violation of any corporate policies to
which such Participant is subject;
c) engage in business practices which, in the opinion of the Board of
Directors of the Company, are detrimental to the interests of the Company;
d) fail to be available for consultation and advice after retirement from or
termination of employment with the Company; or
e) encumber or seek to encumber such Participant's interest in or benefit in
this Plan.
3. Disbursement of Forfeited Account. No Participant shall have any rights
whatsoever to the balance of any forfeited account. Any forfeited balance
shall reduce the Company's liability under the Plan.
B. Vesting. Distributions to all Participant/ Beneficiaries under this Plan
shall be further limited to those amounts allocated to each Participant which
have been vested according to the number of years such Participant shall have
been continuously employed by the Company or its subsidiaries as of the end of
the fiscal year in which such Participant becomes entitled to such
distribution or terminates employment with the Company, whichever occurs
first, and according to the following schedule:
Number of Years
Employed Percent Vested
less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years 100%
Upon termination of employment with the Company, a Participant's aggregate
account balance shall be adjusted according to the above schedule. Any non-
vested balance shall reduce the Company's liability under the Plan.
C. Payments to Participant/Beneficiary or Beneficiaries.
1. Retirement. Upon Participant's Retirement Date, the Company, subject to
the conditions and vesting provisions set forth in sections A and B of this
Article VI, shall pay to the Participant/Beneficiary in approximately equal
monthly installments over a ten year period an amount equal to the
Participant's aggregate account balance. The first installment must be paid
within the first month after such Participant's Retirement Date, unless the
Participant requests a deferral of such first payment for a period not
exceeding twelve months and such deferral is approved by the Board. During
each fiscal year following the first year of distributions to a
Participant/Beneficiary, the allocated earnings on the remaining balance of
the Participant/Beneficiary's aggregate account balance from the prior fiscal
year shall be divided by twelve and paid out to the Participant/Beneficiary as
equal additions to the normal monthly installments.
2. Death. Each Participant shall designate a Beneficiary or Beneficiaries on
a form to be filed with the Company. If a Participant is married when the
Beneficiary designation is made and such designation is someone other than the
spouse, the designation will not be valid without the written consent of the
spouse. If no designation is filed with the Company or if the designated
Beneficiary shall not survive such Participant, then the payments from the
account of the deceased Participant shall be paid to the surviving spouse, if
any, or, if none, then to the Participant's personal legal representative.
If a Participant dies while still in the Company's employ before reaching his
Retirement Date, the Beneficiary or Beneficiaries named by the Participant
prior to his death shall receive a life insurance death benefit from the Fluke
Corporation Pre-Retirement Death Benefit Plan. However, if the Participant's
current aggregate account balance plus $250,000 is greater than the life
insurance benefit, the difference shall be paid to the Beneficiary or
Beneficiaries by the Company. The Participant's aggregate account balance at
death shall be computed as if such Participant was fully vested pursuant to
paragraph B of this Article VI. If the Participant is not an employee of the
Company at the time of death or dies after retirement but before distribution
of all benefits to which such Participant/Beneficiary may have been entitled,
the aggregate account balance at the time of death shall be paid to the
Beneficiary or Beneficiaries named by the Participant in installment payments
as described in section C.1 of this Article VI. The first of such installment
payments must be paid to the Beneficiary or Beneficiaries within three (3)
months after the date of the Participant's death, if none have been paid
before such death, but the first installment payment shall be paid within one
(1) month after the Participant/Beneficiary's death, if payments under Article
VI had already commenced prior to such death.
3. Disability
a) In the event a Participant, prior to reaching such Participant's Retirement
Date and still in the employ of the Company, becomes disabled so such
Participant is no longer able to continue in gainful employment, the aggregate
amount credited to the Participant's account as of the occurrence of the
disability shall be paid to such Participant in installments pursuant to
section C.1 of this Article VI as if such Participant is fully vested pursuant
to section B of this Article VI.
b) Disability shall be established by the certificate of a physician selected
by the Participant and approved by the Company, that the Participant, by
reason of mental or physical disability, is incapable of further gainful
employment. In the event the Participant becomes disabled as defined herein,
and thereafter again becomes capable of gainful employment, the Participant
may be reemployed by the Company on such terms and with such participation
under this Agreement as the Board of Directors, in its sole discretion, shall
then determine.
4. Distribution to Minors or Incompetents. Distribution to minors or in
competents may be made by the Company, at its sole discretion, a) directly to
said persons, b) to the legal guardians of said persons, or c) to the parent
of said minor. The Company shall not be required to see to the application of
any such distributions so made to any of said persons and such payments shall
be a full discharge of the Company's liability under this Plan.
5. Lump Sum or Periodic Payments. Upon a Participant's termination of
employment with the Company, the Board of Directors may, in its discretion,
regardless of the Participant's reaching Retirement Date, allow the
Participant to receive such Participant's account balance in a lump sum or in
the form of periodic installments payable over any fixed or contingent period
not exceeding the life expectancy of the Participant and the Participant's
spouse, if any. The Board may, under these circumstances, require the
repayment of such distributions if the Participant violates the terms of
Article VI, section A.2.
D. Annual Contribution Limitation. The maximum annual contribution to a
Participant's account under this Agreement shall be limited at each attained
age to the amount which, when added to the Participant's current account
balance and to the lump sum value of the Participant's accrued pension from
the Fluke Corporation Pension Plan, so as not to exceed the following
percentage of the Participant's compensation.
Age Last Percent of Age Last Percent of
Birthday Compensation Birthday Compensation
35 107% 49 314%
36 115% 50 339%
37 125% 51 366%
38 135% 52 395%
39 145% 53 427%
40 157% 54 461%
41 170% 55 498%
42 183% 56 505%
43 198% 57 511%
44 214% 58 517%
45 231% 59 521%
46 249% 60 525%
47 269% 61 528%
48 291% 62 and older 531%
Compensation for purposes of this limitation shall be the average of a
Participant's highest three fiscal years total of base salary, senior
management variable compensation and semi-annual profit-sharing bonus
(including amounts deferred into the Company's Retirement Plus program, the
non-qualified deferred compensation plan, or any flexible benefit plan).
ARTICLE VII
Provision Against Anticipation
At no time shall any Participant, or Participant/Beneficiary, have the right
or power to alienate, anticipate, commute, pledge, encumber or assign any of
the benefits, proceeds or avails of the funds credited to such Participant
under this Agreement and no such benefits, proceeds or avails shall be subject
to seizure by any creditor of the Participant, or Participant/Beneficiary,
under any writ or proceedings at law or in equity.
ARTICLE VIII
Termination of Employment
Nothing herein provided shall abrogate or modify in any way the Company's
right to terminate the Company's employment of any Participant at any time,
with or without cause.
ARTICLE IX
Unfunded Status
A. Unsecured General Creditor. Participants and their Beneficiaries, heirs,
successors, and assigns shall have no secured legal or equitable rights,
interest or claims in any property or assets of the Company, nor shall they be
Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by the Company. Except as provided in Section B, 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 collateral 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 Company. The Company's obligation under
the Plan shall be that of an unfunded and unsecured promise to pay money in
the future.
B. 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 1 of ERISA.
ARTICLE X
Amendment and Termination of Agreement
A. Right to Amend and Terminate. The Board of Directors of the Company shall
have the right to terminate this Plan at any time or to modify, alter or amend
it in whole or in part, subject to the Company's obligations to pay all sums
then credited to Participants, Participant/Beneficiaries and Beneficiaries
under the terms of this Plan.
B. Termination of Plan. This Plan shall terminate upon written notice by the
Board of Directors of the Company, upon complete discontinuance of
contributions by the Company for a period of three (3) years, in the event of
the bankruptcy or receivership of the Company or upon the dissolution or
merger of the Company unless a successor to the business agrees to continue
the Plan by executing an appropriate supplemental agreement. In the event
that the Company is taken over by a successor who agrees to continue the Plan,
the employment of any employee who is continued in the employ of such
successor shall not be deemed to have been terminated or severed for any
purpose hereunder.
C. Payment on Termination. Upon termination of this Plan, the aggregate
account balances of all Participants then employed by the Company shall fully
vest. The vested interests of all Participants, Participants/Beneficiaries
and Beneficiaries of former Participants in the Supplemental Retirement Income
Fund shall be distributed to them by the Company or its successors or assigns
in a lump sum within one (1) month of the termination date.
In witness whereof, the parties hereto have caused this Agreement to be
executed this day of , 1996.
Fluke Corporation Participant
George M. Winn, President Signature
Douglas G. McKnight, Secretary Title
Appendix A
Plan Participants
Michael J. Adams
James L. Cavoretto
Linda S. Cheever
William E. Dunn
William R. Hoffman
Elizabeth J. Huebner
David E. Katri
Douglas G. McKnight
Craig T. J. Miller
Patrick J. O'Hara
William G. Parzybok, Jr.
Barry L. Rowan
John R. Smith
Richard W. Van Saun
Ronald R. Wambolt
George M. Winn
As amended December 11, 1996
FLUKE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
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 3
2.10 Discretionary Contributions 3
2.11 Earnings 3
2.12 Fluke Stock Account 3
2.13 Investment Index 3
2.14 Participant 3
2.15 Participation Agreement 3
2.16 Plan 3
2.17 Retirement 4
2.18 Subaccount 4
2.19 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 5
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 6
4.3 Timing of Credits; Withholding 6
4.4 Determination of Accounts and Subaccounts 6
4.5 Vesting of Accounts 7
4.6 Statement of Accounts 7
ARTICLE V_PLAN BENEFITS 7
5.1 Early Withdrawals 7
5.2 Accelerated Distribution 8
5.3 Termination of Employment 8
5.4 Form of Benefits 8
5.5 Pension Restoration Benefit 9
5.6 Withholding; Payroll Taxes 10
5.7 Valuation 10
5.8 Covered Employee 10
5.9 Payment to Guardian 10
ARTICLE VI_BENEFICIARY DESIGNATION 10
6.1 Beneficiary Designation 10
6.2 Amendments 11
6.3 Change in Marital Status 11
6.4 No Beneficiary Designation 11
ARTICLE VII_ADMINISTRATION 12
7.1 Committee; Duties 12
7.2 Agents 12
7.3 Binding Effect of Decisions 12
7.4 Indemnity of Committee 12
ARTICLE VIII_CLAIMS PROCEDURE 12
8.1 Claim 12
8.2 Denial of Claim 13
8.3 Review of Claim 13
8.4 Final Decision 13
ARTICLE IX_AMENDMENT AND TERMINATION OF PLAN 13
9.1 Amendment 13
9.2 Company's Right to Terminate 13
ARTICLE X_MISCELLANEOUS 14
10.1 Unfunded Plan 14
10.2 Unsecured General Creditor 14
10.3 Trust Fund 15
10.4 Nonassignability 15
10.5 Not a Contract of Employment 15
10.6 Governing Law 15
10.7 Validity 15
10.8 Notice 16
10.9 Successors 15
APPENDIX A 16
Investment Indices 17
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 re-
tirement or death for certain employees of the Company. It is intended
that the Plan will aid in attracting and retaining employees of excep-
tional 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 mean-
ings set forth in this Article unless a contrary or different meaning 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 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 Ex-
change Act of 1934, as amended (the "Exchange Act")), together with such
person's Affiliates and Associates as defined in Rule 12b-2 of the Ex-
change 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 em-
ployees, 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 outstanding se-
curities, except that there will not be a Change in Control as the re-
sult 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 twenty-five percent (25%) or
more of the securities of the Company then outstanding; provided, how-
ever, that if a person becomes the beneficial owner of twenty-five per-
cent (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 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 pursuant to a
tender or exchange offer (other than a tender or exchange offer made by
the Company) seeking to acquire securities representing twenty-five per-
cent (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 Ar-
ticle VI of the Company's Articles of Incorporation, cease for any rea-
son to constitute at least a majority of the Board of Directors; or
(d)Upon the date the Company is merged or consolidated with another cor-
poration and as a result of such merger or consolidation less than sev-
enty-five percent (75%) of the outstanding voting securities of the sur-
viving 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 subsidiary of the
Company.
2.5 Committee
"Committee" means the committee appointed by the Board to administer the
Plan pursuant to Article VII.
2.6 Company
"Company" means Fluke Corporation, a Washington corporation and any sub-
sidiary 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 Compen-
sation and shall not be eligible to be deferred.
2.8 Deferral Period
"Deferral Period" means the twelve (12) month period ending December 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 Com-
pany to the Plan. The amount of Discretionary Contributions to the Plan
for each Participant for any calendar year shall be such amount as de-
termined 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 deb-
ited 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 Fluke Stock Account
"Fluke Stock Account" means the Account established to measure the num-
ber of shares of Fluke stock to be distributed to a Participant, under
his/her deferral election.
2.13 Investment Index
"Investment Index" means each index selected by a Participant to be used
as an earnings index pursuant to Article IV. Each Investment Index 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 Corporate
Bond Yield Index or the Standard & Poor's 500 Index, or such other simi-
lar indices as the Committee may select from time to time and shown in
Appendix A attached.
2.14 Participant
"Participant" means any individual eligible under Section 3.1 who has
elected to defer Compensation under this Plan.
2.15 Participation Agreement
"Participation Agreement" means the agreement submitted by a Participant
to the Committee prior to the beginning of a Deferral Period, subject to
3.1(c), specifying the amount to be deferred for such Deferral Period.
2.16 Plan
"Plan" means this Executive Deferred Compensation Plan as amended from
time to time.
2.17 Retirement
"Retirement" means either early retirement or normal retirement as de-
fined by the Fluke Corporation Pension Plan.
2.18 Subaccount
"Subaccount" means the device used by the Company to measure and deter-
mine the amount of deferrals and Discretionary Contributions allocated
to each Subaccount Index selected by the Participant, and the Earnings
allocated thereon.
2.19 Termination
"Termination" means leaving employment with the Company prior to Retire-
ment.
ARTICLE III
PARTICIPATION AND DEFERRALS
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan shall be lim-
ited to those employees who are corporate officers or members of the
senior management team as determined by the Board from time to time.
(b)Participation. An eligible individual may elect to participate in
the Plan with respect to any Deferral Period by submitting a Participa-
tion 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 eligibility to participate. Such
Participation Agreement will be effective only with regard to Compensa-
tion earned following submission to the Committee.
(d)Change in Employment Status. If a Participant is no longer an offi-
cer or a member of the senior management team, the current elected de-
ferral shall be continued to the end of the Deferral 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 Com-
pany 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 percent (100%) for
annual variable compensation and profit-sharing bonuses.
(b) Minimum. The minimum deferral amount shall be a two thousand dollar
($2,000) annual deferral. There shall be no minimum annual variable com-
pensation and profit-sharing bonus deferral requirement if the Partici-
pant has concurrently elected a salary deferral 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 giving 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 ac-
tion.
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 de-
ferral amount shall remain in effect for the applicable Deferral Period.
The election shall be irrevocable except as provided in Sections 5.1(b),
relating to a financial hardship, and 5.4, relating to accelerated dis-
tribution.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNT
4.1 Account
The amounts deferred by a Participant under the Plan, any Discretionary
Contributions, and Earnings shall be credited to the Participant's Ac-
count. Separate Subaccounts shall be maintained to reflect Investment
Index selections. The Account and Subaccounts shall be bookkeeping de-
vices utilized for the sole purpose of determining the benefits payable
under the Plan and shall not constitute a separate fund of assets. For
purposes of the Fluke Stock Account, the amounts deferred by a Partici-
pant under the Plan shall be deemed to purchase shares of Fluke stock at
the market price on such date as the Committee or its designee shall de-
termine, but in no event later than 10 business days from the date of
deferral.
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 defer-
rals 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 Invest-
ment Indices selected.
(b) At the time the Participant selects the Investment Index(es) for new
deferrals and Discretionary Contributions, the Participant may also
elect a different allocation among Investment Funds for current Account
balances.
(c) Notwithstanding (b) above, a Participant may not elect to allocate
from the Fluke Stock Account to another Investment Index. However, a
Participant may elect to allocate from another Investment Index to the
Fluke Stock Account.
4.3 Timing of Credits; Withholding
A Participant's deferred Compensation shall be credited to the Account
and Subaccounts at the time it would have been payable to the Partici-
pant. Any withholding of taxes or other amounts with respect to deferred
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 Determination
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 increased by
any deferred Compensation credited since such Determination Date.
(b) Discretionary Contributions. The Account and Subaccount(s) shall be
increased by Discretionary Contributions, if any, credited since such
Determination Date.
(c) Distributions. The Account and Subaccount(s) shall be reduced by
any benefits distributed to the Participant since such Determination
Date.
(d) Earnings. The Account and Subaccount(s) shall be increased or de-
creased by the Earnings credited on the average daily balance in the Ac-
count and each Subaccount since such Determination Date.
With respect to the Fluke Stock Account, the Account shall be valued
based on the number of shares of Fluke stock deemed to have been pur-
chased pursuant to Section 4.1. If dividends are paid on Fluke stock,
then dividends shall be deemed to purchase additional shares of Fluke
stock at the market price of Fluke stock on such date as the Committee
or its designee shall determine, but in no event later than 10 business
days from the date such dividends were paid.
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 earn-
ings thereon shall vest as set forth by the Board when such contribu-
tions 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 quarterly
basis and at such other times as may be determined by the Committee.
ARTICLE V
PLAN BENEFITS
5.1 Early Withdrawals
A Participant's Account may be distributed to the Participant before
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 de-
ferred 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. Earnings and Discretionary Contribu-
tions 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 deferrals or the Account balance.
(b) Financial Hardship. Upon a finding that a Participant or Benefici-
ary has suffered a financial hardship, the Committee may, at a Partici-
pant's or Beneficiary's request but in its sole discretion:
(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 Beneficiary and
that would result in severe financial hardship to the individual if a
suspension or distribution were not permitted. In no event shall declin-
ing earnings rates be considered a financial hardship. Any distribution
approved by the Committee shall be limited to the amount necessary to
meet the emergency. Distributions shall be made from Participant defer-
rals only.
If a Participant receives a hardship distribution, no additional defer-
rals shall be made by the Participant for the remainder of the calendar
year in which withdrawal is made and for the immediately succeeding cal-
endar year.
(c) Form of Payment. The amount payable under this section shall be
paid in a lump sum within sixty (60) days following receipt of the re-
quest and shall be charged to the Participant's Account as a distribu-
tion.
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 forfeited and
ninety percent (90%) of the Account shall be paid to the Participant.
(b) Suspension of Participation. A Participant who receives a distribu-
tion 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 request 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 Participant
(or the Participant's Beneficiary, in case of death) benefits equal to
the balance in the vested Account on the valuation date pursuant to Sec-
tion 5.7.
5.4 Form of Benefits
Except as provided below, benefits payable as a result of death, Termi-
nation, or Retirement shall be paid in the form elected by the Partici-
pant prior to the beginning of each Deferral Period or as elected pursu-
ant to Subsection (c) below. The Participant may elect a different form
of benefit payment for payments made due to death, Termination or Re-
tirement.
(a) Alternative Forms. Alternative forms of benefit payment shall be:
(i) A lump-sum amount which is equal to the applicable Account balance.
(ii) Equal monthly installments of the Account amortized over a period
of up to one hundred twenty (120) months. Earnings on the unpaid balance
shall continue to be credited to Subaccounts at the appropriate Invest-
ment Fund rate.
(b) Small Amounts. Notwithstanding the form elected, if the Partici-
pant'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 Partici-
pant.
(e) Fluke Stock Account Payment. All payments from the Fluke Stock Ac-
count shall be made in Fluke stock.
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 Partici-
pant whose pension plan benefit is not restored under 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 immediately 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 deferral elections in any calendar year
under this Plan.
(iii) The actuarial equivalent lump-sum present values shall be calcu-
lated in the same manner and using the same factors as are used to cal-
culate lump-sum distributions under the pension plan.
(b) Payment of Restoration Benefit. The amount payable under this sec-
tion shall be paid in a lump sum.
5.6 Withholding; Payroll Taxes
The Company shall withhold from payments hereunder any taxes required
to be withheld from such payments under federal, state or local law. A
Beneficiary, however, may elect not to have withholding of federal in-
come 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 valua-
tion date. For Accounts tracking the Standard and Poor's 500 Index or
such similar index the valuation date shall be the date of termination.
The amount of a lump-sum payment shall be based on the value of the Par-
ticipant's vested Account on the valuation date. Except as provided in
Section 5.8, payments shall be made or commence within sixty (60) days
after the valuation date.
5.8 Covered Employee
Notwithstanding Section 5.6, if any portion of a payment in a calendar
year would be disallowed as a deduction to the Company because the Par-
ticipant is an employee for that calendar year subject to Section 162(m)
(the 1 million dollar limitation on compensation deduction) of the In-
ternal Revenue Code, that portion shall instead be paid in the immedi-
ately following calendar year, by January 30. This section does not ap-
ply 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 incompe-
tent 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 Partici-
pant's Account. Each Beneficiary designation shall be in a written form
prescribed by the Committee and will be effective only when filed with
the Committee during the Participant's life-time. Designation by a mar-
ried Participant of a Beneficiary other than the Participant's spouse
shall not be effective unless the spouse executes a written consent 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 Beneficiary may
be changed by a Participant without the consent of such Beneficiary 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 Sec-
tion 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 designation 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 pro-
vided above, or if the Beneficiary designated by a deceased Participant
dies before the Participant or before complete distribution of the Par-
ticipant's benefits, the Participant's Beneficiary shall be the person
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 par-
ent 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 include
the Vice President General Counsel, Vice President Treasurer, and the
Vice President Human Resources. The Committee shall have the authority
to make, amend, interpret and enforce all appropriate rules and regula-
tions 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 con-
trol 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 adminis-
trative 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 question
arising out of or in connection with the administration, interpretation
and application of the Plan and the rules and regulations promulgated
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 Com-
mittee 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 provi-
sions 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 received a
response within thirty (30) days may request review by notice given in
writing to the Committee. The claim or request shall be reviewed by the
Committee which may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine perti-
nent 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 cir-
cumstances, 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 receiv-
ing installment payments, subject to the following:
(a) Preservation of Account Balance. No amendment shall reduce 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 con-
tinue to operate and be effective with regard to Participation Agree-
ments entered into prior to the effective date of such partial termina-
tion.
(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 Participation 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 in-
stallments 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, not-
withstanding the above schedule.
ARTICLE X
MISCELLANEOUS
10.1 Unfunded Plan
This Plan is an unfunded plan maintained primarily to provide deferred
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 Partici-
pants if it is determined by the United States Department of Labor, a
court of competent jurisdiction, or an opinion of counsel that the Plan
constitutes an employee pension benefit plan within the meaning of Sec-
tion 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 assigns
shall have no secured legal or equitable rights, interest or claims in
any property or assets of the Company, nor shall they be Beneficiaries
of, or have any rights, claims or interests in any life insurance poli-
cies, annuity contracts or the proceeds therefrom owned or which may be
acquired by the Company. Except as provided in Section 10.3, such poli-
cies, 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 collateral 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 Company. The Com-
pany's obligation under the Plan shall be that of an unfunded and unse-
cured 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 provid-
ing 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 ex-
tent 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 Com-
pany. 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 com-
mute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt
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 actual
payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant
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 Partici-
pant the right to be retained in the service of the Company or to inter-
fere with the right of the Company to discipline or discharge a Partici-
pant at any time.
10.6 Governing Law
The provisions of this Plan shall be construed and interpreted accord-
ing to the laws of the State of Washington, except as preempted by fed-
eral law.
10.7 Validity
In case any provision of this Plan shall be held illegal or invalid 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 sufficient if
in writing and hand delivered or sent by registered or certified mail.
Such notice shall be deemed as given as of the date of delivery 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 Commit-
tee shall be directed to the Company's address. Mailed notice to a Par-
ticipant or Beneficiary shall be directed to the individual'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.
APPENDIX A
Investment Indices
Effective January 1, 1997, 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.
Fluke Stock Account
The amounts deferred by a Participant shall be deemed to purchase shares
of Fluke stock at the market price on such date as the Committee or its
designee shall determine, but in no event later than 10 business days
from the date of deferral. If dividends are paid on Fluke stock, then
dividends shall be deemed to purchase additional shares of Fluke stock
at the market price of Fluke stock on such date as the Committee or its
designee shall determine, but in no event later than 10 business days
from the date such dividends were paid.
The Committee reserves the right to change these indices from time to
time.
<TABLE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION>
QUARTER ENDED YEAR ENDED
4/25/97 4/26/96 4/25/97 4/26/96
<S> <C> <C> <C> <C>
Shares issued and
outstanding
at beginning of period 8,726,835 8,628,953 8,652,955 8,475,725
Weighted average shares for
DeskNet acquisition 265,148 --- 66,287 ---
Net issuance of shares under
employee stock plans,
weighted average 8,793 16,525 48,641 122,911
Weighted average common
shares outstanding 9,000,776 8,645,478 8,767,883 8,598,636
Assumed exercise of stock
options, weighted average
of incremental shares 412,787 246,415 309,875 263,705
Average shares and
share equivalents
outstanding 9,413,563 8,891,893 9,077,758 8,862,341
Earnings per share $ 0.02 $ 0.79 $ 2.16 $ 2.67
Net Income $ 221,000 $7,013,000 $19,606,000 $23,703,000
</TABLE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
All years referenced below are for the Company's fiscal years, which end
on the last Friday of April.
1997 highlights
In 1997, several actions were taken to position the Company for future
growth. The Company completed two acquisitions of companies in the
local area network (LAN) and wide area network businesses. In June
1996, the Company acquired Forte Networks, Inc. (Forte), a privately-
held Colorado Springs, Colorado based corporation. The Company
previously had an alliance with Forte from 1992 up to the time of the
acquisition in which Forte provided, exclusively to Fluke, equipment for
testing LANs. Several of these have been recognized by leading trade
magazines for innovation and excellence including the 68X series of
LANMeters.
In February 1997, the Company completed the acquisition of DeskNet
Systems, Inc. (DeskNet), a privately-held Armonk, New York based
corporation. DeskNet is a leading developer of handheld, Asynchronous
Transfer Mode (ATM) network analysis tools for the installation,
maintenance and deployment of ATM networks. Both acquisitions were
recorded under the pooling-of-interests method of accounting. Previous
year financial statements have been restated to reflect the acquisition
of Forte but were not restated for the acquisition of DeskNet because
the impact on the Financial Statements was immaterial.
The Company also signed an alliance agreement with Hewlett-Packard
Company (HP) in April 1997. Under the terms of this agreement the
Company will utilize a limited number of its distributors to sell
certain HP products in the U.S. HP will sell selected Fluke products in
the U.S. through its HP Direct program. The alliance is expected to
provide incremental revenue growth for both companies. The alliance
will be expanded to certain international markets over the next few
years.
The Company reviewed the structure of its European operations. As a
result of that review it was decided to restructure the European
operations to better support the Company's mission-centric products.
Mission-centric products are those products that fit the mission of the
Company as defined several years ago. The Company will align the
European sales organization to better support the indirect sales
channels and centralize the finance and product repair functions. The
centralization will streamline the operations in the country sales
offices allowing them to concentrate on the sales activities. It should
also lower the operating costs of the European operations. The Company
recorded a fourth quarter restructuring charge of $12 million, primarily
for severance and severance-related costs and some facility closure
costs related to the restructuring.
financial results 1997 vs 1996
1997 ended with revenues of $430 million, 4 percent higher than revenues
of $414 million in 1996. This growth rate masks the success of the
mission-centric products that grew 15 percent in 1997 and comprise 77
percent of revenues. Revenues from nonmission-centric products declined
25 percent in 1997. Products introduced in the last three years
represented 41 percent of 1997 revenues compared to 22 percent in 1994
for products introduced in 1994, 1993 and 1992. New mission-centric
products have significantly contributed to this success, as the Company
introduced 10-13 products in each of the last three years. Some of the
products introduced in 1997 were the ScopeMeter 123, OneTouch Network
Assistant, 5720 Multifunction Calibrator and the 74X Process
Calibrators.
The Company was particularly successful in the sales of its network
products that are used to install and maintain LANs. Revenues for these
products increased 45 percent in 1997 compared to 1996. The acquisition
of Forte and DeskNet in 1997, as described above, are intended to
strengthen the Company's position in the computer network testing
market. The Company also had good growth in its process calibration
products and its general purpose multimeter products.
Revenues from customers in the United States increased 17 percent after
relatively little revenue growth over the previous two years. Nearly
all products experienced revenue increases in 1997. Sales through the
Company's network of distributors were up 20 percent over 1996 levels,
led by products sold through the electrical distribution channel. The
Company created this growth by introducing a number of new products
specifically for the electrical industry and by focusing marketing
efforts at this market. The Company's direct sales, handled by
manufacturer's representatives in the United States, increased 11
percent in 1997 over 1996. Much of the growth came from sales of LAN
products, which more than offset the continuing decline in the
nonmission-centric products.
International revenues declined 4 percent in 1997 from 1996. Europe
declined 8 percent while other international markets increased 4 percent
in aggregate. Most countries in Europe experienced lower revenues in
1997 compared to 1996 with the United Kingdom, Italy and Spain being the
exceptions. About half the revenue decline in Europe was a result of
weakened local currencies relative to the U.S. dollar. Struggling
economies in several countries, most significantly Germany and France,
were responsible for the balance of the decline. In spite of this
decline in revenues, network products grew 21 percent. As discussed
above, the Company is restructuring its European operations to focus on
markets for mission-centric products and to better take advantage of
growth opportunities in Europe.
The 4 percent growth in international markets outside of Europe
consisted of some markets that experience strong revenue growth along
with some markets that struggled. Latin American countries had revenue
growth of 38 percent, led by Mexico, where revenues increased 78 percent
over 1996 and Brazil, where revenues were up 32 percent. In the Pacific
Rim, Hong Kong was up 38 percent and Taiwan 37 percent. After
significant growth in previous years, South Korea revenues were down 14
percent due to a slowdown in economic conditions. Revenues in Japan
increased by 8 percent in local currency, but a 15 percent weakening of
the yen relative to the U.S. dollar, resulted in a 7 percent decrease in
U.S. dollar revenues.
Operating expenses, excluding restructuring, increased 3 percent in 1997
over 1996. Marketing and administrative expenses increased 3 percent
while research and development expenses increased 1 percent. Included
in marketing and administrative expenses were costs related to numerous
efforts, including successful litigation, to protect the Company's brand
image. The direct result of these efforts is that several competitors
have stopped copying the distinctive appearance of Fluke products.
Operating income, excluding restructuring, increased 17 percent in 1997
over 1996. This increase was generated through continuing the
improvement in gross margin while maintaining control over the growth in
operating expenses.
The effective annual tax rate increased from 34.1 percent in 1996 to
38.0 percent in 1997. Losses in selected European countries and the
effect of restructuring pushed the Company's 1997 tax rate above the 35
percent U.S. statutory rate. The tax rate in 1996 has been restated
below the U.S. statutory rate because Forte, as a Subchapter S
corporation, had no federal tax expense. Forte stockholders were paid
dividends in prior years to cover their personal share of Forte's
corporate federal income taxes.
The 1997 earnings per share of $2.16 included a pretax restructuring
charge of $12 million, or $0.94 per share. Earnings per share, before
the restructuring charge, was $3.10, up 16 percent from the previous
year.
financial results 1996 vs 1995
The financial results in 1996 showed improvement over 1995. Revenues of
$414 million were up 8 percent over revenues of $382 million in 1995.
International revenues were up 16 percent in 1996, while revenues in the
United States were down 2 percent.
The increase in international revenues in 1996 was led by countries
outside Europe such as The People's Republic of China, South Korea,
Singapore, Brazil, India, Taiwan and Thailand. The significant revenue
growth in these countries led to a 26 percent growth in revenues in
countries outside Europe and the United States. Revenues in Europe
increased 12 percent in 1996 over 1995. Currency positively impacted
revenue growth by 8 percent in Europe.
Gross margin as a percentage of revenues improved from 52 percent in
1995 to 54 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 growth of international
revenues which generate higher margins than revenues in the United
States. Gross margin increased 11 percent on the 8 percent increase in
revenues.
Operating expenses increased 7 percent in 1996 over 1995. Marketing and
administrative expenses increased 8 percent and research and development
expenses increased 4 percent in 1996 over 1995. 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
by the market segments to which the Company sells instead of along
product lines. This 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. This 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 38 percent in 1996 over 1995. This increase
was generated primarily through the improvement in gross margin due to
the introduction of successful higher margin products.
The effective annual tax rate decreased from 35.2 percent in 1995 to
34.1 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 41 percent and earnings per share increased 36
percent in 1996 over 1995. This increase resulted from the 11 percent
increase in gross margin while expenses only increased 7 percent.
liquidity and capital resources
The cash position of the Company continues to remain strong as cash
generated from operating activities provided $30 million of cash flow in
1997 compared to $34 million in 1996. The Company ended the year with
$41 million in cash and cash equivalents and almost zero debt. The
Company maintains committed and uncommitted lines of credit totaling
$137 million. The two acquisitions completed during the year, as
discussed above, were tax-free reorganizations which did not require the
use of cash or debt. The Company expects that cash generated from
operations will be sufficient to fund working capital and capital
expenditure requirements in the foreseeable future. In addition, the
Company is well positioned to take advantage of future acquisitions or
aggressive growth goals with its current cash position and available
credit facilities.
The Company had capital expenditures of $17 million in 1997, $13 million
in 1996 and $14 million in 1995. Capital expenditures consist primarily
of manufacturing and research and development equipment. The increase
in 1997 resulted from increased investment in manufacturing equipment.
The Company has approved a project to replace its existing information
systems over the next several years. The new systems will significantly
update the capabilities of the business and manufacturing systems and
also eliminate most issues related to the upcoming year 2000.
The current ratio was 3.1 to 1 at April 25, 1997, and 3.5 to 1 at April
26, 1996. The decrease in the current ratio was caused primarily by the
liability related to restructuring. Excluding restructuring, the ratio
increased to 3.8 to 1, primarily from higher cash and accounts
receivable balances.
The Company has a program to hedge some of its foreign exchange exposure
using forward exchange contracts. The contracts are not 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>
consolidated balance sheets
In thousands except shares and per share amounts
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
assets
Current Assets
Cash and cash equivalents $ 40,916 $ 36,631
Accounts receivable
(less allowances: 1997-$891; 1996-$1,104) 80,689 69,070
Inventories 54,522 56,602
Deferred income taxes 16,968 15,062
Prepaid expenses 16,185 15,570
Total Current Assets 209,280 192,935
Property, Plant and Equipment
Land 5,236 5,801
Buildings 47,414 46,152
Machinery and equipment 115,022 111,274
Construction in progress 5,634 1,804
173,306 165,031
Less accumulated depreciation (113,660) (106,783)
Net Property, Plant and Equipment 59,646 58,248
Goodwill and Intangible Assets 11,876 16,201
Other Assets 11,558 8,288
Total Assets $ 292,360 $ 275,672
</TABLE>
<TABLE>
In thousands except shares and per share amounts
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
liabilities and stockholders' equity
Current Liabilities
Accounts payable $ 16,504 $ 15,186
Accrued liabilities 35,350 37,776
Accrued liabilities related to restructuring 11,894 -
Income taxes payable 1,584 2,178
Current maturities of long-term obligations
and short-term debt 1,145 180
Total Current Liabilities 66,477 55,320
Long-Term Obligations 563 7,098
Deferred Income Taxes 10,178 10,585
Other Liabilities 12,203 10,592
Total Liabilities 89,421 83,595
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, 9,046,480 in 1997
and 8,652,955 in 1996) 2,262 2,163
Additional paid-in capital 69,490 65,170
Retained earnings 135,998 123,507
Cumulative translation adjustment (4,811) 1,237
Total Stockholders' Equity 202,939 192,077
Total Liabilities and Stockholders' Equity $ 292,360 $ 275,672
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
consolidated statements of income
In thousands except shares and per share amounts
for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Revenues $ 430,166 $ 413,525 $ 382,066
Cost of Goods Sold 196,791 191,360 181,805
Gross Margin 233,375 222,165 200,261
Operating Expenses
Marketing and administrative 149,772 145,121 134,937
Research and development 41,245 40,953 39,247
Restructuring 12,136 _ _
Total Operating Expenses 203,153 186,074 174,184
Operating Income 30,222 36,091 26,077
Nonoperating Expenses (Income)
Interest expense 279 1,421 1,477
Other (1,679) (1,302) (1,320)
Total Nonoperating
Expenses (Income) (1,400) 119 157
Income Before Income Taxes 31,622 35,972 25,920
Provision for Income Taxes 12,016 12,269 9,133
Net Income $ 19,606 $ 23,703 $ 16,787
Earnings Per Share $ 2.16 $ 2.67 $ 1.96
Average Shares and Share Equivalents
Outstanding 9,077,758 8,862,341 8,568,462
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
consolidated statements of cash flows
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
operating activities
Net income $ 19,606 $ 23,703 $ 16,787
Items not affecting cash:
Depreciation and amortization 14,863 15,408 16,006
Deferred income tax (2,729) 777 (982)
Provision for restructuring 12,136 _ _
Other items not affecting cash 281 241 (63)
Net change in:
Accounts receivable (14,336) 5,992 (1,016)
Inventories (352) (6,239) 3,936
Prepaid expenses (945) (6,730) 4,658
Accounts payable 2,212 (579) (4,676)
Accrued liabilities (68) (234) (478)
Accrued liabilities related to
restructuring (242) _ (497)
Income taxes payable 1,163 1,137 4,505
Other assets and liabilities (1,349) 488 (1,921)
Net Cash Provided By
Operating Activities 30,240 33,964 36,259
investing activities
Additions to property,
plant and equipment (16,539) (12,532) (14,340)
Proceeds from disposal of property,
plant and equipment 1,431 2,446 1,774
Net Cash Used By
Investing Activities (15,108) (10,086) (12,566)
financing activities
Proceeds from long-term obligations 705 _ 24,113
Proceeds from short-term obligations 785 _ _
Payments on long-term obligations (6,885) (13,351) (20,067)
Repurchase of common stock (67) (171) (4,704)
Cash dividends paid (5,974) (6,460) (4,994)
Proceeds from stock options 1,274 3,664 2,925
Net Cash Used By
Financing Activities (10,162) (16,318) (2,727)
Effect of Foreign Currency
Exchange Rates on Cash
and Cash Equivalents (685) (557) 1,218
Net Increase In
Cash and Cash Equivalents 4,285 7,003 22,184
Cash and Cash Equivalents at
Beginning of Year 36,631 29,628 7,444
Cash and Cash Equivalents at
End of Year $ 40,916 $ 36,631 $ 29,628
Supplemental Cash Flow Information:
Income taxes paid $ 13,080 $ 12,309 $ 5,809
Interest paid $ 283 $ 1,420 $ 1,435
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
consolidated statements of stockholders' equity
In thousands except shares
<CAPTION>
Number of Par Value of Additional
Common Shares Common Paid-In
Outstanding Stock Capital
<S> <C> <C> <C>
Balance, April 29, 1994 8,475,741 $ 2,346 $ 81,056
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 (153,982)
Cash dividends declared
Income tax benefit from stock plans 35
Exercise of stock options 154,900 27 1,712
Net translation adjustment
Cancellation of repurchased shares (254) (22,825)
Balance, April 28, 1995 8,475,725 $ 2,119 $ 59,981
Net income
Net grant of shares under
stock award plans 1,915 75
Vesting of 4,786 shares under
stock award plans
Repurchase of common shares (4,344)
Cash dividends declared
Income tax benefit from stock plans 1,787
Exercise of stock options 179,659 45 3,619
Net translation adjustment
Cancellation of repurchased shares (1) (170)
Balance, April 26, 1996 8,652,955 $ 2,163 $ 65,292
DeskNet acquisition 305,424 77 858
Net income
Net grant of shares under
stock award plans 38,104 9 1,495
Vesting of 3,985 shares under
stock award plans
Repurchase of common shares (1,603)
Cash dividends declared
Adjustments related to
Forte acquisition 1,050
Income tax benefit from stock plans 679
Exercise of stock options 51,600 13 1,261
Compensation charges
related to stock options 460
Net translation adjustment
Cancellation of repurchased shares (67)
Balance, April 25, 1997 9,046,480 $ 2,262 $ 71,028
consolidated statements of stockholders' equity
In thousands except shares
<CAPTION>
Repurchased Cumulative Total
Retained and Nonvested Translation Stockholder's
Earnings Shares Adjustment Equity
<S> <C> <C> <C> <C>
Balance, April 29, 1994 $ 94,653 $ (19,904) $ (2,103) $ 156,048
Net income 16,787 16,787
Net forfeiture of shares
under stock award plans (3) -
Vesting of 9,524 shares
under stock award plans 201 201
Repurchase of common shares (4,704) (4,704)
Cash dividends declared (5,072) (5,072)
Income tax benefit from
stock plans 35
Exercise of stock options 1,186 2,925
Net translation adjustment 8,458 8,458
Cancellation of
repurchased shares 23,079 -
Balance, April 28, 1995 $ 106,368 $ (145) $ 6,355 $ 174,678
Net income 23,703 23,703
Net grant of shares
under stock award plans (75) -
Vesting of 4,786 shares
under stock award plans 98 98
Repurchase of common shares (171) (171)
Cash dividends declared (6,564) (6,564)
Income tax benefit from
stock plans 1,787
Exercise of stock options 3,664
Net translation adjustment (5,118) (5,118)
Cancellation of
repurchased shares 171 -
Balance, April 26, 1996 $ 123,507 $ (122) $ 1,237 $ 192,077
DeskNet acquisition (904) 31
Net income 19,606 19,606
Net grant of shares
under stock award plans (1,504) -
Vesting of 3,985 shares
under stock award plans 88 88
Repurchase of common shares (67) (67)
Cash dividends declared (6,211) (6,211)
Adjustments related to
Forte acquisition 1,050
Income tax benefit from
stock plans 679
Exercise of stock options 1,274
Compensation charges
related to stock options 460
Net translation adjustment (6,048) (6,048)
Cancellation of
repurchased shares 67 -
Balance, April 25, 1997 $ 135,998 $(1,538) $ (4,811) $ 202,939
</TABLE>
The accompanying notes are an integral part of the financial statements.
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 manufacture and sale of
electronic test tools. This single line of business is primarily made
up of two product categories: handheld service tools and bench test
instruments, with handheld service tools representing approximately 64
percent of revenues. The Company currently markets its products in more
than 100 countries through both indirect and direct sales channels, with
indirect generally used for handheld service tools and direct generally
used for bench 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 currency financial
statements to 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 which are considered available-for-sale. In general,
these instruments, primarily consisting of state and municipal bonds,
are issued with long-term maturities but have interest rate reset dates
ranging from once per week to once every three months. On the interest
rate reset date the Company can sell the investment at par or continue
to hold the investment at the prevailing market interest rate for
another period. At April 25, 1997 and April 26, 1996, short-term
investments totaled $37 million and $27 million, respectively. The
carrying amounts of these investments approximate their fair value due
to the frequency of the interest rate reset dates and the readily
available market for these types of investments. As such, no unrealized
gains or losses were recorded.
concentration of credit risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of investments and trade
accounts receivable. The Company's cash and cash equivalents consist of
high quality financial instruments. The Company sells its products to a
large and diversified customer base in many different industries and
geographic areas. The Company has adopted credit policies consistent
with the industries and countries in which it sells. The Company
performs continuing credit evaluations of its customers' financial
condition and although the Company does not generally require
collateral, letters of credit may be required from some customers. Bad
debt losses to date have been insignificant.
financial instruments
The Company is subject to transaction exposures that arise from foreign
exchange movements between the date 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 25, 1997,
the Company had foreign exchange contracts for various foreign
currencies totaling $3.4 million.
advertising costs
The Company expenses advertising and promotion costs in the year
incurred. These expenses were $22 million in 1997, $20 million in 1996,
and $17 million in 1995.
inventories
Inventories are valued at the lower of cost or market with cost being
the 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. In February
1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share" was issued by the Financial Accounting Standards
Board. The Company is required to adopt the provisions of SFAS No. 128
in the third quarter of the fiscal year ended April 24, 1998. The
Company does not expect it to have a significant impact on earnings per
share.
goodwill and intangibles
Excess cost over the fair value of net assets acquired (goodwill) is
generally amortized on the straight-line basis over twenty years.
Intangible assets are generally amortized over five 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 Company has elected to apply the disclosure only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation." Accordingly, the
Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation expense for
stock options is measured as the excess, if any, of the fair value of
the Company's common stock at the measurement date over the stock option
price. See note 10 for disclosure.
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.
reclassification
Certain prior year numbers have been reclassified to conform with
current year presentation.
2. Acquisitions
On June 26, 1996, Forte Networks, Inc. (Forte) was acquired and merged
into the Company. The Company issued 577,190 shares of Fluke
Corporation common stock in exchange for all outstanding Forte shares.
The transaction was a tax-free reorganization and was accounted for as a
pooling-of-interests. Accordingly, the financial statements as presented
have been restated to reflect the combined companies. Revenues have not
changed because Fluke was Forte's only customer. The Company's net
income reported in 1996 and 1995 have been restated, resulting in an
increase of $2.4 million and $1.9 million, respectively, to reflect
Forte's profits net of eliminations for transactions between the
companies. Forte was primarily engaged in the design of instruments
used to test computer networks.
On February 6, 1997, the Company completed the acquisition of DeskNet
Systems, Inc. (DeskNet). Fluke issued 305,424 shares of Fluke
Corporation common stock in exchange for all outstanding DeskNet shares.
The transaction was a tax-free reorganization and was accounted for as a
pooling-of-interests. This combination did not have a material effect on
the financial statements of prior periods, which therefore, have not
been restated. DeskNet was primarily engaged in the design and
manufacture of wide area Asynchronous Transfer Mode (ATM) network
analysis tools.
3. Related Party
On May 26, 1993, effective May 1, 1993, the Company acquired the test
and measurement business of Philips Electronics N.V. of The Netherlands
(Philips). The purchase price was approximately $41.8 million in cash
and stock.
As part of this acquisition, the Company has service agreements and
facility leases with Philips related to the Company's European
operations. The Company paid Philips $4 million in 1997, $9 million in
1996 and $11 million in 1995 for such services and facility leases. In
addition, the Company purchased $9 million in 1997, $19 million in 1996
and $20 million in 1995 of component parts and finished goods from
Philips.
4. Provisions for Business Restructuring
During the fourth quarter of 1997, the Company recorded a pretax charge
of $12 million, $0.94 per share, related to the restructuring of some of
the Company's European operations. The Company will close its product
development operation in Hamburg, Germany, and transfer all business
responsibilities from Hamburg to Almelo, The Netherlands. The Company
will continue to sell and support the current products, which include TV
pattern generators. The Company intends to centralize European finance
functions as well as European product repair operations. In addition,
changes are being made in the sales organizations in Europe. The
restructuring charge consists primarily of severance related costs of
$11 million, affecting approximately 120 employees. The restructuring
activities are expected to be completed in 1998. Additional charges not
included in this accrual may be recorded as incurred during fiscal 1998.
<TABLE>
5. Inventories
In thousands
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Finished goods $ 17,789 $ 18,147
Work-in-process 11,160 9,464
Purchased parts and materials 25,573 28,991
Total Inventories $ 54,522 $ 56,602
</TABLE>
<TABLE>
6.Accrued Liabilities
In thousands
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Compensation payable $ 12,133 $ 11,098
Accrued expenses 9,799 13,452
Unearned service revenue 1,585 2,355
Other taxes payable 5,255 5,436
Profit-sharing bonus payable 2,354 1,853
Dividends payable 1,448 1,211
Other items 2,776 2,371
Total Accrued Liabilities $ 35,350 $ 37,776
</TABLE>
7. Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the
fair market value of the net assets acquired. Goodwill is being
amortized on the straight-line basis over twenty years. The
Company also owns intangible assets, which are being amortized
over five years. Amortization expense is recorded in marketing
and administrative expense. Cumulative amortization was $10
million at April 25, 1997 and $8 million at April 26, 1996.
A reconciliation of goodwill and intangible assets, net of
accumulated amortization, is provided below:
<TABLE>
in thousands
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Balance at beginning of year $ 16,201 $ 22,543
Amortization expense (2,338) (2,652)
Adjustment related to changes to
deferred tax asset valuation allowance<F1> (866) (2,626)
Translation adjustment (1,121) (1,064)
Balance at end of year $ 11,876 $ 16,201
<FN>
<F1> This adjustment is explained in Note 8, Income Taxes.
</FN>
</TABLE>
8. Income Taxes
For financial reporting purposes, income before income taxes is
as follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
U.S. $ 27,452 $ 22,428 $ 14,903
Foreign 4,170 13,544 11,017
Income before income taxes $ 31,622 $ 35,972 $ 25,920
</TABLE>
The provision for income taxes is as follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Current taxes on income:
U.S. $ 11,648 $ 5,883 $ 5,239
Foreign 2,681 5,113 5,687
14,329 10,996 10,926
Deferred income taxes (2,313) 1,273 (1,793)
Provision for income taxes $ 12,016 $ 12,269 $ 9,133
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
In thousands
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Deferred Tax Assets:
Accrued employee benefit expenses $ 3,760 $ 3,200
Accrued restructuring costs 1,609 -
Inventory adjustments 5,659 5,265
Net operating loss carryforwards 19,831 22,591
Product warranty accruals 687 681
Other items, net 618 658
Total Deferred Tax Assets 32,164 32,395
Valuation reserve (15,196) (17,333)
Net Deferred Tax Assets $ 16,968 $ 15,062
Deferred Tax Liabilities:
Fixed asset basis differences $ 5,303 $ 5,349
Pension 3,746 3,562
Intangible assets 495 1,108
Other items, net 634 566
Total Deferred Tax Liabilities $ 10,178 $ 10,585
</TABLE>
The deferred tax asset valuation reserve is primarily related
to deferred tax assets of foreign operations, including net
operating loss (NOL) carryforwards acquired in connection with
the 1993 acquisition of the Philips test and measurement
business. The acquired 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 reserve of the
acquired NOLs is recorded as a reduction of goodwill.
Reductions in goodwill for NOL benefit were $866,000 in 1997
and $2,626,000 in 1996.
A reconciliation from the U.S. statutory rate to the effective
tax rate is as follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S.
statutory rate $11,068 35.0% $12,590 35.0% $ 9,072 35.0%
Foreign tax greater
than U.S.
statutory rate 1,283 4.1 503 1.4 847 3.3
Utilization
of foreign
tax credits (800) (2.5) (542) (1.5) (35) (0.1)
Foreign Sales
Corporation
tax benefit (560) (1.8) (554) (1.5) (436) (1.7)
State taxes,
net of federal
benefit 446 1.4 326 0.9 211 0.8
Nondeductible
goodwill 202 0.6 264 0.7 302 1.1
Subchapter S
income tax effect (210) (0.7) (826) (2.3) (660) (2.5)
Other items, net 587 1.9 508 1.4 (168) (0.7)
$12,016 38.0% $12,269 34.1% $ 9,133 35.2%
</TABLE>
9. Employee Benefit Plans
The expense related to employee benefit plans is as follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Pension Plan, U.S. $ 2,035 $ 1,444 $ 1,170
Pension Plans, Foreign 1,170 1,111 1,281
Profit-sharing Retirement Plan 1,248 745 639
Profit-sharing Bonus Plan 4,687 3,695 2,064
Other Benefit Plans 956 618 760
Total Employee Benefit Plans $ 10,096 $ 7,613 $ 5,914
</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 for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Service cost $ 2,218 $ 1,899 $ 1,990
Interest cost 3,740 3,260 2,955
Return on plan assets (5,979) (6,682) (3,873)
Net amortization and deferral 2,056 2,967 98
Net periodic pension cost $ 2,035 $ 1,444 $ 1,170
</TABLE>
The funding status of the U.S. pension plan is as follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Vested benefit obligation $ 40,715 $ 34,786
Accumulated benefit obligation 41,537 35,711
Projected benefit obligation 50,487 44,911
Fair market value of plan assets 49,933 43,814
Projected benefit obligation in excess
of plan assets 554 1,097
Prior service cost 465 476
Unrecognized net loss (9,905) (10,007)
Unrecognized net transition asset - 413
Prepaid pension asset $ (8,886) $ (8,021)
</TABLE>
For purposes of calculating the funding status of the plan, the weighted
average discount rate was 8.3 percent in 1997, 8.0 percent in 1996 and
8.8 percent in 1995. 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 3.8 to 5.1 percent in
1997 and from 4.3 to 5.6 percent in 1996 and 1995.
The expected long-term rate of return on plan assets was 9.3 percent in
1997 and 9.5 percent in 1996 and 1995. 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 1997 net periodic pension cost was based upon the 1996
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 remaining net
transition asset was amortized in 1997.
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 $400,000 in 1997, $355,000 in 1996, and
$427,000 in 1995. The remaining foreign pension plans qualify for
accounting under the rules of SFAS 87. The tables below include only
those foreign pension plans that qualify for SFAS 87 treatment.
Net periodic pension expense of foreign plans under SFAS 87 is as
follows:
<TABLE>
In thousands for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Service cost $ 933 $ 746 $ 780
Interest cost 1,434 1,307 1,101
Return on plan assets (1,582) (1,251) (1,015)
Net amortization and deferral (15) (46) (12)
Net periodic pension cost $ 770 $ 756 $ 854
</TABLE>
The funding status of the plans is as follows:
<TABLE>
In thousands
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Vested benefit obligation $ 14,337 $ 15,160
Accumulated benefit obligation 15,474 13,818
Projected benefit obligation 21,322 21,202
Fair market value of plan assets 19,888 19,509
Projected benefit obligation in
excess of plan assets 1,434 1,693
Unrecognized net gain 128 141
Accrued pension liability $ 1,562 $ 1,834
</TABLE>
The weighted average discount rate was 6.0 percent in 1997, 6.5 percent
in 1996, and varied from 7.0 to 7.5 percent in 1995. The rate of
increase in future compensation levels used in determining the actuarial
present values of the projected benefit obligation varied from 3.0 to
4.5 percent in 1997, 3.0 to 3.5 percent in 1996 and from 3.0 to 5.0
percent in 1995. The expected long-term rate of return on plan assets
was 7.0 percent in 1997 and 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 related to these benefit plans are $11.9
million and $10.2 million on April 25, 1997, and April 26, 1996,
respectively, and are included in Other Liabilities on the accompanying
Consolidated Balance Sheet.
10. Stockholders' Equity
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. There were no shares of preferred stock outstanding at April
25,1997 or April 26, 1996.
stock purchase plan
The Company has a voluntary employee stock purchase plan for all
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 $654,000 in 1997, $497,000
in 1996 and $473,000 in 1995.
dividends
The Company declared cash dividends of $0.64 per share in 1997, $0.60
per share in 1996 and $0.56 per share in 1995.
Following is a breakdown of dividends restated for the Forte
acquisition:
<TABLE>
for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Fluke Dividends $ 0.64 $ 0.60 $ 0.56
Forte Dividends 0.07 0.14 0.03
Restated $ 0.71 $ 0.74 $ 0.59
</TABLE>
As a Subchapter S corporation Forte stockholders were personally liable
for paying taxes on their allocated portion of corporate income. Forte
dividends were paid for profit sharing and to provide cash to the
stockholders to pay taxes on corporate income.
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 generally 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 1997, 210,000
options were granted from the 1988 plan which vest in 1999 and expire in
2001. These particular grants have stock price milestones that must be
reached before these options become exercisable. 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.
There was a modification to selected options issued from the 1988 Plan.
These particular options were modified to change the term of the options
upon retirement from one year to the original life of the option. The
modification resulted in a new measurement date for compensation expense
purposes resulting in a compensation expense of $394,000 in the
accompanying financial statements.
The 1988 Stock Incentive Plan provides for the issuance of restricted
common stock subject to vesting periods to key employees. These shares
typically have a two year vesting period. The cost of the awards,
determined as the fair market value of the shares on the date of grant,
is charged to expense ratably over the vesting period. The Restricted
Stock awards granted in fiscal 1997 totaled 37,186 shares. In addition,
the Company issued 1,484 shares of restricted common stock subject to
vesting periods from the Inventor Recognition Plan.
Shares reserved for issuance under these stock option plans totaled
1,678,194 shares at April 25, 1997, 1,766,980 shares at April 26, 1996
and 1,946,500 shares at April 28, 1995. At April 25, 1997, April 26,
1996 and April 28, 1995, there were 102,227 shares, 616,888 shares and
897,062 shares, respectively, for options to be granted in the future.
Changes during 1995, 1996 and 1997 in options outstanding for the
combined plans were as follows:
<TABLE>
<CAPTION>
Weighted Average
Options Option Price
Outstanding Per Share
<S> <C> <C>
Balance April 29, 1994 1,082,250 $ 23.35
Granted 148,618 38.34
Exercised (154,900) 18.87
Expired or terminated (26,530) 28.99
Balance April 28, 1995 (exercisable 443,350) 1,049,438 25.96
Granted 298,313 36.33
Exercised (179,659) 20.41
Expired or terminated (18,000) 28.06
Balance April 26, 1996 (exercisable 502,558) 1,150,092 29.51
Granted 487,626 42.46
Exercised (51,600) 24.67
Expired or terminated (10,151) 29.81
Balance April 25, 1997 (exercisable 652,971) 1,575,967 $ 33.67
</TABLE>
The following table summarizes information about stock options
outstanding at April 25, 1997:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Options Remaining Average Options Average
Range of Outstanding at Contractual Exercise Exercisable at Exercise
Exercise Prices April 25, 1997 Life in Years Price April 25, 1997 Price
<C> <C> <C> <C> <C> <C>
$ 7.01 to $ 9.63 3,811 7.9 $ 7.83 1,490 $ 7.72
11.76 to 16.88 96,716 3.4 14.44 95,501 14.47
20.38 to 29.94 509,810 5.7 26.07 344,945 25.41
30.75 to 46.13 965,630 7.4 39.71 211,035 36.26
$ 7.01 to $ 46.13 1,575,967 6.6 $ 33.67 652,971 $ 27.28
</TABLE>
The pro forma compensation expense as defined by SFAS 123 for the
Company's stock option plans included in the pro forma net income below
is determined based on the fair value at the grant date for awards after
April 28, 1995, with the exception of awards made prior to that date
that have been modified. The resulting pro forma net income and
earnings per share amounts are indicated below as if compensation
expense had been recorded based on the fair value of options granted and
modified:
<TABLE>
In thousands except per share amounts for the years ended
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Net Income - as reported $ 19,606 $ 23,703
Net Income - pro forma 18,471 23,559
Earnings per share - as reported 2.16 2.67
Earnings per share - pro forma 2.06 2.67
</TABLE>
Compensation expense recognized in these pro forma disclosures may not
be representative of the effects on pro forma net income or loss for
future years because the above amounts include only the amortization for
the fair value of the grants made in 1997 and 1996.
The fair value of each option granted is estimated using the Black-
Scholes option-pricing model based on the measurement date and the
following weighted average assumptions:
<TABLE>
for the years ended
<CAPTION>
April 25, 1997 April 26, 1996
<S> <C> <C>
Risk-free interest rate 6.50% 6.08%
Expected life in years 4.98 6.02
Expected volatility 18.88% 19.80%
Expected dividend yield 1.75% 2.03%
</TABLE>
The weighted average fair value of awards granted in 1997 and 1996 is
$7.71 and $9.55 respectively. The weighted average fair value in 1997
includes the effect of the 210,000 shares granted with stock price
milestones, which resulted in lower fair values compared to awards
granted with the Company's standard vesting criteria.
The award modification mentioned above resulted in the modified options
having exercise prices that differed from the market price on the
measurement date. Modified options with an exercise price above market
price had a weighted average fair value of $4.94 and a weighted average
exercise price of $40.38. Modified options with an exercise price below
the market price had a weighted average fair value of $11.96 and a
weighted average exercise price of $24.55.
11.Operations by Geographic Areas
The Company is engaged in one line of business, the manufacture and sale
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 for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Revenues:
United States:
Sales to unaffiliated customers $ 191,212 $ 164,023 $ 167,566
Export sales 49,103 44,956 34,419
Interarea transfers 67,806 67,073 55,090
308,121 276,052 257,075
Europe:
Sales to unaffiliated customers 152,603 166,551 148,902
Interarea transfers 34,636 30,432 32,620
187,239 196,983 181,522
Other areas:
Sales to unaffiliated customers 37,248 37,995 31,179
Eliminations (102,442) (97,505) (87,710)
Consolidated revenues $ 430,166 $ 413,525 $ 382,066
Income before income taxes:
United States $ 40,713 $ 30,328 $ 22,457
Europe 9,102 10,698 7,538
Other 2,801 4,016 4,316
Corporate expense and
eliminations<F1> (20,994) (9,070) (8,391)
Consolidated income before
income taxes $ 31,622 $ 35,972 $ 25,920
Assets:
United States $ 192,906 $ 166,553 $ 149,360
Europe 90,911 100,456 112,783
Other 12,831 12,513 15,201
Eliminations (4,288) (3,850) (2,437)
Consolidated assets $ 292,360 $ 275,672 $ 274,907
<FN>
<F1>Includes $12 million restructuring charge in 1997.
</FN>
</TABLE>
12. Financing and Commitments
The Company has $44 million of committed, noncollateralized, revolving,
multi-currency lines of credit. 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.
Interest rates under the agreements range from LIBOR plus .375 of 1
percent to LIBOR plus .625 of 1 percent, based on leverage ratios. The
Company pays commitment fees of .125 to .225 of 1 percent on the unused
amount of the committed facility based on leverage ratios. The
outstanding balances related to these lines of credit were zero at April
25, 1997 and $7.1 million at April 26, 1996.
The Company has $93 million in short-term uncommitted lines of credit.
Under these lines, there was $785,000 outstanding at April 25, 1997 and
zero at April 26, 1996. Long-term obligations include capital lease
obligations.
The Company's operating lease expense, including leases with a term of
less than one year, was $7.4 million in 1997, $7.5 million in 1996 and
$7.7 million in 1995. The principal leases are for foreign
manufacturing facilities, 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 25, 1997:
<TABLE>
In thousands
<CAPTION>
Facilities Equipment Total
<S> <C> <C> <C>
Fiscal year
1998 $ 4,055 $ 1,559 $ 5,614
1999 932 704 1,636
2000 632 296 928
2001 464 90 554
2002 355 53 408
$ 6,438 $ 2,702 $ 9,140
</TABLE>
13. Contingencies
The Company is a defendant in a lawsuit in Los Angeles County Superior
Court titled Talon Instruments, Inc. and Robert E. Corby vs John Fluke
Manufacturing Company, Inc., et al. The plaintiffs alleged that the
Company and its lawyers maliciously prosecuted a federal patent
infringement action against them in 1988. The jury in that infringement
case found that no infringement had occurred. In March 1997, a Los
Angeles Superior Court jury found in the plaintiffs' favor and awarded
compensatory damages of $2 million and punitive damages of $4 million.
The Company is appealing the decision. Although the ultimate outcome of
these proceedings cannot be determined, the Company believes that the
jury's finding in the case is contrary to established law. Given these
factors, no provision for losses has been recorded at April 25, 1997.
Even if the appeal is not successful, the Company believes that its
insurance should ultimately provide coverage for liability arising from
this lawsuit even though the insurance company has indicated it would
contest coverage of these damages.
The Company is subject to various other pending and threatened legal
actions that arise in the normal course of business. In the opinion of
management, liabilities arising from these claims will not have a
material effect on the financial position of 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 25, 1997 and April 26, 1996 and
the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended April 25,
1997. 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 25, 1997 and
April 26, 1996 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended April
25, 1997, in conformity with generally accepted accounting principles.
Seattle, Washington /s/ Ernst & Young LLP
May 28, 1997
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.
/s/ David E. Katri /s/ Elizabeth J. Huebner
David E. Katri Elizabeth J. Huebner
President, Vice President,
Chief Operating Officer Chief Financial Officer
<TABLE>
financial summary
In thousands except shares and per share amounts for the years ended
<CAPTION>
April 25, 1997 April 26, 1996 April 28, 1995
<S> <C> <C> <C>
Revenues $ 430,166 $ 413,525 $ 382,066
Cost of goods sold $ 196,791 $ 191,360 $ 181,805
Gross margin $ 233,375 $ 222,165 $ 200,261
Restructuring $ 12,136 _ _
Total operating expenses
excluding restructuring $ 191,017 $ 186,074 $ 174,184
Operating income $ 30,222 $ 36,091 $ 26,077
Income before income taxes and
cumulative effect of changes
in accounting principles $ 31,622 $ 35,972 $ 25,920
Cumulative effect of changes in
accounting principles<F1> _ _ _
Net income $ 19,606 $ 23,703 $ 16,787
Average shares and share
equivalents outstanding 9,077,758 8,862,341 8,568,462
Income before cumulative effect
of changes in accounting
principles per share $ 2.16 $ 2.67 $ 1.96
Cumulative effect of changes in
accounting principles per share<F1> _ _ _
Earnings per share $ 2.16 $ 2.67 $ 1.96
Net income as a percent of revenues 4.56% 5.73% 4.39%
Cash dividends declared per share $ 0.64 $ 0.60 $ 0.56
Total assets $ 292,360 $ 275,672 $ 274,907
Total stockholders' equity $ 202,939 $ 192,077 $ 174,678
Long-term obligations $ 563 $ 7,098 $ 21,613
Long-term interest expense $ 247 $ 1,248 $ 1,423
Pro forma net income <F2> $ 19,606 $ 23,703 $ 16,787
Pro forma earnings per share<F2> $ 2.16 $ 2.67 $ 1.96
</TABLE>
<TABLE>
financial summary
In thousands except shares and per share amounts for the years ended
<CAPTION>
April 29, 1994 April 30, 1993<F3> September 25, 1992
<S> <C> <C> <C>
Revenues $ 357,904 $ 132,139 $ 271,819
Cost of goods sold $ 181,409 $ 72,167 $ 149,776
Gross margin $ 176,495 $ 59,972 $ 122,043
Restructuring _ _ _
Total operating expenses
excluding restructuring $ 162,278 $ 56,541 $ 102,259
Operating income $ 14,217 $ 3,431 $ 19,784
Income before income taxes and
cumulative effect of changes
in accounting principles $ 13,908 $ 4,069 $ 20,637
Cumulative effect of changes in
accounting principles<F1> _ $ 3,902 _
Net income $ 8,628 $ 6,855 $ 14,655
Average shares and share
equivalents outstanding 8,607,354 7,645,121 7,609,353
Income before cumulative effect
of changes in accounting
principles per share $ 1.00 $ 0.39 $ 1.93
Cumulative effect of changes in
accounting principles per share<F1> _ $ 0.51 _
Earnings per share $ 1.00 $ 0.90 $ 1.93
Net income as a percent of revenues 2.41% 5.19% 5.39%
Cash dividends declared per share $ 0.52 $ 0.26 $ 0.48
Total assets $ 244,648 $ 172,129 $ 175,889
Total stockholders' equity $ 156,048 $ 134,207 $ 128,826
Long-term obligations $ 14,712 $ 34 $ 391
Long-term interest expense $ 1,327 $ 12 $ 31
Pro forma net income<F2> $ 8,628 $ 4,432 $ 14,389
Pro forma earnings per share<F2> $ 1.00 $ 0.58 $ 1.89
<FN>
<F1>The effect of the change in accounting for inventories ($2.4 million net of
income tax), explained below in Footnote 2 and the adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ($1.5
million), were recorded as cumulative changes in accounting principles.
<F2>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.
<F3>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.
</FN>
</TABLE>
<TABLE>
selected quarterly financial data (unaudited)
In thousands except per share amounts
<CAPTION>
Gross Net Earnings Dividends
Revenues Margin Income Per Share Per Share
<F1>
<S> <C> <C> <C> <C> <C>
Fiscal 1997:
1st Quarter $ 101,154 $ 53,960 $ 5,559 $ 0.62 $ 0.16
2nd Quarter 105,473 56,889 6,404 0.72 0.16
3rd Quarter 108,450 58,627 7,422 0.82 0.16
4th Quarter<F2> 115,089 63,899 221 0.02 0.16
Total $ 430,166 $ 233,375 $ 19,606 $ 2.16 $ 0.64
Fiscal 1996:
1st Quarter $ 98,714 $ 52,270 $ 4,456 $ 0.50 $ 0.15
2nd Quarter 102,872 53,885 5,403 0.61 0.15
3rd Quarter 105,701 56,518 6,831 0.77 0.15
4th Quarter 106,238 59,492 7,013 0.79 0.15
Total $ 413,525 $ 222,165 $ 23,703 $ 2.67 $ 0.60
<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.
<F2>The 1997 fourth quarter net income included the restructuring charge of $12
million with an after tax impact of reducing earnings per share by $0.91 for the
fourth quarter and $0.94 for the fiscal year.
</FN>
</TABLE>
<TABLE>
stock price information
<CAPTION>
1997 1996
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 40 3/8 36 3/4 42 1/2 37 5/8
2nd Quarter 39 1/4 34 1/4 41 35 1/2
3rd Quarter 46 1/2 37 5/8 37 3/4 32
4th Quarter 48 7/8 42 1/4 39 5/8 34 1/4
Fluke Corporation stock is traded on the New York Stock Exchange. Quarterly cash
dividends of $0.16 per share were declared in 1997, $0.15 per share in 1996 and
$0.14 per share in 1995. There were 1,639 shareholders of record at April 25,
1997.
</TABLE>
<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 Electronics Corporation 100 <F1> Washington
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 South East Asia Pte Ltd. 100 <F2> Singapore
K. K. Fluke 100 <F2> Japan
Fluke Europe B.V. 100 <F2> The Netherlands
Fluke Vertriebsgesellschaft m.b.H. 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.
</FN>
</TABLE>
The accounts of these subsidiaries are included in the accompanying
consolidated financial statements.
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 May 28, 1997, included in
the 1997 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 the 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 on Form S-8 No. 33-55331 pertaining to the Company's Stock
Purchase Plan, Form S-8 No. 33-55333 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
May 28, 1997, 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 /s/ Ernst & Young LLP
July 21,1997
<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-25-1997
<PERIOD-START> APR-27-1996
<PERIOD-END> APR-25-1997
<CASH> 40,916<F1>
<SECURITIES> 0
<RECEIVABLES> 81,580
<ALLOWANCES> 891
<INVENTORY> 54,522
<CURRENT-ASSETS> 209,280
<PP&E> 173,306
<DEPRECIATION> 113,660
<TOTAL-ASSETS> 292,360
<CURRENT-LIABILITIES> 66,477
<BONDS> 0
0
0
<COMMON> 2,262
<OTHER-SE> 200,677
<TOTAL-LIABILITY-AND-EQUITY> 292,360
<SALES> 430,166
<TOTAL-REVENUES> 430,166
<CGS> 196,791
<TOTAL-COSTS> 203,153
<OTHER-EXPENSES> (1,400)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279
<INCOME-PRETAX> 31,622
<INCOME-TAX> 12,016
<INCOME-CONTINUING> 19,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,606
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.16
<FN>
<F1>in thousands except shares and per share amounts
</FN>
</TABLE>
