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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
_______ SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 30, 1995
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-2648
HON INDUSTRIES INC.
An Iowa Corporation IRS Employer No. 42-0617510
414 East Third Street
P.O. Box 1109
Muscatine, IA 52761-7109
319/264-7400
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, with Par Value of $1.00 Per Share.
Name of each exchange on which registered: The Nasdaq Stock Market.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
___ ____
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. ____
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, as of March 15, 1996, was: $391,628,151, assuming all 5% holders
are affiliates.
The number of shares outstanding of the registrant's common stock, as of March
15, 1996, was: 30,290,764.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated March 29, 1996, for the May
14, 1996, Annual Meeting of Shareholders are incorporated by reference into Part
III.
Index of Exhibits is located on Page 36.
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ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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Page
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Item 1. Business........................................................ 3
Item 2. Properties...................................................... 7
Item 3. Legal Proceedings............................................... 8
Item 4. Submission of Matters to a Vote of Security Holders............. 9
Table I - Executive Officers of the Registrant.................. 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters......................................................... 11
Item 6. Selected Financial Data -- Eleven-Year Summary.................. 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 14
Item 8. Financial Statements and Supplementary Data..................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 17
PART III
Item 10. Directors of the Registrant..................................... 18
Item 11. Executive Compensation.......................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 18
Compliance with Section 16(a) of the Securities Exchange Act
of 1934......................................................... 18
Item 13. Certain Relationships and Related Transactions.................. 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K........................................................ 20
Signatures................................................................ 22
Financial Statements...................................................... 25
Financial Statement Schedules............................................. 35
Index of Exhibits......................................................... 36
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ANNUAL REPORT ON FORM 10-K
--------------------------
PART I
------
ITEM 1. BUSINESS.
------------------
GENERAL.
HON INDUSTRIES Inc. is principally a national manufacturer and marketer of
office furniture. It also manufactures and markets a limited line of personal
computer accessories. In addition, it is a major manufacturer and marketer of
metal prefabricated fireplaces and related products for the home building
products industry.
The Company is organized into a corporate headquarters and eight operating
units with offices, manufacturing plants, distribution centers, and sales
showrooms nationwide. See Item 2. Properties for additional related discussion.
Six operating units, marketing under various brand names, participate in the
office furniture and products industry. These operating units include: a
division, The HON Company, and five wholly owned subsidiaries, including The
Gunlocke Company, Holga Inc., BPI Inc., Chandler Attwood Limited, and Ring King
Visibles, Inc. Each of these operating units manufactures and markets products
which are sold through various channels of distribution and segments of the
industry. The combined sales of these units rank HON INDUSTRIES Inc. as one of
the larger manufacturers of office furniture in the United States. The Company
is ranked as a Fortune 1000 company.
A sixth wholly owned subsidiary, Heatilator Inc., is one of the nation's
oldest and best known manufacturers of factory-built wood- and gas-burning
fireplaces, fireplace inserts, freestanding stoves, and accessories serving the
home building products industry. These products have contributed less than 10%
of the consolidated net sales and revenues and less than 10% of consolidated net
income during each of the last three years.
An seventh wholly owned subsidiary, HON Export Limited, markets selected
products manufactured by the other various HON INDUSTRIES operating units
outside the United States and Canada.
During 1995, the Company decided to gradually scale down its Chandler Attwood
Limited operations from its six small leased manufacturing sites to eventually
one, as of December 30, 1995. The final site will be closed in April 1996.
Chandler Attwood Limited was a start-up operation in 1992 as a first effort with
distributed manufacturing of a limited line of custom-made office furniture in
select major metropolitan areas.
In 1993, the Company closed its wholly owned subsidiary, CorryHiebert
Corporation. The company manufactured metal office furniture for the contract
segment of the industry. The closure resulted in a pretax charge of $4.0
million in the third quarter of fiscal year 1993.
In January 1996, the Company announced the sale of its wholly owned
subsidiary, Ring King Visibles, Inc., a manufacturer and marketer of a limited
line of personal computer accessories. The sale will result in a gain and will
be recorded in the first quarter of 1996.
For further information with respect to the Company's business, including
operations information, the close down of CorryHiebert Corporation and Chandler
Attwood Limited, and the
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sale of Ring King Visibles, Inc., refer to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, and the following
captions included in the Notes to the Consolidated Financial statements, which
are filed as part of this report: "Nature of Operations and Significant
Customer Information," "Changes in Business," and "Subsequent Events."
EMPLOYEES.
The Company has 5,933 employees (members) and, of this total, 3,378 are
production personnel. The Company employs 296 members who are a party to a
collective bargaining agreement.
PRODUCTS.
Office Furniture and Related Products. A broad line of metal and wood
commercial and home office furniture is manufactured and marketed through The
HON Company division and the Company's wholly owned subsidiaries: BPI Inc.,
Chandler Attwood Limited, Holga Inc., and The Gunlocke Company. Major products
include: file cabinets, desks, freestanding office partitions, panel systems,
credenzas, chairs, storage cabinets, tables, bookcases, machine stands, and
reception area furniture. These products are typically available in
contemporary and conventional styles and are priced to sell in different
channels of distribution and at different price points. During 1995, Ring King
Visibles, Inc., manufactured and marketed personal computer-related workstation
accessories and supplies, including ergonomic accessories, workspace
productivity accessories, and micrographic storage products; however, as noted
earlier, this subsidiary was sold by the Company in January 1996.
Home Building Products. Heatilator Inc., a wholly owned subsidiary,
manufactures and markets a broad line of manufactured fireplaces, principally
for the home. Products include wood- and gas-burning fireplaces and stoves,
fireplace inserts, chimney systems, masonry forms, and fireplace accessories.
MANUFACTURING.
The HON Company manufactures office furniture in California, Georgia, Iowa,
Kentucky, New York, North Carolina, Pennsylvania, South Carolina, Texas, and
Virginia. BPI Inc. manufactures office furniture in North Carolina and
Washington. Chandler Attwood Limited manufactures office furniture in Texas.
Holga Inc. manufactures office furniture in California. The Gunlocke Company
manufactures office furniture in New York. Ring King Visibles, Inc.,
manufactures office products in Iowa. Heatilator manufactures home building
products in Iowa.
The Company purchases raw materials and components from a variety of vendors,
and generally most items are available from multiple sources. Major raw
materials and components include coil steel, bar stock, castings, lumber,
veneer, particle board, fabric, paint, lacquer, hardware, rubber products,
plastic products, and shipping cartons.
PRODUCT DEVELOPMENT.
The Company's product development investments are principally focused on new
product development, improvement of existing products, product line extension,
application of ergonomic research, improvement of manufacturing processes,
application of new materials, and providing engineering support and training to
its operating units. The Company's investment in product development during
1995, 1994, and 1993 totaled $11.6 million, $10.1 million, and $7.7 million,
respectively.
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INTELLECTUAL PROPERTY.
The Company owns 62 U.S. and 23 foreign patents and has applications pending
for 38 U.S. and 48 foreign patents. In addition, the Company holds
registrations for 66 U.S. and 66 foreign trademarks and has applications pending
for 33 U.S. and 96 foreign trademarks.
The Company's primary products do not require frequent technical changes. The
majority of patents are design patents. They expire at various times depending
on when the particular patent was issued. No individual patent nor all the
Company's patents in the aggregate are material to its business.
The Company actively protects trademarks which it believes have a significant
goodwill value. The Company applies for patent protection where it believes the
expense of doing so is justified. It believes that the duration of its
registered patents is adequate to protect these rights. The Company also pays
royalty fees in certain instances for the use of patents on products and
processes owned by others.
SALES AND DISTRIBUTION: CUSTOMERS.
Office furniture and products are distributed nationally through more than
5,000 office product dealers, 30 wholesalers/distributors, over 50 national and
regional retailers, and various contract customers. Several of the Company's
office furniture operating units distribute products through common dealers,
wholesalers/distributors, and retailers. Several operating units also sell
products directly to state governments and to the United States government
through the General Services Administration. Government sales are for certain
products, for a certain price, and for a certain time period; thus, none are
subject to price renegotiation. One customer, United Stationers Inc., accounted
for approximately 13%, 13%, and 16% of the Company's consolidated net sales in
1995, 1994, 1993, respectively. The industry trend is toward increased
consolidation of distribution which implies larger and fewer customers for the
Company's office furniture and related products.
The office furniture and products field sales organization consists of 20
regional sales managers supervising 101 salespersons, plus approximately 175
manufacturers' representatives, providing nationwide coverage. Sales managers
and salespersons are compensated by a combination of salary and incentive bonus.
Limited quantities of select finished goods inventories are maintained at the
Company's principal manufacturing plants and at its various distribution
centers.
Heatilator Inc. sells its fireplace and stove products through approximately
1,700 dealers and 225 distributors. The company has a field sales organization
of 3 regional sales managers supervising 10 salespersons and 4 manufacturers'
representatives.
HON Export Limited sales are made through approximately 125 office furniture
dealers and wholesale distributors serving select foreign markets. They are
principally located in the U.S., Mexico, and the Caribbean. The company has a
field sales organization of 1 regional sales manager and 2 salespersons.
HON INDUSTRIES' office furniture and products business has a seasonality trend
with the third (July - September) and fourth (October - December) fiscal
quarters historically being the two highest sales quarters each year. Home
building products sales tend to have an even larger concentration in third and
fourth fiscal quarters.
As of December 30, 1995, the Company has an order backlog of approximately
$54.9 million which will be filled in the ordinary course of business within the
current fiscal year. This
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compares with $52.3 million as of December 31, 1994, and $57.0 million as of
January 1, 1994. The dollar amount of the ongoing backlog of orders at any point
in time is not considered by management to be a leading indicator of the
Company's expected sales for any particular fiscal period. Large dollar amounts
of order backlogs are unusual since most of the Company's products are
manufactured and shipped within a few weeks following receipt of order, and a
low backlog is an indicator of responsive customer service.
COMPETITION.
The principal competitive factors for both office furniture and home building
products are product performance, product quality, complete and on-time delivery
to the customer, price, and customer service support. The Company believes it
is well positioned to compete in all of its served markets due to its market
share, engineering and manufacturing capability, broad product offering,
national field sales representation, and long-standing customer relationships.
Competitive conditions vary for HON INDUSTRIES Inc. based on the industry,
industry segment, channel of distribution, products involved, and the prevailing
U.S. general economic environment.
The U.S. office furniture industry for calendar year 1995 is estimated by
industry sources to be $9.4 billion, up nearly 8% from 1994. It consists of
several hundred domestic manufacturing companies plus foreign companies who
import products. The Company's primary strength in the office furniture and
products industry lies with its products for the "middle market" segment. This
expanding segment of the industry typically serves the small- and medium-sized
businesses who tend to be more price/value sensitive consumers. However, the
Company's total office furniture sales makes it a significant player in the
broader U.S. office furniture industry. The Company is a niche player in
providing computer accessory products in the very large computer accessories
industry. There are many competitors producing similar products; some are much
larger than the Company's operating unit.
The Company's particular home building products, prefabricated metal
fireplaces and related products, are manufactured by a number of national and
regional competitors. However, a limited number of manufacturers dominate the
sales in this relatively small industry. Heatilator Inc. is one of the larger
U.S. manufacturers of prefabricated metal fireplaces.
For further discussion of the Company's competitive situation, refer to Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
EFFECTS OF INFLATION.
Certain business costs may, from time to time, increase at a rate exceeding
the general rate of inflation. However, the Company does not consider the
current rate of inflation in the U.S. to be a significant business issue or
concern.
The Company adjusts the selling prices of its products to maintain profit
margins whenever possible. Investments are routinely made in modern plants,
equipment, support systems, and for rapid continuous improvement programs.
These investments collectively focus on increasing productivity which helps to
offset the effect of rising material and labor costs. Ongoing cost control
disciplines are also routinely employed. In addition, the last-in, first-out
(LIFO) valuation method is used for most of the Company's inventories, which
ensures the changing material and labor costs are recognized in reported income;
and more importantly, these costs are recognized in pricing decisions.
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For further discussion of the effects of inflation on the Company's business,
refer to Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
ENVIRONMENTAL.
The Company is subject to a variety of environmental laws and regulations
governing discharges to air and water; the handling, storage, and disposal of
hazardous or solid waste materials; and the remediation of contamination
associated with releases of hazardous substances. Although the Company believes
it is in material compliance with all of the various regulations applicable to
its business, there can be no assurance that requirements will not change in the
future or that the Company will not incur material cost to comply with such
regulations. The Company has trained staff responsible for monitoring
compliance with environmental, health, and safety requirements. The Company's
environmental professionals work with responsible personnel at each
manufacturing facility, the Company's environmental legal counsel, and
consultants on the management of environmental, health, and safety issues. The
Company's ultimate goals is to reduce, and wherever practical, eliminate the
creation of hazardous waste in its manufacturing processes.
Compliance with federal, state, and local environmental regulations has not
had a material effect on the capital expenditures, earnings, or competitive
position of the Company to date. There are no financially material capital
expenditures for environmental control facilities anticipated during fiscal year
1996. It is management's judgment that compliance with current regulations
should not have a financially material effect on future earnings. However, the
uncertainty of new environmental legislation and technology in this area makes
it impossible to know with confidence.
For further information regarding the Company's environmental matters, refer
to Item 3. Legal Proceedings, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations, and the "Contingencies" note in
the Notes to the Consolidated Financial Statements.
BUSINESS DEVELOPMENT.
The development of the Company's business during the fiscal years ended
December 30, 1995; December 31, 1994; and January 1, 1994, is discussed in Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ITEM 2. PROPERTIES.
--------------------
The Company maintains its corporate headquarters in Muscatine, Iowa, and
conducts its operations in 17 cities throughout the United States which house
manufacturing and distribution operations and offices. These total an aggregate
6,176,007 square feet. Of this total, 508,099 square feet are leased, including
283,040 square feet under a capital lease.
While the plants are of varying ages, the Company considers that they are well
maintained, are equipped with modern and efficient equipment, and are in good
operating condition and suitable for the purposes for which they are being used.
The Company has sufficient capacity to increase output at most locations by
increasing the use of overtime and/or number of production shifts employed.
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The Company's principal manufacturing and distribution facilities (100,000
square feet in size or larger) are as follows:
<TABLE>
<CAPTION>
Approximate
Location Square Feet Owned Leased Description of Use
- -------- ----------- --------- ------- ------------------
<S> <C> <C> <C> <C>
Avon, NY 164,667 X Mfg. steel casegoods office furniture
Cedartown, GA 443,334 X Mfg. steel casegoods office furniture**
Louisburg, NC 176,354 X Mfg. wood casegoods office furniture
Mt. Pleasant, IA 288,006 X Mfg. metal prefabricated fireplaces
Muscatine, IA 231,444 X Mfg. steel office seating
Muscatine, IA 612,713 X Mfg. steel casegoods office furniture**
Muscatine, IA 177,000 X Mfg. wood casegoods office furniture
Muscatine, IA 209,100 X Mfg. systems panels office furniture
Owensboro, KY 311,575 X Mfg. wood office seating
Richmond, VA 283,040 X* Mfg. metal casegoods office furniture**
South Gate, CA 520,270 X Mfg. steel casegoods & seating office furniture**
Sulphur Springs, TX 155,690 X Mfg. steel casegoods office furniture
Wayland, NY 692,226 X Mfg. wood casegoods & seating office furniture
Williamsport, PA 238,326 X Mfg. wood casegoods office furniture
Winnsboro, SC 180,093 X Mfg. steel office seating
TOTAL SQUARE FEET 4,400,798 283,040
========= =======
* A capital lease. ** Also includes a regional warehouse/distribution center.
</TABLE>
The Company also owns a 223,680 square foot manufacturing facility
located in Muscatine, Iowa, which it leases to another company; and it owns a
478,837 square foot office and manufacturing facility located in Corry,
Pennsylvania, which is listed for sale. Other manufacturing facilities are
located in Dallas, TX; Kent, WA; Mt. Pleasant and Muscatine, IA; Salisbury, NC;
and Van Nuys, CA. These facilities total an aggregate of 789,652 square feet.
Of this total, 225,059 square feet are leased. The Company also leases sales
showroom space in office furniture market centers in several major metropolitan
areas.
There are no major encumbrances on Company-owned properties. The
Company does have outstanding mortgages on certain properties, and the amount of
these outstanding mortgages is disclosed in the "Long-Term Debt and Other
Liabilities" note in the Notes to Consolidated Financial Statements, which are
filed as a part of this report. Refer to the "Property, Plant, and Equipment"
note in the Notes to Consolidated Financial Statements for related cost,
accumulated depreciation, and net book value data.
ITEM 3. LEGAL PROCEEDINGS.
---------------------------
Along with several other potentially responsible parties ("PRPs"), the
Company has been involved with site investigation and clean-up activities
imposed by the Federal Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") at one waste disposal site in Georgia which allegedly
received waste materials containing hazardous substances generated by the
Company or its subsidiaries. In general, under CERCLA, each PRP which actually
contributes hazardous substances to a Superfund site is jointly and severally
liable for the costs associated with investigating and cleaning up the site.
Customarily, the PRPs will work with the Environmental Protection Agency ("EPA")
or equivalent state agency to agree upon and implement a plan for site
remediation. PRPs for the Georgia site have been required to institute a
monitoring program, a background groundwater study, and a possible remediation
work plan. The EPA has issued a Record of Decision for the site ("ROD")
following the completion of a Remedial Investigation/Feasibility Study. The ROD
identified manganese, a constituent not included in waste sent by the Company to
the site, as the sole constituent of concern. The Company also owns a portion
of the property which is part of the site. The original property owner has
agreed to repurchase the property from the Company and indemnify the Company
against environmental liabilities arising from the Company's ownership of the
property.
The Company also is involved in certain continuing clean-up activities
under the supervision of the Pennsylvania state environmental authorities at one
site formerly used by a Company
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subsidiary. The costs associated with this site are comprised primarily of
investigation and remediation efforts associated with soil and groundwater
contamination. In this matter, the Company has worked with appropriate
authorities to resolve the issues involved.
The Company was named, along with three other PRPs, as a party to an
Imminent or Substantial Endangerment Order and Remedial Action Order dated April
28, 1994 by the California Department of Toxic Substances Control ("DTSC") in
connection with the former Firestone Tire & Rubber Company facility in South
Gate, California ("Firestone Site"). The DTSC is seeking to cover the cost of
investigating soil and groundwater contamination and preparing a remedial action
plan for the Firestone Site. From 1927 to 1981, the site was owned by The
Firestone Tire & Rubber Company (now known as Bridgestone/Firestone, Inc.) and
operated from 1928 to 1980 primarily as a tire manufacturing facility. The
Company purchased a portion of the Firestone Site in 1981, and subsequently sold
a portion of that property to a company now in bankruptcy proceedings. The
Company continues to own a part of the Firestone Site. The Company believes its
potential liability at the Firestone Site arises from the Company's status as an
owner of the property and not as a waste generator. The Company has cooperated
in the preparation of a Remedial Investigation/Feasibility Study Work Plan
("RI/FS Work Plan") which was approved by DTSC in June 1995. The investigation
under the RI/FS Work Plan began in August 1995 and is expected to be completed
early in 1997. The Company has, however, denied liability and believes that
substantially all investigation and clean-up costs should be born by
Bridgestone/Firestone, Inc.
The Company has accrued liabilities reflecting management's best
estimate of the eventual future cost of the Company's anticipated share (based
upon estimated ranges of remediation costs, the existence of many other larger
PRPs to share in such costs who are financially viable, the Company's experience
to date in relation to the determination of its allocable share, the volume and
type of waste the Company is believed to have contributed to the sites, and the
anticipated periods of time over which such costs may be paid) of remediation
costs. Potential insurance reimbursements are not anticipated. The Company
also is reviewing available defenses and claims it may have against third
parties, including Bridgestone/Firestone, Inc. Due to such factors as the wide
discretion of regulatory authorities regarding clean-up levels and uncertain
allocation of liability at multiple party sites, estimates made prior to the
approval of a formal plan of action represent management's best judgment as to
estimates of reasonably foreseeable expenses based upon average remediation
costs at comparable sites. While the final resolution of these contingencies
could result in expenses in excess of current accruals and, therefore, have an
impact on the Company's consolidated financial result in a future reporting
period, management believes that the ultimate outcome will not have a material
effect on the Company's financial position or operations.
The Company is a guarantor of certain leases for showroom space at the
International Design Center (IDC) in Long Island City, New York. On June 26,
1992, the Company filed an action in the New York Supreme Court claiming
wrongful eviction and breach of representations and warranties that the IDC
would be maintained as a showroom facility. The IDC has counterclaimed for back
rent and other damages. The parties have filed cross-motions for summary
judgment which are currently pending before the court.
On December 28, 1995, Haworth, Inc., filed a complaint in Federal
District Court in Kalamazoo, Michigan, alleging that certain products sold by
the Company and its subsidiaries infringed its patents covering electrified
panel systems and asking for damages in an unspecified amount. These patents
expired November 29, 1994, and no claim has been made with respect to Company
products sold after that date. The Company believes it has meritorious defenses
and will vigorously defend its rights.
For additional information on this item, refer to the "Contingencies"
note included in the Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------------------------------------------------------------
None.
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PART I, TABLE I
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<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT. (Information as of December 30, 1995)
- -------------------------------------
Family Position Other Business Experience
Name Age Relationship Position Held Since During Past Five Years
- ---- --- ------------ -------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Stanley M. Howe 71 None Chairman of the Board 1984 President (1964-90);
Director 1958 Chief Executive Officer (1979-91).
Jack D. Michaels 58 None President 1990 President and Chief Executive Officer,
Chief Executive Officer 1991 Hussmann Corporation (1987-90).
Director 1990
R. Michael Derry 58 None Senior Vice President, 1990 Senior Vice President (1982-90).
Administration
A. Mosby Harvey, Jr. 52 None Vice President, General 1993 Principal, Harvey and Associates (1991-93);
Counsel and Secretary Vice President, General Counsel and
Secretary, Bridgestone/Firestone Inc.
(1990-91).
George J. Koenigsaecker III 50 None President, The HON 1995 Executive Vice President, Operations, The
Company HON Company (1992-95); Senior Vice
President, HON INDUSTRIES Inc. (1995); Group
Executive, Danaher Corporation (1990-92).
Melvin L. McMains 54 None Controller 1980
David C. Stuebe 55 None Vice President and 1994 President, CEO, and Director, Diversified
Chief Financial Officer Industries, Inc. (1990-94).
</TABLE>
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
----------------------------------------------------------------------
MATTERS.
- --------
The Company's common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol: HONI. As of year-end 1995, the
Company had 5,479 stockholders of record.
The Company serves as its own stock transfer agent. Shareholders may
report a change of address or make inquiries by writing or telephoning:
Stock Transfer Department
HON INDUSTRIES Inc.
P.O. Box 1109
Muscatine, IA 52761-7109
Telephone: 319/264-7223
Common Stock Market Price and Price/Earnings Ratio and Quarterly Common
Stock Market Prices and Dividends are presented in the "Investor Information"
section which follows the "Notes to the Consolidated Financial Statements"
material filed as part of this report. The market price quotations were
published by the National Association of Securities Dealers, Inc. The
quotations represent prices between dealers; do not include retail markup,
markdown, or commissions; and do not necessarily represent actual transactions.
The Company expects to continue its policy of paying regular cash
dividends on the first business day of March, June, September, and December.
Historically, the dividend payout percentage has ranged from approximately 25%
to 33% of the previous year's earnings. Future dividends are dependent on
future earnings, capital requirements, and the Company's financial condition.
In addition, the payment of dividends is subject to the restrictions described
in the "Long-Term Debt and Other Liabilities" note included in the Notes to
Consolidated Financial Statements, filed as part of this report.
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
Approximate Number of Equity
Title of Class Security Holders of Record as of December 30, 1995
-------------- -------------------------------------------------
Common Stock, $1.00 Par Value 5,479
Preferred Stock, $1.00 Par Value -0-
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HON INDUSTRIES Inc. and Subsidiaries
Item 6. Selected Financial Data--Eleven-Year Summary
<TABLE>
<CAPTION>
=======================================================================================================
Per Common Share Data 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from Continuing Operations ...................... $ 1.35 $ 1.74 $ 1.39
Income from Discontinued Operations .................... -- -- --
Cumulative Effect of Accounting Changes ................ -- (.01) .02
Gain on Sale of Discontinued Operations ................ -- -- --
Net Income ............................................. 1.35 1.73 1.41
Cash Dividends ......................................... .48 .44 .40
Book Value ............................................. 7.11 6.35 5.67
Net Working Capital .................................... 2.15 2.53 2.45
Operating Results (Thousands of Dollars)
Net Sales .............................................. $ 893,119 $ 845,998 $ 780,326
Cost of Products Sold .................................. 624,700 573,392 537,828
Gross Profit ........................................... 268,419 272,606 242,498
Interest Expense ....................................... 3,569 3,248 3,120
Income from Continuing Operations before Income Taxes .. 65,517 86,338 70,854
Income before Income Taxes as a % of Net Sales ......... 7.34% 10.21% 9.08%
Federal and State Income Taxes ......................... $ 24,419 $ 31,945 $ 26,216
Effective Tax Rate for Continuing Operations ........... 37.27% 37.00% 37.00%
Income from Continuing Operations ...................... $ 41,098 $ 54,393 $ 44,638
Income from Continuing Operations as a % of Net Sales .. 4.60% 6.43% 5.72%
Income before Cumulative Effect of Accounting Changes .. $ 41,098 $ 54,393 $ 44,638
Income from Discontinued Operations .................... -- -- --
Net Income ............................................. 41,098 54,156 45,127
Cash Dividends and Share Purchase Rights Redeemed ...... 14,536 13,601 12,587
Addition to (Reduction of) Retained Earnings ........... 18,863 13,563 17,338
Net Income Applicable to Common Stock .................. 41,098 54,156 45,127
% Return on Average Shareholders' Equity ............... 20.00% 28.95% 26.35%
Depreciation and Amortization .......................... $ 21,416 $ 19,042 $ 16,631
Distribution of Net Income
% Paid to Shareholders ................................. 35.37% 25.11% 27.89%
% Reinvested in Business ............................... 64.63% 74.89% 72.11%
Financial Position (Thousands of Dollars)
Current Assets ......................................... $ 194,183 $ 188,810 $ 188,419
Current Liabilities .................................... 128,915 111,093 110,759
Working Capital ........................................ 65,268 77,717 77,660
Net Property, Plant, and Equipment ..................... 210,033 177,844 157,770
Total Assets of Continuing Operations .................. 409,518 372,568 352,405
Total Assets of Discontinued Operations--Net ........... -- -- --
Total Assets ........................................... 409,518 372,568 352,405
Long-Term Debt and Capital Lease Obligations ........... 53,611 54,741 51,114
Shareholders' Equity ................................... 216,235 194,640 179,553
Retained Earnings ...................................... 193,505 174,642 161,079
Current Ratio .......................................... 1.51 1.70 1.70
Current Share Data
Number of Shares Outstanding at Year-End ............... 30,394,337 30,674,603 31,675,846
Weighted Average Shares Outstanding During Year ........ 30,495,642 31,217,725 32,090,544
Number of Shareholders of Record at Year-End ........... 5,479 5,556 4,653
Other Operational Data
Capital Expenditures--Net (Thousands of Dollars) ....... $ 53,879 $ 35,005 $ 27,541
Members at Year-End .................................... 5,933 6,131 6,257
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
1992 1991 1990 1989 1988 1987 1986 1985
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.18 $ 1.02 $ 1.30 $ .79 $ .69 $ .59 $ .68 $ .60
-- -- -- -- .03 .03 .03 .01
-- -- -- -- -- -- -- --
-- -- -- -- .22 -- -- --
1.18 1.02 1.30 .79 .94 .62 .71 .61
.37 .36 .30 .24 .20 .20 .16 .15
5.04 4.64 4.06 3.76 3.96 3.33 3.35 2.91
2.46 2.13 1.64 1.66 2.59 1.94 1.79 1.54
$ 706,550 $ 607,710 $ 663,896 $ 602,009 $ 532,456 $ 516,262 $ 460,137 $ 445,068
479,179 411,168 458,522 409,942 366,599 355,456 301,197 300,883
227,371 196,542 205,374 192,067 165,857 160,806 158,940 144,185
3,441 3,533 3,611 3,944 4,188 3,512 3,417 4,011
61,893 52,653 69,085 44,656 41,919 41,887 53,960 49,171
8.76% 8.66% 10.41% 7.42% 7.87% 8.11% 11.73% 11.05%
$ 23,210 $ 19,745 $ 25,907 $ 17,193 $ 16,139 $ 18,431 $ 26,000 $ 23,603
37.50% 37.50% 37.50% 38.50% 38.50% 44.00% 48.18% 48.00%
$ 38,683 $ 32,908 $ 43,178 $ 27,463 $ 25,780 $ 23,456 $ 27,960 $ 25,568
5.47% 5.42% 6.50% 4.56% 4.84% 4.54% 6.08% 5.74%
$ 38,683 $ 32,908 $ 43,178 $ 27,463 $ 25,780 $ 23,456 $ 27,960 $ 25,568
-- -- -- -- 9,515 1,310 1,294 456
38,683 32,908 43,178 27,463 35,295 24,766 29,254 26,024
12,114 11,656 9,931 8,298 7,956 7,957 6,569 6,422
26,569 18,182 (11,952) (17,444) 20,986 (18,750) 15,737 13,871
38,683 32,908 43,178 27,463 35,295 24,766 29,254 26,012
24.75% 23.41% 33.24% 19.92% 25.77% 18.85% 22.74% 22.29%
$ 15,478 $ 14,084 $ 13,973 $ 12,866 $ 11,860 $ 10,227 $ 8,746 $ 8,442
31.32% 35.42% 23.00% 30.22% 22.54% 32.13% 22.46% 24.68%
68.68% 64.58% 77.00% 69.78% 77.46% 67.87% 77.54% 75.32%
$ 171,309 $ 150,901 $ 146,591 $ 162,576 $ 175,367 $ 139,679 $ 140,329 $ 129,763
91,780 82,275 93,465 106,104 78,787 66,136 67,560 65,826
79,529 68,626 53,126 56,472 96,580 73,543 72,769 63,937
145,849 125,465 124,603 114,116 94,339 95,372 84,622 70,486
322,746 280,893 276,984 284,322 275,928 235,621 242,366 222,976
-- -- -- -- -- 9,734 11,841 11,213
322,746 280,893 276,984 284,322 275,928 245,355 254,207 234,189
54,240 35,664 39,575 38,271 38,712 42,328 38,542 37,833
163,009 149,575 131,612 128,203 147,549 126,388 136,336 120,913
143,741 117,172 98,990 110,942 128,386 107,400 126,150 110,413
1.87 1.83 1.57 1.53 2.23 2.11 2.08 1.97
32,368,956 32,208,685 32,384,897 34,097,088 37,323,582 37,976,636 40,724,192 41,608,264
32,758,995 32,371,488 33,110,405 34,816,050 37,426,836 39,794,062 41,083,028 42,846,944
4,534 4,466 4,331 4,124 4,134 3,218 3,179 3,378
$ 26,626 $ 13,907 $ 20,709 $ 12,807 $ 10,299 $ 15,669 $ 16,953 $ 9,037
5,926 5,599 6,073 6,385 5,423 5,840 5,492 5,092
</TABLE>
-13-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Results of Operations
The Company achieved record level net sales in 1995 in the face of major
structural changes in the U.S. office furniture industry, but sacrificed net
income. The industry is experiencing a rapid and unprecedented level of
consolidation. Fierce competitive conditions in the marketplace, inventory
adjustments among certain major office furniture customers in the fast-growing
budget segment, and non-recurring charges drove the Company's 1995 net income
and net income per share to lower than planned levels.
For the year ended December 30, 1995, net sales were $893.1 million compared to
$846.0 million in 1994 and $780.3 million in 1993. The Company's sales growth
was 5.6% in 1995, 8.4% in 1994, and 10.4% in 1993; and net sales for each of
these years represented a record level. Net income for 1995 was $41.1 million
compared to $54.2 million in 1994 and $45.1 million in 1993.
According to BIFMA International, 1995 U.S. office furniture industry shipments
exceeded $9.4 billion in 1995, up 8% from 1994; $8.7 billion in 1994, up 8% from
1993; and $8.1 billion in 1993, up 6% from 1992. BIFMA is predicting 5% industry
growth for 1996 to a level of $9.9 billion in sales. No comparable industry data
is available for the hearth products industry.
Profitable sales growth continues to be a key business strategy. The Company is
focusing its major efforts on further strengthening and increasing its core
commercial and budget office furniture business which serves small- and medium-
sized businesses, including home offices. This market sector demands value-
oriented products and is served through several intensely competitive channels
of distribution, which are characterized by competitive pricing terms and
conditions, reliable customer service, and a steady stream of new innovative
products.
Fiscal year 1994 net sales were driven by essentially the same factors as 1995,
although with less competitive pricing pressure. Fiscal year 1993 net sales were
driven by an overall reduced growth rate of the broader office furniture
industry, but the Company's particular market segments are believed to have been
stronger and more vibrant than the overall industry.
The Company closed five of six Chandler Attwood Limited plants during the year,
and the sixth plant will be closed in early 1996. These small leased facilities
typically employed twelve to fifteen members each. Late in the year, the Company
also reduced its administrative work force by over 100 members by eliminating
the positions. In addition, the Company incurred significant acquisition search
expenses in 1995 as a result of pursuing strategic acquisition targets. These
events collectively resulted in pretax charges of approximately $7.6 million
($4.8 million after tax, or $0.16 earnings per share) for the year, $5.6 million
($3.5 million after tax, or $0.12 earnings per share) of which were recorded in
the fourth quarter of 1995.
During 1994, the Company consolidated the operations of its XLM Company with The
HON Company to increase market share and profitability in serving the rapidly
growing retail and commercial dealer office furniture channels. In late 1993,
the Company closed its CorryHiebert Corporation office furniture plant located
in Corry, Pennsylvania, as a result of its declining profitability. The closure
decision resulted in a charge of $4.0 million to 1993 earnings (after-tax effect
of $2.5 million, or $0.08 per share). Also in 1993, the Company acquired the
DOVRE brand of cast iron stoves for North and South America for approximately
$1.2 million. These products are being successfully marketed through Heatilator
Inc.
The Company is continuing to focus significant resources on reducing cost of
products sold. Primarily, efforts include an ongoing program to upgrade
production facilities, machinery, and equipment; reengineering manufacturing and
distribution processes to make them more efficient and responsive to changing
conditions; and managing the procurement of raw materials and substitution of
lower cost alternative materials. However, these efforts were more than offset
by other influences in the marketplace in 1995-specifically, price realization.
The marketplace demanded a higher level of marketing and sales program support
from the Company in 1995 to meet competitive terms and conditions than had been
seen previously. Gross profit margins were 30.1%, 32.2%, and 31.1% in 1995,
1994, and 1993, respectively.
-14-
<PAGE>
- --------------------------------------------------------------------------------
Since the annual U.S. inflation rate has stabilized in the 2% to 4% range,
inflation has not been a significant cost factor for the Company, although
competitive pressures have limited its ability to pass on cost increases through
higher selling prices. The Company uses the LIFO method for valuing its
principal inventories, which results in cost of products sold, reported in the
financial statements, approximating current costs.
Selling and administrative expenses for 1995 were adversely influenced by the
cost of increased sales aids and co-op advertising allowances, freight costs
increasing at a more rapid rate than product price increases, added costs due to
disruptions resulting from increasing warehouse capacity, increased investment
in new product development efforts, and the nonrecurring expenses. Selling and
administrative expenses as a percentage of net sales were 22.6% in 1995, and
21.9% in both 1994 and 1993. The 1995 percentage increase was also adversely
impacted by price realization.
The Company's effective tax rate was 37.3% for 1995 and 37.0% for 1994 and 1993.
The Company's 1995, 1994, and 1993 profitability, as measured by net income,
reflects management's intense focus on achieving sales growth, productivity
improvements at all levels that exceed the rate of general inflation, and
aggressively managing and reducing support costs.
Financial Condition
During 1995, cash from operations was $93.0 million, a portion of which resulted
from nonsustainable changes in working capital. This amount of cash provided the
funds necessary to meet working capital needs, increase the Company's short-term
investment portfolio, make capital expenditures, repay long-term debt, pay
dividends, and repurchase Company stock.
Cash, cash equivalents, and short-term investments totaled $46.9 million at
year-end 1995, compared to $30.7 million for 1994 and $44.4 million for 1993.
These funds, coupled with future cash from operations and additional long-term
debt, if needed, are expected to be adequate to finance operations, planned
improvements, and growth.
Management was successful in reducing year-end accounts receivable and
inventories for 1995, even though net sales increased year over year.
Net capital expenditures were $53.9 million in 1995, $35.0 million in 1994, and
$27.5 million in 1993. Approximately $11.0 million of the $53.9 million were for
facility capacity expansions and improvements with the remainder invested in
more productive machinery, equipment, and processes. Expenditures for 1994 and
1993 were principally for machinery, equipment, and process improvements. A
significant portion of the expenditures over the past three years has been
related to the production of new products.
Cash dividends were $0.48 per common share for 1995, $0.44 for 1994, and $0.40
for 1993. The Company has paid a cash dividend every quarter since April 15,
1955. The Company's dividend payout percentage has ranged from approximately 25%
to 33% of prior year earnings. The Company expects to continue its quarterly
cash dividend policy.
In 1995, the Company purchased 367,317 shares of its common stock at a cost of
approximately $9.8 million. In 1994, 1,078,835 shares were purchased at a cost
of approximately $29.6 million; and 751,399 shares were purchased in 1993 at a
cost of approximately $19.6 million. From time to time, the Company purchases
its own shares in open market transactions. The Company began acquiring its own
shares in 1985. Approximately 15.2 million shares have been repurchased since
then at a cost of approximately $206.9 million. As of December 30, 1995,
approximately $10.6 million of the Board's current purchase authorization
remained unspent.
The Company is involved in various legal actions arising in the course of
business, including a recent claim of patent infringement against certain past
sales of panel systems and certain environmental matters. With respect to the
patent claim, the Company believes it has meritorious defenses and will
vigorously defend its rights. These contingent liabilities are referenced in the
"Contingencies" note included in the Notes to Consolidated Financial Statements
and more fully described in "Item 3. Legal Proceedings" in the Company's Annual
Report on Form 10-K for the fiscal year ended December 30, 1995.
-15-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Financial Condition (Continued)
Management believes that the Company's contingent liability for these matters,
including the alleged patent infringement claim and the various environmental
issues, will not have a material effect on the financial position or operations
of the Company.
In early January 1996, the Company announced it had entered into an agreement to
sell all of the outstanding shares of its Ring King Visibles, Inc., subsidiary
to Esselte Corporation. Ring King manufactures and sells a variety of personal
computer accessories. This was followed by another announcement on January 24,
1996, that the sale of Ring King was completed for a cash sale price of $8.0
million and forgiveness of intercompany accounts receivables of approximately
$2.0 million. The sale will be recorded in the first quarter of 1996 and will
result in a gain for the Company. The Company chose to divest Ring King because
the personal computer accessory business no longer fits the Company's strategic
plan to focus on its two core businesses: office furniture and hearth products.
-16-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-----------------------------------------------------
The financial statements listed under Item 14 (a)(1) and (2) are filed as
part of this report.
The Summary of Unaudited Quarterly Results of Operations is presented in
the "Investor Information" section which follows the "Notes to the Consolidated
Financial Statements" filed as part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ---------------------
None.
-17-
<PAGE>
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT.
--------------------------------------
The information under the caption "Election of Directors" of the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on May 14,
1996, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
---------------------------------
The information under the caption "Executive Compensation" of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
May 14, 1996, is incorporated herein by reference.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------------------
MANAGEMENT.
- -----------
The information under the caption "Beneficial Owners of Common Stock" of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on May 14, 1996, is incorporated herein by reference.
The information under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" of the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held on May 14, 1996, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
---------------------------------------------------------
The information under the caption "Certain Relationships and Related
Transactions" of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 1996, is incorporated herein by reference.
-18-
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
-19-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
---------------------------------------------------------------------------
(a) (1) Financial Statements.
---------------------
The following consolidated financial statements of HON INDUSTRIES Inc.
and Subsidiaries included in the Company's 1995 Annual Report to
Shareholders are filed as a part of this report pursuant to Item 8:
Page
----
Report of Independent Auditors.................................. 25
Consolidated Statements of Income for the Years Ended
December 30, 1995; December 31, 1994; and January 1, 1994....... 26
Consolidated Balance Sheets -- December 30, 1995;
December 31, 1994; and January 1, 1994.......................... 27
Consolidated Statements of Shareholders' Equity for the Years
Ended December 30, 1995; December 31, 1994; and
January 1, 1994................................................. 28
Consolidated Statements of Cash Flows for the Years Ended
December 30, 1995; December 31, 1994; and January 1, 1994....... 29
Notes to Consolidated Financial Statements...................... 30
Investor Information (including Summary of Unaudited Quarterly
Results of Operations).......................................... 34
(2) Financial Statement Schedules.
------------------------------
The following consolidated financial statement schedule of the Company
and subsidiaries is attached pursuant to Item 14(d):
Schedule II Valuation and Qualifying Accounts for the
Years Ended December 30, 1995; December 31,
1994; and January 1, 1994 35
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
(b) Reports on Form 8-K.
--------------------
There were no reports on Form 8-K filed during the last quarter of the
period covered by this report.
-20-
<PAGE>
(c) Exhibits.
---------
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
Page(s) in
Exhibit Form 10-K
------- ---------
(3ii) By-Laws of the Registrant....................... 37
(21) Subsidiaries of the Registrant.................. 66
(23) Consent of Independent Auditors................. 67
(27) Financial Data Schedule......................... 68
(99A) Executive Bonus Plan of the Registrant.......... 69
(99B) Executive Long-Term Incentive Compensation Plan
of the Registrant............................... 73
(99C) ERISA Supplemental Retirement Plan of the
Registrant...................................... 78
(99D) 1995 Stock-Based Compensation Plan of the
Registrant...................................... 82
(d) Financial Statement Schedules.
------------------------------
See Item 14(a)(2).
-21-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
HON INDUSTRIES Inc.
Date: February 12, 1996 By /s/ Stanley M. Howe
----------------------------
Stanley M. Howe
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated. Each Director whose signature
appears below authorizes and appoints Stanley M. Howe as his or her attorney-in-
fact to sign and file on his or her behalf any and all amendments and post-
effective amendments to this report.
Signature Title Date
--------- ----- ----
/s/ Stanley M. Howe Chairman of the Board and 2/12/96
- ----------------------------- Director
Stanley M. Howe
/s/ Jack D. Michaels President and CEO, 2/12/96
- ----------------------------- Principal Executive Officer,
Jack D. Michaels and Director
/s/ Melvin L. McMains Controller and 2/12/96
- ----------------------------- Principal Accounting Officer
Melvin L. McMains
/s/ David C. Stuebe Vice President and 2/12/96
- ----------------------------- Chief Financial Officer
David C. Stuebe
-22-
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Robert W. Cox Director 2/12/96
- -----------------------------
Robert W. Cox
/s/ W. James Farrell Director 2/12/96
- -----------------------------
W. James Farrell
/s/ Robert L. Katz Director 2/12/96
- -----------------------------
Robert L. Katz
/s/ Lee Liu Director 2/12/96
- -----------------------------
Lee Liu
/s/ Celeste C. Michalski Director 2/12/96
- -----------------------------
Celeste C. Michalski
/s/ Michael S. Plunkett Director 2/12/96
- -----------------------------
Michael S. Plunkett
/s/ Herman J. Schmidt Director 2/12/96
- -----------------------------
Herman J. Schmidt
/s/ Richard H. Stanley Director 2/12/96
- -----------------------------
Richard H. Stanley
/s/ Jan K. Ver Hagen Director 2/12/96
- -----------------------------
Jan K. Ver Hagen
/s/ Lorne R. Waxlax Director 2/12/96
- -----------------------------
Lorne R. Waxlax
-23-
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
-24-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
HON INDUSTRIES Inc.
We have audited the accompanying consolidated balance sheets of HON INDUSTRIES
Inc. and subsidiaries as of December 30, 1995, December 31, 1994, and January 1,
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for the years then ended. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 HON
INDUSTRIES Inc. and subsidiaries as of December 30, 1995, December 31, 1994, and
January 1, 1994, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in the Notes to Consolidated Financial Statements, the Company
changed its method of accounting for postemployment benefits in 1994 and its
method of accounting for income taxes and postretirement benefits other than
pensions in 1993.
Ernst & Young LLP
Chicago, Illinois
January 30, 1996
-25-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Income
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................................................................. $893,119,000 $845,998,000 $780,326,000
Cost of products sold................................................................. 624,700,000 573,392,000 537,828,000
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Profit 268,419,000 272,606,000 242,498,000
Selling and administrative expenses................................................... 201,691,000 185,490,000 171,048,000
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 66,728,000 87,116,000 71,450,000
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income....................................................................... 2,358,000 2,470,000 2,524,000
Interest expense...................................................................... 3,569,000 3,248,000 3,120,000
- ------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes......................................................... 65,517,000 86,338,000 70,854,000
Income taxes.......................................................................... 24,419,000 31,945,000 26,216,000
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes.............................. 41,098,000 54,393,000 44,638,000
Cumulative effect of accounting changes............................................... -- (237,000) 489,000
Net Income......................................................................... $ 41,098,000 $ 54,156,000 $ 45,127,000
===================================================================================================================================
Net Income Per Common Share:
Income before cumulative effect of accounting changes................................. $1.35 $1.74 $1.39
Cumulative effect of accounting changes............................................... -- (.01) .02
Net Income......................................................................... $1.35 $1.73 $1.41
===================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-26-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Balance Sheets
- -----------------------------------------------------------------------------------------------------------------------------------
As of Year-End 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents.......................................................... $ 32,231,000 $ 27,659,000 $ 32,778,000
Short-term investments............................................................. 14,694,000 3,083,000 11,598,000
Receivables........................................................................ 88,178,000 94,269,000 83,650,000
Inventories........................................................................ 36,601,000 43,259,000 38,630,000
Deferred income taxes.............................................................. 14,180,000 11,565,000 11,304,000
Prepaid expenses and other current assets.......................................... 8,299,000 8,975,000 10,459,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 194,183,000 188,810,000 188,419,000
Property, Plant, and Equipment........................................................ 210,033,000 177,844,000 157,770,000
Other Assets.......................................................................... 5,302,000 5,914,000 6,216,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $409,518,000 $372,568,000 $352,405,000
====================================================================================================================================
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses.............................................. $117,273,000 $ 99,898,000 $ 97,205,000
Income taxes....................................................................... 5,361,000 4,949,000 6,936,000
Note payable and current maturities of long-term obligations....................... 6,281,000 6,246,000 6,618,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 128,915,000 111,093,000 110,759,000
Long-Term Debt and Other Liabilities.................................................. 45,911,000 46,080,000 45,260,000
Capital Lease Obligations............................................................. 7,700,000 8,661,000 5,854,000
Deferred Income Taxes................................................................. 10,757,000 12,094,000 10,979,000
Shareholders' Equity
Common stock....................................................................... 30,394,000 30,675,000 31,676,000
Paid-in capital.................................................................... 550,000 434,000 281,000
Retained earnings.................................................................. 193,505,000 174,642,000 161,079,000
Receivable from HON Members Company Ownership Plan................................. (8,214,000) (11,111,000) (13,483,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 216,235,000 194,640,000 179,553,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $409,518,000 $372,568,000 $352,405,000
===================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-27-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock
Balance, beginning of year......................................................... $ 30,675,000 $ 31,676,000 $ 32,369,000
Purchase of shares................................................................. (367,000) (1,078,000) (751,000)
Shares issued under Members Stock Purchase Plan
and restricted stock awards....................................................... 86,000 77,000 58,000
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year............................................................ $ 30,394,000 $ 30,675,000 $ 31,676,000
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-In Capital
Balance, beginning of year......................................................... $ 434,000 $ 281,000 $ 2,580,000
Purchase of shares................................................................. (1,725,000) (1,567,000) (3,615,000)
Shares issued under Members Stock Purchase Plan
and restricted stock awards....................................................... 1,841,000 1,720,000 1,316,000
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year............................................................ $ 550,000 $ 434,000 $ 281,000
- ------------------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance, beginning of year......................................................... $174,642,000 $161,079,000 $143,741,000
Net income......................................................................... 41,098,000 54,156,000 45,127,000
Purchase of shares................................................................. (7,699,000) (26,992,000) (15,202,000)
Dividends paid..................................................................... (14,536,000) (13,601,000) (12,587,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year............................................................ $193,505,000 $174,642,000 $161,079,000
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable from HON Members Company Ownership Plan
Balance, beginning of year......................................................... $(11,111,000) $(13,483,000) $(15,681,000)
Principal repaid by HON Members Company
Ownership Plan.................................................................... 2,897,000 2,372,000 2,198,000
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year............................................................ $ (8,214,000) $(11,111,000) $(13,483,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Balance, end of year............................................................ $216,235,000 $194,640,000 $179,553,000
===================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-28-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Cash Flows From (To) Operating Activities:
Net income.......................................................................... $ 41,098,000 $ 54,156,000 $ 45,127,000
Noncash items included in net income:
Depreciation and amortization..................................................... 21,416,000 19,042,000 16,631,000
Other postretirement and postemployment benefits.................................. 2,273,000 2,104,000 1,750,000
Deferred income taxes............................................................. (3,952,000) 854,000 (2,113,000)
Cumulative effect of accounting changes........................................... -- 237,000 (489,000)
Other-net......................................................................... 1,185,000 54,000 58,000
Changes in working capital:
Receivables....................................................................... 6,091,000 (10,619,000) (4,468,000)
Inventories....................................................................... 6,658,000 (4,629,000) (7,909,000)
Prepaid expenses and other current assets......................................... 676,000 1,484,000 (5,428,000)
Accounts payable and accrued expenses............................................. 17,009,000 4,619,000 16,434,000
Accrued facilities closing and reorganization expenses............................ 366,000 (1,885,000) 1,867,000
Income taxes...................................................................... 412,000 (1,847,000) 1,186,000
Increase in other liabilities....................................................... (216,000) 1,077,000 1,334,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (to) operating activities.................................... 93,016,000 64,647,000 63,980,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Flows From (To) Investing Activities:
Capital expenditures-net............................................................ (53,879,000) (35,005,000) (27,541,000)
Acquisition spending................................................................ -- -- (1,265,000)
Principal repaid by HON Members Company
Ownership Plan..................................................................... 2,897,000 2,372,000 2,198,000
Short-term investments-net.......................................................... (11,611,000) 8,515,000 (5,726,000)
Other-net........................................................................... (205,000) (291,000) (1,901,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (to) investing activities.................................... (62,798,000) (24,409,000) (34,235,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Flows From (To) Financing Activities:
Purchase of HON INDUSTRIES common stock............................................. (9,791,000) (29,637,000) (19,568,000)
Proceeds from long-term debt........................................................ 104,000 -- --
Payments of note and long-term debt................................................. (3,350,000) (3,916,000) (6,025,000)
Proceeds from sale of HON INDUSTRIES
common stock to members............................................................ 1,927,000 1,797,000 1,144,000
Dividends paid...................................................................... (14,536,000) (13,601,000) (12,587,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from (to) financing activities.................................... (25,646,000) (45,357,000) (37,036,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents................................... 4,572,000 (5,119,000) (7,291,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year......................................... 27,659,000 32,778,000 40,069,000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year............................................... $ 32,231,000 $ 27,659,000 $ 32,778,000
===================================================================================================================================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest.......................................................................... $ 3,401,000 $ 3,234,000 $ 3,219,000
Income taxes...................................................................... $ 27,560,000 $ 32,534,000 $ 27,144,000
===================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-29-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
Nature of Operations and Significant Customer Information
HON INDUSTRIES Inc. (the Company) is a national manufacturer of office furniture
and hearth products. The Company operates one principal line of business, the
manufacture of office furniture and accessories. The Company's hearth business,
whether based on assets, revenues, or earnings, is not of sufficient size to be
a reportable segment. Office furniture products are sold through a national
system of dealers, wholesalers, mass merchandisers, warehouse clubs, retail
superstores, end-user customers, and to the General Services Administration.
Dealer, wholesaler, and end-user customers are the major channels based on
sales. Hearth products include wood- and gas-burning factory-built fireplaces,
fireplace inserts, gas logs, and stoves. These products are sold through a
national system of dealers and wholesalers and large regional contractors. The
Company's products are marketed predominantly in the United States and, to a
much lesser extent, Canada and Mexico. The Company exports select products to a
limited number of markets outside North America through its export subsidiary;
how-ever, based on sales, it is not significant.
One customer accounted for approximately 13%, 13%, and 16% of consolidated net
sales in 1995, 1994, and 1993, respectively.
Summary of Significant Accounting Policies
Principles of Consolidation and Fiscal Year-End
- -----------------------------------------------
The consolidated financial statements include the accounts and transactions of
the Company and its subsidiaries. Intercompany accounts and transactions have
been eliminated in consolidation.
The Company's fiscal year ends on the Saturday nearest December 31. Fiscal year
1995 ended on December 30, 1995; 1994 ended on December 31, 1994; and 1993 ended
on January 1, 1994.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents generally consist of cash and commercial paper. These
securities have original maturity dates not exceeding three months from date of
purchase.
Short-Term Investments
- ----------------------
Short-term investments are classified as available-for-sale and are highly
liquid debt and equity securities. These investments are stated at cost which
approximates market value.
Receivables
- -----------
Accounts receivable are presented net of an allowance for doubtful accounts of
$1,867,000; $1,654,000; and $1,917,000 for 1995, 1994, and 1993, respectively.
Inventories
- -----------
Inventories are valued at the lower of cost or market, determined principally by
the last-in, first-out (LIFO) method.
Property, Plant, and Equipment
- ------------------------------
Property, plant, and equipment are carried at cost. Depreciation has been
computed by the straight-line method over estimated useful lives: land
improvements, 10-20 years; buildings, 10-40 years; and machinery and equipment,
4-12 years. The Company capitalized interest costs of $256,000 in 1995.
Product Development Costs
- -------------------------
Product development costs relating to the development of new products and
processes, including significant improvements and refinements to existing
products, are expensed as incurred. The amounts charged against income were
$11,591,000 in 1995, $10,081,000 in 1994, and $7,736,000 in 1993.
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.
New Accounting Policies
- -----------------------
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Statement requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company will adopt Statement No. 121 in the first quarter of 1996 and,
based on current estimates, does not believe the effect of adoption will be
material.
Changes in Business
On October 8, 1993, the Company announced the closing of its CorryHiebert
Corporation furniture plant located in Corry, Pennsylvania, which closed on
December 17, 1993. The closure resulted in a pretax charge of $3,980,000 (after-
tax effect of $2,507,000, or $.08 per share) recorded in the fiscal quarter
ended October 2, 1993.
Subsequent Events
On January 24, 1996, the Company completed the sale of its wholly owned
subsidiary Ring King Visibles, Inc., to Esselte Corporation, a wholly owned
subsidiary of Esselte AB, for a sale price of $8,000,000 in cash and the
forgiveness of intercompany receivables of approximately $2,000,000. Ring King
Visibles, Inc., manufactures and sells a variety of personal computer
accessories. The sale price will be finalized and recorded in the first quarter
of 1996 and will result in a gain for the Company. The sale did not and will not
have a significant effect on reported sales or earnings from normal operations
in the future.
<TABLE>
<CAPTION>
Inventories
1995 1994 1993
-------------------------
(In thousands)
<S> <C> <C> <C>
Finished products.............. $11,265 $13,554 $10,731
Materials and work in process.. 25,336 29,705 27,899
-------------------------
$36,601 $43,259 $38,630
=========================
</TABLE>
Current replacement cost exceeded the amount stated for inventories valued by
the LIFO method by approximately $13,594,000; $12,983,000; and $11,705,000 as of
year-end 1995, 1994, and 1993, respectively.
-30-
<PAGE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Property, Plant, and Equipment
1995 1994 1993
-----------------------------
(In thousands)
<S> <C> <C> <C>
Land and land improvements..................... $ 9,701 $ 8,832 $ 8,779
Buildings...................................... 95,310 84,801 81,409
Machinery and equipment........................ 208,707 185,421 158,386
Construction and equipment
installation in progress..................... 30,036 17,915 18,085
-----------------------------
343,754 296,969 266,659
Less allowances for depreciation............... 133,721 119,125 108,889
-----------------------------
$210,033 $177,844 $157,770
=============================
</TABLE>
<TABLE>
<CAPTION>
Accounts Payable and Accrued Expenses
1995 1994 1993
-----------------------------
(In thousands)
<S> <C> <C> <C>
Trade accounts payable......................... $ 47,617 $ 40,939 $ 36,873
Compensation................................... 4,855 3,343 2,843
Profit sharing and retirement expense.......... 11,490 11,066 10,913
Vacation pay................................... 8,492 8,579 8,083
Marketing expenses............................. 23,930 17,443 20,995
Workers' compensation, general, and
product liability expenses................... 4,032 4,700 5,032
Other accrued expenses......................... 16,857 13,828 12,466
-----------------------------
$117,273 $ 99,898 $ 97,205
=============================
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt and Other Liabilities
1995 1994 1993
----------------------------
(In thousands)
<S> <C> <C> <C>
Industrial development revenue
bonds, various issues, payable
through 2013 with interest
at 4.50-8.50% per annum........................ $24,542 $24,928 $25,396
Note payable to bank, payable
quarterly through 1997 with
interest at a variable rate
(6.56% at year-end 1995)....................... 7,750 9,700 12,100
Accrued employee health care costs............. 6,503 4,230 1,750
Other notes and amounts........................ 7,116 7,222 6,014
----------------------------
$45,911 $46,080 $45,260
============================
</TABLE>
<TABLE>
<CAPTION>
Aggregate maturities of long-term debt are as follows (in thousands):
<S> <C>
1996 $ 3,060
1997 8,282
1998 551
1999 564
2000 719
Thereafter 24,765
</TABLE>
Certain of the above borrowing arrangements include covenants which require the
maintenance of a minimum level of working capital, place restrictions on the
payment of cash dividends, and limit the assumption of additional debt and lease
obligations. Approximately $165,187,000 of retained earnings were unrestricted
at the end of 1995.
The fair value of the Company's outstanding long-term debt obligations at year-
end 1995 approximates the recorded aggregate amount. Property, plant, and
equipment, with net carrying values of approximately $30,165,000 at the end of
1995, are mortgaged.
Income Taxes
Effective January 3, 1993, the Company changed its method of accounting for
income taxes as required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS No. 109). The cumulative effect of adopting
FAS No. 109 at January 3, 1993, was to increase net income by $489,000, or $.02
a share.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal...................................... $25,360 $27,504 $ 26,084
State........................................ 3,011 3,587 2,734
----------------------------
28,371 31,091 28,818
Deferred....................................... (3,952) 854 (2,602)
----------------------------
$24,419 $31,945 $26,216
============================
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Federal statutory tax rate..................... 35.0% 35.0% 35.0%
State taxes, net of federal
tax effect................................... 2.6 2.8 2.4
Other, net..................................... (.3) (.8) (.4)
--------------------------
Effective tax rate............................. 37.3% 37.0% 37.0%
==========================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
(In thousands)
<S> <C> <C> <C>
Net long-term deferred tax liabilities:
Tax over book depreciation................... $(16,358) $(13,630) $(11,620)
Other, net................................... 5,601 1,536 641
-----------------------------
Total net long-term deferred
tax liabilities............................ (10,757) (12,094) (10,979)
-----------------------------
Net current deferred tax assets:
Workers' compensation, general,
and product liability accruals............. 1,670 2,029 2,610
Vacation accrual............................. 3,167 3,180 2,988
Other, net................................... 9,343 6,356 5,706
-----------------------------
Total net current deferred tax
assets................................. 14,180 11,565 11,304
-----------------------------
Net deferred tax (liabilities)
assets................................. $ 3,423 $ (529) $ 325
=============================
</TABLE>
-31-
<PAGE>
HON INDUSTRIES Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shareholders' Equity and Earnings Per Share
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Common Stock, $1 Par Value
Authorized......................... 100,000,000 100,000,000 100,000,000
Issued and outstanding............. 30,394,337 30,674,603 31,675,846
Preferred Stock
Authorized......................... 1,000,000 1,000,000 1,000,000
Issued and outstanding............. -- -- --
</TABLE>
The Company purchased 367,317; 1,078,835; and 751,399 shares of its common stock
during 1995, 1994, and 1993, respectively.
Cash dividends declared and paid per share for each year are:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------
<S> <C> <C> <C>
Common shares........................ $.48 $.44 $.40
</TABLE>
Net income per common share is based on the weighted average number of shares of
common stock outstanding during each year including allocated and unallocated
ESOP shares.
Shares of common stock were issued in 1995, 1994, and 1993 pursuant to a
members' stock purchase plan as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------
<S> <C> <C> <C>
Shares issued........................ 86,049 77,302 49,816
Average price per share.............. $22.39 $23.25 $22.96
</TABLE>
The Company uses the par value method of accounting for common stock
repurchases. The excess of the cost of shares acquired over their par value is
allocated to Paid-In Capital to the extent appropriate, with the excess charged
to Retained Earnings.
During 1994, shareholders approved the 1994 Members' Stock Purchase Plan. Under
the new plan, 500,000 shares of common stock were registered for issuance to
participating members. Beginning on July 3, 1994, rights to purchase stock are
granted on a quarterly basis to all members who have one year of employment
eligibility and work a minimum of 20 hours per week. The price of the stock
purchased under the plan is 85% of the closing price on the applicable purchase
date. No member may purchase stock under the plan in an amount which exceeds the
lesser of 20% of his or her gross earnings or 2,000 shares, with a maximum fair
market value of $25,000 in any calendar year. An additional 336,649 shares were
available for issuance under the plan at December 30, 1995.
The Company has granted restricted stock awards aggregating 75,500 shares of
common stock to officers. The officers are entitled to dividends and have voting
rights on all shares awarded. Unearned compensation expense, representing the
fair market value of the shares at the date of grant, is charged to income over
the vesting period. Approximately$37,000; $37,000; and $223,000 were charged to
income as a result of the awards for the years 1995, 1994, and 1993,
respectively. At year-end 1995, all of the awarded shares were vested.
Pursuant to the Company's Shareholder Rights Plan, each share of common stock
carries with it one Right. Each Right entitles a shareholder to buy one two-
hundredth of a share of a new series of preferred stock at an exercise price of
$75.00. Each one two-hundredth of a share of the new preferred stock has terms
designed to make it the economic equivalent of one share of common stock. Rights
will be exercisable only if a person or group acquires 20% or more of the
Company's common stock or announces a tender offer, the consummation of which
would result in ownership by a person or group of 20% or more of the common
stock. If the Company is acquired in a merger or other business combination
transaction, each Right will entitle its holder to purchase, at the then current
exercise price of the Right, a number of the acquiring company's common shares
having a market value at that time of twice the exercise price of the Right.
The Company has entered into change in control employment agreements with
corporate officers and certain other key employees. According to the agreements,
a change in control occurs when a third person or entity becomes the beneficial
owner of 20% or more of the Company's common stock or when more than one-third
of the Company's Board of Directors is composed of persons not recommended by at
least three-fourths of the incumbent Board of Directors. Upon a change in
control, a key employee is deemed to have a two-year employment with the
Company, and all his or her benefits are vested under Company plans. If, at any
time within two years of the change in control, his or her position, salary,
bonus, place of work, or Company-provided benefits are modified, or employment
is terminated by the Company for any reason other than cause or by the key
employee for good reason, as such terms are defined in the agreement, then the
key employee is entitled to receive a severance payment equal to two times
salary and the average of the prior two years' bonuses.
Retirement Benefits
The Company has defined contribution profit-sharing plans covering substantially
all employees who are not participants in certain defined benefit plans. The
Company's annual contribution to the defined contribution plans is based on
employee eligible earnings and results of operations and amounted to
$10,955,000; $10,849,000; and $10,092,000 in 1995, 1994, and 1993, respectively.
The Company sponsors defined benefit plans which include a limited number of
salaried and hourly employees at certain subsidiaries. The Company's funding
policy is generally to contribute annually the minimum actuarially computed
amount. Net pension costs relating to these plans were $256,000; $228,000; and
$172,000 for 1995, 1994, and 1993, respectively. The actuarial present value of
benefit obligations, less related plan assets at fair value, is not significant.
In 1992, the Company established a trust to administer a newly adopted leveraged
employee stock ownership plan (ESOP), the HON Members Company Ownership Plan.
Company contributions based on employee eligible earnings and dividends on the
shares are used to make loan interest and principal payments. As the loan is
repaid, shares are distributed to the ESOP trust for allocation to participants.
Selected financial data pertaining to the ESOP is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------
(In thousands, except share data)
<S> <C> <C> <C>
Company contribution to ESOP.......... $3,302 $ 2,977 $ 2,962
Dividend income of ESOP............... 436 403 366
Company interest expense on ESOP
loan.................................. 749 656 605
Shares of common stock allocated to
ESOP participant accounts............. 149,749 133,945 133,666
Shares held in suspense (unallocated)
by ESOP as of year-end................ 376,672 526,421 660,366
Fair value of shares held in suspense
by ESOP as of year-end................ $8,758 $14,082 $18,490
Closing market price of common stock
as of year-end........................ $23.25 $ 26.75 $ 28.00
</TABLE>
In 1994, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits." The cumulative effect
of adoption was to reduce net income by $237,000 after tax, or $.01 a share.
-32-
<PAGE>
- -------------------------------------------------------------------------------
Postretirement Health Care
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," as of
January 3, 1993, and recorded the cumulative effect of the accounting change on
the deferred recognition basis.
The following table sets forth the funded status of the plan, reconciled to the
accrued postretirement benefits cost recognized in the Company's balance sheet
at:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
(In thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees........................................... $ 8,138 $ 6,947 $ 7,192
Fully eligible active plan participants............ 5,612 3,816 3,374
Other active plan participants..................... 7,809 6,397 6,368
Unrecognized net loss................................ (933) (713) (1,659)
Unrecognized prior service cost...................... (2,922) -- --
Unrecognized transition obligation................... (12,214) (12,932) (13,650)
-------------------------------
Accrued postretirement benefit cost.................. $ 5,490 $ 3,515 $ 1,625
===============================
Net periodic postretirement benefits costs include:
Service cost......................................... $ 685 $ 687 $ 603
Interest cost........................................ 1,344 1,242 1,134
Amortization of transition obligation
over 20 years...................................... 718 718 718
-------------------------------
Net periodic postretirement
benefits cost...................................... $ 2,747 $ 2,647 $ 2,455
===============================
</TABLE>
The discount rates at fiscal year-end 1995, 1994, and 1993 were 7.75%, 8.0%, and
7.5%, respectively. The pre-65 1996 gross trend rates begin at 11.3% for the
medical and prescription drug coverages and grade down to 5.9% in 2006 and
remain at this level for all future years. The post-64 gross trend rates begin
at 8.3% for the medical coverage and decrease until the maximum Company subsidy
(cap) is reached in 2003. For the prescription drug coverage, the 1996 gross
trend rates begin at 11.3% and decrease until the cap is reached in 2001. If the
medical trend rates were increased by 1.0% for each year, the accumulated
postretirement benefit obligation as of December 30, 1995, would increase by
$506,000; and, the sum of the service and interest cost components of the net
periodic postretirement benefit cost for fiscal year 1995 would increase by
$45,000. The Company's postretirement health care plans are not funded.
Leases
The Company leases certain warehouse and plant facilities and equipment.
Commitments for minimum rentals under noncancellable leases at the end of 1995
are as follows:
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
-------------------------------
(In thousands)
<S> <C> <C>
1996.................................... $ 1,571 $ 3,174
1997.................................... 2,024 2,112
1998.................................... 2,024 1,614
1999.................................... 2,024 1,228
2000.................................... 2,024 484
Thereafter.............................. 3,186 377
------- -------
Total minimum lease
payments............................... 12,853 $ 8,989
Less amount representing =======
interest............................... 4,408
-------
Present value of net
minimum lease payments,including
current maturities of $745,000 ........ $ 8,445
=======
Property, plant, and equipment at year-end include the following amounts for
capitalized leases:
1995 1994 1993
-------------------------
(In thousands)
<S> <C> <C> <C>
Buildings............................... $ 3,299 $ 3,709 $ 3,709
Machinery and equipment................. 8,419 8,419 8,286
-------------------------
11,718 12,128 11,995
Less allowances for
depreciation........................... 3,569 2,507 4,376
-------------------------
$ 8,149 $ 9,621 $ 7,619
=========================
</TABLE>
Rent expense for the years 1995, 1994, and 1993 amounted to approximately
$7,439,000; $6,572,000; and $4,854,000, respectively. Contingent rent expense
under both capitalized and operating leases (generally based on mileage of
transportation equipment) amounted to $608,000; $525,000; and $490,000 for the
years 1995, 1994, and 1993, respectively.
Contingencies
The Company is involved in various legal actions arising in the course of
business. Although management cannot predict the ultimate outcome of these
matters with certainty, it believes, after taking into consideration legal
counsel's evaluation of such actions, that the outcome of these matters will not
have a material effect on the financial position or operations of the Company.
On December 28, 1995, Haworth, Inc., filed a complaint in Federal District Court
alleging that certain products sold by the Company and its subsidiaries
infringed its patents covering panel systems and asking for damages in an
unspecified amount. These patents expired November 29, 1994, and no claim has
been made with respect to Company products sold after that date. The Company
believes it has meritorious defenses and will vigorously defend its rights.
The Company and certain subsidiaries are party to three environmental actions
which have arisen in the ordinary course of business. These include possible
obligations to investigate and mitigate the effects on the environment of the
disposal or release of certain chemical substances at various sites, such as
Superfund sites and other operating or closed facilities. The effect of these
actions on the Company's financial position and operations to date has not been
significant. The Company is participating in environmental assessments and
monitoring, and liabilities have been accrued reflecting management's best
estimate of the eventual future cost of the Company's anticipated share (based
upon estimated ranges of remediation costs, the existence of many other larger
"potentially responsible parties" who are financially viable to share in such
costs, the Company's experience to date in relation to the determination of its
allocable share, the volume and type of waste the Company is believed to have
contributed to each site, and the anticipated periods of time over which such
costs may be paid) of remediation costs. Potential insurance reimbursements are
not anticipated. The Company is also reviewing available defenses and claims it
may have against third parties. Due to such factors as the wide discretion of
regulatory authorities regarding clean-up levels and uncertain allocation of
liability at multiple party sites, estimates made prior to the approval of a
formal plan of action represent management's best judgment as to estimates of
reasonably foreseeable expenses based upon average remediation costs at
comparable sites. While the final resolution of these contingencies could result
in expenses in excess of current accruals and therefore have an impact on the
Company's consolidated financial results in a future reporting period,
management believes that the ultimate outcome will not have a material effect on
the Company's financial position or operations.
-33-
<PAGE>
<TABLE>
<CAPTION>
HON INDUSTRIES Inc. and Subsidiaries
Investor Information
- ----------------------------------------------------------------------------------------------------------------------------------
Summary of Unaudited Quarterly
Results of Operations
First Second Third Fourth Total
Quarter Quarter Quarter* Quarter** Year
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year-End 1995:
Net sales................ $216,498 $206,604 $228,195 $241,822 $893,119
Gross profit............. 68,942 60,358 67,876 71,243 268,419
Income before income
taxes................... 20,119 12,366 19,448 13,584 65,517
Income taxes............. 7,544 4,638 7,209 5,028 24,419
Net income............... 12,575 7,728 12,239 8,556 41,098
Net income per common
share................... .41 .25 .41 .28 1.35
Year-End 1994:
Net sales................ $200,693 $193,045 $222,112 $230,148 $845,998
Gross profit............. 63,374 59,713 71,005 78,514 272,606
Income before income
taxes................... 18,458 14,637 24,659 28,584 86,338
Income taxes............. 6,830 5,415 9,124 10,576 31,945
Income before cumulative
effect of accounting
change.................. 11,628 9,222 15,535 18,008 54,393
Cumulative effect of
accounting change....... (237) -- -- -- (237)
Net income............... 11,391 9,222 15,535 18,008 54,156
Net income per common
share:
Income before cumulative
effect of
accounting change....... .37 .30 .49 .58 1.74
Cumulative effect of
accounting change....... (.01) -- -- -- (.01)
Net income per common
share................... .36 .30 .49 .58 1.73
Year-End 1993:
Net sales................ $186,111 $177,537 $203,070 $213,608 $780,326
Gross profit............. 55,457 53,643 64,024 69,374 242,498
Income before income
taxes................... 12,807 12,946 18,628 26,473 70,854
Income taxes............. 4,675 4,725 7,021 9,795 26,216
Income before cumulative
effect of accounting
change.................. 8,132 8,221 11,607 16,678 44,638
Cumulative effect of
accounting change....... 489 -- -- -- 489
Net income............... 8,621 8,221 11,607 16,678 45,127
Net income per common
share:
Income before cumulative
effect of
accounting change....... .25 .25 .36 .53 1.39
Cumulative effect of
accounting change....... .02 -- -- -- .02
Net income per common
share................... .27 .25 .36 .53 1.41
</TABLE>
* In 1993, includes a pretax charge of $3,980,000 (after-tax effect of
$2,507,000, or $.08 per share) for discontinuing the operations of a
subsidiary.
**In 1995, includes various pretax charges totaling $5,575,000 (after-tax
effect of $3,512,000, or $.12 per share) for nonrecurring costs primarily
associated with closing several leased facilities and severance arrangements
from eliminating certain administrative positions.
<TABLE>
<CAPTION>
Common Stock Market Price and Price/
Earnings Ratio (Unaudited)
Annual 1995 -- 1985
Price/
Market Earnings
Price* Earnings Ratio
----------------- per ----------------
Year High Low Share* High Low
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 $ 31/1/4 $ 23 $ 1.35 23 17
1994 34 24 1.73 20 14
1993 29/1/4 21/1/2 1.41 21 15
1992 23/1/2 16/1/2 1.18 20 14
1991 20/1/2 13/1/4 1.02 20 13
1990 23 13/1/2 1.30 18 10
1989 19/7/8 8/3/4 .79 25 11
1988 10/1/4 7/7/8 .94 11 8
1987 11/1/2 8/1/8 .62 19 13
1986 9/7/8 7 .71 14 10
1985 7/3/4 4/1/8 .61 13 7
------------
Eleven-Year Average 19 12
============
</TABLE>
*Adjusted for the effect of stock splits
<TABLE>
<CAPTION>
Common Stock Market Prices and Dividends
(Unaudited)
Quarterly 1995 -- 1994
1995 by Dividends
Quarter High Low per Share
- --------------------------------------------------
<S> <C> <C> <C>
1st $ 30/1/2 $ 23 $ .12
2nd 30 25/3/4 .12
3rd 31/1/4 25/1/2 .12
4th 29/3/4 23/1/4 .12
-----
Total Dividends Paid $ .48
=====
</TABLE>
<TABLE>
<CAPTION>
1994 by Dividends
Quarter High Low per Share
-------------------------------------------------
<S> <C> <C> <C>
1st $ 34 $ 24 1/2 $ .11
2nd 34 26 1/4 .11
3rd 27 3/8 24 .11
4th 28 1/2 25 1/4 .11
-----
Total Dividends Paid $ .44
=====
</TABLE>
-34-
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
HON INDUSTRIES Inc. AND SUBSIDIARIES
December 30, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS Deductions-- Balance at
DESCRIPTION Balance at Beginning ----------------------------------- Describe End of
of Period (1) (2) Period
Charged to Costs Charged to Other
and Expenses Accounts--Describe
- ----------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Reserves deducted in the consolidated
balance sheet from the assets to
which they apply:
Year ended December 30, 1995:
Allowance for doubtful accounts $1,654 $1,099 $ 886(A) $1,867
====== ====== ===== ======
Year ended December 31, 1994:
Allowance for doubtful accounts $1,917 $ 594 $ 857(A) $1,654
====== ====== ===== ======
Year ended January 1, 1994:
Allowance for doubtful accounts $1,964 $ 632 $ 679(A) $1,917
====== ====== ===== ======
</TABLE>
Note A--Excess of accounts written off over recoveries.
-35-
<PAGE>
ITEM 14(a)(3) - INDEX OF EXHIBITS.
- ----------------------------------
<TABLE>
<CAPTION>
Page
----
Exhibits
- --------
<S> <C> <C>
(3ii) By-Laws of the Registrant................. 37
(21) Subsidiaries of the Registrant............ 66
(23) Consent of Independent Auditors........... 67
(27) Financial Data Schedule................... 68
(99A) Executive Bonus Plan of the Registrant.... 69
(99B) Executive Long-Term Incentive Compensation
Plan of the Registrant.................... 73
(99C) ERISA Supplemental Retirement Plan of the
Registrant................................ 78
(99D) 1995 Stock-Based Compensation Plan of the
Registrant................................ 82
</TABLE>
<PAGE>
Exhibit (3ii)
BY-LAWS
OF
HON INDUSTRIES Inc.
Includes all amendments through November 13, 1995
-1-
<PAGE>
INDEX TO BY-LAWS
HON INDUSTRIES Inc.
ARTICLE 1. OFFICES AND PLACES OF BUSINESS
- ------------------------------------------
1.01. Principal Place of Business.
1.02. Registered Office.
1.03. Other Places.
ARTICLE 2. SHAREHOLDERS
- ------------------------
2.01. Annual Meeting.
2.02. Special Meetings.
2.03. Place of Shareholders' Meetings.
2.04. Notice of Shareholders' Meetings.
2.05. Closing of Transfer Books; Fixing of Record Date.
2.06. Voting List.
2.07. Quorum of Shareholders.
2.08. Adjourned Meetings.
2.09. Vote Required for Action.
2.10. Proxies.
2.11. Shareholders' Voting Rights.
2.12. Voting of Shares by Certain Holders.
2.13. Organization.
2.14. Waiver of Notice by Shareholders.
2.15. Postponement of Shareholders' Meetings.
2.16. Notice of Shareholder Business and Nominations.
ARTICLE 3. BOARD OF DIRECTORS
- ------------------------------
3.01. General Powers.
3.02. Election of Directors.
3.03. Number, Terms, Classification, and Qualifications.
3.04. Vacancies in Board.
3.05. Regular Meetings.
3.06. Special Meetings.
3.07. Place of Meetings.
3.08. Notice of Special Meetings.
3.09. Quorum.
3.10. Adjourned Meetings.
3.11. Vote Required for Action.
3.12. Voting.
3.13. Organization.
3.14. Rules and Order of Business.
3.15. Presumption of Assent.
3.16. Waiver of Notice by Directors.
3.17. Informal Action by Directors.
3.18. Committees.
3.19. Compensation.
-2-
<PAGE>
ARTICLE 4. OFFICERS
- --------------------
4.01. Number and Designation.
4.02. Election or Appointment of Officers.
4.03. Tenure and Qualifications.
4.04 Removal.
4.05. Vacancies.
4.06. Duties and Powers of Officers.
4.07. Chairman of the Board of Directors; Vice-Chairman;
President.
4.08. Vice-Presidents.
4.09. Secretary.
4.10. Treasurer.
4.11. Assistant Secretaries.
4.12. Assistant Treasurers.
4.13. Compensation.
4.14. Bond.
ARTICLE 5. SHARES AND CERTIFICATES
- -----------------------------------
5.01. Issuance of and Consideration for Shares.
5.02. Restrictions on Issuance of Shares and Certificates.
5.03. Certificates Representing Shares.
5.04. Lost, Destroyed, Stolen, or Mutilated Certificates.
5.05. Transfer of Shares.
5.06. Shareholders of Record; Change of Name or Address.
5.07. Regulations.
ARTICLE 6. GENERAL PROVISIONS
- ------------------------------
6.01. Seal.
6.02. Fiscal Year.
6.03. Dividends.
6.04. Execution of Documents and Instruments.
6.05. Loans.
6.06. Checks and Drafts.
6.07. Voting of Shares Owned by Corporation.
6.08. Interest of Directors in Transactions.
6.09. Indemnification.
6.10. Duty of Care.
6.11. Reliance on Documents.
6.12. Effect of Partial Invalidity.
6.13. Definitions.
6.14. Authority to Carry Out Resolutions and Motions.
ARTICLE 7. AMENDMENTS
- ----------------------
7.01. Reservation of Right to Amend.
7.02. Procedure to Amend.
-3-
<PAGE>
BY-LAWS
OF
HON INDUSTRIES Inc.
Adopted on September 7, 1960. Amended on
April 23, 1964, April 28, 1966, August 13, 1969,
April 15, 1970, February 12, 1976, July 23, 1976,
January 11, 1977, February 13, 1977, April 18, 1977,
July 28, 1977, July 29, 1977, October 27, 1977,
February 27, 1978, February 19, 1979, August 1, 1979,
March 3, 1980, April 30, 1980, October 29, 1980,
August 3, 1982, January 31, 1983, October 31, 1983,
October 30, 1984, February 5, 1985, May 6, 1985,
February 4, 1986, August 5, 1986, February 15, 1988,
July 7, 1988, March 13, 1990, February 11, 1991,
April 29, 1991, July 29, 1991, May 5, 1992, November 2,
1992, May 11, 1993, February 14, 1994, May 10, 1994,
and November 13, 1995.
ARTICLE 1. OFFICES AND PLACES OF BUSINESS
------------------------------------------
Section 1.01. Principal Place of Business. The principal place of
business of the Corporation shall be located in such place, within or without
the State of Iowa, as shall be fixed by or pursuant to authority granted by the
Board of Directors from time to time.
Section 1.02. Registered Office. The registered office of the Corporation
required by the Iowa Business Corporation Act to be maintained in the State of
Iowa may be, but need not be, the same as its principal place of business. The
registered office may be changed from time to time by the Board of Directors as
provided by law.
Section 1.03. Other Places. The Corporation may conduct its business,
carry on its operations, have offices, carry out any or all of its purposes, and
exercise any or all of its powers anywhere in the world, within or without the
State of Iowa.
ARTICLE 2. SHAREHOLDERS
------------------------
Section 2.01. Annual Meeting. The annual meeting of the shareholders
shall be held in each year at such time and place as shall be fixed by the Board
of Directors or by the Chairman of the Board of Directors; provided, however,
that the annual meeting shall not be scheduled on a legal holiday in the state
where held. Any previously scheduled annual meeting may be postponed by
resolution of the Board of Directors and on public notice given prior to the
date previously scheduled for such annual meeting. At the annual meeting, the
shareholders shall
-4-
<PAGE>
elect Directors as provided in Section 3.02 and may conduct any other business
properly brought before the meeting. (As amended 4/23/64, 8/1/79, 10/31/83, and
4/29/91.)
Section 2.02. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, may be called, and the time and place thereof fixed by
the Board of Directors or by the holders of not less than one-tenth of the
outstanding shares entitled to vote at the meeting. Business conducted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice of the meeting. Any previously scheduled special meeting of shareholders
may be postponed by resolution of the Board of Directors and public notice given
prior to the date previously scheduled for such special meeting of shareholders.
(As amended 4/23/64, 8/1/79, and 4/29/91.)
Section 2.03. Place of Shareholders' Meetings. Any annual meeting or
special meeting of shareholders may be held at any place, either within or
without the State of Iowa. The place of each meeting of shareholders shall be
fixed as provided in these By-laws, or by a waiver or waivers of notice fixing
the place of such meeting and signed by all shareholders entitled to vote at
such meeting. If no designation is made of the place of a meeting of
shareholders, the place of meeting shall be the registered office of the
Corporation in the State of Iowa.
Section 2.04. Notice of Shareholders' Meetings. Written or printed notice
stating the place, day, and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days (unless a longer period shall be required by
law) nor more than sixty days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
officer or persons calling the meeting, to each shareholder 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 shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. (As amended 4/29/91.)
Section 2.05. Closing of Transfer Books; Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least fifteen days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors
-5-
<PAGE>
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy days and, in
case of a meeting of shareholders, not less than fifteen days prior to the date
on which the particular action, requiring such determination of shareholders, is
to be taken. If the Board of Directors does not provide that the stock transfer
books shall be closed and does not fix a record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the record date for such
determination of shareholders shall be seventy days prior to the date fixed for
such meeting or seventy days prior to the date of payment of such dividend, as
the case may be. When any record date is fixed for any determination of
shareholders such determination of shareholders shall be made as of the close of
business on the record date. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof. (As amended 4/30/80,
8/3/82 and 4/29/91.)
Section 2.06. Voting List. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten days prior to such meeting shall be kept on file
at the registered office of the Corporation and shall be subject to inspection
by any shareholder at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders. Failure to comply with the requirements of
this Section shall not affect the validity of any action taken at such meeting.
(As amended 4/29/91.)
Section 2.07. Quorum of Shareholders. Except as otherwise expressly
provided by the Articles of Incorporation or these By-laws, a majority of the
outstanding common shares entitled to vote, represented in person or by proxy,
shall onstitute a quorum at any meeting of shareholders.
Section 2.08. Adjourned Meetings. Any meeting of share-holders may be
adjourned from time to time and to any place, without further notice, by the
chairman of the meeting or by the affirmative vote of the holders of a majority
of the outstanding common shares entitled to vote and represented at the
meeting, even if less than a quorum. At any adjourned meeting at which a quorum
shall be present, any business may be transacted which
-6-
<PAGE>
might have been transacted at the meeting as originally notified. (As amended
4/29/91.)
Section 2.09. Vote Required for Action. The vote required for the
adoption of any motion or resolution or the taking of any action at any meeting
of shareholders shall be as provided in the Articles of Incorporation. However,
action may be taken on the following procedural matters by the affirmative vote
of the holders of a majority of the outstanding common shares entitled to vote
and represented at the meeting, even if less than a quorum: election or
appointment of a Chairman or temporary Secretary of the meeting (if necessary),
or adoption of any motion to adjourn or recess the meeting or any proper
amendment of any such motion. Whenever the minutes of any meeting of
shareholders shall state that any motion or resolution was adopted or that any
action was taken at such meeting of shareholders, such minutes shall be prima
facie evidence that such motion or resolution was duly adopted or that such
action was duly taken by the required vote, and such minutes need not state the
number of shares voted for and against such motion, resolution, or action.
Section 2.10. Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote either in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney in fact. Each such proxy
shall be filed with the Secretary of the Corporation or the person acting as
Secretary of the meeting, before or during the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.
Section 2.11. Shareholders' Voting Rights. Each outstanding share
entitled to vote shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders, except as otherwise provided in the Articles
of Incorporation. Voting rights for the election of Directors shall be as
provided in Section 3.02 and in the Articles of Incorporation. (As amended
2/12/76.)
Section 2.12. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the By-laws of such corporation may prescribe, or, in the
absence of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian, or conservator may be voted
by him, either in person or by proxy, without a transfer of such shares into his
name.
Shares standing in the name of a trustee may be voted by him, either in person
or by proxy, but no trustee shall be
-7-
<PAGE>
entitled to vote shares held by him without a transfer of such shares into his
name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so be contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Treasury shares shall not be voted at any meeting or counted in determining the
total number of outstanding shares at any given time.
Section 2.13. Organization. The Chairman of the Board of Directors or the
Vice-Chairman or the President or a Vice-President, as provided in these By-
laws, shall preside at each meeting of shareholders; but if the Chairman of the
Board of Directors, the Vice-Chairman, the President, and each Vice-President
shall be absent or refuse to act, the shareholders may elect or appoint a
Chairman to preside at the meeting. The Secretary or an Assistant Secretary, as
provided in these By-laws, shall act as Secretary of each meeting of
shareholders; but if the Secretary and each Assistant Secretary shall be absent
or refuse to act, the shareholders may elect or appoint a temporary Secretary to
act as Secretary of the meeting. (As amended 4/23/64 and 8/1/79.)
Section 2.14. Waiver of Notice by Shareholders. Whenever any notice
whatsoever is required to be given to any shareholder of the Corporation under
any provision of law or the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether signed before or after the time of the meeting or event of which notice
is required, shall be deemed equivalent to the giving of such notice. Neither
the business to be conducted at, nor the purpose of, any annual or special
meeting of shareholders need be specified in any waiver of notice of such
meeting. The attendance of any shareholder, in person or by proxy, at any
meeting of shareholders shall constitute a waiver by such shareholder of any
notice of such meeting to which such shareholder would otherwise be entitled,
and shall constitute consent by such shareholder to the place, day, and hour of
such meeting and all business which may be conducted at such meeting, unless
such shareholder attends such meeting and objects at such meeting to any
business conducted because the meeting is not lawfully called or convened. (As
amended 4/29/91.)
-8-
<PAGE>
Section 2.15. Postponement of Shareholders' Meetings. Any meeting of the
shareholders may be postponed prior to the record date by the Board of Directors
or by the Chairman. Written or printed notice of the postponement shall be
delivered not less than 10 days nor more than 60 days before the date set for
the meeting, either personally or by mail to each shareholder of record entitled
to vote. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his or her address as
it appears on the stock transfer books of the Corporation, with postage thereon
prepaid. (As adopted 2/11/91.)
Section 2.16. Notice of Shareholder Business and Nominations.
(a) Annual Meeting of Shareholders.
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (i) pursuant
to the Corporation's notice of meeting, (ii) by or at the direction of the
Board of Directors, or (iii) by any shareholder of the Corporation who was
a share-holder of record at the time of giving of notice provided for in
this By-law, who is entitled to vote at the meeting and who complies with
the notice procedures set forth in this By-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to Subsection 2.15(a)(1)(iii), the
shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the
Corporation not less than sixty days nor more than ninety days prior to the
first anniversary of the preceding year's annual meeting of shareholders;
provided, however, that, if the date of the annual meeting is advanced by
more than thirty days or delayed by more than sixty days from such
anniversary date, notice by the shareholder, to be timely, must be so
delivered not earlier than ninety days prior to such annual meeting and not
later than the close of business on the later of the sixtieth day prior to
such annual meetingor the tenth day following the date on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth:
(i) as to each person whom the shareholder proposes to nominate
for election or reelection as a Director, all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each
case pursuant to Regulation 14A under the
-9-
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected;
(ii) as to any other business that the shareholder proposes to
bring before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting such
business at the meeting, and any material interest of such shareholder
in such business and the beneficial owner, if any, on whose behalf the
proposal is made; and
(iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, the
name and address of such shareholder and of such beneficial owner as
they appear on the Corporation's books, and the class and number of
shares of the Corporation which are owned beneficially and of record
by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of Subsection
2.15(a)(2) to the contrary, if the number of Directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all the nominees for Director or
specifying the size of the increased Board of Directors at least seventy
days prior to the first anniversary of the preceding year's annual meeting
of shareholders, a shareholder's notice required by this By-law shall also
be considered timely, but only with respect to nominees for any new
positions created by such increase, if it is delivered to the Secretary at
the principal executive offices of the Corporation not later than the close
of business on the tenth day following the date on which such public
announcement is first made by the Corporation.
(b) Special Meetings of Shareholders. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
shareholders at which Directors are to be elected pursuant to the Corporation's
notice of meeting (1) by or at the direction of the Board of Directors or (2) by
any shareholder of the Corporation who was a shareholder of record at the time
of giving of notice provided for in this By-law, who is entitled to vote at the
meeting, and who complies with the notice procedures set forth in this By-law.
Nominations by shareholders of persons for election to the Board of Directors
may be made at such a special meeting of shareholders if the shareholder's
notice required by Subsection 2.15(a)(2) is delivered to the Secretary at the
principal executive offices of the Corporation no earlier than ninety days prior
to such special meeting and not
-10-
<PAGE>
later than the close of business on the later of the sixtieth day prior to such
special meeting or the tenth day following the date on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
(c) General.
--------
(1) Only persons who are nominated in accordance with the
procedures set forth in this By-law shall be eligible to serve as
Directors, and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in these By-laws. Except as
otherwise provided by law, the Articles of Incorporation, or the By-
laws of the Corporation, the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with
the procedures set forth in these By-laws and, if any proposed
nomination or business is not in compliance with these By-laws, to
declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this By-law, "public announcement" means
disclosure in a press release reported by the Dow Jones News Service,
Associated Press, or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-law, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this By-law. Nothing in this By-law shall be
deemed to affect any rights of shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act. (As adopted 4/19/91.)
ARTICLE 3. BOARD OF DIRECTORS
------------------------------
Section 3.01. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors may exercise
all such powers of the Corporation and may do all such lawful acts and things as
are not by law or the Articles of Incorporation or these By-laws expressly
required to be exercised or done by the shareholders.
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Section 3.02. Election of Directors. Subject to the Articles of
Incorporation, the common shareholders shall elect one class of Directors at
each annual meeting of shareholders. At each election of Directors, each common
shareholder entitled to vote shall have the right to vote, in person or by
proxy, the number of common shares owned by him and entitled to vote, for as
many persons as the number of the class to be elected. Cumulative voting shall
not be permitted. The election of Directors may be conducted by written ballot,
but need not be conducted by written ballot unless required by a rule or motion
adopted by the shareholders. (As amended 2/12/76.)
Section 3.03. Number, Terms, Classification, and Qualifications. Subject to
the Articles of Incorporation:
(a) The number of Directors shall be twelve. (As amended 10/29/80,
1/31/83, 2/5/85, 8/5/86, 3/13/90, 5/5/92, 11/2/92, 5/11/93, 2/14/94, 5/10/94,
and 11/13/95.)
(b) The Directors shall be divided into three classes, each of which shall
be as nearly equal in number as possible. The term of office of one class shall
expire in each year. At each annual meeting of the shareholders a number of
Directors equal to the number of the class whose term expires at the annual
meeting shall be elected for a term ending when Directors are elected at the
third succeeding annual meeting. Section 6.03 of the Articles of Incorporation
shall apply if there is a failure in any one or more years to elect one or more
Directors or to elect any class of Directors. (As Amended 2/4/86.)
(c) The number of Directors may be increased or decreased from time to
time by amendment of this Section, but no decrease shall have the effect of
shortening the term of any incumbent Director. Any new Directorships shall be
assigned to classes, and any decrease in the number of Directors shall be
scheduled, in such a manner that the three classes of Directors shall be as
nearly equal in number as possible.
(d) The term of each Director shall begin at the time of his election.
Unless sooner removed as provided in the Articles of Incorporation or elected to
fill a vacancy with a shorter unexpired term pursuant to Section 3.04, each
Director shall serve for a term ending when Directors are elected at the third
succeeding annual meeting of shareholders.
However, any Director may resign at any time by delivering his written
resignation to the Chairman, Vice-Chairman, President, or Secretary of the
Corporation. The resignation shall take effect immediately upon delivery,
unless it states a later effective date. (As amended 8/1/79.)
(e) Directors need not be residents of the State of Iowa or shareholders
of the Corporation.
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(As amended 4/23/64, 4/15/70, 2/12/76, 7/23/76, 1/11/77, 4/18/77, 7/28/77,
7/29/77, 2/27/78, and 2/4/86.)
Section 3.04. Vacancies in Board. Any vacancy occurring in the Board of
Directors for any reason, and any Directorship to be filled by reason of an
increase in the number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office even if less than a quorum
(notwithstanding Sections 3.09 and 3.11). Except as otherwise provided in
Section 6.03 of the Articles of Incorporation, a Director elected as provided in
this Section shall be elected for the unexpired term of his predecessor in
office or the unexpired term of the class of Directors to which his new
Directorship is assigned. However, if a Director is elected to fill a vacancy
caused by the resignation of a predecessor whose resignation has not yet become
effective, the new Director's term shall begin when his predecessor's
resignation becomes effective. (As amended 4/23/64 and 2/12/76.)
Section 3.05. Regular Meetings. A regular meeting of the Board of
Directors may be held without notice other than this Section, promptly after and
at the same place as each annual meeting of shareholders.
Other regular meetings of the Board of Directors may be held at such time and at
such places as shall be fixed by (or pursuant to authority granted by)
resolution or motion adopted by the Board of Directors from time to time,
without notice other than such resolution or motion. However, unless both the
time and place of a regular meeting shall be fixed by the Board of Directors,
notice of such meeting shall be given as provided in Section 3.08.
Section 3.06. Special Meetings. Special meetings of the Board of
Directors may be called, and the time and place thereof fixed, by the Chairman
of the Board of Directors or the Vice-Chairman or the President or the Secretary
or by a majority of the Directors then in office. (As amended 4/23/64 and
8/1/79.)
Section 3.07. Place of Meetings. Any regular meeting or special meeting
of the Board of Directors may be held at any place, either within or without the
State of Iowa. The place of each meeting of the Board of Directors shall be
fixed as provided in these By-laws, or by waiver or waivers of notice fixing the
place of such meeting and signed by all Directors then in office. If no
designation is made of the place of a meeting of the Board of Directors, the
place of meeting shall be the registered office of the Corporation in the State
of Iowa.
Section 3.08. Notice of Special Meetings. Written or printed notice
stating the place, day, and hour of a special meeting of the Board of Directors
shall be delivered to each
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Director not less than twenty-four hours before the time of the meeting, either
personally or by mail or by telegram, by or at the direction of the President,
the Secretary, or the officer or persons calling the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the Director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. If given by telegram, such notice
shall be deemed to be delivered when the telegram is delivered to the telegraph
company, addressed to the Director at his address as it appears on the records
of the Corporation. Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Directors need be specified in the notice of
such meeting. (As amended 7/7/88.)
Section 3.09. Quorum. Except as otherwise expressly provided by the
Articles of Incorporation or these By-laws, a majority of the number of
Directors fixed by these By-laws shall constitute a quorum at any meeting of the
Board of Directors.
Section 3.10. Adjourned Meetings. Any meeting of the Board of Directors
may be adjourned from time to time and to any place, without further notice, by
the affirmative vote of a majority of the Directors present at the meeting, even
if less than a quorum. At any adjourned meeting at which a quorum shall be
present, any business may be conducted which might have been transacted at the
meeting as originally notified. (As amended 4/29/91.)
Section 3.11. Vote Required for Action. Except as otherwise provided in
these By-laws, the affirmative vote of a majority of the number of Directors
fixed by these By-laws shall be required for and shall be sufficient for the
adoption of any motion or resolution or the taking of any action at any meeting
of the Board of Directors. However, the following actions may be taken by the
affirmative vote of a majority of the Directors present at the meeting, even if
less than a quorum: election or appointment of a Chairman or temporary
Secretary of the meeting (if necessary), or adoption of any motion to adjourn or
recess the meeting or any proper amendment of any such motion. Whenever the
minutes of any meeting of the Board of Directors shall state that any motion or
resolution was adopted or that any action was taken at such meeting of the Board
of Directors, such minutes shall be prima facie evidence that such motion or
resolution was duly adopted or that such action was duly taken by the required
vote, and such minutes need not state the number of Directors voting for and
against such motion, resolution, or action.
Section 3.12. Voting. Each Director (including, without limiting the
generality of the foregoing, any Director who is also an officer of the
Corporation and any Director presiding at a meeting) may vote on any question at
any meeting of the Board of Directors, except as otherwise expressly provided in
these By-laws. (As amended 4/23/64.)
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Section 3.13. Organization. The Chairman of the Board of Directors or the
Vice-Chairman or the President or a Vice-President, as provided in these By-
laws, shall preside at each meeting of the Board of Directors; but if the
Chairman of the Board of Directors, the Vice-Chairman, the President, and each
Vice-President shall be absent or refuse to act, the Board of Directors may
elect or appoint a Chairman to preside at the meeting. The Secretary or an
Assistant Secretary, as provided in these By-laws, shall act as Secretary of
each meeting of the Board of Directors; but if the Secretary and each
Assistant Secretary shall be absent or refuse to act, the Board of Directors may
elect or appoint a temporary Secretary to act as Secretary of the meeting. (As
amended 4/23/64 and 8/1/79.)
Section 3.14. Rules and Order of Business. The Board of Directors may
adopt such rules and regulations, not inconsistent with applicable law or the
Articles of Incorporation or these By-laws, as the Board of Directors deems
advisable for the conduct of its meetings. Except as otherwise expressly
required by law or the Articles of Incorporation or these By-laws or such rules
or regulations, meetings of the Board of Directors shall be conducted in
accordance with Robert's Rules of Order, Revised (as further revised from time
to time). Unless otherwise determined by the Board of Directors, the order of
business at the first meeting of the Board of Directors held after each annual
meeting of shareholders, and at other meetings of the Board of Directors to the
extent applicable, shall be as follows:
(1) Roll call or other determination of attendance and quorum.
(2) Proof of notice of meeting.
(3) Reading and action upon minutes of preceding meeting and any
other unapproved minutes.
(4) Report of President.
(5) Reports of other officers and committees.
(6) Election of officers.
(7) Unfinished business.
(8) New business.
(9) Adjournment.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at any meeting unless (a) specific and timely
objection is made at the meeting and (b) the person complaining thereto sustains
direct and material damage by reason of such failure.
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Section 3.15. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof at which
action on any corporate matter is taken, shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered or certified mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
Section 3.16. Waiver of Notice by Directors. Whenever any notice
whatsoever is required to be given to any Director of the Corporation under any
provision of law or the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the Director or Directors entitled to such notice,
whether signed before or after the time of the meeting or event of which notice
is required, shall be deemed equivalent to the giving of such notice. Neither
the business to be transacted at, nor the purpose of, any meeting of the Board
of Directors need be specified in any waiver of notice of such meeting. The
attendance of any Director at any meeting of the Board of Directors shall
constitute a waiver by such Director of any notice of such meeting to which such
Director would otherwise be entitled, and shall constitute consent by such
Director to the place, day, and hour of such meeting and all business which may
be conducted at such meeting, unless such Director attends such meeting and
objects at such meeting to any business conducted because the meeting is not
lawfully called or convened. (As amended 4/29/91.)
Section 3.17. Informal Action by Directors. Any action required by law or
the Articles of Incorporation or these By-laws to be taken by vote of or at a
meeting of the Board of Directors, or any action which may or could be taken at
a meeting of the Board of Directors (or of a committee of Directors), may be
taken without a meeting if a consent in writing setting forth the action so
taken shall be signed by all of the Directors then in office (or all of the
members of such committee, as the case may be). Such consent shall have the
same force and effect as unanimous vote. The signing by each such Director (or
by each member of such committee) of any one of several duplicate originals or
copies of the instrument evidencing such consent shall be sufficient. The
written instrument or instruments evidencing such consent shall be filed with
the Secretary, and shall be kept by the Secretary as part of the minutes of the
Corporation. Such action shall be deemed taken on the date of such written
instrument or instruments as stated therein, or on the date of such filing with
the Secretary, whichever of such two dates occurs first. (As amended 4/23/64.)
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Section 3.18. Committees. The Board of Directors, by resolution adopted
by the affirmative vote of a majority of the number of Directors fixed by
Section 3.03, may designate one or more committees (including, without limiting
the generality of the foregoing, an Executive Committee). Each committee shall
consist of two or more Directors elected or appointed by the Board of Directors.
To the extent provided in such resolution as initially adopted and as thereafter
supplemented or amended by further resolution adopted by a like vote, any such
committee shall have and may exercise, when the Board of Directors is not in
session, all the authority and powers of the Board of Directors. However, no
committee shall have or exercise any authority prohibited by law.
No member of any committee shall continue to be a member thereof after he ceases
to be a Director of the Corporation.
Unless otherwise ordered by the Board of Directors, the affirmative vote or
consent in writing of all members of a committee shall be required for the
adoption of any motion or resolution or the taking of any action by any such
committee, except that an alternate member may take the place of any absent
member to the extent hereinafter provided.
The Board of Directors may elect or appoint one or more Directors as alternate
members of any such committee. Any such alternate member may take the place of
any absent member, upon request by the Chairman of the Board of Directors or the
Vice-Chairman or the President or the Chairman of such committee. The vote or
consent in writing of such alternate member in the absence of such member shall
have the same effect as the vote or consent in writing of such member. (As
amended 8/1/79.)
The Board of Directors may at any time increase or decrease the number of
members of any committee, fill vacancies therein, remove any member thereof,
adopt rules and regulations therefor, or change the functions or terminate the
existence thereof. The designation of any committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors or any Director
of any responsibility imposed by law. (As amended 4/23/64.)
Section 3.19. Compensation. The Board of Directors may fix or provide for
reasonable compensation of any or all Directors for services rendered to the
Corporation as Directors, officers, or otherwise, including, without limiting
the generality of the foregoing, payment of expenses of attendance at meetings
of the Board of Directors or committees, payment of a fixed sum for attendance
at each meeting of the Board of Directors or a committee, salaries, bonuses,
pensions, pension plans, pension trusts, profit-sharing plans, stock bonus
plans, stock option plans (subject to approval of the shareholders if required
by law), and other incentive, insurance, and welfare plans, whether
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or not on account of prior services rendered to the Corporation. No such
compensation shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE 4. OFFICERS
--------------------
Section 4.01. Number and Designation. The officers of the Corporation
shall be a Chairman of the Board of Directors, a Vice-Chairman, a President, one
or more Vice-Presidents, a Secretary, a Treasurer, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as the
Board of Directors deems advisable. (As amended 4/23/64 and 8/1/79.)
Section 4.02. Election or Appointment of Officers. At the first meeting
of the Board of Directors held after each annual meeting of shareholders, the
Board of Directors shall elect the officers specifically referred to in Section
4.01, shall appoint certified public accountants to perform the annual audit,
and shall elect or appoint such other officers and agents as the Board deems
advisable. If in any year the election of officers does not take place at such
meeting, such election shall be held as soon thereafter as may be convenient.
In addition, the Board of Directors may from time to time elect, appoint, or
authorize any officer to appoint such other officers and agents as the Board
deems advisable. Any election may be conducted by ballot, but need not be
conducted by ballot unless required by a rule, regulation, or motion adopted by
the Board of Directors. (As amended 3/3/80.)
Section 4.03. Tenure and Qualifications. Each officer, unless sooner
removed as provided in Section 4.04, shall hold office until his successor shall
be elected or appointed and shall qualify. However, any officer may resign at
any time by filing his written resignation with the President or Secretary of
the Corporation; and such resignation shall take effect immediately upon such
filing, unless a later effective date is stated therein. Officers need not be
residents of the State of Iowa or Directors or shareholders of the Corporation.
Any two or more offices may be held by the same person.
Section 4.04. Removal. Any officer or agent of the Corporation may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, 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 contract rights.
Section 4.05. Vacancies. Any vacancy occurring in any office for any
reason may be filled by the Board of Directors.
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Section 4.06. Duties and Powers of Officers. Except as otherwise
expressly provided by law or the Articles of Incorporation or these By-laws, the
duties and powers of all officers and agents of the Corporation shall be
determined and defined from time to time by the Board of Directors. Unless
otherwise determined by the Board of Directors, the officers referred to in the
following Sections shall have the duties and powers set forth in the following
Sections, in addition to all duties and powers of such officers prescribed by
law or by the Articles of Incorporation or other provisions of these By-laws.
However, the Board of Directors may from time to time alter, add to, limit,
transfer to another officer or agent, or abolish any or all of the duties and
powers of any officer or agent of the Corporation (including, without limiting
the generality of the foregoing, the duties and powers set forth in the
following Sections and in other provisions of these By-laws). Any person who
holds two or more offices at the same time may perform or exercise any or all of
the duties and powers of either or both of such offices in either or both of
such capacities.
Section 4.07. Chairman of the Board of Directors; Vice-Chairman;
President.
(a) The Chairman of the Board of Directors shall preside at all meetings of
shareholders and of the Board of Directors. He shall be responsible for making
recommendations concerning Board policies and committees, shall maintain Board
liaison with the President, and, when required, because of the inability of the
President to act or otherwise, shall have the same powers as the President on
behalf of the Corporation. He may from time to time, unless otherwise ordered
by the Board, authorize or direct the Vice-Chairman or President to perform any
of the duties or exercise any of the powers of the Chairman. (As amended
10/27/77, 10/30/84, 2/15/88, and 7/29/91.)
(b) The Vice-Chairman shall preside at meetings of the shareholders or of
the Board in the absence of the Chairman. He shall also perform such other
duties as the Chairman may authorize or direct. (As amended 7/29/91.)
(c) The President shall be the chief executive officer of the Corporation
and, subject to the control of the Board, shall supervise, control, and manage
all of the business affairs of the Corporation. He shall report to the Chairman
when the Board is not in session. In the absence of the Chairman and Vice-
Chairman, the President shall preside at meetings of shareholders and of the
Board. Unless otherwise ordered by the Board, the President (1) may employ,
appoint and discharge such employees, agents, attorneys and accountants (except
the certified public accountants appointed by the Board pursuant to Section
4.02) for the Corporation as he deems necessary or advisable, and shall
prescribe their authority, duties, powers, and compensation, including, if
appropriate, the authority to perform some or all
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of the duties or exercise some or all of the powers of the President; (2) may
make and enter into on behalf of the Corporation all deeds, conveyances,
mortgages, leases, contracts, agreements, bonds, reports, releases, and other
documents or instruments which may in his judgment be necessary or advisable in
the ordinary course of the Corporation's business or which shall be authorized
by the Board; (3) shall see that all Corporation policies and all orders and
resolutions of the Board are carried into effect; and (4) shall have all the
usual duties and powers of the President of a corporation and such other duties
and powers as may be prescribed from time to time by the Board. (As amended
7/29/91.)
Section 4.08. Vice-Presidents. Each Vice-President shall have such duties
and powers as may be prescribed from time to time by the President or the Board
of Directors. (As amended 4/23/64 and 10/27/77.)
Section 4.09. Secretary. The Secretary:
-------------------------
(a) shall, when present, act as Secretary of each meeting of the
shareholders and of the Board of Directors;
(b) shall keep the minutes of the meetings of the shareholders and the
Board of Directors in one or more books provided for that purpose;
(c) shall see that all notices are duly given and that lists of
shareholders are made and filed as required by law or the Articles of
Incorporation or these By-laws;
(d) shall be custodian of the corporate records and the seal of the
Corporation and shall, when duly authorized, see that the seal is affixed to any
instrument requiring it;
(e) shall keep a record of the Directors, giving the names and addresses
of all Directors; and (As amended 4/23/64 and 2/19/79.)
(f) shall have all the usual duties and powers of the Secretary of a
corporation and such duties and powers as may be prescribed from time to time by
the President or the Board of Directors. (As amended 2/19/79.)
Section 4.10. Treasurer. The Treasurer:
-------------------------
(a) shall have charge and custody of and be responsible for all funds,
securities, and evidences of indebtedness belonging to the Corporation;
(b) shall receive and give receipts for moneys due and payable to the
Corporation from any source whatever;
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(c) shall see that all such moneys are deposited in the name of and to the
credit of the Corporation in such depositories as shall be designated by or
pursuant to authority granted by the Board of Directors;
(d) shall cause the funds of the Corporation to be disbursed when and as
duly authorized to do so;
(e) shall see that correct and complete books of account and financial
statements are kept and prepared in accordance with generally accepted
accounting principles except to the extent such duties are assigned by the
President to other officers or employees of the Corporation; (As amended
2/13/77.)
(f) shall have all the usual duties and powers of the Treasurer of a
corporation and such duties and powers as may be prescribed from time to time by
the President or the Board of Directors; (As amended 2/13/77.)
(g) shall keep at the registered office or principal place of business of
the Corporation a record of its shareholders (which shall be part of the stock
transfer books of the Corporation), giving the names and addresses of all
shareholders and the number and class of the shares held by each; and (As
amended 2/19/79.)
(h) shall have charge of the stock transfer books of the Corporation, and
shall record the issuance and transfer of shares, except to the extent that such
duties shall be delegated by the Board of Directors to a transfer agent or
registrar. (As amended 2/19/79.)
Section 4.11. Assistant Secretaries. In the absence of the Secretary or
in the event of his death or inability or refusal to act, the Assistant
Secretary (or, if there shall be more than one, the Assistant Secretaries in the
order designated by the Board of Directors from time to time, or, in the absence
of any such designation, in the order in which their names shall appear in the
minutes showing their election) shall perform the duties and exercise the powers
of the Secretary. Each Assistant Secretary shall also have such duties and
powers as may be prescribed from time to time by the Secretary or the President
or the Board of Directors. (As amended 4/23/64.)
Section 4.12. Assistant Treasurers. In the absence of the Treasurer or in
the event of his death or inability or refusal to act, the Assistant Treasurer
(or, if there shall be more than one, the Assistant Treasurers in the order
designated by the Board of Directors from time to time, or, in the absence of
any such designation, in the order in which their names shall appear in the
minutes showing their election) shall perform the duties and exercise the powers
of the Treasurer. Each Assistant Treasurer shall also have such duties and
powers as may be
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prescribed from time to time by the Treasurer or the President or the Board of
Directors. (As amended 4/23/64.)
Section 4.13. Compensation. The Board of Directors may fix or provide for,
or may authorize any officer to fix or provide for, reasonable compensation of
any or all of the officers and agents of the Corporation, including, without
limiting the generality of the foregoing, salaries, bonuses, payment of
expenses, pensions, pension plans, pension trusts, profit-sharing plans, stock
bonus plans, stock option plans (subject to approval of the shareholders if
required by law), and other incentive, insurance, and welfare plans, whether or
not on account of prior services rendered to the Corporation. (As amended
4/23/64.)
Section 4.14. Bond. The Board of Directors may require an officer or
agent to give a bond for the faithful performance of his duties, in such amount
and with such surety or sureties as the Board of Directors deems advisable.
ARTICLE 5. SHARES AND CERTIFICATES
-----------------------------------
Section 5.01. Issuance of and Consideration for Shares. Shares and
securities convertible into shares of the Corporation may be issued for such
consideration expressed in dollars (not less than the par value thereof in the
case of shares having a par value) as shall be fixed from time to time by the
Board of Directors, and may be issued to such persons as may be designated from
time to time by or pursuant to authority granted by the Board of Directors,
except as otherwise required by law or the Articles of Incorporation or these
By-laws.
Section 5.02. Restrictions on Issuance of Shares and Certificates. No
share of the Corporation shall be issued until such share is fully paid as
provided by law. Neither promissory notes of the subscriber nor future services
shall constitute payment or part payment for shares of the Corporation.
No fractional share or certificate representing any fractional share shall be
issued unless expressly authorized by the Board of Directors.
No new certificate shall be issued in place of any certificate until the old
certificate for a like number of shares shall have been surrendered and
cancelled, except as otherwise provided in Section 5.04.
Section 5.03. Certificates Representing Shares. Each shareholder shall be
entitled to a certificate or certificates representing the shares of the
Corporation owned by him. Certificates representing shares of the Corporation
shall be in such form as shall be determined by or pursuant to authority
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granted by the Board of Directors. Each certificate shall be signed by the
President or a Vice-President and by the Secretary or an Assistant Secretary,
and the corporate seal may be affixed thereto. All certificates shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, and the number and
class of shares and date of issuance, shall be entered on the stock transfer
books of the Corporation.
Section 5.04. Lost, Destroyed, Stolen, or Mutilated Certificates. The
Board of Directors may authorize a new certificate to be issued in place of any
certificate alleged to have been lost, destroyed, or stolen, or which shall have
been mutilated, upon production of such evidence and upon compliance with such
conditions as the Board of Directors may prescribe.
Section 5.05. Transfer of Shares. Shares of the Corporation shall be
transferable only on the stock transfer books of the Corporation, by the holder
of record thereof or by his duly authorized attorney or legal representative
(who shall furnish such evidence of authority to transfer as the Corporation or
its agent may reasonably require), upon surrender to the Corporation for
cancellation of the certificate representing such shares, duly endorsed or with
a proper written assignment or power of attorney duly executed and attached
thereto, and with such proof of the authenticity of signatures as the
Corporation or its agent may reasonably require. The Corporation shall cancel
the old certificate, issue a new certificate to the person entitled thereto, and
record the transaction on its stock transfer books. However, if the applicable
law permits shares to be transferred in a different manner, then to the extent
required to comply with such law all references in this Section to "shares"
shall mean the rights against the Corporation inherent in or arising out of such
shares.
Section 5.06. Shareholders of Record; Change of Name or Address. The
Corporation shall be entitled to recognize the exclusive right of a person shown
on its stock transfer books as the holder of shares to receive notices and
dividends, to vote as such holder, and to have and exercise all other rights
deriving from such shares, and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have actual or constructive notice thereof. Unless the
context or another provision of these By-laws clearly indicates otherwise, all
references in these By-laws to "shareholders" and "holders" shall mean the
shareholders of record as shown on the stock transfer books of the Corporation.
Each shareholder and each Director shall promptly notify the Secretary in
writing of his correct address and any change in his name or address from time
to time. If any shareholder or
-23-
<PAGE>
Director fails to give such notice, neither the Corporation nor any of its
Directors, officers, agents, or employees shall be liable or responsible to such
shareholder or Director for any error or loss which might have been prevented if
such notice had been given. (As amended 4/23/64.)
Section 5.07. Regulations. The Board of Directors may adopt such rules
and regulations, not inconsistent with applicable law or the Articles of
Incorporation or these By-laws, as it deems advisable concerning the issuance,
transfer, conversion, and registration of certificates representing shares of
the Corporation.
ARTICLE 6. GENERAL PROVISIONS
------------------------------
Section 6.01. Seal. The corporate seal shall be circular in form and
shall have inscribed thereon the name of the Corporation and the words
"Corporate Seal" and "Iowa". The seal may be affixed by causing it or a
facsimile thereof to be impressed or reproduced or otherwise.
Section 6.02. Fiscal Year. The fiscal year of the Corporation shall be
fixed by the Board of Directors from time to time.
Section 6.03. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on the outstanding shares in the
manner and upon the terms and conditions provided by law and the Articles of
Incorporation.
Section 6.04. Execution of Documents and Instruments. All deeds and
conveyances of real estate, mortgages of real estate, and leases of real estate
(for an initial term of five years or more) to be executed by the Corporation
shall be signed in the name of the Corporation by the Chairman of the Board of
Directors or the Vice-Chairman or the President or a Vice-President and signed
or attested by the Secretary or an Assistant Secretary, and the corporate seal
shall be affixed thereto.
All other documents or instruments to be executed by the Corporation (including,
without limiting the generality of the foregoing, contracts, agreements, bonds,
reports, notices, releases, promissory notes, and evidences of indebtedness; and
deeds, conveyances, mortgages, and leases other than those referred to in the
preceding sentence) shall be signed in the name of the Corporation by any one or
more of the officers of the Corporation, with or without the corporate seal.
However, from time to time the Board of Directors or the Chairman of the Board
of Directors or the Vice-Chairman or the President may alter, add to, limit,
transfer to another officer or agent, or abolish the authority of any officer or
officers to sign any or all documents or instruments, or may authorize the
execution
-24-
<PAGE>
of any document or instrument by any person or persons, with or without the
corporate seal, and such action may be either general or confined to specific
instances. (As amended 4/23/64 and 8/1/79.)
Section 6.05. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by or pursuant to authority granted by the Board of Directors. Such
authorization may be either general or confined to specific instances.
Section 6.06. Checks and Drafts. All checks and drafts issued in the name
of the Corporation shall be signed by such person or persons and in such manner
as shall be authorized by or pursuant to authority granted by the Board of
Directors.
Section 6.07. Voting of Shares Owned by Corporation. Any shares or
securities of any other corporation or company owned by this Corporation may be
voted at any meeting of shareholders or security holders of such other
corporation or company by the Chairman of the Board of Directors of this
Corporation. Whenever in the judgment of the Chairman of the Board of Directors
it shall be advisable for the Corporation to execute a proxy or waiver of notice
or to give a consent with respect to any shares or securities of any other
corporation or company owned by this Corporation, such proxy, waiver, or consent
shall be executed in the name of this Corporation, as directed by the Chairman
of the Board of Directors, without necessity of any authorization by the
Board of Directors. Any person or persons so designated as the proxy or proxies
of this Corporation shall have full right, power, and authority to vote such
shares or securities on behalf of this Corporation. In the absence of the
Chairman of the Board of Directors or in the event of his death or inability to
act, the Vice-Chairman may perform the duties and exercise the powers of the
Chairman of the Board of Directors under this Section. The provisions of this
Section shall be subject to any specific directions by the Board of Directors.
(As amended 4/23/64 and 8/1/79.)
Section 6.08. Interest of Directors in Transactions. In the absence of
fraud, any contract or other transaction between the Corporation and any or all
of its Directors (including, without limiting the generality of the foregoing,
any authorization of or payment of compensation to any Director or officer of
the Corporation), or between the Corporation and any person or party in which
any or all of the Directors of the Corporation are interested or with which they
are connected (whether as shareholders, directors, officers, owners, partners,
members, employees, or otherwise) shall be valid for all purposes,
notwithstanding the presence of such Director or Directors at the meeting of the
Board of Directors which shall act upon or with respect to such contract or
transaction, and notwithstanding his or their participation in and vote upon
such
-25-
<PAGE>
action, if the fact of such interest shall be disclosed or otherwise known
to the Board of Directors prior to or at the time of the taking of such action.
Such interested Director or Directors are hereby expressly authorized to vote
upon any action of the Board of Directors upon or with respect to such contract
or transaction; may be counted in determining whether a quorum is present; and
may be included in the majority necessary to take such action. Each Director of
the Corporation is hereby expressly relieved, in the absence of fraud, from any
liability which might otherwise exist or arise from contracting with the
Corporation for the benefit of himself or any person or party in which he may be
in any way interested or with which he may be in any way connected.
Any contract, transaction, or action of the Corporation or of the Board of
Directors which shall be ratified at any meeting of shareholders by the
affirmative vote of the holders of a majority of the outstanding common shares
entitled to vote, shall be as valid and as binding as though expressly
authorized in writing by every shareholder of the Corporation. However, any
failure of the shareholders to approve or ratify such contract, transaction, or
action, when and if submitted, shall not be deemed in any way to render the same
invalid or to deprive the Directors or officers of authority to proceed with
such contract, transaction, or action.
This Section shall not be construed to invalidate any contract or transaction
which would otherwise be valid, nor as a limitation upon the powers of the
Directors or officers, nor as a requirement that any contract or transaction of
the Corporation be approved or ratified by the shareholders.
Section 6.09. Indemnification. The Corporation may indemnify any
Qualified Person. For purposes of this Section, "Qualified Person" means any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative including, without limitation, an
action or suit by or in the right of the Corporation) (collectively, "Action")
by reason of the fact that he or she is or was a Director, officer, employee,
member, if any, volunteer, or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, partner, trustee,
employee, member, if any, volunteer, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan. The indemnification may be against expenses (including attorneys'
fees), judgments, fines, and amounts paid or incurred in settlement which the
Qualified Person actually and reasonably incurred in connection with the Action,
in the manner and to the extent provided in this Section.
(a) Indemnification may be made in the following independent and
alternative methods:
-26-
<PAGE>
(1) In the manner and to the extent provided by Iowa law;
(2) If and to the extent that the Board of Directors determines that
the person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation.
This determination may be made (notwithstanding Sections 3.09 and 3.11)
either by: (i) a majority vote of a quorum consisting of Directors who were
not parties to the Action; or (ii) a unanimous vote of all Directors who
were not parties to the Action (whether or not constituting a quorum), if
there are at least two such Directors;
(3) In accordance with any agreement authorized by the Board of
Directors before the commencement of the Action;
(4) If and to the extent authorized by action of the shareholders; or
(5) In any other manner not prohibited by Iowa law.
(b) Restrictions and presumptions required by law with regard to
indemnification referred to in Subsection (a)(1) shall not apply to
indemnification under Subsections (a)(2), (3), or (4); provided, however,
indemnification shall not be provided in any case for:
(1) A breach of a person's duty of loyalty to the Corporation;
(2) Acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of the law;
(3) A transaction from which the person derives an improper personal
benefit; or
(4) Proceedings by or in the right of the Corporation unless permitted
in Iowa Code Section 496A.4A(2) as amended from time to time.
(5) Proceedings by or in the right of the Corporation unless permitted
in Iowa Code Section 496A.4A(2), as amended from time to time.
(c) To the extent that a Qualified Person has been successful on the
merits or otherwise in defense of any Action or in defense of any claim, issue,
or matter therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with such Action.
-27-
<PAGE>
(d) Any indemnification of a Qualified Person may be both as to action in
his or her official capacity and as to action in another capacity while holding
such official capacity; shall continue as to a Qualified Person who has ceased
to be a Director, officer, employee, member, if any, volunteer, or agent; and
shall inure to the benefit of the heirs, beneficiaries, and personal
representatives of the Qualified Person.
(e) Indemnification may be made either by direct payment by the
Corporation or by reimbursement to the Qualified Person. (As amended 2/15/88.)
Section 6.10. Duty of Care. Directors and officers of the Corporation
shall not be liable for losses of the Corporation incurred under their
management which are not the result of misconduct in the performance of duty or
negligence in failing to exercise that diligence, care, and skill which an
ordinarily prudent man would exercise under similar circumstances.
Section 6.11. Reliance on Documents. Each Director and officer shall, in
the performance of his duties, be fully protected in relying and acting in good
faith upon the books of account or other records of the Corporation, or reports
made or financial statements presented by any officer of the Corporation or by
an independent public or certified public accountant or firm of such accountants
or by an appraiser selected with reasonable care by the Board of Directors or by
any committee thereof; and each Director and officer is hereby expressly
relieved from any liability which might otherwise exist or arise from or in
connection with any such action.
Section 6.12. Effect of Partial Invalidity. If a court of competent
jurisdiction shall adjudge to be invalid any clause, sentence, paragraph,
section, or part of the Articles of Incorporation or these By-laws, such
judgment or decree shall not affect, impair, invalidate, or nullify the
remainder of the Articles of Incorporation or these By-laws, but the effect
thereof shall be confined to the clause, sentence, paragraph, section, or part
so adjudged to be invalid.
Section 6.13. Definitions. Any word or term which is defined in the Iowa
Business Corporation Act shall have the same meaning wherever used in the
Articles of Incorporation or in these By-laws, unless the context or another
provision of the Articles of Incorporation or these By-laws clearly indicates
otherwise. Wherever used in the Articles of Incorporation or in these By-laws,
unless the context or another provision of the Articles of Incorporation or
these By-laws clearly indicates otherwise, the use of the singular shall include
the plural, and vice versa; and the use of any gender shall be applicable to any
other gender. Wherever used in the Articles of Incorporation or in these By-
laws, the word "written" shall mean written, typed,
-28-
<PAGE>
EXHIBIT (21) SUBSIDIARIES OF THE REGISTRANT.
-------------------------------
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation Doing Business As
- ---------- ------------- -----------------
<S> <C> <C>
CorryHiebert Corporation Iowa CorryHiebert Corporation
Heatilator Inc. Iowa Heatilator Inc.
Hiebert East, Inc. Iowa The HON Company
Holga Inc. Iowa Holga Inc.
Murphy-Miller Co. Iowa The HON Company
BPI Inc. Iowa BPI Inc.
Ring King Visibles, Inc. Iowa Ring King Visibles, Inc.
XLM Company Iowa The HON Company
The Gunlocke Company Iowa The Gunlocke Company
Chandler Attwood Limited Iowa Chandler Attwood Limited
HON Financial Corporation III Iowa HON Financial Corporation
III
HON Export Limited Iowa HON Export Limited
T. M. Export Inc. Barbados T. M. Export Inc.
</TABLE>
<PAGE>
Exhibit (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-20759) pertaining to the members' stock purchase plan and
incorporation by reference in the Registration Statement (Form S-8 No. 33-61305)
pertaining to the 1995 stock-based compensation plan of HON INDUSTRIES Inc. of
our report dated January 30, 1996, with respect to the consolidated financial
statements and schedule of HON INDUSTRIES Inc. and subsidiaries included in the
Annual Report (Form 10-K) for the year ended December 30, 1995.
Ernst & Young LLP
Chicago, Illinois
March 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000048287
<NAME> HON INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 32,231
<SECURITIES> 14,694
<RECEIVABLES> 90,045
<ALLOWANCES> 1,867
<INVENTORY> 36,601
<CURRENT-ASSETS> 194,183
<PP&E> 343,754
<DEPRECIATION> 133,721
<TOTAL-ASSETS> 409,518
<CURRENT-LIABILITIES> 128,915
<BONDS> 45,911
<COMMON> 30,394
0
0
<OTHER-SE> 185,841
<TOTAL-LIABILITY-AND-EQUITY> 409,518
<SALES> 893,119
<TOTAL-REVENUES> 893,119
<CGS> 624,700
<TOTAL-COSTS> 624,700
<OTHER-EXPENSES> 201,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,211
<INCOME-PRETAX> 65,517
<INCOME-TAX> 24,419
<INCOME-CONTINUING> 41,098
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,098
<EPS-PRIMARY> $1.35
<EPS-DILUTED> $1.35
</TABLE>
<PAGE>
Exhibit (99A)
EXECUTIVE BONUS PLAN
HON INDUSTRIES INC.
As adopted on May 1, 1974, and amended
on April 20, 1976, April 19, 1977,
January 31, 1983, February 5, 1985,
November 4, 1986, July 7, 1988,
May 4, 1992, November 2, 1992,
February 8, 1993, February 14, 1994,
November 14, 1994, and May 8, 1995
1. Purpose. The Executive Bonus Plan purpose is to encourage a
consistently high standard of excellence and continued employment by officers
and selected other executives of the Corporation and any subsidiary which elects
to become a part of the Plan (electing Subsidiary). The Plan shall be operated
at all times in conformance with applicable government regulations. (As amended
January 31, 1983 and May 4, 1992).
2. Participants. All of the officers of HON INDUSTRIES Inc.
and electing Subsidiaries as of the end of each fiscal year and such other
executives of HON INDUSTRIES Inc. and electing Subsidiaries as are selected by
the Board of Directors each year shall be eligible to be Participants. (As
amended April 20, 1976 and April 19, 1977.)
3. Payment. Upon final determination of bonus awards by the
Board of Directors, the bonuses shall be paid as follows:
a. Each award for the immediately preceding fiscal year shall
be paid in three annual installments: (1) the first, equal to one-half of
the award, shall be paid on the last day of the Corporation's February
fiscal month following the end of the Corporation's fiscal year for which
the award is made; (2) the second and third, each equal to one-fourth of
the award, shall be paid on the last day of the Corporation's February
fiscal month following the end of each following fiscal year (until the
full amount of the award is paid) if earned by the Participant by
continuing service with the Corporation through the date of payment of each
installment or if earned as described in Paragraph 4. (As amended May 8,
1995.)
b. At a Participant's request, the Human Resources and
Compensation Committee (the "Committee") may, in the alternative, approve
payment (to be made on the last day of the Corporation's February fiscal
month following the end of the Corporation's fiscal year for which the
award is made) of the entire award, or any portion thereof, in shares of
Bonus Stock issued pursuant to the Corporation's Stock-Based Compensation
Plan, and in the event such payment is made; provided, however, that any
shares of Bonus Stock issuable in relation to what otherwise would be the
second and third cash installment payments shall not be issued to such
Participant until the time at which such cash installment payments would
have been paid pursuant to Paragraph
<PAGE>
3(a) hereof and/or "earned out" pursuant to Paragraph 4 below. The number
of shares of Bonus Stock to be paid shall be determined by dividing the
cash amount of the award by the average closing prices of a share of the
Corporation's common stock for the 20 trading days immediately preceding
the date of such payment, with cash paid in lieu of any fractional share.
Provision for all income tax withholding and other employment taxes shall
be made pursuant to Section 5.5 of the Stock-Based Compensation Plan. If a
Participant is an officer of the Corporation, the Participant's request to
receive shares of Bonus Stock under this Section 3 shall not be honored
unless it is irrevocable and made in writing delivered to the Committee at
least six months before the award, if any, would be payable. (As amended
January 31, 1983 and May 8, 1995.)
4. Earn Out. Participants' rights to installments shall vest
and be earned as follows:
a. A Participant's right to all unpaid and undelivered bonus
awards shall vest immediately upon his death or disability, upon
termination of his employment for any reason within 27 months after a
change in corporate control, or upon his retirement after age 55 pursuant
to established retirement policies of the Corporation. Payments to a living
Participant shall be made according to Paragraph 5 as though he continued
in service with the Corporation unless Participant's employment has been
terminated within 27 months after a change in control, in which case
payments shall be made to the Participant no later than 30 days following
such termination. Payments to a deceased Participant shall be made in full
to his legal representatives at such time as determined by the Board of
Directors, but in no event later than the time at which he would have
received such payments had he remained living and employed by the
Corporation. The Board of Directors' decisions concerning disability shall
be final. (As amended February 5, 1985, and November 14, 1994.)
b. A Participant whose employment terminates
for any reason other than death, disability, retirement after age 55
pursuant to established retirement policies of the Corporation, or a change
in corporate control may retain his rights to earn out unearned bonus
awards only to such extent as the Board of Directors may decide. No
installment or amount paid or delivered prior to the date of the decision
of the Board of Directors shall be required to be returned. (As amended
January 31, 1983.)
c. As used above, "change in corporate control" means (i) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of Directors (the "Outstand-
-2-
<PAGE>
ing voting securities of the Company entitled to vote generally in the
election of Directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (a) any acquisition
directly from the Company, (b) any acquisition by the Company, (c) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(d) any acquisition by any corporation pursuant to a transaction
which complies with clauses (a), (b) and (c) of subsection (iii) of this
Section 4; or (ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds of the Board; provided, however, that any individual becoming a
Director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the Directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of Directors or other
actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or (iii) consummation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business Combination,
(a) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of Directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (b) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed
-3-
<PAGE>
prior to the Business Combination and (c) at least a majority of the
members of the Board of Directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or (iv) approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.
(As amended November 4, 1986, July 7, 1988, and November 14, 1994.)
5. Cash. Each such bonus shall be paid in cash. (As amended
May 4, 1992 and February 14, 1994.)
6. Administration. The Board of Directors shall have full power to
interpret and administer this Plan from time to time in accordance with the By-
laws of the Corporation, except to the extent provided in the Corporation's
Stock-Based Compensation Plan or to the extent that the Board of Directors may
have delegated its powers to the Committee. Decisions of the Board of Directors
or the Committee shall be final, conclusive, and binding upon all parties. (As
amended May 8, 1995.)
7. Forfeitures. A Participant who loses his right to earn out
unearned bonus awards shall receive all earned out portions of bonus awards, if
any. The balance of unearned bonus awards shall not be paid in any form and
shall accrue to the benefit of the Corporation. (As amended February 14, 1994.)
8. Cost. Electing Subsidiaries shall reimburse HON INDUSTRIES
Inc. for the amount of such bonuses which shall be awarded and paid to
Participants for services to such Subsidiaries as determined by the Board of
Directors.
9. Limitation on Amount of Individual Bonus. Beginning with the bonus
payable for the 1976 fiscal year and continuing thereafter, the amount of an
individual Participant's award shall not exceed the following:
a. One hundred percent of base salary for
the Chairman of the Board or the President of the
Corporation.
b. Seventy-five percent of base salary for the
operating head of any Division or Subsidiary of the
Corporation.
c. Fifty percent of base salary for any other
officer of the Corporation or a Subsidiary.
d. Twenty-five percent of base salary for any
other Participant.
(As amended April 20, 1976.)
-4-
<PAGE>
Exhibit (99B)
EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
HON INDUSTRIES INC.
AS ADOPTED ON APRIL 30, 1984, AMENDED ON NOVEMBER 4, 1986,
RESTATED ON FEBRUARY 5, 1987, AND AMENDED ON
JULY 7, 1988, OCTOBER 29, 1991,
FEBRUARY 14, 1994, MAY 9, 1994, NOVEMBER 14, 1994,
FEBRUARY 13, 1995 AND MAY 8, 1995
1. Purpose of Plan. The purpose of the Plan is to provide reward for
performance and incentive for future endeavor to selected executives who
have major influence on profitability and contribute to the long-term
success of the Company by making them participants in that success, to
focus the attention of executives on the long-range interests of the
shareholders rather than just quarterly or annual profits, and to base the
reward on the performance of the Company rather than the performance of the
stock market.
2. Administration of Plan. The Board of Directors shall have full power to
interpret and administer this Plan from time to time in accordance with the
By-laws of the Company, except to the extent provided in the Company's
Stock-Based Compensation Plan or to the extent that the Board of Directors
may have delegated its powers to the Human Resources and Compensation
Committee (the "Committee"). Decisions of the Board of Directors or the
Committee, as the case may be, shall be final, conclusive, and binding upon
all parties. (As amended May 8, 1995.)
3. Participants. Any executive of HON INDUSTRIES Inc., or its subsidiaries,
may be selected by the Board of Directors to participate in the Plan, but
the intent is to involve only the few key executives who have major
influence on long-range success and profitability.
4. Form of Awards. Awards under the Plan will be in the form of rights to the
appreciation in value of units of permanent capital assigned to
participants. Awards may be in units of permanent capital applicable to
HON INDUSTRIES Inc., or of any HON INDUSTRIES' division or subsidiary. For
purposes of calculating appreciation hereunder, an award period measured in
calendar years shall be deemed to mean and be the equivalent of the
corresponding Company fiscal year. For purposes of calculating
appreciation hereunder, an award period measured in calendar years shall be
deemed to mean and be the equivalent of the corresponding Company fiscal
year. (As amended February 13, 1995.)
For purposes of the Plan, permanent capital is determined by the Board of
Directors and is generally defined as total assets less current liabilities
(excluding current portions of long-term debt and capital lease obligations
from current liabilities).
The appreciation in value of units of permanent capital assigned to
participants shall be limited in all respects to appreciation resulting
from the earnings of HON INDUSTRIES Inc., or of an applicable HON
INDUSTRIES' division or subsidiary. Appreciation will exclude non-operating
items
<PAGE>
such as gains and losses from sales of assets and sales, transfers,
or redemptions of permanent capital.
In determining annual appreciation, no allocations of parent company
expense to operating companies will be made, but parent company charges for
services requested and performed, and parent company costs directly
attributable to operating companies will be made. Local, state, and federal
income taxes; sales taxes; investment tax credits; and other adjustments
are computed and allocated to operating companies on as near an actual
basis as possible. Interest on long-term debt and capital lease obligations
is not deducted from earnings in the determination of appreciation in value
of awards.
Calculation of the appreciation and value of a participant's award
following a change in corporate control shall be made in a manner
consistent with that made by the Corporation prior to the change in
corporate control. (As adopted November 14, 1994.)
5. Grant of Awards. Awards may be made at any time at the discretion of the
Board of Directors.
6. Duration of Awards. Awards may be granted for a period of any length up to
five years, from the designated start of a calendar year. (As amended
October 29, 1991, and February 13, 1995.)
In the event a participant transfers employment (to or from) within HON
INDUSTRIES Inc., or any related division or subsidiary during the term of
an award, such award may be terminated by the Board of Directors and such
award will be paid out in accordance with Section 7 herein, or as otherwise
determined by the Board of Directors. (As amended October 29, 1991.)
7. Payment. Upon final determination at the end of the award period of the
appreciation and value of an award by the Board of Directors, the
appreciation on such award will be paid in cash to the participant in three
annual installments unless (a) the participant requests and the Board
approves a different payout schedule, (b) the participant requests and the
Committee approves payment in shares of Bonus Stock issued under the
Company's Stock-Based Compensation Plan which shares may be issued at the
election of the participant (i) at once, or (ii) in three annual
installments, and (c) the participant is receiving payment following
termination of employment following a change in corporate control, in which
case payment shall be made no later than 90 days following the end of the
year in which such termination takes place. The number of shares of Bonus
Stock to be paid shall be determined by dividing the cash amount of the
award by the average closing prices of a share of the Company's common
stock for the 20 trading days immediately preceding the date of such
payment, with cash paid in lieu of any fractional share. Provision for all
income tax withholding and other employment taxes shall be made pursuant to
Section 5.5 of the Stock-Based Compensation Plan. If a participant is an
officer of the Company, the
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<PAGE>
participant's request to receive shares of Bonus Stock under this Paragraph
7 shall not be honored unless it is irrevocable and made in writing
delivered to the Committee at least six months before the award, if any,
would be payable. (As amended May 9, 1994, November 14, 1994, and May 8,
1995.)
If payment is made in cash installments, interest will accrue on any unpaid
balance at the annual interest rate (compounded quarterly) equal to one-
half percentage point below the current prime rate charged by The Northern
Trust Company, Chicago, Illinois, on each interest calculation date.
8. Vesting. An award shall vest on January 1 and shall be payable, together
with interest, on or before February 28 of the calendar year following the
end of the award period. A participant whose employment terminates for any
reason after the end of the award period shall retain rights to payment
under Section 7 of the Plan. (As amended February 13, 1995.)
A participant whose employment terminates before the end of the award
period for any reason other than as specified in the immediately following
paragraph will not retain rights to payment under the Plan. (As amended May
9, 1994 and November 14, 1994.)
A participant whose employment terminates before the end of the award
period for reasons of death, disability, or retirement after age 62, or for
any reason following a change in corporate control, shall retain rights to
payment under Section 7 of the Plan. Payment will be made to such
participant based upon the appreciation and value of such participant's
award through the end of the year in which such termination takes place.
For purposes of this Plan, "change in corporate control" means (a) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securi ties of the Company
entitled to vote generally in the elec tion of Directors (the "Outstanding
Company Voting Securi ties"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acqui sition by any
corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 8; or (b) individuals who, as
of the date hereof, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least two-thirds of the Board; provided,
however, that any individual becoming a
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<PAGE>
Director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the Direc tors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of Directors or other
actual or threatened solicitation of proxies or consents by or on be half
of a Person other than the Board; or (c) consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business Combination"),
in each case, un less, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then out standing shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of Directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limita tion, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (ex cluding any corporation resulting
from such Business Com bination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the Board of Directors of
the corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination; or
(d) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company. (As amended November 14, 1994.)
9. Cost. Costs application to the Plan will be allocated between HON
INDUSTRIES Inc. and its divisions and subsidiaries as determined by the
Board of Directors.
10. Participant Rights. A participant shall have no rights under the Plan
unless expressly provided for in Sections 1 through 10. The Plan does not
constitute nor shall it be construed to extend any right of employment
whatsoever to any participant.
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<PAGE>
11. Duration of Plan. The Plan may be terminated or amended by the Board of
Directors at its sole discretion at any time. Termination will not cancel
or otherwise affect awards made prior to the termination of the Plan.
-5-
<PAGE>
Exhibit (99C)
HON INDUSTRIES INC. ERISA SUPPLEMENTAL RETIREMENT PLAN
(EFFECTIVE JANUARY 1, 1995)
1. Purpose of the Plan. The purpose of this HON INDUSTRIES Inc. ERISA
Supplemental Retirement Plan (the "Plan") is to provide to selected executives
benefits equal to the amounts which, but for limitations imposed by the Internal
Revenue Code of 1986 (the "Code") or plan provisions, would have been provided
by the HON INDUSTRIES Inc. Profit-Sharing Retirement Plan, the HON Members
Company Ownership Plan, and the HON INDUSTRIES Inc. Cash Profit-Sharing Plan.
2. Definitions. Except as otherwise defined in this Plan, capitalized
terms used herein shall have the respective meanings assigned to such terms in
the HON INDUSTRIES Inc. Profit-Sharing Retirement Plan.
3. Participation. Each employee of an Employer whose compensation for any
calendar year beginning after December 31, 1994, determined under the HON
INDUSTRIES Inc. Profit-Sharing Retirement Plan but without regard to any
election by the Participant to defer any compensation earned for such year and
without regard to any payment made pursuant to the HON INDUSTRIES Inc. Executive
Long-Term Incentive Compensation Plan for such year, exceeds $150,000 (or such
other amount as may be in effect under Section 401(a)(17) of the Code for such
year) and who has been selected for participation by the Company's Board of
Directors shall be a Participant in this Plan. It is intended that the
Participants constitute a "select group of management or highly compensated
employees" within the meaning of ERISA.
4. Benefits.
(a) Benefits in Respect of the HON INDUSTRIES Inc. Profit-Sharing
Retirement Plan and HON Members Company Ownership Plan. As soon as practicable
after the last day of each calendar year beginning after December 31, 1994, the
Company shall determine the amount that would have been credited for such year
to (A) the Participant's Profit-Sharing Retirement Account under the HON
INDUSTRIES Inc. Profit-Sharing Retirement Plan; (B) the Participant's Account
under the Cash Profit-Sharing Plan; and (C) the Participant's ESOP Account under
the HON Members Company Ownership Plan for such calendar year but for the
application of: (i) The last two sentences of Section 2.13 of the HON INDUSTRIES
Inc. Profit-Sharing Retirement Plan and of Section 2.10 of the HON Members
Company Ownership Plan (limiting the amount of compensation taken into account
under such plans); and (ii) Section 4.5 of the HON INDUSTRIES Inc. Profit-
Sharing Retirement Plan and Section 6.8 of the HON Members Company Ownership
Plan (generally limiting annual contributions on behalf of a Participant to
$30,000 under Section 415 of the Code). See
Annex A.
<PAGE>
(b) Benefits in Respect of Cash Profit-Sharing Plan. As soon as
practicable after the last day of each calendar year beginning after December
31, 1994, the Company shall determine an amount equal to the payments such
Participant would have received under the Cash Profit-Sharing Plan in such year
in respect of the Participant's Compensation, as described in Section 2, but for
any limitation on eligible earnings taken into account under the terms of the
Cash Profit-Sharing Plan. See Annex A.
(c) Distributions. Not later than the March 15 following each
calendar year for which a benefit is determined under Paragraphs 4(a) or (b)
above, the benefit determined for each Participant shall be paid in shares of
Bonus Stock issued under the Company's Stock-Based Compensation Plan. The
number of shares of Bonus Stock to be paid shall be determined by dividing the
amounts determined under Paragraphs 4(a) and (b) above by the average of the
closing prices of a share of the Company's common stock for each trading day of
the last calendar quarter of the most recent calendar year immediately preceding
the date of such payment, with cash paid in lieu of any fractional share. Such
shares shall not be transferable, whether by sale, pledge, gift, or otherwise,
while the Participant is employed by the Company or any of its subsidiaries.
Provision for all income tax withholding and other employment taxes shall be
made pursuant to Section 5.5 of the Stock-Based Compensation Plan.
5. Administration. The Human Resources and Compensation Committee of the
Company's Board of Directors shall be charged with the administration of this
Plan, shall have the same powers and duties, and shall be subject to the same
limitations, as are described in Article 10 of the HON INDUSTRIES Inc. Profit-
Sharing Retirement Plan. Decisions of such Committee shall be conclusive and
binding upon all persons claiming benefits under the Plan.
6. Nonassignment of Benefits. Notwithstanding anything contained herein
or in any other plan maintained by the Company to the contrary, it shall be a
condition of the payment of benefits under this Plan that neither such benefits
nor any portion hereof shall be assigned, alienated, or transferred to any
person voluntarily or by operation of any law, including any assignment,
division, or awarding of property under state domestic relations law (including
community property law). If any person shall endeavor or purport to make any
such assignment, alienation, or transfer, the amount otherwise provided
hereunder which is the subject of such assignment, alienation, or transfer shall
cease to be payable to any person.
7. No Guaranty of Employment. Nothing contained in this Plan shall be
construed as a contract of employment between any employee and his or her
Employer or as conferring a right on any employee to be continued in the
employment of an Employer.
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<PAGE>
8. Amendment and Termination. This Plan shall be subject to the same
reserved powers of amendment and termination as contained in Section 12.2 of the
HON INDUSTRIES Inc. Profit-Sharing Retirement Plan (without regard to any
limitations imposed on such powers by the Code or ERISA).
9. Miscellaneous.
(a) Certain Profit-Sharing Retirement Plan Provisions. Except as
otherwise provided herein, the provisions contained in Sections 1.2 (relating to
applicable law), 1.3 (relating to severability), and Article 13 (relating to
Adoption by Affiliated Employers) of the HON INDUSTRIES Inc. Profit-Sharing
Retirement Plan are hereby incorporated herein by reference, and shall be
applicable as if such provisions were set forth herein.
(b) Successors and Assigns. The provisions of this Plan shall bind
and inure to the benefit of each Employer and its successors and assigns, as
well as each Participant and his or her beneficiaries and successors.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
and its corporate seal to be hereunder affixed this day of
, 1995.
HON INDUSTRIES Inc.
By:
----------------------------------------
Title:
-------------------------------------
ATTEST:
- ---------------------------------
Title:
-------------------------------
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<PAGE>
ANNEX A
HON INDUSTRIES INC.
ERISA SUPPLEMENTAL RETIREMENT PLAN
PARTICIPANT STATEMENT
PARTICIPANT: ____________________ COMPANY: ____________________________
SOC. SEC. #: ____________________ RESIDENT STATE: ____________________________
<TABLE>
<CAPTION>
UNCAPPED
ELIGIBLE CONTRIBUTION UNCAPPED CAPPED* ESRP
COMPENSATION RATE CONTRIBUTION CONTRIBUTION CONTRIBUTION
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH PROFIT-SHARING *(Assumes $75,000
PAYMENTS: cap/period)
Period 1: June payment (4Q-1Q)
Period 2: Nov. payment (2Q-3Q)
RETIREMENT PROFIT-SHARING: *(Assumes $150,000 cap)
Mandatory company
contribution - 401K
Deferred profit-sharing
MEMBERS STOCK OWNERSHIP *(Assumes $150,000 cap)
PLAN:
Mandatory company contribution
-------------------------------------------------------------------
TOTAL BENEFIT
===================================================================
</TABLE>
<TABLE>
<C> <C>
CONVERSION INTO HON IND. COMMON STOCK - GROSS SHARES
============
(ESRP Contribution Total Benefit amount divided by the average
CLOSING price on HON IND. Common Stock for P/Y 4Q)
TAXABLE COMPENSATION, APPLICABLE PAYROLL TAXES, AND ISSUANCE OF COMMON STOCK
- Taxable Compensation: Gross Shares multiplied by the FMV of HON IND. Common Stock
on date of issuance
============
- Cash Value of Partial Share: Partial share amount multiplied by the FMV of
HON IND. Common Stock on date of issuance
============
- Applicable Payroll Taxes:
</TABLE>
<TABLE>
<CAPTION>
Default Cash Value of Total Applicable
Tax Table Partial Share Payroll Taxes
--------- ------------- -------------
<S> <C> <C> <C>
Federal Income Tax
State Income Tax
Social Security
Medicare _____________________________________________________
Total =====================================================
- Share Equivalent of Adjusted Tax Amount - Gross Shares ============
(Default Tax Table total divided by the FMV of HON IND. Common Stock on date
Common Stock on date of issuance)
- Tax Adjustment for Cash Value of Partial Share ============
(Partial share of Adjusted Tax Amount multiplied by the FMV of HON IND.
Common Stock on date of issuance)
NET WHOLE SHARES DUE PARTICIPANT
(Gross Whole Shares from Total Benefit Conversion less Gross Whole Shares
from the Adjusted Tax Amount) ============
**Average closing price of HON IND. Common Stock Date_______ Per Share_______
**Fair Market Value (FMV) of HON IND. Common Stock Date_______ Per Share_______
</TABLE>
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<PAGE>
Exhibit (99D)
HON INDUSTRIES INC.
1995 STOCK-BASED COMPENSATION PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the 1995 Stock-Based Compensation Plan (the
"Plan") of HON INDUSTRIES Inc. (the "Company") and its subsidiaries from time to
time (individually a "Subsidiary" and collectively the Subsidiaries") are (i) to
align the interests of the Company's shareholders and the recipients of awards
under this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, (ii) to advance the interests of the Company by
attracting and retaining officers and other key employees and well-qualified
persons who are not officers or employees of the Company ("Non-Employee
Directors") for service as directors of the Company and (iii) to motivate such
employees and non-employee directors to act in the long-term best interests of
the Company's shareholders. For purposes of this Plan, references to employment
by the Company shall also mean employment by a Subsidiary.
1.2 Certain Definitions.
"Agreement" shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
"Board" shall mean the Board of Directors of the Company.
"Bonus Stock" shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.
"Bonus Stock Award" shall mean an award of Bonus Stock under this Plan.
"Change in Control" shall have the meaning set forth in Section 5.8(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee designated by the Board, consisting of
three or more members of the Board, each of whom shall be (i) a "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act and (ii) an
"outside director" within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.
<PAGE>
"Common Stock" shall mean the common stock, $1.00 par value per share, of
the Company.
"Company" has the meaning specified in Section 1.1.
"Disability" shall mean the inability of the holder of an award to perform
substantially such holder's duties and responsibilities for a continuous period
of at least six months, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the average of the high and low transaction
prices of a share of Common Stock as reported in the National Association of
Securities Dealers Automated Quotation National Market System on the date as of
which such value is being determined, or, if there are no reported transactions
for such date, on the next preceding date for which transactions were reported;
provided, however, that if Fair Market Value for any date cannot be so
determined, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
"Incumbent Board" shall have the meaning set forth in Section 5.8(b)(2)
hereof.
"Non-Employee Director" shall mean any director of the Company who is not
an officer or employee of the Company or any Subsidiary.
"Performance Measures" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in the case of a Performance Share Award, of payment with
respect to such award. Such criteria and objectives may include, but are not
limited to, the attainment by a share of Common Stock of a specified Fair Market
Value for a specified period of time, earnings per share, return on equity,
earnings of the Company, revenues, market share, cash flows or cost reduction
goals, or any combination of the foregoing and any other criteria and objectives
established by the Committee. In the sole discretion of the Committee, the
Committee may amend or adjust (upward and downward) the Performance Measures or
other terms and conditions of an outstanding award in recognition of
-2-
<PAGE>
unusual or nonrecurring events affecting the Company or its financial statements
or changes in law or accounting principles.
"Performance Period" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock, which may be Restricted Stock, or in lieu thereof,
the Fair Market Value of such Performance Share in cash.
"Performance Share Award" shall mean an award of Performance Shares under
this Plan.
"Restricted Stock" shall mean shares of Common Stock which are subject to a
Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under this
Plan.
"Restriction Period" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award.
"Tax Date" shall have the meaning set forth in Section 5.5.
1.3 Administration. This Plan shall be administered by the Committee. Any one
or a combination of the following awards may be made under this Plan to eligible
officers and other key employees of the Company and its Subsidiaries: (i) Stock
Awards in the form of Restricted Stock or Bonus Stock and (ii) Performance
Shares. The Committee shall, subject to the terms of this Plan, select eligible
officers and other key employees for participation in this Plan and determine
the form, amount and timing of each award to such persons and, if applicable,
the number of shares of Common Stock or the number of Performance Shares subject
to such an award, the time and conditions of settlement of the award and all
other terms and conditions of the award, including, without limitation, the form
of the Agreement evidencing the award. The Committee shall, subject to the
terms of this Plan, interpret this Plan and the application thereof, establish
rules and regulations it deems necessary or desirable for the administration of
this Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities. All such
-3-
<PAGE>
interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.
The Committee may delegate some or all of its power and authority hereunder
to the President and Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (i) the grant
of an award under this Plan to any person who is a "covered employee" within the
meaning of Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an award hereunder
to such employee would be outstanding or (ii) the selection for participation in
this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an award to such an
officer or other person.
No member of the Board of Directors or Committee, and neither the
President and Chief Executive Officer nor any other executive officer to whom
the Committee delegates any of its power and authority hereunder, shall be
liable for any act, omission, interpretation, construction or determination made
in connection with this Plan in good faith, and the members of the Board of
Directors and the Committee and the President and Chief Executive Officer or
other executive officer shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's Articles of Incorporation, By-
laws, and under any directors' and officers' liability insurance that may be in
effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.4 Eligibility. Participants in this Plan shall consist of such officers or
other key employees of the Company and its Subsidiaries as the Committee in its
sole discretion may select from time to time. The Committee's selection of a
person to participate in this Plan at any time shall not require the Committee
to select such person to participate in this Plan at any other time. Non-
Employee Directors shall be eligible to participate in this Plan in accordance
with Article IV.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7, the
total number of shares of Common Stock available for all grants of awards under
this Plan in any calendar year, shall be one-half of one percent (.5%) of the
outstanding and
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<PAGE>
issued Common Stock as of January 1 of such year beginning January 1, 1995, plus
the number of shares of Common Stock which shall have become available for
grants of awards under this Plan in any and all prior calendar years, but which
shall not have become subject to any award granted in any prior year.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
II. STOCK AWARDS
2.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to
such eligible persons as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a Restricted
Stock Award or Bonus Stock Award. Stock Awards may be made in satisfaction of
the Company's obligations under the Company's Cash Bonus Plan, its Long Term
Incentive Plan or any other Plan of a similar nature that may be adopted by the
Company.
2.2 Terms of Stock Awards. Stock Awards shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of the Company
during the specified Restricted Period and for the forfeiture of the shares of
Common Stock subject to such award (x) if specified Performance Measures are not
satisfied or met during the specified Restriction Period or (y) if the holder of
such award does not remain continuously in the employment of the Company during
the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods. Notwithstanding the foregoing,
-5-
<PAGE>
Bonus Stock Awards may be subject to restrictions on sale or transfer as the
Committee may determine.
(c) Share Certificates. During the Restriction Period, a certificate
or certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend required pursuant
to Section 5.6, indicating that the ownership of the shares represented by such
certificate is subject to the restrictions, terms and conditions of this Plan
and the Agreement relating to the Restricted Stock Award. During any period for
which a Bonus Stock Award is subject to any restriction on sale or transfer, a
certificate or certificates representing such award shall be registered in the
holder's name and may bear a legend, in addition to any legend required pursuant
to Section 5.6, indicating that the ownership of the shares represented by such
certificate is subject to such restrictions. All such certificates shall be
deposited with the Company, together with stock powers or other instruments of
assignment (including a power of attorney), each endorsed in blank with a
guarantee of signature if deemed necessary or appropriate, which would permit
transfer to the Company of all or a portion of the shares of Common Stock
subject to the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period (and
the satisfaction or attainment of applicable Performance Measures), upon the
expiration of any restriction on sale applicable to a Bonus Stock Award or upon
the grant of a Bonus Stock Award not subject to any restrictions, in each case
subject to the Company's right to require payment of any taxes in accordance
with Section 5.5, a certificate or certificates evidencing ownership of the
requisite number of shares of Common Stock shall be delivered to the holder of
such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a shareholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a distribution in cash, shall be deposited with the Company and shall
be subject to the same restrictions as the shares of Common Stock with respect
to which such distribution was made.
2.3 Termination of Employment. Subject to Section 5.8, all the terms relating
to the satisfaction of Performance Measures and the termination of the
Restriction Period relating to a Restricted Stock Award, or any cancellation or
forfeiture of such Restricted Stock Award upon a termination of employment with
the Company of the holder of such Restricted Stock Award, whether by
-6-
<PAGE>
reason of Disability, retirement, death or other termination, shall be set forth
in the Agreement relating to such Restricted Stock Award.
III. PERFORMANCE SHARE AWARDS
3.1 Performance Share Awards. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.
3.2 Terms of Performance Share Awards. Performance Share Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. If a Performance Share Award is settled in shares of
Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 2.2(c) and the holder of such
Restricted Stock shall have such rights of a shareholder of the Company as
determined pursuant to Section 2.2(d). Prior to the settlement of a Performance
Share Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no rights as a shareholder of the Company with respect to
the shares of Common Stock subject to such award.
3.3 Termination of Employment. Subject to Section 5.8, all the terms relating
to the satisfaction of Performance Measures and
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the termination of the Performance Period relating to a Performance Share Award,
or any cancellation or forfeiture of such Performance Share Award upon a
termination of employment with the Company of the holder of such Performance
Share Award, whether by reason of Disability, retirement, death or other
termination, shall be set forth in the Agreement relating to such Performance
Share Award.
IV. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
4.1 Eligibility. Each Non-Employee Director shall be eligible to elect to
receive shares of Common Stock in accordance with this Article IV.
4.2 Time and Manner of Election. At least six (6) months prior to the date of
any annual meeting of shareholders of the Corporation during the term of this
Plan, Non-Employee Directors may file with the Committee or its designee a
written election to receive shares of Common Stock in lieu of all or a portion
of such Non-Employee Director's future annual retainer, paid quarterly,
exclusive of meeting or committee fees. Notwithstanding the foregoing, an
election made by (i) a Non-Employee Director in respect of the annual retainer
payable for the period beginning on the date of the 1995 annual meeting of the
shareholders of the Company or (ii) an individual who becomes a Non-Employee
Director on a date less than six months prior to any annual meeting of
shareholders, shall become effective on the first business day that is six
months after the date ("Effective Date") such Non-Employee Director files such
election, and such election shall be applicable only to the portion of such Non-
Employee Director's annual retainer determined by multiplying such annual
retainer by a fraction, the numerator of which is the number of calendar days
from and including the Effective Date to and including the last day for which
such Annual Retainer is payable and the denominator is 365. An election
pursuant to this Section, once made, shall be irrevocable in respect to the
annual retainer for which made.
The shares to be issued pursuant to this Section shall be issued on
each date on which an installment of the Non-Employee Director's annual retainer
would otherwise be payable in cash. The number of such shares to be issued
shall be determined by dividing the amount of the then payable installment of
the annual retainer subject to an election under this Section by the Fair Market
Value of a share of Common Stock on such date. Any fraction of a share shall be
disregarded and the remaining amount of the annual retainer shall be paid in
cash.
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V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to the
shareholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1995 annual meeting of shareholders, shall become
effective on the date of such approval. This Plan shall terminate 10 years
after its effective date unless terminated earlier by the Board. Termination of
this Plan shall not affect the terms or conditions of any award granted prior to
termination.
Awards hereunder may be made at any time prior to the termination of
this Plan, provided that no award may be made later than 10 years after the
effective date of this Plan. In the event that this Plan is not approved by the
shareholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.
5.2 Amendments. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of shareholder approval required by applicable law,
rule or regulation including Rule 16b-3 under the Exchange Act and Section
162(m) of the Code; provided, however, that no amendment shall be made without
shareholder approval if such amendment would (a) increase the maximum number of
shares of Common Stock available for issuance under this Plan (subject to
Section 5.7) or (b) extend the term of this Plan. No amendment may impair the
rights of a holder of an outstanding award without the consent of such holder.
5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by the Company and the recipient of such
award and, upon execution by each party and delivery of the Agreement to the
Company, such award shall be effective as of the effective date set forth in the
Agreement.
5.4 Non-Transferability of Performance Shares. No Performance Share, and to
the extent provided pursuant to Section 2.2(c), no Bonus Stock Award, shall be
transferable other than (i) by will, the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company or (ii)
as otherwise permitted under Rule 16b-3 under the Exchange Act as set forth in
the Agreement relating to such award. Each such award may be settled during the
participant's lifetime only by the holder or the holder's legal representative
or similar person. Except as permitted by the second preceding sentence, no
such award may be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by
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operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any such award, it and all rights thereunder
shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery to the Company of previously
owned whole shares of Common Stock (which the holder has held for at least six
months prior to the delivery of such shares and for which the holder has good
title, free and clear of all liens and encumbrances) having an aggregate Fair
Market Value, determined as of the Tax Date, equal to the amount necessary to
satisfy any such obligation, (C) authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered having an aggregate
Fair Market Value, determined as of the Tax Date, or withhold an amount of cash
which would otherwise be payable to a holder, equal to the amount necessary to
satisfy any such obligation, or (D) any combination of (A), (B) and (C), in each
case to the extent set forth in the Agreement relating to the award; provided,
however, that the Committee shall have sole discretion to disapprove of an
election pursuant to any of clauses (B)-(D) and that in the case of a holder who
is subject to Section 16 of the Exchange Act, the Company may require that the
method of satisfying such an obligation be in compliance with Section 16 and the
rules and regulations thereunder. An Agreement may provide for shares of Common
Stock to be delivered or withheld having an aggregate Fair Market Value in
excess of the minimum amount required to be withheld, but not in excess of the
amount determined by applying the holder's maximum marginal tax rate. Any
fraction of a share of Common Stock which would be required to satisfy such an
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the holder.
5.6 Restrictions on Shares. Each award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any
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governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any award made hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding Stock Award, and the
terms of each outstanding Performance Share shall be appropriately adjusted by
the Committee. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive. If any such adjustment would result in
a fractional security being (i) available under this Plan, such fractional
security shall be disregarded, or (ii) subject to an award under this Plan, the
Company shall pay the holder of such award, in connection with the first vesting
or settlement of such award, in whole or in part, occurring after such
adjustment, an amount in cash determined by multiplying (i) the fraction of such
security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A)
the Fair Market Value on the vesting or settlement date over (B) the exercise or
base price, if any, of such award.
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5.8 Change in Control.
(a) (1) Notwithstanding any provision in this Plan or any Agreement,
in the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of Common Stock
that are registered under Section 12 of the Exchange Act, (i) the Restriction
Period applicable to any outstanding Restricted Stock Award shall lapse, (ii)
the Performance Period applicable to any outstanding Performance Share shall
lapse, (iii) the Performance Measures applicable to any outstanding Restricted
Stock Award (if any) and to any outstanding Performance Share shall be deemed to
be satisfied at the maximum level, (iv) any other restrictions on sale or
transferability shall terminate and (v) there shall be substituted for each
share of Common Stock available under this Plan, whether or not then subject to
an outstanding award, the number and class of shares into which each outstanding
share of Common Stock shall be converted pursuant to such Change in Control.
(2) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of Common Stock that are registered under Section 12 of the Exchange
Act, each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be cancelled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control pursuant to Section (b)(1) or (2) below or within ten days of the
approval of the shareholders of the Company contemplated by Section (b)(3) or
(4) below, a cash payment from the Company in an amount equal to, in the case of
a Restricted Stock Award or Performance Share Award, the number of shares of
Common Stock or the number of Performance Shares, as the case may be, then
subject to such award, multiplied by the greater of (A) the highest per share
price offered to shareholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of Common
Stock on the date of occurrence of the Change in Control. The Company may, but
is not required to, cooperate with any person who is subject to Section 16 of
the Exchange Act to assure that any cash payment in accordance with the
foregoing to such person is made in compliance with Section 16 and the rules and
regulations thereunder.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the
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Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of Directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
Section 5.8(b); or
(2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least two-thirds of the
Board; provided, however, that any individual becoming a Director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least three-quarters of the Directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50
percent of, respectively, the then outstanding shares of Common Stock, and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of Directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
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Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of Common Stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(4) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
5.9 No Right of Participation or Employment. No person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
5.10 Rights as Shareholder. No person shall have any right as a shareholder of
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a shareholder of record with respect to such shares of Common
Stock or equity security.
5.11 Governing Law. This Plan, each award hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Iowa and construed in accordance therewith
without giving effect to principles of conflicts of laws.
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