UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission File Number 0-2648
HON INDUSTRIES Inc.
(Exact name of Registrant as specified in its charter)
Iowa 42-0617510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 1109, 414 East Third Street, Muscatine, Iowa 52761-0071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 319/264-7400
Indicate by check mark whether the registrant (1) has filed all
required reports 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 the number of share outstanding of each of the issuer's
classes of commons tock, as of the latest practical date.
Class Outstanding at April 3,1999
Common Shares, $1 Par Value 61,256,914 shares
Exhibit Index is on Page 18.
<PAGE>
HON INDUSTRIES Inc. and SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
April 3, 1999, and January 2, 1999 3-4
Condensed Consolidated Statements of Income -
Three Months Ended April 3, 1999, and April 4, 1998 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended April 3, 1999, and April 4, 1998 6
Notes to Condensed Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
(3i) Articles of Incorporation,
as amended and restated, on May 11, 1999
(10i) 1995 Stock-Based Compensation Plan,
as amended and restated, on February 10, 1999
(27) Financial Data Schedule
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLITATED BALANCE SHEETS
April 3, January 2,
1999 1999
(Unaudited)
ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents $10,722 $ 17,500
Short-term investments - 169
Receivables 178,625 183,576
Inventories (Note B) 66,587 67,225
Deferred income taxes 14,285 12,477
Prepaid expenses and other current assets 12,685 9,382
Total Current Assets 282,904 290,329
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land and land improvements 14,724 12,156
Buildings 157,908 144,559
Machinery and equipment 438,314 411,238
Construction in progress 72,453 85,782
683,399 653,735
Less accumulated depreciation 223,359 209,558
Net Property, Plant, and Equipment 460,040 444,177
GOODWILL 109,368 108,586
OTHER ASSETS 20,226 21,377
Total Assets $872,538 $864,469
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLITATED BALANCE SHEETS
April 3, January 2,
1999 1999
(Unaudited)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $173,491 $193,859
Income taxes 8,803 1,921
Note payable and current maturities
of long-term debt 14,310 15,769
Current maturities of other long-term
obligations 3,373 5,889
Total Current Liabilities 199,977 217,438
LONG-TERM DEBT 147,952 128,069
CAPITAL LEASE OBLIGATIONS 7,478 7,494
OTHER LONG-TERM LIABILITIES 17,585 18,067
DEFERRED INCOME TAXES 32,462 31,379
SHAREHOLDERS' EQUITY
Capital Stock:
Preferred, $1 par value; authorized
1,000,000 shares; no shares outstanding - -
Common, $1 par value; authorized
200,000,000 shares; outstanding - 61,257 61,290
1999 - 61,256,914 shares;
1998 - 61,289,618 shares
Paid-in capital 47,817 48,348
Retained earnings 357,579 351,786
Accumulated other comprehensive income 431 598
Total Shareholders' Equity 467,084 462,022
Total Liabilities and Shareholders'
Equity $872,538 $864,469
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
April 3, April 4,
1999 1998
(In thousands, except
per share data)
Net sales $424,459 $418,263
Cost of products sold 295,222 291,571
Gross Profit 129,237 126,692
Selling and administrative expenses 89,264 88,563
Provision for closing facilities (Note C) 19,679 -
Operating Income 20,294 38,129
Interest income 184 435
Interest expense 2,229 2,607
Income Before Income Taxes 18,249 35,957
Income taxes 6,661 13,484
Net Income 11,588 22,473
Net income per common share $.19 $.36
Average number of common shares
outstanding 61,154,027 61,647,784
Cash dividends per common share $.095 $.08
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
HON INDUSTRIES Inc. and SUBSIDIARIES
CONDENSED CONSOLITATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
April 3, April 4,
1999 1998
(In thousands)
Net Cash Flows From (To) Operating
Activities:
Net income $ 11,588 $ 22,473
Noncash items included in net income:
Depreciation and amortization 15,396 11,911
Other postretirement and postemployment
benefits 494 354
Deferred income taxes (636) 1,125
Other - net (44) (12)
Net increase (decrease) in noncash
operating assets and liabilities (13,425) (32,712)
Increase (decrease) in other liabilities (1,264) (1,326)
Net cash flows from operating activities 12,109 1,813
Net Cash Flows From (To) Investing
Activities:
Capital expenditures - net (30,144) (40,067)
Acquisition spending, net of cash acquired (1,637) (11,523)
Short-term investments - net 169 (2)
Long-term investments (9) (1)
Other - net - 1
Net cash flows (to) investing activities (31,621) (51,592)
Net Cash Flows From (To) Financing
Activities:
Purchase of HON INDUSTRIES common stock (5,126) (940)
Proceeds from long-term debt 41,651 35,050
Payments of note and long-term debt (22,593) (15,952)
Proceeds from issuance of stock 4,598 1,226
Dividends paid (5,796) (4,933)
Net cash flows from financing activities 12,734 14,451
Net increase (decrease) in cash and
cash equivalents (6,778) (35,328)
Cash and cash equivalents at beginning
of period 17,500 46,080
Cash and cash equivalents at end of period $ 10,722 $ 10,752
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HON INDUSTRIES Inc. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
April 3, 1999
Note A. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period
ended April 3, 1999, are not necessarily indicative of the
results that may be expected for the year ending January 1, 2000.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report
on Form 10-K for the year ended January 2, 1999.
Note B. Inventories
Inventories of the Company and its subsidiaries are summarized as
follows:
April 3, 1999 January 2,
($000) (Unaudited) 1999
Finished products $ 23,882 $ 24,955
Materials and work in process 53,766 53,320
LIFO Allowance (11,061) (11,050)
$ 66,587 $ 67,225
Note C. Provision for Closing Facilities
On February 11, 1999, the Company adopted a plan to close three
of its office furniture facilities located in Winnsboro, South
Carolina; Sulphur Springs, Texas; and Mt Pleasant, Iowa. The
operations will close following an orderly transition of
production to other facilities, which is expected to be completed
during the second and third quarter of 1999. A pretax charge of
$19.7 million or $0.20 per diluted share was recorded during the
quarter ended April 3, 1999. The charge includes $12.5 million
for write-offs of plant and equipment, $2.6 million for severance
arising from the elimination of approximately 360 positions, $2.1
million for other employee related costs, and $2.4 million for
certain other expenses associated with the closing of the
facility.
During the first quarter ended April 3, 1999, $2.9 million of
pretax exit costs were paid and charged against the liability.
It included $1.6 million for write-off of plant and equipment,
$1.1 million for severance for 210 positions, $.1 million for
other employee related expenses and $.1 million for certain other
expenses associated with the closing of the facility.
Note D. New Accounting Standards
In March 1998, the Accounting Standards Executive Committee of
the AICPA issued Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use". The SOP, which was adopted as of January 3, 1999,
the beginning of the Company's 1999 fiscal year, requires the
capitalization of certain costs incurred in connection with
developing or obtaining internal use software. Prior to the
adoption of SOP 98-1, the Company expensed all internal use
software related costs as incurred. The effect of adopting the
SOP was immaterial on the Company's financial condition or
results of operation during the quarter ended April 3, 1999.
Note E. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income", as of January
4, 1998, the beginning of its 1998 fiscal year. For the three-
month periods ended April 3, 1999 and April 4, 1998, the change
in comprehensive income is approximately ($167,000) and $1,000,
respectively.
The Company's comprehensive income consists of an unrealized
holding gain or loss on equity securities available-for-sale
under SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities", and nominal foreign currency adjustments.
Note F. Business Segment Information
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information," effective with its 1998 fiscal year
beginning January 4, 1998. Management views the Company as being
in two business segments: office furniture and hearth products
with the former being the principal business segment.
The office furniture segment manufactures and markets a broad
line of metal and wood commercial and home office furniture which
includes file cabinets, desks, credenzas, chairs, storage
cabinets, tables, bookcases, freestanding office partitions and
panel systems, and other related products. The hearth product
segment manufactures and markets a broad line of manufactured gas-
, pellet- and wood-burning fireplaces and stoves, fireplace
inserts, and chimney systems principally for the home.
For purposes of segment reporting, intercompany sales transfers
between segments are not material and operating profit is income
before income taxes exclusive of certain unallocated corporate
expenses. These unallocated corporate expenses include the net
costs of the Company's corporate operations, interest income, and
interest expense. Management views interest income and expense
as corporate financing costs and not as a business segment cost.
In addition, management applies one effective tax rate to its
consolidated income before income taxes so income taxes are not
reported or viewed internally on a segment basis.
No geographic information for revenues from external customers or
for long-lived assets is disclosed inasmuch as the Company's
primary market and capital investments are concentrated in the
United States.
Reportable segment data reconciled to the consolidated financial
statements for the three month period ended April 3, 1999, and
April 4, 1998, is as follows:
Three Months Ended
April 3, April 4,
1999 1998
Net Sales:
Office furniture $359,981 $366,836
Hearth products 64,478 51,427
$424,459 $418,263
Operation Profit:
Office furniture
Normal operations $ 36,294 $ 36,663
Facility closedown provision (19,679) -
Office furniture - net 16,615 36,663
Hearth products 5,784 2,931
Total operating profit 22,399 39,594
Unallocated corporate expense (4,150) (3,637)
Income before income taxes $ 18,249 $ 35,957
Identifiable Assets:
Office furniture $666,632 $591,118
Hearth products 159,143 145,917
General corporate 46,763 41,374
$872,538 $778,409
Depreciation & Amortization
Expense:
Office furniture $ 12,458 $ 9,650
Hearth products 2,607 1,942
General corporate 331 319
$ 15,396 $ 11,911
Capital Expenditure, Net:
Office furniture $ 20,291 $ 35,694
Hearth products 4,303 4,526
General corporate 5,550 (153)
$ 30,144 $ 40,067
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
A summary of the period-to-period changes in the principal items
included in the Condensed Consolidate Statements of Income is
shown below:
Comparison of
Increases (Decreases) Three Months Three Months
Ended Ended
Dollars in Thousands April 3, 1999 & April 3, 1999 &
April 4, 1998 January 2, 1999
Net sales $ 6,196 1.5% $(3,615) (0.8)%
Cost of products sold 3,651 1.3 983 0.3
Selling & Administrative
expenses 701 0.8 4,943 5.9
Provision for closing
facilities 19,679 N/M 19,679 N/M
Interest income (251) (57.7) (173) (48.5)
Interest expense (378) (14.5) (308) (12.1)
Income taxes (6,823) (50.6) (11,094) (62.5)
Net income (10,885) (48.4) (17,991 (60.8)
The Company reported record first quarter sales and earnings for
its fiscal quarter ended April 3, 1999, prior to a one-time
charge for a cost savings initiative. This is the 13th
consecutive quarter of record results from operations.
Consolidated net sales for the first quarter ending April 3,
1999, were $424.5 million, a 1.5% increase from the $418.3
million in the first quarter of 1998. The closing of three
plants, a cost savings initiative to increase long-term
profitability, was announced in first quarter with an anticipated
annualized savings of $11.6 million upon completion of the
closings. Accounting for a one-time charge of $19.7 million
against pre-tax earnings, net income for the quarter was $11.6
million or $0.19 per share. Net income, before the charge,
reached $24.1 million, an increase of 7.2% from $22.5 million for
the same period a year ago. Prior to the one-time charge, net
income per share was $0.39 per diluted share compared to $0.36
per share in first quarter 1998.
For the first quarter of 1999, office furniture comprised 85% of
consolidated net sales and hearth products comprised 15%. Net
sales for office furniture were down 2% for the quarter compared
to the same quarter a year ago. Due to the unusually strong
office furniture industry growth rate in 1997 of 15%, the Company
ended fiscal year 1997 with a higher than normal order backlog
which further strengthened first quarter 1998 net sales. While
backlog is normally not a consideration because of the Company's
short delivery times, it is a factor when comparing first quarter
1998 and 1999 shipments. Hearth products sales increased 25% for
the quarter compared to the same quarter a year ago. Office
furniture contributed 86% of first quarter 1999 consolidated
operating profit before unallocated corporate expenses and the
one-time charge and hearth products 14%.
The consolidated gross profit margin for the first quarter of
1999 was 30.4% compared to 30.3% for the same period in 1998.
The Company is continuing to focus on improving gross margins.
The focus is on improving the net selling price of products and
on reducing production costs.
Selling and administrative expenses for the first quarter of
1999, excluding the one-time charge, were 21.0% of net sales
compared to 21.2% in the comparable quarter of 1998. Management
places emphasis on controlling and reducing selling and
administrative expenses as a percent of net sales. Selling and
administrative expenses also include freight and distribution
expenses incurred to get the product to the customer.
The Company adopted a plan to close three of its office furniture
facilities located in Winnsboro, South Carolina; Sulphur Springs,
Texas; and Mt. Pleasant, Iowa on February 11, 1999. The
operations will close following an orderly transition of
production to other facilities which is expected to be completed
during the second and third quarters of 1999. Upon completion of
the closedowns, the Company is anticipating annualized savings of
$11.6 million mainly from reduced salaries and benefits,
depreciation, and other costs related to operating the three
facilities. A pretax charge of $19.7 million or $0.20 per
diluted share was recorded during the quarter ended April 3,
1999. The charge includes $12.5 million for write-offs of plant
and equipment, $2.6 million for severance arising from the
elimination of approximately 360 positions, $2.1 million for
other employee related costs, and $2.4 million for certain other
expenses associated with the closing of the facilities. During
the first quarter ended April 3, 1999, $2.9 million of pretax
exit costs were paid and charged against the liability. It
included $1.6 million for write-off of plant and equipment, $1.1
million for severance for 210 positions, $.1 million for other
employee related expenses and $.1 million for certain other
expenses associated with the closing of the facility.
The Company decreased its estimated annual effective tax rate to
36.5% for the first quarter of 1999 from 37.5% a year earlier to
reflect lower estimated state income taxes.
Liquidity and Capital Resources
As of April 3, 1999, cash and short-term investments decreased to
$10.7 million compared to a $17.7 million balance at year-end
1998. The decrease is due to marketing program payments
typically made in the first quarter and capital expenditures.
Net capital expenditures for the first quarter of 1999 were $30.1
million and primarily represent investment in new, more-efficient
machinery and equipment. These investments were funded by a
combination of cash reserves, cash from operations and a
revolving credit agreement.
The Board of Directors approved an 18.8% increase in the common
stock quarterly dividend from $.08 per share to $.095 per share.
The dividend was paid on March 1, 1999 to shareholders of record
on February 19, 1999. This was the 176th consecutive quarterly
dividend paid by the Company.
In the first quarter, the Company repurchased 231,405 of its
common stock at a cost of approximately $5.1 million or an
average price of $22.15 per share. As of April 3, 1999,
approximately $57.3 million of the Board's current repurchase
authorization remained unspent.
On May 10, 1999, the Board of Directors declared an $.095 per
common share cash dividend to shareholders of record on May 20,
1999, to be paid on June 1, 1999.
Year 2000
The Company is continuing to work on its comprehensive Year 2000
("Y2K") Compliance Plan. The primary mission of the Plan is to
maintain business continuity by giving priority remediation and
resolution to any Year 2000 issue that could compromise normal
business operations.
The project is focused on three business fronts: (1) information
technology, which encompasses traditional computer hardware,
software and related networks; (2) operations, which encompasses
material suppliers, equipment vendors, and embedded chips used by
facility, production, and distribution machinery, equipment, and
support processes; and (3) customers and other nonoperational
service providers.
All three project focus initiatives are on schedule to be
completed during the second and third quarters of 1999, leaving
fourth quarter of 1999 primarily for follow-up compliance testing
and contingency planning as needed. The Company plans to engage
an independent review of its Y2K compliance plan and follow-
through effort during June-September to further assess its
quality and comprehensiveness. The Company still estimates its
total incremental out-of-pocket project costs will not exceed the
$1 million range, including some costs that, because of their
nature, will be capitalized. All internal and external costs
associated with this project are being expensed or capitalized in
the period incurred. Through the fiscal quarter ended April 3,
1999, the Company has incurred and recorded costs of
approximately $125,000.
At this point, the Company assesses its Y2K issues to be
comparatively modest and routine in nature. Current efforts are
being concentrated on internal compliance testing of equipment
and processes. While the Company does not anticipate any
material business interruptions due to Year 2000 issues that are
within its control, this outcome is also dependent on many other
business and service partners having their Year 2000 house in
order. These partners include among others: utility service
providers, key suppliers, including a few foreign suppliers; key
customers; banking system; equipment vendors; and software and
other related system and service providers. In these cases, the
Company is relying principally on individual Y2K readiness
statements. The Company maintains an electronic copy of its
latest Year 2000 Readiness Disclosure at its website location at
www.honi.com.
So, given the unusual nature of the Y2K challenge, even with a
comprehensive and responsive due diligence effort, business risk
can not be totally avoided. Management views the Company's
business risks to include, but not necessarily limited to the
following: higher than expected remediation costs, exclusion of
coverage by insurers for losses/damages attributable to Year 2000
issues, loss of production, loss of sales, and litigation risk.
Looking Ahead
The Company is optimistic about its business outlook for fiscal
year 1999. If the U.S. economy remains healthy, 1999 is expected
to be another record year in terms of earnings. This optimism is
based on the Company's ability to continue improving its cost
structure, increase sales through the introduction of new value-
priced products, and provide outstanding customer service and
support.
Except for the historic information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements. Such
forward-looking statements involve risks and uncertainties which
could cause actual results or outcomes to differ materially from
those discussed in the forward-looking statements including but
not limited to: competitive conditions, pricing trends in the
office furniture and hearth products markets, acceptance of the
Company's new product introductions, the overall growth rate of
the office furniture and hearth product industries, the achievement
of cost reductions and productivity in the Company's operations,
the impact of future acquisitions, the Company's ability to identify
and correct or implement contingency plans to deal with the Y2K
issues, as well as the risks, uncertainties, and other factors
described from time to time in the Company's SEC filings and reports.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of HON INDUSTRIES Inc. was
held on May 11, 1999, for purposes of electing four Directors to
the Board of Directors, and to amend the Articles of
Incorporation to increase the authorized shares of the Company's
preferred stock from 1,000,000 to 2,000,000. As of March 12,
1999, the record date for the meeting, there were 61,083,054
shares of common stock issued and outstanding and entitled to
vote at the meeting. The first proposal voted upon was the
election of four Directors for a term of three years and until
their successors are elected and shall qualify. The four persons
nominated by the Company's Board of Directors received the
following votes and were elected:
For Withheld Against
Cheryl A. Francis 54,725,131 123,263 -0-
or 89.6% or .2% or 0%
Robert L. Katz 54,732,710 115,684 -0-
or 89.6% or .2% or 0%
Richard H. Stanley 54,673,402 174,992 -0-
or 89.5% or .3% or 0%
Brian E. Stern 54,764,243 84,151 -0-
or 89.7% or .1% or 0%
The second proposal voted upon was the approval of the Amendment
of the Articles of Incorporation. The proposal was approved with
33,770,694 votes, or 55.3% voting for; 11,223,189 votes, or 18.4%
voting against; and 207,145 votes, or .3% voting withheld.
As to the second proposal, there were 9,647,365 or 15.8% broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: May 14, 1999 HON INDUSTRIES Inc.
By /s/ David C. Stuebe
David C. Stuebe
Vice President and
Chief Financial Officer
By /s/ Melvin L. McMains
Melvin L. McMains
Vice President and
Controller
<PAGE>
PART II. EXHIBITS
EXHIBIT INDEX
(3i) Articles of Incorporation, as amended and
restated, on May 11, 1999
(10i) 1995 Stock-Based Compensation Plan, as amended and
restated, on February 10, 1999
(27) Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000048287
<NAME> HON INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-1-2000
<PERIOD-START> JAN-3-1999
<PERIOD-END> APR-3-1999
<CASH> 10,722
<SECURITIES> 0
<RECEIVABLES> 181,790
<ALLOWANCES> (3,165)
<INVENTORY> 66,587
<CURRENT-ASSETS> 282,904
<PP&E> 683,399
<DEPRECIATION> 223,359
<TOTAL-ASSETS> 872,538
<CURRENT-LIABILITIES> 199,977
<BONDS> 147,952
0
0
<COMMON> 61,257
<OTHER-SE> 405,827
<TOTAL-LIABILITY-AND-EQUITY> 872,538
<SALES> 424,459
<TOTAL-REVENUES> 424,459
<CGS> 295,222
<TOTAL-COSTS> 295,222
<OTHER-EXPENSES> 108,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,229
<INCOME-PRETAX> 18,249
<INCOME-TAX> 6,661
<INCOME-CONTINUING> 11,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,588
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
HON INDUSTRIES Inc.
Amended and restated on May 5, 1987.
Amended on May 3, 1988, July 7, 1988, May 12, 1998,
August 10, 1998 and May 11, 1999.
ARTICLE 1.
Section 1.01. Name. The name of the Corporation is HON
INDUSTRIES Inc.
Section 1.02. Law Under Which Incorporated. The
Corporation was incorporated under Chapter 384 of the Code of
Iowa (1939), and has voluntarily adopted the provisions of the
Iowa Business Corporation Act, Chapter 496A of the Code of Iowa.
ARTICLE 2.
Section 2.01. Duration. The Corporation shall have
perpetual duration.
ARTICLE 3.
Section 3.01. Purposes and Powers. The Corporation shall
have unlimited power to engage in, and to do any lawful act
concerning, any or all lawful businesses for which corporations
may be organized under the Iowa Business Corporation Act.
ARTICLE 4.
Section 4.01. Authorized Shares. The aggregate number of
shares which the Corporation shall authority to issue is
202,000,000 shares, consisting of 2,000,000 shares designated as
"preferred stock" or "preferred shares," with a par value of
$1.00 per share, and 200,000,000 shares designated as "common
stock" or "common shares," with a par value of $1.00 per share.
(Amended 5/12/98 and 5/11/99.)
Section 4.02. Series of Preferred Shares. Authority is
hereby vested in the Board of Directors to divide the preferred
shares into series and, within the limitations set forth in the
Iowa Business Corporation Act and in these Articles of
Incorporation, to fix and determine the relative rights and
preferences of the shares of any series so established. In order
to establish such series, the Board of Directors and the
Corporation shall comply with the procedure therefor as provided
in the Iowa Business Corporation Act. Upon such compliance, the
resolution of the Board of Directors establishing and designating
the series and fixing and determining the relative rights and
preferences thereof shall become effective and shall constitute
an amendment of these Articles of Incorporation.
Series A Junior Participating Preferred Stock (As adopted
7/7/88 and amended 8/10/98):
1. Designation and Amount. The shares of this series
shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock"), and the
number of shares constituting the Series A Preferred Stock
shall be 1,000,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares
of Series A Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares
reserved for issuance on the exercise of outstanding
options, rights, or warrants or on the conversion of any
outstanding securities issued by the Corporation convertible
into Series A Preferred Stock.
2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common
Stock, par value $1.00 per share (the "Common Stock"), of
the Corporation and of any other junior stock, shall be
entitled to receive, when, as, and if declared by the Board
of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of
March, June, September, and December in each year (each such
date being identified as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock. Such dividends shall be
in an amount per share (rounded to the nearest cent) equal
to the greater of (1) $1 or (2) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share
of Series A Preferred Stock. If the Corporation at any time
declares or pays any dividend on the Common Stock payable in
shares of Common Stock or effects a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, in each
such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such
event under clause (2) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (a) of this Section immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that,
if no dividend or distribution has been declared on the
Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless (1) the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or (2) the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for
the payment thereof.
3. Voting Rights. Except as required by law, holders
of Series A Preferred Stock shall have no voting rights and
their consent shall not be required for taking any corporate
action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock
outstanding have been paid in full, the Corporation shall
not:
(1) declare or pay dividends or make any other
distributions on any shares of stock ranking junior
(either as to dividends or on liquidation, dissolution,
or winding up) to the Series A Preferred Stock;
(2) declare or pay dividends or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or on liquidation,
dissolution, or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(3) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or on liquidation, dissolution,
or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem,
purchase, or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or
on liquidation, dissolution, or winding up) to the
Series A Preferred Stock; or
(4) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock or
any shares of stock ranking or a parity with the Series
A Preferred Stock except in accordance with a purchase
offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such
shares on such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and classes, determines in good faith
will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless
the Corporation could, under paragraph (a) of this Section
4, purchase or otherwise acquire such shares at such time
and in such manner.
5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such
shares shall, on cancellation, become authorized but
unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in
the Articles of Incorporation, or in any other Statement of
Resolution creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. On any
liquidation, dissolution, or winding up of the Corporation,
no distribution shall be made (a) to the holders of shares
of stock ranking junior (either as to dividends or on
liquidation, dissolution, or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares
of Series A Preferred Stock have received $100 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date
of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of
shares of Common Stock, or (B) to the holders of shares of
stock ranking on a parity (either as to dividends or on
liquidation, dissolution, or winding up) with the Series A
Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all
such shares are entitled on such liquidation, dissolution,
or winding up. If the Corporation at any time declares or
pays any dividend on the Common Stock payable in shares of
Common Stock or effects a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, in each such case the aggregate
amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under
the proviso in clause (a) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. If the Corporation
enters into any consolidation, merger, combination, or other
transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities,
cash, or any other property, each share of Series A
Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to
the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash,
or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is
changed or exchanged. If the Corporation at any time
declares or pays any dividend on the Common Stock payable in
shares of Common Stock, or effects a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, in each
such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event, and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
9. Rank. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the
distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
Section 4.03. Relative Rights and Preferences of Each
Series. All preferred shares shall be identical, except as to
the relative rights and preferences as to which the Iowa Business
Corporation Act permits variations between different series.
Section 4.04. Pre-Emptive Rights Denied. No holder of
shares of any class shall have any pre-emptive right to acquire,
subscribe for, or purchase any shares of any class (whether such
shares shall be authorized by these Articles of Incorporation or
authorized hereafter), treasury shares, or securities of the
Corporation. Any and all pre-emptive rights which might
otherwise exist are expressly denied.
Section 4.05. Voting Rights. The preferred shareholders
shall have no voting rights, and the vote or consent of the
preferred shareholders shall not be required with respect to any
matter, except that the preferred shareholders shall have the
right to vote on any matter as to which the Iowa Business
Corporation Act expressly requires that they be permitted to vote
notwithstanding any contrary provisions of the Articles of
Incorporation.
Cumulative voting shall not be permitted or be effective at any
meeting of shareholders.
Section 4.06. Vote Required for Action; General Rule.
Except as otherwise provided in Sections 4.07, 4.08, 4.09, and
4.10, the affirmative vote of the holders of two-thirds of the
total outstanding shares of common stock entitled to vote shall
be required and shall be sufficient to adopt any motion or
resolution or to take any action at any meeting of the
shareholders (including, without limitation, the election or
removal of Directors, any amendment to these Articles of
Incorporation, any action with respect to which the Iowa Business
Corporation Act requires the vote or concurrence of a greater or
lesser proportion of the shares, and any matter which is
submitted to a vote at a meeting of shareholders, whether or not
such submission is required by law, by action of the Board of
Directors, or by agreement).
However, notwithstanding this Section, the By-laws may provide
that action may be taken on any or all of the following matters
by the vote of a lesser proportion of the common stock, even if
less than a quorum: election or appointment of a temporary
presiding officer or a temporary secretary for a meeting of
shareholders, or adjournment or recess of a meeting of
shareholders.
Section 4.07. Majority Vote Sufficient for Certain Actions.
(a) Notwithstanding Section 4.06, the affirmative vote of
the holders of a majority of the total outstanding shares of
common stock of the Corporation entitled to vote shall be
required and shall be sufficient to take any of the following
actions or to authorize, adopt, approve, or ratify any of the
following which is submitted to a vote at a meeting of
shareholders (whether or not such submission is required by law,
by action of the Board of Directors, or by agreement):
(1) Any amendment to these Articles of Incorporation
which has been approved or recommended by the Board of Directors
of the Corporation. However, this Subsection shall not apply to
any amendment which would amend, limit, or conflict with Sections
4.06, 4.07, 4.08, 4.09, 4.10, 5.01, 5.02, or 5.03.
(2) The election of a class of Directors at any annual
meeting of the shareholders if both the following events have
occurred: (i) at the annual meeting of the shareholders in the
third preceding year, an election of such class of Directors was
held or attempted, but no Director of such class was elected at
such meeting because no candidate received the two-thirds
majority vote required by Section 4.06; (ii) the term of such
class of Directors was extended as provided in Subsection 5.03(b)
for an additional term of three years, ending when Directors are
elected at the annual meeting to which this Subsection applies.
This Subsection shall apply severally to each class of Directors
and the reduced voting requirements under this Subsection shall
apply only to the election of the particular class of Directors
referred to in this Subsection.
(3) Any other motion, resolution, or action which has
been approved or recommended by the Board of Directors of the
Corporation. However, this Subsection shall not apply to any
motion, resolution, or action regarding the election or removal
of Directors, any amendment to these Articles of Incorporation,
any Corporate Combination (as defined in Section 4.10), any
partial or complete liquidation of the Corporation, any
liquidating dividend or distribution, or any dissolution of the
Corporation.
(b) Sections 4.06 and 4.07 shall not be construed to
require that any matter or action be (1) submitted to a vote at
any meeting of the shareholders; or (2) authorized, adopted,
approved, or ratified by the shareholders, if such submission,
vote, authorization, adoption, approval, or ratification would
not be required in the absence of such Sections.
Section 4.08. Vote Required for Action When Class Voting
Required. On any matter with respect to which the preferred
shareholders have the right to vote as a class (as provided in
Section 4.05), the affirmative vote of (a) the holders of the
required majority of the total outstanding common shares entitled
to vote as provided in Section 4.06 and 4.07 (whichever would be
applicable in the absence of preferred shareholders' voting
rights), and (b) the holders of a majority of the total
outstanding preferred shares entitled to vote, and (c) the
holders of a majority of the total outstanding shares entitled to
vote, shall be required and shall be sufficient to take action,
notwithstanding any provision of the Iowa Business Corporation
Act which requires the vote or concurrence of a greater or lesser
proportion of the total outstanding shares or of the shares of
any or each class. However, on any matter with respect to which
only the only the preferred shareholders have the right to vote,
as provided in Section 4.05, the affirmative vote of the holders
of a majority of the total outstanding preferred shares entitled
to vote shall be required and shall be sufficient to take action.
Section 4.09. Vote Required for Action When Preferred
Shareholders Have Voting Rights But Class Voting Not Required.
On any matter with respect to which the preferred shareholders
have the right to vote but do not have the right to vote as a
class (as provided in Section 4.05), the affirmative vote of the
holders of two-thirds of the total outstanding shares entitled to
vote shall be required and shall be sufficient to take action,
notwithstanding any provision of the Iowa Business Corporation
Act which requires the vote or concurrence of a greater or lesser
proportion of the total outstanding shares. However, if Section
4.07 would be applicable to such matter and Section 4.06 would
not be applicable to such matter in the absence of preferred
shareholders, voting rights, the affirmative vote of the holders
of a majority of the total outstanding shares entitled to vote
shall be required and shall be sufficient to take action on such
matter.
Section 4.10. Vote Required for Action Relating to a
Corporate Combination.
(a) Notwithstanding Section 4.06, the affirmative vote of
the holders of that fraction of the total outstanding shares of
common stock of the Corporation entitled to vote, but not less
than two-thirds, determined by using as the numerator a number
equal to the sum of (1) the outstanding shares of common stock of
the Corporation entitled to vote which are owned or controlled by
a Related Person, plus (2) two-thirds of the remaining number of
outstanding shares of common stock of the Corporation entitled to
vote, and using as the denominator a number equal to the total
number of outstanding shares of common stock of the Corporation
entitled to vote, shall be required for any act of the
shareholders relating to adoption and authorization of a
Corporate Combination or any amendment of this Section 4.10.
(b) Notwithstanding Subsection 4.10(a), the affirmative
vote of two-thirds of the outstanding shares of common stock of
the Corporation entitled to vote shall be sufficient for the
adoption and authorization of a Corporate Combination when:
(1) The Corporate Combination will result in an
involuntary sale, redemption, cancellation, or other termination
of ownership of all shares of common stock of the Corporation
owned by shareholders who do not vote in favor of or consent in
writing to the Corporate Combination;
(2) The cash or fair market value (as determined in
good faith by the Board of Directors) of other readily marketable
consideration to be received by all holders of common stock for
their shares will be: (i) at least equal to the Minimum Price Per
Share, and (ii) in cash or in the same form as the Transaction
Person has previously paid for shares of common stock of the
Corporation. If the Transaction Person has paid for shares of
common stock of the Corporation with varying forms of
consideration, the form of consideration for such common stock
shall be either cash or the form used to acquire the largest
number of shares of such class of stock of the Corporation
previously acquired by it;
(3) During the period from the earlier of the date
that a person becomes a Transaction Person or a Transaction
Person becomes a Related Person until the date of consummation of
such Corporate Combination:
(i) There shall have been no failure to declare
and pay at the regular date therefor any full dividends,
whether or not cumulative, on any outstanding preferred
stock of the Corporation;
(ii) There shall have been: (a) no reduction in
the annual rate of dividends paid on the common stock of the
Corporation, except as necessary to reflect any subdivision
of such stock, and (b) all increases in such annual rate of
dividends necessary to reflect any reclassification,
including any reverse stock split, recapitalization,
reorganization, or any similar transaction which has the
effect of reducing the number of outstanding shares of the
common stock of the Corporation;
(iii) The Transaction Person shall not have become
the beneficial owner of any additional shares of stock of
the Corporation except as part of the transaction which
results in the Transaction Person's becoming a Related
Person; and
(iv) The Transaction Person shall not have
received the benefit, directly or indirectly, except
proportionately as a shareholder, of any loans, advances,
guaranties, pledges, other financial assistance, tax
credits, or tax advantages provided by the Corporation,
whether in anticipation of or in connection with such
Corporate Combination or otherwise; and
(4) A proxy statement responsive to the requirements
of the Securities Exchange Act of 1934 shall be mailed to the
shareholders of the Corporation at least 30 days prior to the
proposed consummation of a Corporate Combination (whether or not
such proxy statement is required to be mailed pursuant to such
Act or subsequent provisions) for the purpose of soliciting
shareholder approval of the proposed Corporate Combination.
(c) For all purposes under this Section 4.10:
(1) An "Affiliate" of a person is any other person
which directly or indirectly (through one or more intermediaries,
or otherwise) controls, is controlled by, or is under common
control with such person.
(2) An "Associate" of a person is any officer,
Director, partner, or employee of such person (or of an Affiliate
of such person); any person which owns ten percent or more of any
class of Equity Securities of such person (or of any Affiliate of
such person); any corporation or other person of which such
person is an officer, Director, or a partner; any corporation or
other person of which such person is the owner of ten percent or
more of any class of Equity Securities; any trust or estate in
which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a fiduciary capacity;
and.any person acting under the direction of such person in
connection with the matter in question.
(3) "Control" (including "controls" and "controlled
by") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of
a person, whether through the ownership of securities, by
agreement, or otherwise.
(4) "Corporate Combination" means:
(i) Any merger or consolidation of the
Corporation or any subsidiary with (a) any Related Person
other than a subsidiary, or (b) any other corporation, other
than a Subsidiary (whether or not itself a Related Person)
which is, or after such merger or consolidation would be, an
Affiliate of a Related Person;
(ii) Any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition in one transaction or a
series of transactions to or with any Transaction Person of
any assets of the Corporation or any Subsidiary having an
aggregate fair market value of $1,000,000 or more;
(iii) The issuance or transfer by the Corporation
or any Subsidiary in one transaction or a series of
transactions of any securities of the Corporation or any
Subsidiary to any Transaction Person in exchange for cash,
securities, other property, or a combination thereof, having
an aggregate fair market value of $1,000,000 or more;
(iv) The adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of a Related Person or any Affiliate of any
Related Person;
(v) Any reclassification of securities, including
any reverse stock split or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries, or any other
transaction (whether or not with, into, or otherwise
involving a Related Person) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of Equity Securities or
convertible securities of the Corporation or any subsidiary
which is directly or indirectly owned by any Related Person
or any Affiliate of any Related Person.
(5) "Equity Securities" means any shares of capital
stock and any securities which are convertible (with or without
consideration) into shares of capital stock or into other
securities convertible into shares of capital stock.
(6) "Owns," "owned," and "owner" mean direct or
indirect ownership, either of record or beneficial. Any person
is conclusively deemed to be the beneficial owner of any Equity
Securities (of the Corporation or any other person) if (i) such
person has the right to acquire such Equity Securities pursuant
to any agreement or upon exercise of conversion rights, warrants,
options, or otherwise; (ii) such person has the right to vote or
direct the voting of such Equity Securities (either generally or
with respect to the matter in question), whether by agreement,
arrangement, understanding, or otherwise; or (iii) such Equity
Securities are owned by the spouse, parent, child, or grandchild
of such person.
(7) "Minimum Price Per Share" means the amount of cash
or fair market value of other readily marketable consideration to
be received by shareholders in a Corporate Combination which
amount is at least equal to the highest gross price per share
(including brokerage commissions, transfer taxes, and soliciting
dealers, fees) paid or agreed to be paid to acquire any shares of
common stock of the Corporation by any Related Person, provided
such payment or agreement to make payment was made within two
years immediately prior to the record date set to determine the
shareholders entitled to vote or consent to the Corporate
Combination in question.
(8) "Person" means any corporation, partnership,
association, trust, fiduciary, individual, or other entity.
(9) "Related Person" means any person which, together
with its Affiliates, its Associates, and the Associates of its
Affiliates, owns ten percent or more of the outstanding common
stock of the Corporation.
(10) "Subsidiary" means a corporation of which a
majority of any class of Equity Securities is owned directly or
indirectly by the Corporation.
(11) "Transaction Person" means:
(i) Any person who would become a Related Person
as the result of any proposed Corporate Combination;
(ii) Any Related Person that proposes, initiates,
or facilitates any Corporate Combination;
(iii) Any Affiliate, Associate, or Associate of an
Affiliate of a person described in (i) or (ii) of this
Subparagraph (11).
(d) When evaluating any offer to make a tender or exchange
offer for any Equity Securities of the Corporation or any offer
to effect any Corporate Combination, it is appropriate for the
Board of Directors, in the exercise of its judgment in
determining what is in the best near-term and long-range
interests of the shareholders of the Corporation, to give
consideration to all relevant factors, including, without
limitation, the economic and social effects on the employees,
customers, and other constituents of the Corporation and its
subsidiaries and on the communities in which the Corporation and
its subsidiaries operate or are located.
ARTICLE 5.
Section 5.01. Directors: Number, Terms, Classification.
The number of Directors shall be fixed by the By-laws. 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. This Section is subject to
Section 5.03.
Section 5.02. Removal of Directors. At any meeting of
shareholders, it the notice of the meeting includes a statement
to the effect that the purpose or one of the purposes for which
the meeting is called is to remove one or more named Directors,
the common shareholders may remove any or all of such named
Directors, with or without cause, by the affirmative vote of the
holders of two-thirds of the total outstanding common shares
entitled to vote. At such meeting, the common shareholders may
elect a new Director or Directors to fill the vacancy or
vacancies in the Board of Directors caused by such removal; but
any such vacancy or vacancies not so filled by the common
shareholders shall be filled as provided by law or the By-laws.
Section 5.03. Failure to Elect Directors.
(a) Failure in any one or more years to elect one or more
Directors or to elect any class of Directors shall not: (1) end
the term of any Director or class of Directors (except as
otherwise provided in Subsection 5.03(c)); (2) cause any vacancy
or vacancies in the Board of Directors (except as otherwise
provided in Subsection S.03(c)); (3) constitute a reason for
liquidation of the Corporation or its assets or business; or (4)
affect the existence or powers of (or the validity of any act of)
the Corporation or the Board of Directors.
(b) This Subsection shall apply if and whenever an entire
class of Directors is not elected in the year when the election
should have taken place. The term of each Director of the class
whose term would have expired at the annual meeting of the
shareholders if Directors of such class had been elected, shall
be extended for an additional term of three years, ending when
Directors are elected at the third succeeding annual meeting.
(c) This Subsection shall apply if and whenever one or more
Directors are elected at an annual meeting of the shareholders,
but the number of Directors elected is less than the number of
the class of Directors which should be elected at such annual
meeting. The term of each Director of such class shall end when
one or more Directors are elected at such annual meeting. The
remaining Directorship or Directorships not filled by election at
such annual meeting shall be vacant. The vacancy or vacancies
shall be filled by the affirmative vote of a majority of the
Directors in office after such annual meeting, even if less than
a quorum.
Each Director elected to fill such a vacancy shall be elected for
the full term of such class of Directors.
Section 5.04. Limitation of Director's Personal Liability.
No person who is or was a Director of the Corporation or who,
while a Director of the Corporation, is or was serving at the
request of the Corporation as a Director, officer, partner,
trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise,
or employee benefit plan (including such person's heirs and
personal representatives) shall be personally liable to the
Corporation or to its shareholders for monetary damages for
breach of fiduciary duty as a Director, provided that any such
person's liability shall not be eliminated or limited for:
(a) A breach of the Director's duty of loyalty to the
Corporation or its shareholders;
(b) Acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of the
law;
(c) A transaction from which the Director derives an
improper personal benefit; or
(d) An improper act prohibited in Iowa Code Section
496A.44, as amended from time to time.
No amendment to or repeal of this Section shall apply to or have
any effect on the liability or alleged liability of any person
for or with respect to any acts or omissions of such person
occurring prior to such amendment or repeal. (Adopted 5/3/88.)
ARTICLE 6.
Section 6.01. By-laws. The power to amend the By-laws is
vested in the Board of Directors. Wherever used in these
Articles of Incorporation with respect to the By-laws, the word
"amendment" or "amend" includes and shall apply to the amendment,
alteration, or repeal of any or all provisions of the By-laws or
the adoption of new By-laws.
Section 6.02. Effect of Articles of Incorporation and By-
laws. Each shareholder, by the act of becoming or remaining a
shareholder of the Corporation, shall be deemed to have accepted
and agreed to all provisions of these Articles of Incorporation
and the By-laws, as amended from time to time. All provisions of
the By-laws which (or the substance of which) at any time shall
have been adopted, approved, or ratified by the affirmative vote
of the holders of a majority of the outstanding common shares
entitled to vote shall have the same force and effect as if such
provisions were included in full in these Articles of
Incorporation. No such provision of the By-laws shall be
construed as having any lesser force or effect by reason of being
included in the By-laws rather than in the Articles of
Incorporation. This Section shall not be construed to require
that any provision or amendment of the By-laws be adopted,
approved, or ratified by the shareholders. Any shareholder,
regardless of the period of time during which he has been a
shareholder, shall have the right to examine the By-laws of the
Corporation in person or by agent or attorney at any reasonable
time or times and to make extracts therefrom. Upon the written
request of any shareholder, the Corporation shall mail to such
shareholder within a reasonable time a copy of the By-laws.
Section 6.03. Amendment of Articles of Incorporation. The
Corporation and the shareholders expressly reserve the right from
time to time to amend these Articles of Incorporation, in the
manner now or hereafter permitted by the Iowa Business
Corporation Act or other applicable law, whether or not such
amendment shall constitute or result in a fundamental change in
the purposes or structure of the Corporation or in the rights or
privileges of shareholders or others or in any or all of the
foregoing. All rights and privileges of shareholders or others
shall be subject to this reservation. Wherever used in these
Articles of Incorporation with respect to the Articles of
Incorporation, the word "amendment" or "amend" includes and shall
apply to the amendment, alteration, or repeal of any or all
provisions of the Articles of Incorporation or the adoption of
new or restated Articles of Incorporation.
EXHIBIT 10i
HON INDUSTRIES Inc.
STOCK-BASED COMPENSATION PLAN
(ADOPTED MAY 9, 1995. AMENDED AND RESTATED
MAY 13, 1997. AMENDED FEBRUARY 10, 1999.)
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
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 6.8(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 "Non-Employee
Director" 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.
"Common Stock" shall mean the common stock, $1.00 par value, of the Company.
"Company" has the meaning specified in Section 1.1.
"Deferral Period" shall mean the period of time during which Deferred Shares
are subject to deferral limitations under Section 3.4 of this Plan.
"Deferred Shares" shall mean an award made pursuant of Section 3.4 of this
Plan of the right to receive Common Shares at the end of a specified
Deferral Period.
"Deferred Share Award" shall mean an award of Deferred Shares under the Plan.
"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 shall be 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.
"Free-Standing SAR" shall mean an SAR which is not issued in tandem with,
or by reference to, an option, which entitles the holder thereof to receive,
upon exercise, shares of Common Stock (which may be Restricted Stock), cash
or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over
the base price of such SAR, multiplied by the number of such SARs which are
exercised.
"Immediate Family" shall mean any spouse, child, stepchild, or adopted child.
"Incentive Stock Option" shall mean an option to purchase shares of Common
Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
incentive stock option.
"Incumbent Board" shall have the meaning set forth in Section 6.8(b)(2)
hereof.
"Non-Employee Director" shall mean except as applied to the definition of
Committee, any director of the Company who is not an officer or employee of
the Company or any Subsidiary.
"Non-Statutory Stock Option" shall mean a stock option which is not an
Incentive Stock Option.
"Performance Measures" shall mean, the criteria and objectives, established
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of an option or SAR, (ii) as a condition
to the grant of a Stock Award or (iii) 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
to stockholders (including dividends), return on equity, earnings of the
Company, revenues, market share, cash flow 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 the Performance Measures or other terms and
conditions of an outstanding award in recognition of 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
of all or a portion 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.
"Retirement" or "Retires" shall mean a Participant's termination of employment
with the Company on or after the date that such Participant could elect to
commence a distribution under the HON INDUSTRIES Inc. Profit-Sharing
Retirement Plan, as amended from time to time, which, as of January 1, 1999,
is upon attainment of age 55.
"SAR" shall mean a stock appreciation right which may be a Free-Standing SAR
or a Tandem SAR.
"Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted
prior to the date of grant of the SAR), which entitles the holder thereof to
receive, upon exercise of such SAR and surrender for cancellation of all or
a portion of such option, shares of Common Stock (which may be Restricted
Stock), cash or a combination thereof with an aggregate value equal to the
excess of the Fair Market Value of one share of Common Stock on the date of
exercise over the base price of such SAR, multiplied by the number of shares
of Common Stock subject to such option, or portion thereof, which is
surrendered.
"Tax Date" shall have the meaning set forth in Section 6.5.
"Ten Percent Holder" shall have the meaning set forth in Section 2.1(a).
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) options to purchase shares of Common Stock in the form of
Incentive Stock Options or Non-Statutory Stock Options, (ii) SARs in the form
of Tandem SARs or Free-Standing SARs, (iii) Stock Awards in the form of
Restricted Stock or Bonus Stock and (iv) 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, the number of SARs and the number of Performance
Shares subject to such an award, the exercise price or base price associated
with the award, the time and conditions of exercise or 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
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
and 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 V.
1.5 Shares Available. Subject to adjustment as provided in Section 6.7, the
total number of shares of Common Stock available for all grants of awards
under this Plan on any calendar year, shall be eighty-three hundredths of one
percent (0.83%) of the outstanding and issued Common Stock as of January 1
of such year beginning January 1, 1997, 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.
Notwithstanding the foregoing, the maximum number of shares of Common Stock
available for the grant of Incentive Stock Options shall be 2,000,000.
The maximum number of shares of Common Stock with respect to which options
or SARs or a combination thereof may be granted during any calendar year to
any person shall be 250,000, subject to adjustment as provided in
Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof, that is not an Incentive
Stock Option, shall be a Non-Statutory Stock Option. Each Incentive Stock
Option shall be granted within ten years of the effective date of this Plan.
To the extent that the aggregate Fair Market Value (determined as of the
date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by
a participant during any calendar year (under this Plan or any other plan of
the Company, or any parent or Subsidiary) exceeds the amount (currently
$100,000) established by the Code, such options shall constitute
Non-Statutory Stock Options.
Options 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 Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of a Non-Statutory Stock Option shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date of
grant of such option and the purchase price per share of Common Stock
purchasable upon exercise of an Incentive Stock Option shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date
of grant of such option; provided further, that if an Incentive Stock Option
shall be granted to any person who, at the time such option is granted, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
Subsidiary) (a "Ten Percent Holder"), the purchase price per share of Common
Stock shall be the price (currently 110% of Fair Market Value) required by
the Code in order to constitute an Incentive Stock Option.
(b) Option Period and Exercisability. The period during which an option may
be exercised shall be determined by the Committee; provided, however, that
no Incentive Stock Option shall be exercised later than ten years after its
date of grant; provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised
later than five years after its date of grant. The Committee may, in its
discretion, establish Performance Measures which shall be satisfied or met
as a condition to the grant of an option or to the exercisability of all or
a portion of an option. The Committee shall determine whether an option
shall become exercisable in cumulative or non-cumulative installments and in
part or in full at any time. An exercisable option, or portion thereof, may
be exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock
to be purchased and accompanied by payment therefor in full (or arrangement
made for such payment to the Company's satisfaction) either (A) in cash,
(B) by delivery of previously owned whole shares of Common Stock (which the
optionee has held for at least six months prior to delivery of such shares
and for which the optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (C) by authorizing the Company to withhold a number of whole
shares of Common Stock which would otherwise be delivered upon exercise of
the option having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, provided that the optionee attests in a manner satisfactory to the
Committee that the optionee at the time of such exercise holds and has held
for at least six months prior to such exercise an equal number of whole
shares of Common Stock and as to which the optionee has good title, free
and clear of all liens and encumbrances, (D) in cash by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (E) a combination of (A), (B) and (C), in each case to
the extent set forth in the Agreement relating to the option, (ii) if
applicable, by surrendering to the Company any Tandem SARs which are
cancelled by reason of the exercise of the option and (iii) by executing
such documents as the Company may reasonably request. The Committee may
require that the method of making such payment be in compliance with
Section 16 and the rules and regulations thereunder. Any fraction of a
share of Common Stock which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid in cash by
the optionee. No certificate representing Common Stock shall be delivered
until the full purchase price therefor has been paid.
2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant
SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR
or a Free-Standing SAR.
SARs 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 SARs and Base Price. The number of SARs subject to an award
shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the
purchase price per share of Common Stock of the related option. The base
price of a Free-Standing SAR shall be determined by the Committee; provided,
however, that such base price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date of grant of such SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an award
of SARs shall specify whether such award may be settled in shares of Common
Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later
than the expiration, cancellation, forfeiture or other termination of the
related option. The Committee may, in its discretion, establish Performance
Measures which shall be satisfied or met as a condition to the grant of an
SAR or to the exercisability of all or a portion of an SAR. The Committee
shall determine whether an SAR may be exercised in cumulative or
non-cumulative installments and in part or in full at any time. An
exercisable SAR, or portion thereof, may be exercised, in the case of a
Tandem SAR, only with respect to whole shares of Common Stock and, in the
case of a Free-Standing SAR, only with respect to a whole number of SARs.
If an SAR is exercised for shares of Restricted Stock, a certificate or
certificates representing such Restricted Stock shall be issued in
accordance with Section 3.2(c) and the holder of such Restricted Stock shall
have such rights of a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the exercise of an SAR for shares of Common
Stock, including Restricted Stock, the holder of such SAR shall have no
rights as a stockholder of the Company with respect to the shares of Common
Stock subject to such SAR and shall have rights as a stockholder of the
Company in accordance with Section 6.10.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request. A Free-Standing SAR
may be exercised (i) by giving written notice to the Company specifying the
whole number of SARs which are being exercised and (ii) by executing such
documents as the Company may reasonably request.
2.3 Termination of Employment. Except as otherwise provided in this
Section 2.3 and subject to Section 6.8, all of the terms relating to the
exercise, cancellation or other disposition of an option or SAR upon a
termination of employment with the Company of the holder of such option or
SAR, as the case may be, whether by reason of retirement or other
termination, shall be determined by the Committee. Such determination
shall be made at the time of the grant of such option or SAR, as the case
may be, and shall be specified in the Agreement relating to such option or
SAR. Notwithstanding the foregoing, each option or SAR granted under the
Plan shall become fully vested and nonforfeitable upon the death or
Disability of the Participant awarded such option or SAR, provided such
Participant is employed by the Company on the date of death or Disability.
III. STOCK AWARDS
3.1 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.
3.2 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 Restriction 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.
(c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award may be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the
shares of Common Stock represented by such certificate is subject to the
restrictions, terms and conditions of this Plan and the Agreement relating
to the Restricted Stock Award. 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 by the Company,
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), or upon the grant of a Bonus Stock Award, in each
case subject to the Company's right to require payment of any taxes in
accordance with Section 6.5, 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 stockholder 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.
3.3 Termination of Employment. Except as otherwise provided in this
Section 3.3 and subject to Section 6.8, all of the terms relating to the
satisfaction of Performance Measures and the termination of the Restriction
Period relating to a Restricted Stock Award, or cancellation of 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
reason of retirement or other termination, shall be set forth in the
Agreement relating to such Restricted Stock Award, except that,
notwithstanding the foregoing, each Restricted Stock Award shall become fully
vested and nonforfeitable upon the death or Disability of the Participant
awarded such Restricted Stock Award, provided such Participant is employed by
the Company on the date of death or Disability.
3.4 Deferred Shares. The Committee may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any
or all of the authorizations and shall be subject to all of the requirements
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the Company to
deliver Common Stock to the Participant in the future in consideration of the
performance of services, but subject to the fulfillment of such conditions
during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional consideration or
in consideration of a payment by such Participant that is less than the Fair
Market Value per share of Common Stock at the date of grant.
(c) Each such grant or sale shall be subject to a Derferral Period of not
less than 1 year, as determined by the Board at the date of grant, and may
provide for the earlier lapse or other modification of such Deferral Period
in the event of a Change in Control.
(d) During the Deferral Period, the Participant shall have no right to
transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but
the Committee may, at or after the date of grant, authorize the payment of
dividend equivalents on such Shares on either a current or deferred or
contingent basis, either in cash or in additional Common Stock.
(e) Each grant or sale of Deferred Shares shall be evidenced by an agreement
executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
IV. PERFORMANCE SHARE AWARDS
4.1 Performance Share Awards. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.
4.2 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 3.2(c) and
the holder of such Restricted Stock shall have such rights of a stockholder
of the Company as determined pursuant to Section 3.2(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 stockholder of the Company with respect to the shares of Common Stock
subject to such award.
4.3 Termination of Employment. Except as otherwise provided in this
Section 4.3 and subject to Section 6.8, all of the terms relating to the
satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Share Award, or cancellation of 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 retirement or other termination, shall be set forth in the
Agreement relating to such Performance Share Award, except that,
notwithstanding the foregoing, each Performance Share Award shall become
fully vested and nonforfeitable upon the death or Disability of the
Participant holding such Performance Share Award, provided such Participant
is employed by the Company on the date of death or Disability.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 Eligibility. Each Non-Employee Director shall be eligible to elect to
receive shares of Common Stock in accordance with this Article V.
5.2 Time and Manner of Election. At least 6 (six) months prior to the date
of any annual meeting of shareholders of the Company 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 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.
VI. GENERAL
6.1 Effective Date and Term of Plan. This Plan shall be submitted to the
stockholders 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 1997 annual meeting of stockholders, 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 stockholders of the Company, this Plan and any awards hereunder shall be
void and of no force or effect.
6.2 Amendments. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable
law, rule or regulation including Section 162(m) of the Code; provided,
however, that no amendment shall be made without stockholder approval if such
amendment would (a) increase the maximum number of shares of Common Stock
available under this Plan (subject to Section 6.7), or (b) extend the term of
this Plan; provided further that, subject to Section 6.7. No amendment may
impair the rights of a holder of an outstanding award without the consent of
such holder. Notwithstanding the foregoing, the Board may condition the
grant of any award or combination of awards authorized under the Plan on the
surrender or deferral by the Participant of such Participant's right to an
award hereunder, a cash bonus, or other compensation otherwise payable by the
Company to the Participant.
6.3 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.
6.4 Transferability of Stock Options, SARs and Performance Shares.
(a) Except as set forth in Section 6.4(b) or as otherwise determined by the
Board, no option, SAR or Performance Share shall be transferable other than
(i) by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Committee or (ii) as otherwise
permitted under Rule 16b-3 under the Exchange Act as set forth in the
Agreement relating to such award. Except to the extent permitted by the
foregoing sentence and Section 6.4(b), each option, SAR or Performance Share
may be exercised or settled during the holder's lifetime only by the holder
or the holder's legal representative or similar person. Except to the extent
permitted by the second preceding sentence and Section 6.4(b), no option,
SAR or Performance Share may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of
law or otherwise) or be subject to execution, attachment or similar process.
Except as provided in Section 6.4(b), upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any option,
SAR or Performance Share, such award, and all rights thereunder shall
immediately become null and void.
(b) Notwithstanding the provisions of Section 6.4(a), option rights (other
than Incentive Stock Options) shall be transferable by a Participant, without
payment of consideration therefor by the transferee, to any one or more
members of the Participant's Immediate Family (or to one or more trusts
established solely for the benefit of one or more members of the
Participant's Immediate Family or to one or more partnerships in which the
only partners are members of the Participant's Immediate Family); provided,
however, that (i) no such transfer shall be effective unless reasonable prior
notice thereof is delivered to the Company and such transfer is thereafter
effected subject to the specific authorization of, and in accordance with
any terms and conditions that shall have been made applicable thereto, by the
Committee or by the Board and (ii) any such transferee shall be subject to
the same terms and conditions hereunder as the Participant.
6.5 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, (D) in the case of the exercise of an option,
a cash payment by a broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise or (E) 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), (E) 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.
6.6 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 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.
6.7 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 option and the purchase price per security, the terms of
each outstanding SAR, the number and class of securities subject to each
outstanding Stock Award or Deferred Share Award, and the terms of each
outstanding Performance Share shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding options
and SARs without an increase in the aggregate purchase price or base price.
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, exercise 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, exercise or
settlement date over (B) the exercise or base price, if any, of such award.
6.8 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) all
outstanding options and SARS shall immediately become exercisable in full,
(ii) the Restriction Period applicable to any outstanding Restricted Stock
Award shall lapse, (iii) the Performance Period applicable to any outstanding
Performance Share shall lapse, (iv) 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,
(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, and (vi) the Deferral Period
applicable to any Deferred Shares shall lapse. In the event of any such
substitution, the purchase price per share in the case of an option and the
base price in the case of an SAR shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding options and
SARs without an increase in the aggregate purchase price or base price.
(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 stockholders of the Company contemplated by
Section (b)(3) or (4) below, a cash payment from the Company in an amount
equal to (i) in the case of an option, the number of shares of Common Stock
then subject to such option, multiplied by the excess, if any, of the greater
of (A) the highest per share price offered to stockholders 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, over the purchase price per share of Common Stock subject
to the option, (ii) in the case of a Free-Standing SAR, the number of shares
of Common Stock then subject to such SAR, multiplied by the excess, if any,
of the greater of (A) the highest per share price offered to stockholders 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, over the base price of the SAR,
(iii) in the case of a Restricted Stock Award, Performance Share Award or
Deferred 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
stockholders 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. In the event of a Change in
Control, each Tandem SAR shall be surrendered by the holder thereof and shall
be cancelled simultaneously with the cancellation of the related option.
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 (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, 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
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); excluding, however,
the following: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition by
the Company, (C) any acquisition by an 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 (i), (ii) and (iii) of subsection
(3) of this Section 6.8(b); or
(2) individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least
a majority of such Board; provided, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a the
vote of at least a majority of the directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and provided further,
that any individual who was initially elected as a director of the Company
as a result of an actual or threatened election contest, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, or any other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board shall not be deemed a
member of the Incumbent 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
in the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding 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 the action of the Board, providing
for such Business Combination; or
(4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
6.9 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.
6.10 Rights as Stockholder. No person shall have any right as a stockholder
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 stockholder of record with respect to such
shares of Common Stock or equity security.
6.11 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.
