<PAGE>
[CONFORMED COPY]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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 1-168
---------------------
AMETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-4923320
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
STATION SQUARE, PAOLI, PA 19301
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(610) 647-2121
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
COMMON STOCK, $.01 PAR VALUE (VOTING) NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
9 3/4% SENIOR NOTES DUE 2004 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF EACH CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS OR ANY AMENDMENT TO THIS FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1997, was $675,774,520.
The number of shares of common stock outstanding as of February 28, 1997,
was 32,758,125.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
AMETEK, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C> <C>
Item 1. Business............................................................................... 3
Item 2. Properties............................................................................. 10
Item 3. Legal Proceedings...................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders.................................... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 10
Item 6. Selected Financial Data................................................................ 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 12
Item 8. Financial Statements and Supplementary Data............................................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 39
PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 40
Item 11. Executive Compensation................................................................. 42
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 46
Item 13. Certain Relationships and Related Transactions......................................... 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 49
Signatures...................................................................................... 50
Index to Exhibits............................................................................... 51
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
AMETEK, Inc. ("AMETEK" or the "Company") was incorporated in Delaware in
1930 under the name of American Machine and Metals, Inc. and maintains its
principal executive offices at Station Square, Paoli, Pennsylvania 19301.
AMETEK is a global manufacturer of electrical products, and materials
engineered for niche markets. Operations are in North America, Europe, and
Asia, with one-third of sales to international markets. The Company has a
significant market share for many of its products. The Electromechanical Group
is the world's largest independent producer of electric motors and blowers for
vacuum cleaners and floor-care products; the Precision Instruments Group
builds technologically advanced monitoring, sensing, calibration, and display
devices for the aerospace, process, and heavy-vehicle industries; and the
Industrial Materials Group produces specialty materials and water filtration
products for consumer and industrial markets. The Company has grown through a
focus on the manufacturing of electronic, electromechanical and electrical
products, for niche markets where, based on technological or cost advantages,
it has or it seeks to build a significant market share.
Continuation of Shareholder Value Enhancement Plan
In November 1993, the Company adopted a Shareholder Value Enhancement Plan
(the "Plan") with the objective of improving AMETEK's earnings growth through
a combination of financial and operating strategies.
The Plan's financial strategies consist of a share repurchase program (which
is ongoing), a debt refinancing (completed in 1994) and a dividend reduction
(which was adopted at the same time as the Plan). From the inception of the
Plan through December 31, 1996, AMETEK has repurchased approximately 30% of
its outstanding shares. This represents approximately 12.2 million shares of
common stock at an aggregate repurchase price of $171 million (or an average
cost of $14.01 per share). During 1996, AMETEK repurchased 698,000 shares at
an aggregate repurchase price of $12.5 million (or an average cost of $17.92
per share). Also, during 1996, AMETEK's Board of Directors authorized a new
share repurchase program of up to $50 million.
Shortly after the Plan was adopted, AMETEK implemented certain of its
operating strategies primarily by restructuring the Precision Instruments
Group and, as a result, incurred after-tax charges of $33.5 million in 1993.
The Plan's other operating strategies, which are ongoing, consist of: (i)
achieving operational excellence through improved asset management, increased
operating synergies and reduced cycle time, (ii) intensifying new product
development efforts, especially in the electric motor-blower, precision
instruments and specialty metals product lines, (iii) completing strategic
acquisitions and alliances which concentrate on enhancing AMETEK's
technological and manufacturing advantages and market position in its core
businesses, and (iv) pursuing global and market expansion, especially in
Europe and Asia.
In continuing to carry out the financial and operating strategies of the
Plan, AMETEK has sought to allocate its historically strong cash flow to those
opportunities, including the furtherance of its operating strategies,
additional share repurchases and further debt reductions, which appear to have
the best potential for improving earnings growth and thereby enhancing
shareholder value.
AGREEMENT TO MERGE WATER FILTRATION BUSINESS INTO CULLIGAN
In a recent development the Company announced on February 5, 1997 that it
had entered into an agreement to merge its water filtration business into
Culligan Water Technologies, Inc., for a total purchase price of approximately
$155 million. The purchase price, less assumed debt (ranging from $25 million
to $75 million at AMETEK's discretion), is payable in Culligan common stock
valued at $37.50 per share.
3
<PAGE>
The transaction, which utilizes a "Morris Trust" structure, will involve the
tax-free spin-off to AMETEK's shareholders of an entity containing all of
AMETEK's existing operations, except its water filtration business. This spun-
off entity will retain the AMETEK name and its common stock will be traded on
the New York and Pacific Stock Exchanges.
AMETEK's water filtration business consists of the Plymouth Products
Division, based in Sheboygan, Wisconsin, and three international subsidiaries:
AMETEK Filters Ltd., Teeside, England; APIC, S. A., Colombe, France; and
AFIMO, S. A. M., Monaco. AMETEK's water filtration business had 1996 sales of
approximately $70 million.
Following the spin-off, AMETEK's water filtration business, assuming the
expected $25 million of retained debt, will be merged with Culligan in return
for 3,466,667 shares of Culligan common stock (or, 0.11 shares of Culligan for
each share of AMETEK, based on AMETEK's shares outstanding as of December 31,
1996). The new AMETEK stock and the Culligan stock issued in this transaction
are intended to be distributed on a tax-free basis to AMETEK's shareholders.
The transaction is subject to approval by AMETEK's shareholders and other
regulatory approvals.
AMETEK has decided to postpone its annual meeting of shareholders,
customarily held in April in order to combine it with the shareholders meeting
to be held at a date to be determined to vote on the merger of the Water
Filtration Business.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN OPERATIONS AND EXPORT
SALES
Business segment and geographic information is shown on pages 35-37 of this
report.
Among the Company's growth strategies are global and market expansion, which
are subject to certain risks inherent in conducting business outside the
United States, such as fluctuation in currency exchange rates and controls;
restrictions on the movement of funds, import and export controls; and other
economic, political and regulatory policies of the countries in which business
is conducted. The expansion results from a combination of increasing levels of
export sales of products manufactured in the United States, sales from
overseas operations, and strategic alliances.
NARRATIVE DESCRIPTION OF BUSINESS
PRODUCTS AND SERVICES
The Company's growth strategies are focused on its principal businesses:
Electromechanical, Precision Instruments, and Industrial Materials. The
products and markets of each business are described below:
ELECTROMECHANICAL GROUP
Overview
The Electromechanical Group ("EMG") is the world's largest independent
producer of high-speed, air-moving electric motors for original equipment
manufacturers ("OEMs") of floor-care products. The manufacture of small vacuum
motors parts rotating at 25,000 to 40,000 RPM requires advanced manufacturing
technology. EMG must address complex motor-blower dynamics including heat,
noise, vibration, and wear, in designing its customized products. EMG's
worldwide market leadership is based on core competencies developed over 80
years. EMG has a leading market share in North America and Western Europe and
a growing share in the Pacific Rim. Sales have more than quadrupled since
1981--increasing from approximately $80 million to $376 million in 1996.
EMG has grown its business by extending its technological expertise in
manufacturing high-speed, air-moving electric motors to a variety of targeted
markets, with the floor care market being its primary focus. EMG has formed
alliances with OEM customers to design and manufacture cost-effective products
for numerous floor care applications. EMG is also using its technological and
marketing expertise in an effort to penetrate new markets, such as lawn and
garden equipment, where it is seeking to establish alliances with its major
customers.
4
<PAGE>
EMG is seeking to build on its market leadership in the floor care markets
of North America and Europe, through initiatives in Eastern Europe, Latin
America and the Pacific Rim. In addition to pursuing strategic alliances and
joint ventures, EMG has expanded its presence in the Pacific Rim with a plant
in Shanghai, Peoples' Republic of China (PRC). Such Shanghai operations plus
facilities in the Czech Republic and Mexico are expected to contribute to
manufacturing output in 1997. About 50% of EMG's sales are outside of the
United States.
Consistent with its strategies for long-term global growth and low-cost
producer status, EMG has increased its production capacity over the past three
years with highly automated production lines at its Graham, North Carolina,
facility. The recently initiated operations in Reynosa, Mexico, Shanghai, PRC;
and the Czech Republic are focused on reducing costs and then market
expansion.
EMG employs approximately 2,900 people and has thirteen manufacturing
locations: six in the United States, three in Italy, two in Mexico, and one
each in the PRC and the Czech Republic. EMG produced approximately 22 million
motor products in 1996 with flexible, automated production lines designed for
low-cost, high-volume operations. Technological resources provide EMG
customers with custom-designed products.
Floor-Care Market and Product Line
About two thirds of EMG's sales are to floor-care markets, where it has a
leading share through sales of air-moving electric motors to most of the
world's major floor-care OEMs, including integrated OEMs that produce some of
their own motors. EMG produces a full range of floor-care products, from hand-
held, canister and upright vacuums to central vacuums for residential use.
High performance vacuums are marketed for residential and commercial
applications. Customers include Matsushita, Bissell, Royal, Eureka, and SEB-
Rowenta.
Sales growth in the floor-care industry has been achieved by marketing
products to vertically integrated vacuum cleaner manufacturers that decide to
outsource motor production to realize the economic and operational advantages
of reducing or discontinuing their own motor production. By purchasing EMG's
motors, vacuum cleaner manufacturers can reduce the otherwise substantial
capital expenditures they would incur to manufacture motors for changing
consumer demands. The global consumer trend toward multiple floor-care
products increases the variety and frequency of these investments by OEMs,
which are striving to operate more economically.
EMG's new product development focuses on enhancing motor-blower cost-
performance through advances in power, efficiency, size, weight, and
quietness. EMG's world lamination design is gaining market share in the world
lawn and garden market due to the motor's performance-to-weight ratio. A new
line of high-efficiency fans complement this motor and are targeted for floor-
care applications in Asia, representing one of EMG's major growth initiatives.
EMG has a significant position in the European floor-care market. The
electric motors it produces in Italy are similar to those produced in the
United States. Capacity and productivity in Italy have been increased through
capital investment and such initiatives as manufacturing integration,
automation, inventory management, and increased labor flexibility.
Technical Motor Market and Product Line
EMG formed the Technical Motor Division to capitalize upon its global
presence and technical expertise in floor-care products and to expand
production and marketing of its brushless DC motor-blowers.
EMG's brushless motors are used in computer equipment, business machines and
medical equipment. Brushless motors are free of static charges and have high
reliability. They are increasingly popular in medical and other applications
in which long life and speed control are desired. Continuing product
developments include the use of brushless motors in systems designed to assist
patients with sleep-breathing disorders, in hospital
5
<PAGE>
air-mattress systems as well as systems that recover gasoline fumes at
automotive fueling stations. Customers include Thomas Industries, Gast, Rheem,
Kinetic Concepts, and DevilBiss.
Commercial Motor Market and Product Line
EMG's leadership in air-moving electric motors, and its manufacturing
infrastructure, technical expertise and global marketing strengths serve as
the foundation for its future growth. EMG is capitalizing on its core
competencies in air-moving electric motors to create opportunities in consumer
appliances and in lawn and garden equipment, and outdoor power equipment, in
consumer products such as leaf blowers and chainsaws as well as low-pressure
paint sprayers, and high-pressure power washers. For example, EMG has received
orders from most of the world's major producers of lawn and garden products.
Customers include Poulan, American Kleaner, Sunbeam, and Wagner Spray Tech.
Customers
EMG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on the Company's operations.
Approximately 31% of EMG's sales for 1996 were made to its five largest
customers.
PRECISION INSTRUMENTS GROUP
The Precision Instruments Group ("PI") applies its niche market focus and
technology to produce monitoring, calibration and display instruments for the
aerospace, process, and heavy vehicle industries.
PI's growth is based on competitive advantages, which include designing
products for specific customer applications that are significantly
differentiated from or are lower in cost than competitive products. Precision
Instruments is number one or two in many of the niche markets it serves,
including aerospace fuel-flow meters, heavy-vehicle instrument panels, oxygen
analyzers, and pressure gauges. About 25% of sales are to markets outside the
United States.
Aerospace Market and Product Line
Approximately one third of PI revenues are from the sale of aerospace
products, including airborne-data and vibration-monitoring systems; turbine
engine temperature measurement; indicators and displays; fuel and fluid
measurements; and sensors, switches and electronic cable harnesses. PI's
customers are the leading producers of airframes and jet engines, commercial
airlines and aircraft operators. As a prime innovator with more than 50 years
experience, PI serves all segments of commercial aerospace, including
helicopters, business jets, commuter aircraft, and commercial airliners.
Customer support includes parts warehousing and maintenance programs.
Aerospace products are designed to customer specifications and manufactured to
stringent operational and reliability requirements. Operations are in
Binghamton, NY; Sellersville, PA; and Wilmington, MA. A repair and maintenance
facility is in Seattle, WA.
The aerospace business operates in niche markets, where its products have a
technological and/or cost advantage. Its 50 years of experience as a prime
aerospace contractor and its long-standing customer relationships with global
commercial aircraft OEMs and jet engine manufacturers are significant
competitive advantages. Its new products are now in service on the Boeing 777
airliner, the Bombardier Global Express business jet, and the Agusta 109
helicopter. Other aircraft with PI products aboard include: Learjet 60, Boeing
737/747/757/767, Beechjet, Sikorsky S-64, Cessna Citation, Saab SK-60,
Mitsubishi YS-11, and Bell 407. Jet engines with PI products include GE 90,
Pratt & Whitney 4000 series, Rolls Royce Trent 700/800 and GE CF6-50/80
series. Customers include Boeing, General Electric, Honeywell and the Federal
Government.
In 1993, PI reduced costs and restructured operations to increase
profitability in a weak aerospace market. Further initiatives include
achieving additional efficiencies, improving asset management, and optimizing
the benefits of prior actions. Demand in the aerospace market has strengthened
significantly, as airlines replace aging fleets, passenger miles increase, and
airline profits improve.
6
<PAGE>
Process and Analytical Instruments Market and Product Line
Approximately one half of PI sales are process and analytical instruments,
and pressure sensors. This includes pressure gauges and products for
industrial measurement and calibration; oxygen, moisture, combustion and
liquid analyzers; and emission monitors. The market focus is on measurement
and analysis for the process industry, which includes refining and
petrochemical plants, power generation, specialty gas, water and waste
treatment, and natural gas distribution. The Group also has products which
serve the semiconductor market. PI is the leader in the North American
pressure gauge market, which has been adversely affected by low-cost offshore
products. PI has reduced costs through restructuring its Sellersville, PA,
operations and refocusing its domestic manufacturing on more advanced pressure
measurement products, such as its new Electronic Pressure Calibrator Model
2000.
In connection with its global expansion, PI has 50% ownership of a joint
venture that manufactures low-cost pressure gauges in Taiwan and the PRC,
where the joint venture also markets these products. For the remainder of the
world, PI is the exclusive marketer of the joint venture's products, expanding
PI's leadership in price-sensitive gauges.
The process industry has experienced lackluster market conditions in the
United States, primarily due to reduced refinery and petrochemical plant
construction and lower industry operating rates, resulting in part from
increased environmental regulations. Worldwide process industry markets are
benefiting from improved economic conditions and new construction in Europe
and Asia, where increased growth and market expansion are expected. Customers
in this segment include Exxon, DuPont, and Intel.
Heavy-Vehicle Market Product Line
Approximately one fifth of PI sales are electronic and mechanical
instruments and panels for heavy vehicles, such as Class 8 heavy trucks. New
products, acquisitions and the addition of construction and agricultural
vehicle markets have increased the markets served. The strategic acquisition
of privately held Dixson, Inc. in 1995 added to PI's number-one position in
the U.S. heavy-truck market and increased market share in other heavy-vehicle
instrument segments, including agricultural, construction and off-road
vehicles. Dixson also has a complementary customer base in Europe and Asia and
product development capabilities in solid-state instruments that monitor
engine performance, efficiency and emissions. Dixson's market position in
Europe enhances the global opportunities for this product line. Instrument
demand in 1996 was reduced by a down cycle in the heavy-truck industry. Modest
industry improvement is expected in 1997. Customers include Peterbilt and
Kenworth, Mack, Volvo, Freightliner, Ford, Clark and Caterpillar.
Customers
The Precision Instruments Group is not dependent on any single customer such
that the loss of that customer would have a material adverse effect on PI's
operations. Approximately 27% of PI's 1996 sales were made to its five largest
customers.
INDUSTRIAL MATERIALS GROUP
The Industrial Materials Group ("IMG") is a world leader in the manufacture
of technology-based materials and products. It uses proprietary mechanical,
metallurgical and plastics technology to develop differentiated products,
including water filtration products, high-purity metal powders and products,
and materials for industrial and chemical processing.
Water Filtration Product Line
As previously noted, AMETEK has reached agreement to merge its water
filtration business into Culligan Water Technologies, Inc., (see "Agreement to
Merge Water Filtration Business Into Culligan", page 3 of this report). This
business produces fluid cartridge filtration products for consumer,
commercial, and industrial customers in the United States and over a hundred
other countries. It offers a broad line of cartridge filters, ranging from
whole-house to countertop water filtration systems; special-purpose filter
housings; and
7
<PAGE>
replacement cartridges that improve the quality and taste of water. It is a
leader in point-of-use drinking water filters, which are used in the removal
of objectionable taste and odor, hazardous chemicals, bacteria, and heavy
metals. It also has a branded line of filters, housings, and cartridges
designed for plumbing professionals serving residential and commercial
customers. Customers include major hardware chains, national home centers,
water treatment distributors, OEMs and mass merchandisers, such as Home Depot,
Wal-Mart, Ace Hardware, Manitowoc, Cotter, and Builder's Square.
Specialty Metals Markets and Product Line
This business manufactures high-purity, engineered metal powders; high-
purity strip and wire manufactured from metal powders; and clad products with
tailored metallurgical properties. Its niche market focus is based upon
proprietary manufacturing technology and strong customer relations. Markets
served include consumer products, electronics, telecommunications, automotive,
and energy production. New product developments include patented ultra
stainless steel metal powders and copper-based spinodal(R) alloys. Global and
market expansion in Europe and Asia significantly increased sales in 1996.
Customers include DuPont, Regal Ware, Inc., Stoody Co., Smith International,
and Pall Corp.
Chemical and Industrial Products
Products include silicas, phenolic resins, and Teflon(R) (a registered
trademark of DuPont) polymer products for high-temperature and highly
corrosive applications. Product applications include the filtering of molten
metal, heat exchangers and protective welding curtains. Chemical Products
Division also is a custom compounder of specialty resins and thermoplastics
with enhanced properties, such as fire retardance and improved adhesion.
Markets include automotive parts, electronics, appliances, and
telecommunications housings. Customers include Exxon, Mytex, Kansetsu, DuPont,
and Newport News Shipbuilding.
Customers
Although IMG is not dependent on any single customer such that the loss of
that customer would have a material adverse effect on IMG's operations,
approximately 16% of IMG's 1996 sales were made to its five largest customers.
MARKETING
Generally, the Company's marketing efforts are organized and carried out at
the Group and divisional levels. Given the similarity and technical nature of
its many products as well as its significant worldwide market share, EMG
conducts most of its domestic and international marketing activities through a
direct sales force, and makes only limited use of sales agents in other
countries.
Because of their relatively diverse product lines, PI and IMG make
significant use of distributors and sales agents in marketing their products.
With its specialized customer base of aircraft and jet engine manufacturers,
and airlines, PI's aerospace products and services are marketed primarily by
its sales engineers.
COMPETITION
Generally, most markets in which the Company operates are highly
competitive. The principal elements of competition for the products
manufactured in each of the Company's business segments are price, product
features, distribution, quality, and service.
EMG's primary competition in the U.S. floor-care market consists of a few
competitors, each of which has a smaller market share but is part of a company
with larger and greater resources than AMETEK. There is additional potential
competition from vertically integrated manufacturers of floor-care products
that produce their own motor-blowers. Many of these manufacturers are also
potential EMG customers if they outsource their motors. In Europe, competition
comes from a small group of very large competitors and from numerous small
competitors.
In the markets served by PI, the Company believes that it is one of the
world's largest pressure gauge manufacturers and ranks among the top 10 U.S.
producers of certain measuring and control instruments. It is one of the
leading instrument and sensor suppliers to commercial aviation. Competition is
strong and could intensify for certain aerospace products. In the pressure
gauge and heavy-vehicle markets served by PI, only a limited
8
<PAGE>
number of companies compete on price and technology. In the process and
analytical instrument markets, numerous companies in each market niche compete
on the basis of product quality, performance and innovation.
Many of the products sold by IMG are made by a few competitors, and
competition comes mainly from producers of substitute materials. IMG is one of
several major producers of residential water filtration systems, a market with
numerous competitors. In the industrial and commercial filtration markets, IMG
does not have a major market share and faces competition from many sources.
Specialty Metal Products is comprised of five niche product lines that have
few competitors. The primary competition is from competitive materials and
processes.
BACKLOG AND SEASONAL VARIATIONS OF BUSINESS
The Company's approximate backlog of unfilled orders, at the dates
specified, by business segment, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Electromechanical..................................... $ 87.9 $ 96.7 $111.3
Precision Instruments................................. 113.2 108.5 101.7
Industrial Materials.................................. 20.5 23.5 21.2
------ ------ ------
Total............................................. $221.6 $228.7 $234.2
====== ====== ======
</TABLE>
Of the total backlog of unfilled orders at December 31, 1996, approximately
94% are expected to be shipped by December 31, 1997.
The Company believes that neither its business as a whole nor any of its
business segments is subject to significant seasonal variations, although
certain individual operations experience some seasonal variability.
RAW MATERIALS
The Company's business segments obtain raw materials and supplies from a
variety of sources and generally from more than one supplier. However, in the
Industrial Materials segment, certain items are available only from a limited
number of suppliers. The Company believes its sources and supplies of raw
materials are adequate for its needs.
RESEARCH, PRODUCT DEVELOPMENT AND ENGINEERING
The Company remains committed to appropriate research, product development
and engineering activities that are designed to identify and develop potential
new and improved products or enhance existing products. Research, product
development and engineering costs during the past three years were: 1996-$37.4
million, 1995-$33.2 million, 1994-$32.8 million. Company-funded research and
development costs included in total product development and engineering costs
were: 1996-$17.7 million, 1995-$16.0 million, 1994-$17.7 million. Product
research and engineering activities are conducted by the various businesses of
the Company in their respective technologies and markets.
ENVIRONMENTAL COMPLIANCE
Information with respect to environmental compliance by the Company is set
forth on page 17 of this report in the section of Management's Discussion and
Analysis of Financial Condition and Results of Operations entitled
"Environmental Matters."
PATENTS, LICENSES, AND TRADEMARKS
The Company owns numerous unexpired United States patents, United States
design patents, and foreign patents, including counterparts of its more
important United States patents, in the major industrial countries of the
world. The Company is a licensor or licensee under patent agreements of
various types, and its products are marketed under various registered United
States and foreign trademarks and trade names. However, the Company
9
<PAGE>
does not consider any single patent or trademark, or any group thereof,
essential either to its business as a whole or to any of its business
segments. The annual royalties received or paid under license agreements are
not significant to any single business segment or to the Company's overall
operations.
EMPLOYEES
At December 31, 1996, the Company employed approximately 6,500 individuals.
WORKING CAPITAL PRACTICES
The Company does not have extraordinary working capital requirements in any
of its business segments. Customers generally are billed at normal trade terms
with limited extended payment provisions. Inventories are closely controlled
and maintained at levels related to production cycles and are responsive to
the normal delivery requirements of customers.
ITEM 2. PROPERTIES
The Company has 36 operating plant facilities in 13 states and 9 foreign
countries. Of these facilities, 26 are owned by the Company and 10 are leased.
The properties owned by the Company consist of approximately 419 acres, of
which approximately 3,394,000 square feet are under roof, and include property
recently purchased in the Czech Republic for its Electromechanical Group,
where operations will begin during 1997. Under lease is a total of
approximately 573,000 square feet. The leases expire over a range of years
from 1997 to 2009, with renewal options for varying terms contained in most of
the leases. Production facilities in Taiwan and the PRC provide the Company
with additional production capacity through the Company's 50% ownership in a
joint venture. The Company also owns certain property that is pending sale.
The Company's executive offices in Paoli, Pennsylvania, occupy approximately
34,000 square feet under a lease that will expire in 2002.
The Company's machinery, plants, and offices are in satisfactory operating
condition and are adequate for the uses to which they are put. The operating
facilities of the Company by business segment are summarized in the following
table:
<TABLE>
<CAPTION>
NUMBER OF
PLANT FACILITIES SQUARE FEET UNDER ROOF
------------------ ------------------------
OWNED LEASED OWNED LEASED
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Electromechanical............. 10 3 1,249,000 163,000
Precision Instruments......... 9 5 959,000 387,000
Industrial Materials.......... 7 2 1,186,000 23,000
-------- -------- ------------ ----------
TOTAL..................... 26 10 3,394,000 573,000
======== ======== ============ ==========
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The Company's common stock is also listed on the
Pacific Stock Exchange. On February 28, 1997, there were approximately 4,798
record holders of the Company's common stock.
Market price and dividend information with respect to the Company's common
stock are set forth on page 38 in the section of the Notes to the Consolidated
Financial Statements entitled "Quarterly Financial Data (Unaudited)." Future
dividend payments by the Company will be dependent on future earnings,
financial requirements, contractual provisions of debt agreements, and other
relevant factors.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
CONSOLIDATED OPERATING
RESULTS (Years Ended
December 31,) (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................. $ 868.7 $ 837.5 $ 774.7 $ 701.8 $ 738.7
Costs and expenses........ 773.6 748.2 699.4 703.1 662.1
----------- ----------- ----------- ----------- -----------
Operating income (loss)... 95.1 89.3 75.3 (1.3) 76.6
Other expenses, net....... (16.4) (20.0) (17.5) (11.3) (12.5)
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before income taxes...... 78.7 69.3 57.8 (12.6) 64.1
Provision for (benefit
from) income taxes....... 27.5 25.5 21.2 (4.5) 21.3
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations.... 51.2 43.8 36.6 (8.1) 42.8
Special items(/1/)........ -- 8.5 (5.6) .8 1.6
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $ 51.2 $ 52.3 $ 31.0 $ (7.3) $ 44.4
=========== =========== =========== =========== ===========
Earnings per share:
Income (loss) from
continuing operations... $ 1.57 $ 1.31 $ .99 $ (.18) $ .97
Special items(/1/)....... -- .25 (.15) .01 .04
----------- ----------- ----------- ----------- -----------
Net income (loss)........ $ 1.57 $ 1.56 $ .84 $ (.17) $ 1.01
=========== =========== =========== =========== ===========
Dividends declared and
paid per share........... $ .24 $ .24 $ .24 $ .57 $ .68
=========== =========== =========== =========== ===========
CONSOLIDATED FINANCIAL
POSITION (at December 31)
Working capital of
continuing operations.... $ 61.0 $ 38.7 $ 80.5 $ 143.1 $ 194.0
Property, plant and
equipment, net........... 192.4 176.8 164.3 165.9 166.3
Net assets of discontinued
operations............... -- -- 10.6 19.0 19.7
Intangibles, investments
and other assets......... 98.6 100.6 72.9 75.8 89.2
----------- ----------- ----------- ----------- -----------
Total.................... 352.0 316.1 328.3 403.8 469.2
Long-term debt............ 150.3 150.4 190.3 172.4 187.2
Deferred income tax
liability................ 35.2 31.9 26.1 25.9 40.2
Other long-term
liabilities.............. 37.0 46.7 38.7 40.2 31.5
----------- ----------- ----------- ----------- -----------
Stockholders' equity...... $ 129.5 $ 87.1 $ 73.2 $ 165.3 $ 210.3
=========== =========== =========== =========== ===========
ADDITIONAL FINANCIAL DATA
Financial Ratios:
Return on beginning--
Capital................ 21.6% 23.6% 12.7% 1.0% 13.3%
- --Stockholders' equity.... 58.8% 71.4% 18.8% (3.5)% 21.0%
Return on net sales..... 5.9% 6.2% 4.0% (1.0)% 6.0%
Total debt as a
percentage of
capitalization......... 58.5% 70.4% 73.4% 53.1 % 49.6%
Ratio of EBITDA to
interest expense(/2/).. 6.8 5.8 4.9 5.0 5.6
Ratio of debt to
EBITDA(/2/)............ 1.4 1.7 1.8 2.1 1.8
Ratio of earnings to
fixed charges.......... 4.6 4.0 3.3 -- (/3/) 3.9
OTHER DATA
FOR THE YEAR:
Capital expenditures..... $ 41.2 $ 31.7 $ 22.8 $ 35.8 $ 23.8
Depreciation and
amortization............ $ 34.9 $ 34.5 $ 35.5 $ 33.7 $ 34.6
EBITDA(/2/).............. $ 131.4 $ 123.7 $ 113.1 $ 88.8 $ 112.4
Research and development
expenses................ $ 17.7 $ 16.0 $ 17.7 $ 14.6 $ 14.1
Sales per employee (in
thousands).............. $ 135.5 $ 135.4 $ 131.0 $ 118.6 $ 123.2
Common stock trading
range:
High.................... 22 1/4 19 1/2 18 3/4 17 1/2 18 1/8
Low..................... 16 15 3/4 11 5/8 10 5/8 13 1/8
AT YEAR END:
Number of shares
outstanding............. 32.7 32.9 34.7 43.6 44.2
Stockholders' equity per
share................... $ 3.96 $ 2.65 $ 2.11 $ 3.79 $ 4.76
Total assets............. $ 537.9 $ 526.7 $ 494.2 $ 556.1 $ 596.6
Number of stockholders of
record.................. 4,845 5,156 5,952 6,509 7,227
Number of employees...... 6,500 6,300 6,000 5,800 6,000
</TABLE>
- --------
(1) Special items in 1995 includes a $10.4 million ($.31 per share) gain from
the sale of a discontinued operation and a $2.7 million ($.08 per share)
after-tax loss related to debt agreements. Amounts in 1994 includes $11.8
million ($.32 per share) after-tax loss on the early extinguishment of
debt, and an after-tax gain of $3.8 million ($.11 per share) from the
effect of a change in accounting for certain marketable securities.
(2) EBITDA represents income from continuing operations before interest,
taxes, depreciation and amortization, amortization of deferred financing
costs, and nonrecurring items. It should not be considered, however, as an
alternative to operating income as an indicator of the Company's operating
performance, or as an alternative to cash flows as a measure of the
Company's overall liquidity as presented in the Company's financial
statements.
(3) Earnings from continuing operations in 1993 were insufficient to cover
fixed charges by approximately $13.5 million.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of the Company's financial condition
and results of operations set forth below should be read in conjunction with
the consolidated financial statements of the Company and the related notes
shown in the index on page 19 of this report.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Results of Operations
For 1996, the Company's continuing operations achieved record sales, income,
and earnings per share. The new record marked the third consecutive record
year for such results from continuing operations. Sales for 1996 totaled
$868.7 million, an increase of $31.2 million, or 3.7% from the 1995 total of
$837.5 million. All business segments reported increased sales, led by the
Industrial Materials Group, stemming from higher domestic and export sales of
water filtration and specialty metal products. The Precision Instruments Group
sales increase was due primarily to higher sales of aerospace instruments, and
the Electromechanical Group increase was due to higher domestic sales of
floor-care and non-floor-care products. Sales by all segments to foreign
markets totaled $293.6 million compared to $281.3 million in 1995, an increase
of $12.3 million or 4.4%, and represents approximately one-third of total
sales in both years. Export shipments from the United States in 1996 continued
trending upward, reaching $151.0 million compared to $139.1 million in 1995,
an increase of 8.5%, due primarily to higher foreign shipments of aerospace
products, water filters, and specialty metal products.
New orders during 1996 were $861.6 million compared to $832.0 million for
1995, an increase of $29.6 million, or 3.6%. The backlog of orders was $221.6
million at year-end 1996, a decrease of 3.1% from the end of 1995. Business
segment operating profit for 1996 was $116.4 million, compared to $111.4
million in 1995, an increase of 4.5%. The increase in profit was primarily due
to higher sales volume and continued production efficiency, as total segment
operating profit margins for 1996 of 13.4% were essentially maintained at the
1995 level.
Corporate administrative and other expenses continued a decreasing trend in
1996, totaling $21.3 million, compared to $22.1 million in 1995, due to lower
overall administrative expenses. Record operating income of $95.1 million was
achieved for 1996, compared to the 1995 record of $89.3 million, an increase
of $5.8 million or 6.5%. Interest and other expenses, net were $16.4 million
for 1996, compared to $20.0 million in 1995, a decrease of $3.6 million, due
to increased investment income from the Company's captive insurance
subsidiary, and lower interest expense due to lower effective interest rates
on lower outstanding borrowings. Also contributing to the lower net expenses
for 1996 was lower amortization due to reduced deferred debt issuance costs,
which were charged off as an extraordinary loss in the third quarter of 1995,
in connection with the replacement of a prior revolving credit agreement.
The effective tax rate was 34.9% for 1996, compared to 36.8% for 1995. The
reduced 1996 tax rate reflects the effect of a lower proportion of 1996 pretax
income from the Company's Italian motor operations, which are taxed at rates
higher than U.S. pretax income. The 1995 tax rate reflected a higher
proportion of Italian income, and also included the impact on current and
deferred taxes of a one percent increase in the Italian statutory income tax
rate. The 1995 tax rate also reflected a lower state tax provision than in
1996 due to favorable settlements of prior tax years.
Income from continuing operations and net income for 1996 was $51.2 million,
an increase of 17%, or $1.57 per share. The income from continuing operations
and per share results were both new records compared to $43.8 million or $1.31
per share in 1995. Net income in 1995 was $52.3 million, or $1.56 per share,
and reflected income from discontinued operations of $.8 million or $.02 per
share, a gain of $10.4 million or $.31 per share related to the sale of the
Microfoam Division in the second quarter of 1995, and also an extraordinary
charge of $2.7 million or $.08 per share for the early repayment of debt in
the third quarter of 1995.
12
<PAGE>
The weighted average shares outstanding during 1996 was 32.7 million shares,
compared to the average of 33.4 million shares for 1995, a reduction of 2.3%.
The reduced number of shares in 1996 resulted from the repurchase and
retirement of shares under the Company's ongoing share repurchase program,
which began in March 1994, net of shares issued in connection with the
exercise of employee stock options. Shares outstanding at December 31, 1996
were 32.7 million shares, not significantly different from year-end 1995.
Business Segment Results
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
NET SALES(/1/):
Electromechanical.............................. $375,633 $372,038 $340,358
Precision Instruments.......................... 308,737 301,440 280,638
Industrial Materials........................... 184,291 164,012 153,742
-------- -------- --------
Total net sales.............................. $868,661 $837,490 $774,738
======== ======== ========
INCOME:
Segment operating profit(/2/)
Electromechanical.............................. $ 44,238 $ 48,858 $ 46,203
Precision Instruments.......................... 37,253 34,803 29,189
Industrial Materials........................... 34,874 27,741 23,251
-------- -------- --------
Total segment operating profit............... 116,365 111,402 98,643
Corporate administrative and other expenses.... (21,307) (22,104) (23,351)
-------- -------- --------
Consolidated operating income................ 95,058 89,298 75,292
Interest and other expenses, net............... (16,398) (20,041) (17,529)
-------- -------- --------
Consolidated income from continuing
operations before income taxes.............. $ 78,660 $ 69,257 $ 57,763
======== ======== ========
</TABLE>
- --------
(1) After elimination of intra- and intersegment sales, which are not
significant in amount.
(2) Segment operating profit represents sales less all direct costs and
expenses (including certain administrative and other expenses) applicable
to each segment, but does not include interest expense.
The ELECTROMECHANICAL GROUP'S sales increased $3.6 million or 1.0% to $375.6
million for 1996. Higher domestic sales of both floor care and non-floor-care
products were largely offset by reduced sales by the Group's Italian motor
operations. Continuing recessionary conditions in Europe and highly
competitive pricing adversely affected sales in Europe. Operating profit for
the Group decreased $4.6 million or 9.5% to $44.2 million in 1996. Profit
margins fell to 11.8% in 1996 from 13.1% in the prior year due to the lower
European sales and reduced operating efficiencies in the Group's Italian motor
operations caused by the sales reduction. Also contributing to the profit
decline was the incurrence of start-up costs in 1996 for new motor production
operations in the PRC, Mexico, and the Czech Republic. These reductions were
mitigated somewhat by increased profits from the Group's domestic motor
operations due to higher domestic sales and improved operating efficiencies.
The competitive situation in Europe caused a delay in implementing the
Group's strategy to increase market penetration by offering its motor products
as a low-cost outsourcing alternative to certain European vertically
integrated floor care manufacturers. The Group expects to continue
implementation of this strategy during 1997. During 1996, the Group continued
initiatives to lower production costs, including both the start-up of the new
motor production operations previously mentioned above and the purchase of a
facility in the Czech Republic for operations to begin later in 1997. These
new operations are expected to lower costs and create additional market share
opportunities for the Group worldwide.
PRECISION INSTRUMENT GROUP sales in 1996 were $308.7 million, an increase of
$7.3 million or 2.4% from 1995. Increased sales of aerospace instruments were
partially offset by lower worldwide sales of heavy-truck
13
<PAGE>
instruments caused by a continuing decline in industry-wide demand and by
lower process instrument sales to European markets. Operating profit of the
Group for 1996 increased $2.5 million, or 7.0%, to $37.3 million, compared to
$34.8 million in the prior year. Profit margins for the Group improved to
12.1% for 1996 from 11.5% in 1995 due primarily to significant profit
improvements from the Group's aerospace operations. Such profit improvement
was the result of a lower cost structure, due to restructuring activities in
prior years; increased sales, and a favorable change in product mix. Also
contributing to the increase was the full-year profit contribution from a 50%-
owned joint venture in Asia, which was acquired in March 1995 and manufactures
low-cost pressure gauges. The profit improvement was limited to some extent by
the lower sales of heavy-truck instruments by the Dixson business which was
also acquired in March 1995, and by reduced sales of process instruments in
Europe.
INDUSTRIAL MATERIAL GROUP sales in 1996 were $184.3 million, an increase of
$20.3 million or 12.4% from 1995. The sales increase was due primarily to
higher domestic and export sales of water filtration products, resulting from
increased market penetration into residential and retail markets, as well as
the full-year sales contribution of a French water filter producer acquired
late in 1995. Higher worldwide sales of specialty metal products due, in part,
to the introduction of new products, also contributed to the sales increase.
Group operating profit increased significantly by $7.1 million or 25.7% to
$34.9 million in 1996; profit margins increased to 18.9% from 16.9% in the
prior year. The profit improvement was due primarily to the sales increase,
and in part to improved operating efficiencies resulting from cost containment
initiatives throughout the Group. In June 1996, the Company announced it would
retain the Group's Westchester Plastics Division, which was previously
considered for sale. Westchester Plastics and the Haveg Division have been
combined to form a new Chemical Products Division within the Group. In
February 1997, the Company announced, subject to approval by its shareholders,
that it had entered into an agreement with Culligan Water Technologies, Inc.
to divest itself of its water filtration business through a merger of that
business with Culligan for shares of Culligan stock to be distributed to the
Company's shareholders. The transaction is expected to be completed in four to
six months from the date of the announcement. The water filtration business
consists of the Group's U.S.-based Plymouth Products Division and three
foreign subsidiaries. Net sales of the water filtration business totaled
approximately $70 million in 1996 (see Note 15 to the financial statements).
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Results of Operations
For 1995, the Company achieved record sales and earnings. Sales were $837.5
million for 1995, an increase of $62.8 million or 8.1% from the 1994 total of
$774.7 million, which was also a record at that time. Sales and other amounts
for years prior to 1995 have been restated for the May 1995 sale of the
Microfoam Division, which is reported in the accompanying financial statements
as a discontinued operation. All business segments reported increased sales,
led by the Electromechanical Group, whose introduction of new products and
entry into emerging markets benefited 1995. Softness in the U.S. floor-care
markets experienced in the second half of 1995 reduced domestic sales growth.
Precision Instruments Group 1995 sales increased due largely to the Company's
acquisition of the heavy-vehicle instrumentation business of privately held
Dixson, Inc. in late March 1995. In 1995, the Industrial Materials Group
continued to benefit from improved business conditions in many of its markets,
resulting in increased sales led by the Company's metal powder business. Sales
by all business segments to foreign markets totaled $281.3 million in 1995
compared to $237.7 million in 1994, an increase of 18.3%. Export shipments
from the United States in 1995 continued to increase, reaching $139.1 million
compared to $116.2 million in 1994, an increase of 19.7%.
New orders during 1995 were $832.0 million, compared to $797.8 million for
1994, an increase of $34.2 million or 4.3%. The backlog of orders was $228.7
million at year-end 1995, a decrease of 2.4% from the end of 1994. Business
segment operating profit was $111.4 million in 1995 compared to $98.6 million
in 1994, an increase of 12.9%. The increase in profits was due to the higher
sales volume and the successful implementation of cost reduction programs in
the Precision Instruments and Industrial Materials groups. The Precision
Instruments Group also benefited from the restructuring of the aerospace
business, which was initiated in 1993.
14
<PAGE>
Lower operating costs in the temperature- and corrosion-resistant-materials
and plastics compounding businesses enhanced the profitability of the
Industrial Materials Group.
Corporate administrative and other expenses were $22.1 million in 1995,
slightly lower than the $23.4 million incurred in 1994. Operating income
reached a record $89.3 million in 1995, an increase of $14.0 million or 19%
over 1994. Interest and other expenses, net were $20.0 million in 1995
compared to $17.5 million in 1994, an increase of $2.5 million. The increase
in net expenses reflects lower interest expenses during 1995 due to lower
effective interest rates on debt outstanding during the year, but it was more
than offset by lower interest and other investment income.
The effective tax rate was approximately 37% for both 1995 and 1994. Both
years reflect a lower net state tax provision, and the 1995 rate included
foreign tax benefits related to certain capital investments.
Income from continuing operations improved 19.5% in 1995 to $43.8 million,
or $1.31 per share, compared to $36.6 million, or $.99 per share in 1994.
Income from discontinued operations was $.8 million, or $.02 per share in
1995, compared to $2.4 million, or $.06 per share in 1994. Results in 1995
also included an after-tax gain of $10.4 million ($.31 per share), due to the
sale of the Microfoam Division in the second quarter of 1995.
Income before extraordinary items was $55.0 million, or $1.64 per share in
1995, and $39.0 million, or $1.05 per share in 1994, an income improvement of
$16.0 million or 41%. After an extraordinary after-tax charge in the third
quarter of 1995 for the write-off of deferred debt issuance costs of $2.7
million, or $.08 per share, net income for 1995 was $52.3 million, or $1.56
per share, compared to 1994 net income of $31.0 million, or $.84 per share.
Net income for 1994 included a first quarter after-tax charge for an
extraordinary loss of $11.8 million ($.32 per share) due to the early
extinguishment of debt, and a $3.8 million ($.11 per share) after-tax gain due
to a change in accounting for certain marketable securities.
Weighted average shares outstanding during 1995 were 33.4 million shares,
compared to the average of 37.1 million shares for 1994, a reduction of 3.7
million shares or 10%. The reduced number of shares in 1995 resulted from the
repurchase and retirement of shares under the Company's ongoing share
repurchase program, which began in March 1994. Shares outstanding at December
31, 1995 and 1994 were 32.9 million shares and 34.7 million shares,
respectively.
Business Segment Results
The ELECTROMECHANICAL GROUP'S sales increased $31.7 million or 9.3% to
$372.0 million, due primarily to increased market share, introduction of new
products, and the 1994 completion of capacity expansion programs at two plants
in North Carolina. Sales for 1995 from the Company's Italian operations
increased 25.6% before currency translation effects, which were minimal.
However, softness in the U.S. floor care markets experienced in the second
half of 1995 limited domestic sales growth. Operating profit of the Group
increased 5.7% to $48.8 million in 1995 due primarily to the increase in sales
volume. The Group's profit margin in 1995 was 13.1% compared to 13.6% in 1994.
Higher material costs primarily in the Italian operations exceeded modest
price increases and cost reductions, which reduced Group profitability. That
condition was being moderated by additional cost-saving activities.
PRECISION INSTRUMENTS GROUP sales in 1995 were $301.4 million, an increase
of $20.8 million or 7.4% from 1994. The increase was due largely to increased
sales of heavy-vehicle instruments, resulting from acquisition of the Dixson
business at the end of the first quarter of 1995. An expected market downturn
started to affect fourth-quarter 1995 shipments of heavy-truck instruments,
which was expected to be alleviated somewhat by improving sales of commercial
aerospace products. Sales of process instruments also increased in 1995;
however, that increase was mostly offset by lower first-half sales of
aerospace instruments. Group operating profit in 1995 increased 19.2% to $34.8
million, compared to $29.2 million in 1994. A profit contribution by Dixson, a
manufacturing joint venture in Asia, and increased operating efficiencies in
the aerospace business resulting from the restructuring activities, along with
benefits from cost reduction programs initiated in prior years, accounted for
the improved operating results. The cost savings being realized from the
restructuring of the Group are expected to continue.
15
<PAGE>
INDUSTRIAL MATERIALS GROUP sales from continuing operations were $164.0
million in 1995, an increase of $10.3 million or 6.7% from 1994, due primarily
to higher sales by the Company's metal powder business. Sales growth of water
filtration products, which had been strong in prior years, was reduced due to
softness in the U.S. retail market segment. Group operating profit in 1995
increased $4.5 million or 19.3% to $27.7 million. The increase in
profitability was due in part to the higher sales volume, but mostly to cost
reduction programs and improved operating efficiencies in the Company's
temperature- and corrosion-resistant-materials business. The plastics
compounding business benefited primarily from a third-quarter 1995 cost
recovery from an insurance settlement. The overall profit increase was offset
somewhat by reduced performance by the water filtration business. In May 1995
the Microfoam Division was sold. In November 1995, APIC/AFIMO, a French
producer of filtration products, was acquired and added to the Group. The
acquisition had no significant effect on the Group's results for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Working capital of continuing operations at December 31, 1996 amounted to
$61.0 million, an increase of $22.3 million from December 31, 1995, largely
reflecting the repayment of short-term borrowings. The ratio of current assets
to current liabilities at December 31, 1996 was 1.33:1, compared to 1.18:1 at
December 31, 1995. The Company's earnings before interest, taxes, depreciation
and amortization (EBITDA) from continuing operations was $131.4 million in
1996, compared to $123.7 million in 1995.
Cash provided by the Company's continuing operations totaled $74.7 million
in 1996 compared to $68.0 million in 1995, a net increase of $6.7 million. The
net increase reflects higher income from continuing operations, and lower
overall working capital requirements. Total cash provided by operating
activities in 1995 was $65.4 million, and included $2.6 million of cash used
for discontinued operations.
Total 1996 charges against reserves for restructuring and other unusual
items amounted to $7.2 million, compared to $13.0 million in 1995. The charges
were primarily for cash, and did not significantly affect the Company's
liquidity. Charges in both years were for workforce reductions, relocation of
aerospace operations, and facilities combination, which required cash outlays,
and for the write-off of certain assets, which did not require the use of
cash. In 1997, the Company expects to incur additional restructuring-related
cash and noncash charges against its restructuring reserves. It anticipates
substantial completion of the restructuring program by the end of 1997, except
for certain longer-term pension-related aspects of the program. Once the
restructuring program has been completed, it is anticipated that the benefits,
which have already been substantial, will continue to more than offset the
required cash expenditures under the plan.
Cash used for investing activities was $41.5 million in 1996, compared to
$28.7 million in 1995, an increase of $12.8 million. The primary reason for
the increase was additions to property, plant, and equipment, which totaled
$41.2 million compared to $31.7 million in 1995. Net cash expenditures for
investing activities in 1995 also included the acquisition of two businesses
and investment in a joint venture, requiring a total cash outlay of $44.0
million, more than offset by $47.4 million in cash proceeds, received
primarily from the sale of the Microfoam Division and other assets.
Financing activities used cash totaling $37.2 million in 1996, compared to
$36.9 million in 1995. During 1996, the Company made net repayments of short-
term borrowings totaling $24.4 million, repurchased 698,000 shares of the
Company's common stock at a total cost of $12.5 million, funded dividend
payments of $7.9 million, and received cash proceeds of $7.0 million from the
exercise of employee stock options. Financing activities for 1995 included net
proceeds of $54.5 million from short-term borrowings; repayment of $50.0
million in term loans, of which $5 million was required; expenditures of $39.6
million for the repurchase of 2.3 million shares of the Company's common
stock; funding of dividends totaling $8.0 million; and net proceeds of $5.6
million related to the exercise of employee stock options.
16
<PAGE>
On September 12, 1996, the Company amended its $195 million Bank Credit
Agreement. In addition to providing somewhat greater financial flexibility,
the amended agreement also extended the maturity of the credit facility by one
year, to 2001, and provided for slightly lower interest rates and fees on the
total credit facility. At December 31, 1996, $176.9 million of the domestic
bank credit facility was unused and available, along with approximately $8.8
million of unused foreign credit lines with European banks.
The stock repurchases mentioned previously were made under the Company's
ongoing share repurchase programs. Since beginning the stock repurchase
programs in March 1994, the Company has acquired a total of 12.2 million
shares at a total cost of $171.0 million as of December 31, 1996. Additional
stock repurchases, if any, will be made under a new $50 million authorization
announced in June 1996, of which $48.2 million was unexpended as of year-end
1996.
As a result of all 1996 cash flow activities, cash and cash equivalents at
December 31, 1996 totaled $3.1 million, compared to $7.0 million at December
31, 1995. The Company believes it has sufficient cash-generating capabilities
and available domestic and foreign credit facilities to enable it to meet its
needs in the foreseeable future.
NEW ACCOUNTING STANDARDS
In the first quarter of 1996, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Statement No.
121 establishes new accounting standards for measuring the impairment of long-
lived assets. The adoption of the new statement did not have any impact on the
Company's consolidated financial position or results of operations.
As of January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement No. 123 establishes a fair
value method of accounting for stock-based awards issued to employees and
others that includes expensing related compensation cost in the income
statement; but it also allows companies the choice of continuing to measure
compensation expense as it was previously measured prior to the effective date
of adoption of Statement No. 123. The Company elected to continue to use the
previous method of accounting for stock-based awards issued to employees, but
to provide the disclosures required by Statement No. 123. Consequently,
adoption of the statement did not have any impact on the Company's
consolidated financial position or results of operations (see Note 7 to the
consolidated financial statements).
INTERNAL REINVESTMENT
Capital Expenditures
Capital expenditures were $41.2 million in 1996, compared to $31.7 million
in 1995, an increase of $9.5 million or 29.9%. Approximately 83% of the 1996
expenditures were for additional manufacturing equipment to increase
production efficiencies, and for expanded production capacity, primarily in
the Electromechanical Group. The Company expects to increase its capital
spending in 1997 slightly above 1996 levels, with continued emphasis on
investment in production efficiencies and expansion, primarily in the
Electromechanical Group.
Product Development and Engineering
Product development and engineering expenses in 1996 totaled $37.4 million
compared to $33.2 million in 1995, and $32.8 million in 1994. These amounts
include expenses for research and development of $17.7 million in 1996, $16.0
million in 1995, and $17.7 million in 1994. Such expenditures were directed
toward the development of new products and processes, and the improvement of
existing products and processes.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations as well as
stringent cleanup requirements and also has been named a potentially
responsible party at several sites that are the subject of government-mandated
cleanups. Provisions for environmental cleanup at those sites and other sites
were approximately $1.8 million in 1996, $2.4 million in 1995, and $1.6
million in 1994.
17
<PAGE>
It is not possible to accurately quantify the potential financial impact of
actions regarding environmental matters, but the Company believes that based
on past experience and current evaluations, the outcomes of these actions is
not likely to have a material adverse effect on the future results of
operations, financial position, or cash flows of the Company.
IMPACT OF INFLATION
The Company attempts to minimize the impact of inflation through cost
reduction programs and by improving productivity. In addition, the Company
uses the last-in, first-out (LIFO) method of accounting for inventories
(whereby the cost of products sold approximates current costs), and therefore,
the impact of inflation is substantially reflected in operating costs. In
general, the Company believes programs are in place that are designed to
monitor the impact of inflation and to take necessary steps to minimize
inflation's effect on operations.
OTHER MATTERS
In cooperation with the Consumer Products Safety Commission, the Company,
along with its supplier and customer, is participating in a voluntary recall
of one water filter cartridge model involving 14,000 units which were sold,
beginning in March 1996, through a mass merchandiser, when the filter
cartridges were introduced. Although only a limited number of the filter
cartridges may contain an incorrect form of carbon, all units are being
recalled as a precautionary measure. Neither the Company, the carbon supplier,
nor the distributors are aware of any consumer injuries related to the filter
cartridge. The Company does not believe it is at fault in this matter and
based upon the information available at this time, it is not expected that the
outcome will have a material effect on the Company's financial position or
results of operations.
RISK FACTORS
Except for historical information contained herein, certain matters
discussed in this Form 10-K are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act (PSLRA) of 1995, which involve risk
and uncertainties that exist in the Company's operations and business
environment, and are subject to change based on various important factors. The
Company wishes to take advantage of the "safe harbor" provisions of the PSLRA
by cautioning readers that numerous important factors discussed below, among
others, in some cases have caused, and in the future could cause, the
Company's actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. The
following includes some, but not all, of the factors or uncertainties that
could cause actual results to differ from projections:
. An economic slowdown in any one, or all of, the Company's global market
segments.
. Unforeseen selling price reductions in any one, or all of, the Company's
global market segments, with adverse effects on profit margins.
Currently, the most noticeable price pressure is in the electric motor
market in which some competitors are scaling back prices, and new
competitors are seeking to gain market entry.
. The Company's ability to achieve cost reduction targets; due in part to
varying prices and availability of certain raw materials and semifinished
materials and components.
. Underutilization of the Company's existing factories and plants, or plant
expansions or new plants, possibly resulting in production
inefficiencies, higher and unanticipated start-up expenses and production
delays at new plants.
. The unanticipated expenses of divesting businesses currently under
consideration, or of assimilating newly-acquired business into the
Company's business structure; as well as, the impact of unusual expenses
from on-going evaluations of business strategies, asset valuations,
acquisitions, divestitures and organizational structures. Acquisition and
divestiture strategies may face legal and regulatory delays and other
unforeseeable obstacles beyond the Company's control.
18
<PAGE>
. Unpredictable delays or difficulties in the development of key new
product programs.
. The risk of not recovering major research and development expenses, and
the risks associated with major technological shifts away from the
Company's technologies and core competencies.
. A slower than anticipated improvement in the build rate in the U.S. and
Europe for heavy-trucks, construction and agricultural equipment and
related instrumentation, as well as a restriction in the ability of heavy
vehicle manufacturers to secure components manufactured by outside
suppliers.
. Rapid or unforeseen escalation of the cost of regulatory compliance
and/or litigation, including but not limited to, environmental
compliance, product-related liability, assertions related to intellectual
property rights and licenses, adoption of new, or changes in, accounting
policies and practices and the application of such policies and
practices.
. The effects, in the U.S. and abroad, of changes in trade practices;
monetary and fiscal policies; laws and regulations; other activities of
governments, agencies, and similar organizations; and social and economic
conditions, such as trade restrictions or prohibitions; unforeseen
inflationary pressures and monetary fluctuation; import and other charges
or taxes; and the ability or inability of the Company to obtain, or hedge
foreign currencies, foreign currency exchange rates and fluctuation in
those rates. This would include extreme currency fluctuations in the
Italian lira and German mark; protectionism and confiscation of assets;
nationalizations and unstable governments and legal systems, and
intergovernmental disputes.
The Company believes that it has the product offering, facilities, personnel
and competitive and financial resources for continued business success.
However, future revenues, costs, margins, product mix and profits are all
influenced by a number of factors, as discussed above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEX TO FINANCIAL STATEMENTS (ITEM 14(A) 1)
Report of Independent Auditors........................................ 20
Consolidated Statement of Income for the years ended December 31,
1996, 1995, and 1994................................................. 21
Consolidated Balance Sheet at December 31, 1996 and 1995.............. 22
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996, 1995, and 1994.................................... 23
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995, and 1994................................................. 24
Notes to the Consolidated Financial Statements........................ 25
</TABLE>
FINANCIAL STATEMENT SCHEDULES (ITEM 14(A) 2)
Financial statement schedules have been omitted because either they are not
applicable or the required information is included in the financial
statements or the notes thereto.
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of AMETEK, Inc.:
We have audited the accompanying consolidated balance sheets of AMETEK,
Inc., as of December 31, 1996 and 1995, and the related consolidated
statements of income, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AMETEK, Inc., at December 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for marketable securities.
/s/ ERNST & YOUNG LLP
Philadelphia, PA
January 22, 1997,
except for Note 15, as to which the date is
February 5, 1997
20
<PAGE>
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales................................. $ 868,661 $ 837,490 $ 774,738
---------- ---------- ----------
Expenses:
Cost of sales (excluding depreciation).. 669,784 647,008 600,290
Selling, general and administrative..... 76,059 74,790 70,980
Depreciation............................ 27,760 26,394 28,176
---------- ---------- ----------
Total expenses........................ 773,603 748,192 699,446
---------- ---------- ----------
Operating income.......................... 95,058 89,298 75,292
Other income (expenses):
Interest expense........................ (19,071) (20,175) (21,618)
Other, net.............................. 2,673 134 4,089
---------- ---------- ----------
Income from continuing operations before
income taxes............................. 78,660 69,257 57,763
Provision for income taxes................ 27,470 25,500 21,144
---------- ---------- ----------
Income from continuing operations......... 51,190 43,757 36,619
Discontinued operations, net of taxes:
Income from discontinued operations..... -- 779 2,372
Gain on sale of discontinued
operations............................. -- 10,420 --
---------- ---------- ----------
Income before extraordinary items and
cumulative effect of accounting change... 51,190 54,956 38,991
Extraordinary loss on early extinguishment
of debt, net of taxes.................... -- (2,676) (11,810)
Cumulative effect of accounting change for
marketable securities, net of taxes...... -- -- 3,819
---------- ---------- ----------
Net income................................ $ 51,190 $ 52,280 $ 31,000
========== ========== ==========
Earnings (loss) per share:
Income from continuing operations....... $ 1.57 $ 1.31 $ .99
Discontinued operations:
Income from discontinued operations... -- .02 .06
Gain on sale of discontinued
operations........................... -- .31 --
---------- ---------- ----------
Income before extraordinary items and
cumulative effect of accounting
change................................. 1.57 1.64 1.05
Extraordinary loss on early
extinguishment of debt................. -- (.08) (.32)
Cumulative effect of accounting change.. -- -- .11
---------- ---------- ----------
Net income.............................. $ 1.57 $ 1.56 $ .84
========== ========== ==========
Average common shares outstanding......... 32,670,726 33,426,436 37,125,569
========== ========== ==========
</TABLE>
See accompanying notes.
21
<PAGE>
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,051 $ 7,011
Marketable securities.................................... 6,441 5,694
Receivables, less allowance for possible losses.......... 126,212 118,782
Inventories.............................................. 94,413 101,515
Deferred income taxes.................................... 11,086 11,825
Other current assets..................................... 5,769 4,518
-------- --------
Total current assets................................... 246,972 249,345
Property, plant and equipment, net......................... 192,356 176,838
Intangibles, investments and other assets.................. 98,587 100,562
-------- --------
$537,915 $526,745
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term
debt.................................................... $ 31,898 $ 56,374
Accounts payable......................................... 77,994 76,569
Income taxes payable..................................... 10,227 9,177
Accrued liabilities...................................... 65,852 68,556
-------- --------
Total current liabilities.............................. 185,971 210,676
Long-term debt............................................. 150,333 150,430
Deferred income taxes...................................... 35,099 31,927
Other long-term liabilities................................ 37,014 46,653
Stockholders' equity:
Preferred stock, $1.00 par value; authorized: 5,000,000
shares; none issued..................................... -- --
Common stock, $.01 par value; authorized: 100,000,000
shares; issued: 1996--34,208,095 shares; 1995--
34,906,717 shares....................................... 342 349
Capital in excess of par................................. 1,190 783
Retained earnings........................................ 157,843 124,503
-------- --------
159,375 125,635
Net unrealized losses.................................... (15,375) (18,691)
Less: Cost of shares held in treasury: 1996--1,502,617
shares; 1995--2,049,194 shares.......................... (14,502) (19,885)
-------- --------
Total stockholders' equity............................. 129,498 87,059
-------- --------
$537,915 $526,745
======== ========
</TABLE>
See accompanying notes.
22
<PAGE>
AMETEK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CAPITAL STOCK
Preferred Stock................................. $ -- $ -- $ --
-------- -------- --------
Common Stock, $.01 par value:
Balance at the beginning of the year........... 349 372 46,414
Common stock retirement........................ (7) (23) (6,988)
Reduction in par value from $1.00 per share to
$.01 per share................................ -- -- (39,054)
-------- -------- --------
Balance at the end of the year............... 342 349 372
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Balance at the beginning of the year........... 783 7,382 6,389
Employee stock options and savings plan........ 2,943 2,093 976
Reduction in par value of common stock......... -- -- 39,054
Common stock retirement........................ (2,536) (8,661) (39,607)
Other.......................................... -- (31) 570
-------- -------- --------
Balance at the end of the year............... 1,190 783 7,382
-------- -------- --------
RETAINED EARNINGS
Balance at the beginning of the year........... 124,503 111,150 161,297
Net income..................................... 51,190 52,280 31,000
Cash dividends paid............................ (7,853) (7,983) (8,910)
Common stock retirement........................ (9,997) (30,944) (72,237)
-------- -------- --------
Balance at the end of the year............... 157,843 124,503 111,150
-------- -------- --------
NET UNREALIZED LOSSES
Foreign currency translation:
Balance at the beginning of the year........... (15,008) (16,148) (20,163)
Translation adjustments........................ 1,281 1,140 4,015
-------- -------- --------
Balance at the end of the year............... (13,727) (15,008) (16,148)
-------- -------- --------
Pension liability in excess of unrecognized
prior service cost:
Balance at the beginning of the year........... (4,384) (4,391) (4,731)
Adjustments during the year.................... 1,802 7 340
-------- -------- --------
Balance at the end of the year............... (2,582) (4,384) (4,391)
-------- -------- --------
Other (principally valuation allowance for
marketable securities):
Balance at the beginning of the year........... 701 (683) 3,262
Appreciation (depreciation) in marketable
securities.................................... 233 1,384 (2,547)
Other.......................................... -- -- (1,398)
-------- -------- --------
Balance at the end of the year............... 934 701 (683)
-------- -------- --------
Balance at the end of the year............... (15,375) (18,691) (21,222)
-------- -------- --------
TREASURY STOCK
Balance at the beginning of the year........... (19,885) (24,502) (27,142)
Employee stock options and savings plan........ 5,200 4,237 2,577
Other.......................................... 183 380 63
-------- -------- --------
Balance at the end of the year............... (14,502) (19,885) (24,502)
-------- -------- --------
Total Stockholders' Equity................. $129,498 $ 87,059 $ 73,180
======== ======== ========
</TABLE>
See accompanying notes.
23
<PAGE>
AMETEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Cash provided by (used for):
Operating activities:
Income from continuing operations............. $ 51,190 $ 43,757 $ 36,619
Adjustments to reconcile income from
continuing operations to net cash provided by
continuing operations:
Depreciation and amortization............... 34,906 34,461 35,469
Deferred income taxes....................... 2,424 3,989 4,585
Proceeds from sale of securities in trading
portfolio.................................. -- -- 31,566
Changes in operating working capital:
Increase in receivables................... (4,092) (3,511) (7,902)
Decrease (increase) in inventories and
other current assets..................... 7,924 1,243 (9,703)
(Decrease) increase in payables, accruals
and income taxes......................... (6,608) (17,948) 20,323
(Decrease) increase in other long-term
liabilities................................ (4,377) 6,273 (723)
Other....................................... (6,667) (304) (3,289)
-------- -------- ---------
Cash provided by continuing operations.......... 74,700 67,960 106,945
Cash (used for) provided by discontinued
operations..................................... -- (2,572) 7,645
-------- -------- ---------
Total operating activities................ 74,700 65,388 114,590
-------- -------- ---------
Investing activities:
Additions to property, plant and equipment.... (41,247) (31,746) (22,798)
Proceeds from sale of assets and discontinued
operations................................... 4,023 42,709 8,428
Purchase of businesses and investments........ (5,926) (43,980) (1,144)
Decrease in marketable securities and other... 1,649 4,293 5,611
-------- -------- ---------
Total investing activities................ (41,501) (28,724) (9,903)
-------- -------- ---------
Financing activities:
Net change in short-term borrowings........... (24,357) 54,544 1,600
Cash dividends paid........................... (7,853) (7,983) (8,910)
Additional long-term borrowings............... -- -- 306,004
Repayment of long-term debt................... -- (50,000) (292,506)
Debt issuance costs and debt prepayment
premiums..................................... -- (166) (29,211)
Repurchases of common stock................... (12,540) (39,628) (118,832)
Proceeds from stock options................... 6,953 5,629 3,554
Other......................................... 638 706 400
-------- -------- ---------
Total financing activities................ (37,159) (36,898) (137,901)
-------- -------- ---------
Decrease in cash and cash equivalents........... (3,960) (234) (33,214)
Cash and cash equivalents:
Beginning of year............................. 7,011 7,245 40,459
-------- -------- ---------
End of year................................... $ 3,051 $ 7,011 $ 7,245
======== ======== =========
</TABLE>
See accompanying notes.
24
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and subsidiaries, after elimination of all significant intercompany
transactions in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Equivalents, Securities, and Other Investments
All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. In January 1994, the Company
adopted Statement of Financial Accounting Standard (SFAS) No. 115, Accounting
for Certain Investment in Debt and Equity Securities. SFAS No. 115 requires
that equity securities and fixed income securities be carried at market value,
and that the unrealized gains and losses on securities, less deferred income
taxes, be reflected as a component of stockholders' equity for securities
considered available for sale, and be reflected in income for securities held
for trading purposes. The cumulative effect on net income of adopting that
standard for securities, then classified in a trading portfolio, was to
increase net income for 1994 by $3.8 million (net of taxes), or $.11 per
share. At December 31, 1996 and 1995, all of the Company's equity securities
and fixed income securities (primarily those of a captive insurance
subsidiary) are considered available-for-sale. The aggregate market value of
such securities at December 31, 1996 and 1995 was: 1996--$14.9 million ($13.5
million amortized cost), and 1995--$12.2 million ($10.9 million amortized
cost). The Company's other investments are accounted for by the equity method.
Inventories
Inventories are stated at the lower of cost or market, cost being determined
principally by the last-in, first-out (LIFO) method of inventory valuation,
and market on the basis of the lower of replacement cost or estimated net
proceeds from sales. The excess of the first-in, first-out (FIFO) method over
the LIFO value was $35.0 million and $36.4 million at December 31, 1996 and
1995.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for additions
to plant facilities, or that extend their useful lives, are capitalized. The
cost of tools, jigs and dies, and maintenance and repairs is charged to
operations as incurred. Depreciation of plant and equipment is calculated
principally on a straight-line basis over the estimated useful lives of the
related assets.
Revenue Recognition
The Company's revenues are recorded as products are shipped and services are
rendered. The policy with respect to sales returns and allowances generally
provides that a customer may not return products, or be given allowances,
except at the Company's option. The aggregate provisions for estimated
warranty costs (not significant in amount) are recorded at the time of sale
and periodically adjusted to reflect actual experience.
Research and Development
Company-funded research and development costs are charged to operations as
incurred and during the past three years were: 1996--$17.7 million, 1995--
$16.0 million, and 1994--$17.7 million.
25
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings Per Share
Earnings per share are based on the average number of common shares
outstanding during the period. No material dilution of earnings per share
would result for the periods if it were assumed that all outstanding stock
options were exercised.
Foreign Currency Translation
Assets and liabilities of foreign operations are translated by using
exchange rates in effect at the balance sheet date, and their results of
operations are translated by using average exchange rates for the year.
Certain transactions of the Company and its subsidiaries are made in
currencies other than their functional currency. Gains and losses from those
transactions (not significant in amount) are included in operating results for
the year.
In addition, the Company utilizes various financial instruments to hedge
firm commitments for certain export sales, thereby minimizing its exposure to
foreign currency fluctuation. Foreign exchange contracts, foreign currency
options, and foreign currency swaps may be entered into for periods consistent
with the Company's exposure, generally one year or less. Gains and losses from
those arrangements are deferred and are reflected as adjustments of the
related foreign currency transaction.
Interest Rate Swap and Cap Agreements
The Company enters into interest rate swap and cap agreements to modify the
interest characteristics of certain of its revolving credit loans, and to
reduce the impact of increases in interest rates on its floating-rate loans.
Such agreements generally involve the exchange of fixed- and floating-rate
interest payments periodically over the life of the agreement without an
exchange of the underlying principal amount. The differential to be paid or
received is accrued as interest rates change, and it is recognized as an
adjustment to interest expense related to the debt over the life of the
agreements. Under interest rate cap agreements, the interest rate on a
specified percentage of certain revolving credit loans outstanding, which is
subject to the floating interest rate, cannot exceed a fixed percentage. The
Company also uses foreign currency and interest rate swaps in its selective
hedging of certain foreign currency and interest rate risk exposure.
Intangible Assets
The excess of cost over net assets acquired (goodwill) is being amortized on
a straight-line basis over periods of 20 to 30 years. The Company reviews the
carrying value of goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Patents are being amortized on a straight-line basis over their estimated
useful lives of 9 to 10 years. Other acquired intangibles are being amortized
on a straight-line basis over their estimated useful lives of 5 to 30 years.
Reclassifications
Certain amounts appearing in the prior year's financial statements and
supporting footnote disclosures have been reclassified to conform to the
current year's presentation.
2. RESTRUCTURING
As of December 31, 1996, charges against a restructuring reserve of $45.1
million established in 1993 (primarily for the Company's Precision Instruments
Group) totaled approximately $32.2 million, of which $7.2 million was charged
in 1996, $13 million in 1995 and $7.9 million in 1994. The charges were for
costs related to workforce reductions, a facility combination and asset write-
downs. The remaining reserves of $12.9 million at December 31, 1996, related
primarily to certain pension and employee-related obligations and product line
26
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
relocation, are currently anticipated to be fully utilized with no material
change in the estimates. Except for certain long-term pension obligations, the
significant portion of these actions are expected to be completed by the end
of 1997.
3. ACQUISITIONS
On November 1, 1995, the Company acquired APIC and AFIMO (APIC), a French
and Monaco based manufacturer of water filtration products, for cash. This
acquisition was completed in early 1996 upon the determination of fair values
of the assets acquired and the liabilities assumed. On March 31, 1995, the
Company purchased the heavy-vehicle instrumentation business of privately held
Dixson, Inc. also for cash. These acquisitions were accounted for by the
purchase method and the results of their operations are included in the
Company's consolidated results from their respective acquisition dates. The
acquisitions of Dixson and APIC would not have had a material effect on the
Company's sales or earnings for 1995 or 1994 had they been made at the
beginning of the respective periods.
On March 1, 1995, the Company acquired a 50% ownership interest in a joint
venture established with a Taiwanese supplier to manufacture low-cost pressure
gauges in China and Taiwan for worldwide markets. The investment is accounted
for by the equity method, and the Company's 50% share of the operating results
since March 1, 1995 (not material in amount) is included in the earnings of
its domestic gauge manufacturing Division.
The aggregate purchase price of the above mentioned acquisitions and
investment in the joint venture totaled $46.8 million, consisting of cash paid
at closing and minor deferred payment obligations over periods of up to three
years. The investment in the joint venture is reported with Intangibles,
Investments and Other Assets in the accompanying balance sheet.
4. DISCONTINUED OPERATIONS
On May 18, 1995, the Company sold its foam packaging business (Microfoam
Division) for approximately $37 million in cash. The sale of the assets of
Microfoam, after providing for certain costs related to the sale, resulted in
a second quarter 1995 gain of $10.4 million, net of taxes of $6.4 million. As
a result of the transaction, the Company's prior period financial statements
were restated to report Microfoam as a discontinued operation.
Summary operating results of discontinued operations, excluding the gain on
sale, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net sales...................................................... $12,153 $33,226
======= =======
Income before income taxes..................................... $ 1,291 $ 4,044
Provision for income taxes..................................... 512 1,672
------- -------
Net income..................................................... $ 779 $ 2,372
======= =======
</TABLE>
27
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------
1996 1995
--------- ---------
<S> <C> <C>
INVENTORIES
Finished goods and parts................................ $ 28,565 $ 31,628
Work in process......................................... 18,829 23,491
Raw materials and purchased parts....................... 47,019 46,396
--------- ---------
$ 94,413 $ 101,515
========= =========
PROPERTY, PLANT AND EQUIPMENT, at cost
Land.................................................... $ 8,840 $ 8,107
Buildings............................................... 99,515 95,249
Machinery and equipment................................. 340,242 304,694
--------- ---------
448,597 408,050
Less accumulated depreciation........................... (256,241) (231,212)
--------- ---------
$ 192,356 $ 176,838
========= =========
INTANGIBLES, INVESTMENTS AND OTHER ASSETS
Intangibles, at cost:
Patents............................................... $ 20,698 $ 20,993
Goodwill.............................................. 33,872 30,626
Other acquired intangibles............................ 48,529 48,455
Less accumulated amortization......................... (61,190) (54,818)
--------- ---------
41,909 45,256
Investments............................................. 36,437 35,806
Other................................................... 20,241 19,500
--------- ---------
$ 98,587 $ 100,562
========= =========
ACCRUED LIABILITIES
Accrued employee compensation and benefits.............. $ 23,753 $ 22,572
Restructuring........................................... 5,556 11,208
Other................................................... 36,543 34,776
--------- ---------
$ 65,852 $ 68,556
========= =========
</TABLE>
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year......................... $ 6,373 $3,921 $2,394
Additions charged to expense......................... 169 2,723 1,601
Recoveries credited to allowance..................... 38 6 110
Write-offs........................................... (1,246) (432) (219)
Currency translation adjustment and other............ 41 155 35
------- ------ ------
Balance at end of year............................... $ 5,375 $6,373 $3,921
======= ====== ======
</TABLE>
28
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
At December 31, 1996 and 1995, long-term debt consisted primarily of $150
million in 9 3/4% senior notes due 2004. The annual future payments required
by the terms of the long-term debt for the years 1997 through 2001 are not
significant.
In March 1994, the Company entered into a $250 million senior secured credit
agreement with a group of banks led by The Chase Manhattan Bank, N.A. The net
proceeds from these debt issues, together with available cash were used, among
other things, to finance the Company's early retirement of debt in March 1994.
In October 1994, the Company amended the agreement by reducing the total
credit facility from $250 million to $200 million. In connection with this
early retirement of debt, the Company recorded a first quarter 1994
extraordinary charge of $11.8 million (net of tax benefits of $7.6 million),
or $.32 per share, for the prepayment premiums paid and the write-off of
related deferred debt issuance costs.
On August 2, 1995, the Company replaced its $200 million secured bank credit
facility with a new Bank Credit Agreement with a group of banks led by The
Chase Manhattan Bank, N.A. The five-year revolving credit facility was
unsecured, and provided up to $195 million in revolving credit loans, with
scheduled reductions in the total credit facility to $150 million by August 1,
2000. In connection with the August 2, 1995 Bank Credit Agreement, the Company
recorded a third quarter 1995 noncash extraordinary charge of $2.7 million
(net of tax benefits of $1.7 million), or $.08 per share, for the write-off of
deferred debt issuance costs related to the previous bank credit agreement.
On September 12, 1996, the Company amended the $195 million Bank Credit
Agreement, extending the maturity of the facility by one year, to 2001. In
addition, the amended agreement provides somewhat greater financial
flexibility, and slightly lower interest rates and fees on the entire credit
facility.
Among other things, the agreements place certain restrictions on cash
payments, including the payment of cash dividends. At December 31, 1996,
retained earnings of approximately $12 million were not subject to the
dividend limitation.
Outstanding loans under the credit facility are subject to interest rate
swap and cap agreements based on the combination of a fixed rate and the
London Interbank Offered Rate (LIBOR), plus a negotiated spread over LIBOR.
Under the new Bank Credit Agreement, at December 31, 1996 the Company had
$18.1 million in revolving credit loans outstanding at a blended interest rate
of 7.4%.
Foreign subsidiaries of the Company had lines of credit with European banks
of approximately $22.5 million, of which $8.8 million was unused at December
31, 1996. The revolving credit loans, along with the foreign bank borrowings
totaling $13.7 million at December 31, 1996, are classified on the
accompanying balance sheet as short-term borrowings. The weighted average
interest rate on all short-term borrowings outstanding at December 31, 1996
was 8.6%. The Company also has outstanding letters of credit totaling $13.6
million at December 31, 1996.
7. STOCKHOLDERS' EQUITY
In June 1996, the Company announced a new $50 million stock repurchase
authorization, and rescinded the unused portion ($5.8 million) of the previous
authorizations, which had totaled $175 million. During 1996, the Company
repurchased 698,000 shares of its common stock at an aggregate cost of $12.5
million. As of December 31, 1996, shares repurchased since the inception of
the stock repurchase programs in March 1994 totaled 12.2 million shares at an
aggregate cost of $171 million. At December 31, 1996, $48.2 million was
unexpended under the outstanding stock repurchase authorization.
29
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
All of the repurchased shares have been retired as required by the Company's
loan agreements, and such retired shares are considered authorized but
unissued shares. At December 31, 1996, shares outstanding totaled 32,705,478
shares, compared to 32,857,523 shares outstanding at December 31, 1995.
In 1995 a Stock Incentive Plan was adopted by the Company, providing for the
grant of up to 2.2 million shares of common stock to eligible employees and
nonemployee Directors of the Company. Under the Plan, the awards may include
the grant of stock options, stock appreciation rights, restricted stock
awards, and phantom stock awards.
In certain circumstances, the Company provides for restricted stock awards
of its common stock to eligible employees and nonemployee Directors of the
Company at such cost to the recipient as the Stock Incentive Plan Committee of
the Board of Directors may determine. Such shares are issued subject to
certain conditions, with transfer and other restrictions as prescribed by the
Plan. No restricted stock was awarded during 1996 or 1995. In 1994, the
Company awarded 20,000 shares of restricted common stock to certain
nonemployee Directors under the Plan. Upon issuance of restricted stock,
unearned compensation, equivalent to the excess of the market value of the
shares awarded over the price paid by the recipient at the date of the grant,
is charged to stockholders' equity and is amortized to expense over the
periods until the restrictions lapse. Amortization expense in 1996, 1995, and
1994 for awards under the Plan was not significant.
The Company has a Shareholder Rights Plan, under which the Board of
Directors declared a dividend in 1989 of one Right for each share of Company
common stock owned. The Plan provides, under certain conditions involving
acquisition of the Company's common stock, that holders of Rights, except for
the acquiring entity, would be entitled (i) to purchase shares of preferred
stock at a specified exercise price, or (ii) to purchase shares of common
stock of the Company, or the acquiring company, having a value of twice the
Rights exercise price. The Rights under the Plan expire in 1999.
As of January 1, 1996, the Company adopted the disclosure provisions of
Financial Accounting Standards Board Statement No. 123, Accounting for Stock-
Based Compensation. As permitted by Statement No. 123, the Company elected to
continue to account for stock options under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation
expense is not recognized for fixed-price stock options when the exercise
price of the employee stock option is equal to the market price of the
underlying stock on the date of grant.
Total compensation expense recognized by the Company for all stock-based
employee compensation awards for 1996, 1995, and 1994 was not significant. Had
compensation expense for the Company's stock option plans been determined by
Statement No. 123, the pro forma effects on the Company's net income and
earnings per share for the years ended December 31, 1996 and 1995 would not
have been materially different from the amounts reported. The effects of
applying Statement No. 123 in 1996 for providing pro forma compensation
expense disclosure may not be representative of the effects on reported net
income, or earnings per share in future years.
At December 31, 1996, 3,786,623 (4,402,164 in 1995) shares of common stock
were reserved under all of the Company's incentive and nonqualified stock
plans. The options are exercisable at prices not less than market price value
on dates of grant, and in installments over four to ten-year periods from such
dates. The Company also has outstanding 32,500 (48,500 in 1995) stock
appreciation rights exercisable for cash and/or shares of the Company's common
stock when the related option is exercised. Subject to certain limitations,
each right relates to the excess of the market value of the Company's common
stock over the exercise price of the related option. Charges and credits,
immaterial in amount, are made to income for these rights and certain related
options.
30
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the Company's stock option activity and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------------ ------------------------
PRICE PRICE PRICE
SHARES RANGE SHARES RANGE SHARES RANGE
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 2,714,540 $11.69-$17.69 2,689,961 $ 8.94-$16.50 2,046,225 $ 8.94-$16.50
Granted................. 705,150 17.38- 19.56 610,900 17.00- 17.69 1,152,600 12.31- 15.19
Exercised............... (603,975) 11.69- 17.50 (542,626) 8.94- 15.44 (302,146) 8.94- 15.44
Canceled................ (48,413) 12.19- 19.19 (43,695) 12.19- 17.50 (206,718) 12.19- 15.44
--------- ------------- --------- ------------- --------- -------------
Outstanding at end of
year................... 2,767,302* 11.69- 19.56* 2,714,540 11.69- 17.69 2,689,961 8.94- 16.50
========= ============= ========= ============= ========= =============
Exercisable at end of
year................... 1,154,663 $11.69-$17.69 1,203,097 $11.69-$16.31 1,102,064 $ 8.94-$16.50
========= ============= ========= ============= ========= =============
</TABLE>
- --------
* Expiring from 1997 through 2006.
The weighted average fair value of options granted during 1996 and 1995 was
$4.98 and $5.08, respectively. The fair value for the option grants was
estimated on the date of grant by using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in 1996 and
1995 respectively: a risk-free interest rate of 5.94% for each year, dividend
yields of 1.4% for each year, expected volatility of the market price of the
Company's common stock of 22.8% and 25.5%; and a weighted average expected
life of options granted of five years.
8. LEASES
Minimum aggregate rental commitments under noncancelable leases in effect at
December 31, 1996 (principally for production and administrative facilities
and equipment) amounted to $11.4 million consisting of annual payments of $3.2
million in 1997, $2.8 million in 1998, and decreasing amounts thereafter.
Rental expense was $6.3 million in 1996, $4.9 million in 1995 and $4.4 million
in 1994.
9. INCOME TAXES
The components of income from continuing operations before income taxes and
the details of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income from continuing operations before income taxes:
Domestic............................................. $72,005 $51,470 $42,995
Foreign.............................................. 6,655 17,787 14,768
------- ------- -------
Total............................................ $78,660 $69,257 $57,763
======= ======= =======
Provision for income taxes:
Current:
Federal............................................ $19,837 $12,764 $10,963
Foreign............................................ 2,640 7,378 5,860
State.............................................. 2,580 1,423 258
------- ------- -------
Total current.................................... 25,057 21,565 17,081
------- ------- -------
Deferred:
Federal............................................ 227 1,851 1,214
Foreign............................................ 1,495 1,410 2,209
State.............................................. 691 674 640
------- ------- -------
Total deferred................................... 2,413 3,935 4,063
------- ------- -------
Total provision.................................. $27,470 $25,500 $21,144
======= ======= =======
</TABLE>
31
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's deferred tax (asset) liability as of
December 31 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------
1996 1995
-------- --------
<S> <C> <C>
Current deferred tax asset:
Reserves not currently deductible........................ $ (9,171) $ (9,825)
Other.................................................... (1,915) (2,000)
-------- --------
Net current deferred tax asset......................... (11,086) (11,825)
======== ========
Long-term deferred tax (asset) liability:
Differences in basis of property and accelerated
depreciation............................................ 23,508 21,547
Purchased tax benefits................................... 10,110 13,268
Reserves not currently deductible........................ (11,528) (13,798)
Other.................................................... 13,009 10,910
-------- --------
Net long-term deferred tax liability................... 35,099 31,927
-------- --------
Net deferred tax liability............................. $ 24,013 $ 20,102
======== ========
</TABLE>
The effective rate of the provision for income taxes reconciles to the
statutory rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory rate................................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit......... 2.7 2.0 0.9
Foreign Sales Corporation and other tax credits............... (2.7) (2.7) (3.2)
Effect of foreign operations.................................. 0.9 3.9 4.7
Other......................................................... (1.0) (1.4) (0.8)
---- ---- ----
34.9% 36.8% 36.6%
==== ==== ====
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $33.1 million at December 31, 1996. Those earnings are
considered to be indefinitely reinvested and, accordingly, no provision for
U.S. deferred taxes has been made. Upon distribution of those earnings to the
U.S., the Company would be subject to U.S. income taxes (subject to a
reduction for foreign tax credits) and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized
deferred income tax liability is not practicable.
10. RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit retirement and pension
plans. Benefits for eligible United States salaried and hourly employees are
funded through trusts established in conjunction with the plans. Employees of
certain foreign operations participate in various local plans that in the
aggregate are not significant.
The Company also has nonqualified unfunded retirement plans for its
Directors and certain retired employees, as well as contractual arrangements
with a current and certain former executives that provide for supplemental
pension benefits in excess of those provided by the Company's primary pension
plan. Fifty percent of the projected benefit obligation of the supplemental
pension benefit arrangements with the executives has been funded by grants of
restricted shares of the Company's common stock. The remaining 50% is
unfunded. The Company is providing for those arrangements by charges to
earnings (included in net pension expense below) over the periods to age 65 of
the participants.
32
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's funding policy with respect to its qualified plans is to
contribute amounts determined annually on an actuarial basis that provide for
current and future benefits in accordance with the funding requirements of
federal law and regulations. Assets of funded benefit plans are invested in a
variety of equity and debt instruments and in pooled temporary funds, as well
as the Company's common stock, not material to total plan assets.
Net pension expense, excluding plan administrative expenses, consists of the
following components:
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost for benefits earned during the
period......................................... $ 6,320 $ 5,999 $ 6,676
Interest cost on projected benefit obligation... 16,292 15,446 14,742
Actual return on plan assets.................... (21,780) (23,665) (17,922)
Net amortization and deferrals.................. 3,460 6,894 215
-------- -------- --------
Net pension expense............................. $ 4,292 $ 4,674 $ 3,711
======== ======== ========
</TABLE>
In addition to pension expense shown in the table above, the Company also
incurs other pension-related expenses, including plan administrative expenses
prior to 1996. Such additional expense for the past three years was not
material in amount.
Net pension expense reflects an expected long-term rate of return on plan
assets of 9 1/4% for 1996, 1995, and 1994. The actual return has been adjusted
to defer gains and losses that differ from the expected return. The present
value of projected benefit obligations was determined by using an assumed
discount rate of 7 3/4% for 1996, 7 1/2% for 1995, and 7 3/4% for 1994. The
assumed rate of compensation increase used in determining the present value of
projected benefit obligations was 5% for 1996 and 1995, and 5 1/4% for 1994.
For pension plans with accumulated benefits in excess of assets at December
31, 1996, the balance sheet reflects an additional long-term pension liability
of $7.4 million ($11.5 million in 1995), a long-term intangible asset of $3.5
million ($4.8 million in 1995), and a charge in stockholders' equity (net of
deferred taxes) of $2.6 million in 1996, and $4.4 million in 1995 and 1994.
The charge in stockholders' equity represents the excess of the additional
long-term liability over unrecognized prior service cost. No balance sheet
recognition is given to pension plans with assets in excess of accumulated
benefits.
The following table sets forth the funded status of the plans:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation.... $138,083 $ 66,157 $115,129 $ 84,780
======== ======== ======== ========
Accumulated benefit
obligation.................. $143,946 $ 71,987 $118,348 $ 91,750
======== ======== ======== ========
Projected benefit
obligation.................. $156,626 $ 72,068 $130,038 $ 93,617
Plan assets at fair value.... 164,038 61,870 132,370 75,520
-------- -------- -------- --------
Plan assets in excess (less
than) projected benefit
obligation.................. 7,412 (10,198) 2,332 (18,097)
Unrecognized prior service
cost........................ 1,302 3,963 1,479 4,145
Unrecognized net loss........ 5,091 2,563 6,016 8,876
Unrecognized net transition
(asset) obligation, net of
amortization................ (3,641) 574 (4,207) 621
-------- -------- -------- --------
Prepaid (accrued) pension
expense..................... $ 10,164 $ (3,098) $ 5,620 $ (4,455)
======== ======== ======== ========
</TABLE>
33
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The company provides limited postretirement benefits other than pensions for
certain retirees and a small number of employees. Benefits under these
arrangements are not significant. The Company also provides limited
postemployment benefits for former or inactive employees after employment but
before retirement. Those benefits, which are not significant in amount, have
always been accounted for on the accrual basis, thereby meeting the current
accounting requirement for postemployment benefits.
11. FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Such instruments are
generally used to manage well-defined interest rate risks and to hedge firm
commitments related to certain export sales denominated in a foreign currency.
Interest rate swap and cap agreements are used to reduce the potential
impact of increases in interest rates on the Company's floating-rate revolving
credit loans. Accordingly, the Company enters into those agreements to
effectively convert floating-rate loans to fixed-rate loans and to cap certain
interest rates that are indexed to LIBOR rates to reduce the Company's risk of
incurring higher interest costs due to rising interest rates. At December 31,
1996, the Company was party to one interest rate swap agreement with a
notional amount of $19.4 million, which decreases by $2.2 million semiannually
through the May 1997 termination date. The interest rate cap agreement
entitles the Company to receive amounts from counterparties on a quarterly
basis if specified market interest rates rise above fixed cap rates. The fair
value of both agreements at December 31, 1996 and 1995 was not significant.
Cross currency and interest rate agreements are in effect to hedge a portion
of the Company's net investment in two of its smaller foreign subsidiaries,
whereby the Company agreed to swap certain European currencies for an
equivalent amount of U.S. dollars totaling $7.1 million. The agreements
provide for the Company to make floating interest payments while receiving
interest at fixed and floating rates, and capping a portion of floating rate
payments. The swap agreements will terminate with settlement of the contracts
in 1997. At December 31, 1996 and 1995, the fair value of the swaps was not
significant.
Forward currency contracts are entered into to hedge certain firm export
sales commitments denominated in deutsche marks, and in 1996, certain firm
purchase commitments denominated in Japanese yen. The purpose of such hedging
activities is to protect the Company from the risk that the eventual net cash
dollar inflows and outflows resulting from the sale of products to foreign
customers and from the purchase of parts and materials from foreign suppliers
respectively, will be adversely affected by changes in exchange rates. At
December 31, 1996 and 1995, the notional values of the contracts were $1.1
million and $6.4 million, respectively. The terms of the currency contracts
are dependent on the firm commitment and generally do not exceed one year.
Deferred gains and losses on the contracts at December 31, 1996 and 1995 were
not significant and are recognized in operations as the related sales and
purchases occur.
The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31. Cash, cash equivalents,
and marketable securities are recorded at fair value at December 31, 1996 and
1995 in the accompanying balance sheet.
<TABLE>
<CAPTION>
ASSET (LIABILITY) (IN THOUSANDS)
------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fixed income and equity
investments...................... 33,933 33,933 30,106 30,106
Short-term borrowings............. (31,837) (31,837) (56,143) (56,143)
Long-term debt (Including current
portion)......................... (150,394) (160,000) (150,661) (167,000)
</TABLE>
34
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair values of fixed income and equity investments are based on quoted
market prices. The fair value of short-term borrowings is based on the
carrying value at year end. The fair value of the Company's long-term debt,
which consists primarily of publicly traded notes, is based on the quoted
market price for such notes and borrowing rates currently available to the
Company for loans with similar terms and maturities. The fair value of forward
currency contracts, which are not reflected in the financial statements, is
based on quoted market prices for comparable contracts, and is not material.
12. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION
Included in other income is interest and other investment income of $4.7
million, $2.4 million, and $5.0 million for 1996, 1995, and 1994,
respectively. Income taxes paid in 1996, 1995, and 1994 were $22.9 million,
$30.3 million, and $13.6 million, respectively. Cash paid for interest for
each of the three years approximated interest expense.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company classifies its operations into three business segments:
Electromechanical, Precision Instruments, and Industrial Materials. The
Electromechanical Group produces motor blower systems for manufacturers of
floor care appliances and produces fractional horsepower motors and motor
blowers for computer, business machine, medical equipment, and high-efficiency
heating equipment producers. Sales of fractional horsepower electric motors
and blowers represented 43.2% in 1996, 44.4% in 1995, and 43.9% in 1994 of the
Company's consolidated net sales.
The Precision Instruments Group produces aircraft cockpit instruments and
displays, in addition to pressure, temperature, flow, and liquid level sensors
for aircraft and jet engine manufacturers and for airlines, as well as
airborne electronics systems that monitor and record flight and engine data.
The Group also produces instruments and complete instrument panels for heavy
truck manufacturers and heavy construction vehicles; process monitoring and
display systems; combustion gas analysis; moisture and emissions monitoring
systems; force and speed measuring instruments; air and noise monitors;
pressure and temperature calibrators; and pressure-indicating and digital
manometers.
The Industrial Materials Group produces high-temperature-resistant materials
and textiles; corrosion-resistant heat exchangers; tanks and piping for
process systems; drinking water filter and treatment systems; industrial and
commercial filters for other liquids; replacement filter cartridges; liquid
bag filters and multiple cartridge filter housings; high-purity metals and
alloys in powder; strip and wire form for high-performance aircraft,
automotive and electronics requirements; and thermoplastic compounds and
concentrates for automotive, appliance, and telecommunication applications.
35
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Business Segment Financial Information
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET SALES(/1/)
Electromechanical.............................. $375,633 $372,038 $340,358
Precision Instruments.......................... 308,737 301,440 280,638
Industrial Materials........................... 184,291 164,012 153,742
-------- -------- --------
Total Consolidated........................... $868,661 $837,490 $774,738
======== ======== ========
OPERATING INCOME AND INCOME BEFORE INCOME TAXES:
Operating income:
Electromechanical.............................. $ 44,238 $ 48,858 $ 46,203
Precision Instruments.......................... 37,253 34,803 29,189
Industrial Materials........................... 34,874 27,741 23,251
-------- -------- --------
Total segments operating income(/2/)......... 116,365 111,402 98,643
Corporate administrative and other expenses.... (21,307) (22,104) (23,351)
-------- -------- --------
Consolidated operating income................... 95,058 89,298 75,292
Interest and other expenses, net................ (16,398) (20,041) (17,529)
-------- -------- --------
Consolidated income from continuing operations
before income taxes............................ $ 78,660 $ 69,257 $ 57,763
======== ======== ========
IDENTIFIABLE ASSETS
Electromechanical.............................. $217,793 $196,805 $190,339
Precision Instruments.......................... 166,286 180,837 142,403
Industrial Materials........................... 83,327 77,222 75,509
-------- -------- --------
Total segments............................... 467,406 454,864 408,251
Corporate and discontinued operations.......... 70,509 71,881 85,936
-------- -------- --------
Total Consolidated........................... $537,915 $526,745 $494,187
======== ======== ========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT(/3/)
Electromechanical.............................. $ 27,881 $ 19,891 $ 11,922
Precision Instruments.......................... 7,293 10,417 6,633
Industrial Materials........................... 6,303 5,567 4,073
-------- -------- --------
Total segments............................... 41,477 35,875 22,628
Corporate...................................... 294 583 170
-------- -------- --------
Total Consolidated........................... $ 41,771 $ 36,458 $ 22,798
======== ======== ========
DEPRECIATION AND AMORTIZATION
Electromechanical.............................. $ 14,967 $ 13,454 $ 12,430
Precision Instruments.......................... 14,270 15,915 15,253
Industrial Materials........................... 5,411 4,895 7,636
-------- -------- --------
Total segments............................... 34,648 34,264 35,319
Corporate...................................... 258 197 150
-------- -------- --------
Total Consolidated........................... $ 34,906 $ 34,461 $ 35,469
======== ======== ========
</TABLE>
- --------
(1) After elimination of intra and intersegment sales, which are not
significant in amount. Such sales are generally based on prevailing market
prices.
(2) Segment operating income represents sales less all direct costs and
expenses (including certain administrative and other expenses) applicable
to each segment, but does not include an allocation of interest expense.
(3) Includes $.5 million in 1996 and $4.7 million in 1995 from acquired
businesses.
36
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Geographic Areas
<TABLE>
<CAPTION>
(IN THOUSANDS)
-------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET SALES (based on destination):
United States.............................. $575,099 $556,236 $537,048
International (including United States
exports shown below):
Europe................................... 189,043 201,179 171,088
Asia..................................... 48,582 35,160 25,143
Canada................................... 33,976 30,273 25,031
Other.................................... 21,961 14,642 16,428
-------- -------- --------
Total International........................ 293,562 281,254 237,690
-------- -------- --------
Total Consolidated....................... $868,661 $837,490 $774,738
======== ======== ========
INCOME (LOSS) BEFORE INCOME TAXES:
United States.............................. $107,454 $ 93,047 $ 82,504
International:
Europe................................... 10,539 18,514 16,290
Asia, Canada, and other.................. (1,628)(a) (159) (151)
Corporate administrative and other
expenses.................................. (21,307) (22,104) (23,351)
Interest and other expenses, net........... (16,398) (20,041) (17,529)
-------- -------- --------
Total Consolidated....................... $ 78,660 $ 69,257 $ 57,763
======== ======== ========
IDENTIFIABLE ASSETS
United States.............................. $333,449 $339,594 $315,242
International:
Europe................................... 120,584 107,314 92,907
Asia, Canada, and other (principally
Asia)................................... 13,373 7,956 102
Corporate.................................. 70,509 71,881 85,936
-------- -------- --------
Total Consolidated....................... $537,915 $526,745 $494,187
======== ======== ========
UNITED STATES EXPORT SALES (reported in
international sales above)
Europe..................................... $ 57,966 $ 59,928 $ 50,165
Asia....................................... 44,326 35,160 25,140
Canada..................................... 33,974 30,273 25,031
Other...................................... 14,707 13,729 15,869
-------- -------- --------
Total Consolidated....................... $150,973 $139,090 $116,205
======== ======== ========
</TABLE>
- --------
(a) Includes start-up costs for operations in Mexico.
37
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1996
Net sales............. $227,633 $223,998 $212,763 $204,267 $868,661
Operating income...... $ 23,474 $ 24,144 $ 23,692 $ 23,748 $ 95,058
Income from continuing
operations........... $ 12,216 $ 12,967 $ 12,956 $ 13,051 $ 51,190
Net income............ $ 12,216 $ 12,967 $ 12,956 $ 13,051 $ 51,190
Earnings per share:
Income from
continuing
operations.......... $ .37 $ .40 $ .40 $ .40 $ 1.57
Net income........... $ .37 $ .40 $ .40 $ .40 $ 1.57
Dividends paid per
share................ $ .06 $ .06 $ .06 $ .06 $ .24
Common stock trading
range:(a)
High................. 18 7/8 22 1/4 21 5/8 22 1/4 22 1/4
Low.................. 16 17 3/8 18 1/4 17 3/4 16
1995
Net sales............. $211,527 $219,111 $204,922 $201,930 $837,490
Operating income...... $ 21,506 $ 24,470 $ 21,476 $ 21,846 $ 89,298
Income from continuing
operations........... $ 10,149 $ 11,929 $ 10,830 $ 10,849 $ 43,757
Net income............ $ 10,662 $ 22,615 $ 8,154(b) $ 10,849 $ 52,280(c)
Earnings per share:(d)
Income from
continuing
operations.......... $ .30 $ .36 $ .33 $ .33 $ 1.31
Net income........... $ .31 $ .68 $ .25(b) $ .33 $ 1.56(c)
Dividends paid per
share................ $ .06 $ .06 $ .06 $ .06 $ .24
Common stock trading
range:(a)
High................. 18 5/8 18 1/8 19 1/2 19 1/4 19 1/2
Low.................. 15 3/4 16 1/4 16 1/8 16 5/8 15 3/4
</TABLE>
- --------
(a) Trading ranges are based on the New York Stock Exchange composite tape.
(b) Includes an extraordinary loss of $2.7 million ($.08 per share) associated
with debt agreements.
(c) Includes income from discontinued operations in the first and second
quarters of 1995. The second quarter of 1995 also includes a gain on the
sale of discontinued operations of $10.4 million ($.32 per share).
(d) The sum of quarterly earnings per share will not equal total year earnings
per share due to the effect of the Company's purchasing shares of its
outstanding common stock.
15. SUBSEQUENT EVENT
On February 5, 1997, the Company announced that it had entered into an
agreement and Plan of Merger ("the Merger") whereby its water filtration
business would be merged with and into Culligan Water Technologies, Inc.
("Culligan") for a total purchase price to Culligan of approximately $155
million. The Company's water filtration business consists of the Plymouth
Products Division, a U.S. operation, and three foreign subsidiaries: AMETEK
Filters Ltd., a U.K. subsidiary; APIC, S.A., a French subsidiary; and AFIMO,
S.A.M., a Monaco subsidiary. For 1996, the water filtration business had
approximately $70 million in sales, $12 million in operating income, and total
assets of $40 million.
The purchase price less assumed debt is payable in Culligan common stock
valued at $37.50 per share. Following the Merger, Culligan will assume between
$25 million and $75 million of the Company's debt. Based
38
<PAGE>
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
on the expected assumption of $25 million of the Company's debt, Culligan will
distribute 3,466,667 shares of its common stock to AMETEK's shareholders, or
.11 shares of Culligan stock for each outstanding share of AMETEK common stock
(based on shares outstanding as of December 31, 1996).
The Merger is subject to approval by the shareholders and lenders of the
Company and to certain other conditions, including the receipt of an Internal
Revenue Service ruling that the Merger and stock distribution qualify as a
tax-free reorganization. It is presently expected that it will take from four
to six months from the aforementioned date to complete the transaction.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
39
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
Directors are elected at the annual meeting of stockholders to hold office
until the next annual meeting of stockholders and until their respective
successors have been duly elected and qualified. Information on directors of
the Company is shown below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
OR POSITION, CONTINUOUSLY
NAME OF DIRECTOR AGE OTHER DIRECTORSHIPS(/1/) SINCE
---------------- --- ------------------------ ------------
<S> <C> <C> <C>
Walter E. Blankley++.... 61 Chairman of the Board and Chief
Executive Officer of the Company since
April 1993(/2/) 1990
Lewis G. Cole*.......... 66 Senior Partner, Stroock & Stroock &
Lavan LLP, Attorneys 1987
Helmut N.
Friedlaender.*......... 83 Private investor 1955
Sheldon S. Gordon*+++... 61 Chairman of Union Bancaire Privee
International, Inc. since May 1996. Mr.
Gordon was a General Partner of The
Blackstone Group, L.P. from April 1991
to May 1995 and a Limited Partner until
May 1996. Mr. Gordon is also a director
of Anangel-American Shipholdings
Limited, and Energy Ventures, Inc. 1989
Charles D. Klein+.++.... 58 A Managing Director of American
Securities, L.P. and an executive
officer of the corporate general
partner of several affiliated entities 1980
James R. Malone+........ 54 Chairman of the Board of HMI Industries,
Inc. since December 1996; Chairman of
the Board of Anchor Resolution Corp.
(formerly Anchor Glass Container Corp.)
from January 1996 to February, 1997;
and Chairman of the Board of Intek
Capital Corporation since September
1990(/3/) 1994
David P. Steinmann*..... 55 A Managing Director of American
Securities, L.P. and an executive
officer of the corporate general
partner of several affiliated entities 1993
Elizabeth Rosenwald
Varet+++............... 53 A Managing Director of American
Securities, L.P. and chairman of the
corporate general partner of several
affiliated entities 1987
</TABLE>
- --------
* Member of the Audit Committee.
+ Member of the Compensation Committee.
. Member of the Nominating Committee.
++ Member of the Executive Committee.
(1) Except as noted, each nominee has held his or her present occupation for a
period in excess of five years.
(2) Mr. Blankley has been Chief Executive Officer since April 1990. From April
1990 to April 1993, Mr. Blankley also served as President of the Company.
Mr. Blankley is also a Director of AMCAST Industrial Corporation and CDI
Corporation.
(3) Mr. Malone was President and Chief Executive Officer of Anchor Glass
Container Corporation from May 1993 to January 1996 and was Chairman,
President and Chief Executive Officer of Grimes Aerospace Co. from
September 1990 to May 1993. Mr. Malone is also a director of Amsouth Bank
N.A.
40
<PAGE>
Executive Officers of the Registrant
Officers are appointed by the Board of Directors to serve for the ensuing
year and until their successors have been elected and qualified. Information
on executive officers of the Company is shown below:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Walter E. Blankley................. 61 Chairman of the Board and Chief
Executive Officer
Frank S. Hermance.................. 48 President and Chief Operating Officer
John J. Molinelli.................. 50 Senior Vice President--Chief Financial
Officer
Albert J. Neupaver................. 46 President of the Electromechanical and
Industrial Materials Groups
Robert W. Chlebek.................. 53 President of the Precision Instruments
Group
George E. Marsinek................. 59 Senior Vice President--Electromechanical
Group
Philip A. Goodrich................. 39 Senior Vice President--Corporate
Development
Robert R. Mandos, Jr............... 38 Comptroller
Deirdre D. Saunders................ 49 Treasurer and Assistant Secretary
Robert W. Yannarell................ 63 Secretary
</TABLE>
WALTER E. BLANKLEY'S employment history with the Company and other
directorships currently held are included under the section "Directors and
Executive Officers of the Registrant."
FRANK S. HERMANCE was elected President and Chief Operating Officer on
November 21, 1996. He previously had been Executive Vice President--Chief
Operating Officer since January 1, 1996 and most recently he served as
President of the Precision Instruments Group, a position he was elected to on
September 23, 1994. He joined the Company as a Group Vice President in
November 1990.
JOHN J. MOLINELLI was named Senior Vice President--Chief Financial Officer
on April 29, 1994. Previously he had served as Vice President and Comptroller
of AMETEK since April 1993. He was elected Comptroller in 1991.
ALBERT J. NEUPAVER was elected President of the Electromechanical Group on
January 10, 1997, and was elected President of the Industrial Materials Group
on September 23, 1994. Previously he had served as a Group Vice President
since May 1994 . He was elected Vice President of AMETEK in 1991 and was
General Manager of the Specialty Metal Products Division since 1989.
ROBERT W. CHLEBEK joined the Company as President of the Precision
Instruments Group on March 1, 1997. Prior to joining AMETEK, Mr. Chlebek had
been president of Phillips Components North America, a subsidiary of Phillips
Electronics, N.V., ("Phillips") since 1993. Previously, he held general
management positions with Phillips.
GEORGE E. MARSINEK became Senior Vice President--Electromechanical Group
effective January 10, 1997. For health reasons, he stepped aside from his
previous position as President of the Electromechanical Group which he had
held since September 23, 1994. He had been a Group Vice President since April
1990.
PHILIP A. GOODRICH joined the Company as Senior Vice President--Corporate
Development on August 28, 1996. Prior to joining AMETEK, Mr. Goodrich had been
Vice President of Corporate Development at General Signal Corporation for
seven years.
ROBERT R. MANDOS, JR. was elected Comptroller of the Company effective April
1, 1996. Mr. Mandos's more than 15 years of experience with the Company
includes various corporate financial positions and divisional controllership
assignments. Most recently he served as Director of Financial Information at
the corporate office and previously was Division Vice President--Finance for
the multiplant operations of the U. S. Gauge Division.
DEIRDRE D. SAUNDERS has served as Treasurer and Assistant Secretary since
April 1993. Ms. Saunders joined AMETEK in 1987 as Assistant Treasurer.
ROBERT W. YANNARELL has served as Secretary of the Company since April 1993.
Previously he had served as Treasurer and Assistant Secretary since 1987. Mr.
Yannarell will retire on April 30, 1997.
41
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information for the fiscal year ended
December 31 in each of 1996, 1995 and 1994 concerning compensation paid or
accrued for the Chairman of the Board and Chief Executive Officer and for the
four other most highly compensated executive officers of the Company serving
at December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)(/1/)
------------------ ---- ------- ------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter E. Blankley...... 1996 487,000 440,000 -- -- 80,000 2,736
Chairman of the Board 1995 472,000 400,000 -- -- 75,000 1,752
and Chief Executive Of-
ficer 1994 457,500 335,000 -- -- 125,000 1,656
Frank S. Hermance....... 1996 300,000 225,000 -- -- 100,000 1,776
President and 1995 228,000 152,000 -- -- 30,000 1,332
Chief Operating Offi-
cer................... 1994 220,000 125,000 -- -- 50,000 1,326
George E.
Marsinek(/2/).......... 1996 225,000 150,000 -- -- 30,000 3,096
Senior Vice President-- 1995 215,000 165,000 -- -- 30,000 1,620
Electromechanical Group 1994 205,500 150,000 -- -- 50,000 1,554
John J. Molinelli....... 1996 200,000 140,000 -- -- 30,000 1,872
Senior Vice President-- 1995 182,500 125,000 -- -- 25,000 1,356
Chief Financial Officer 1994 157,933 100,000 -- -- 40,000 1,350
Albert J.
Neupaver(/2/).......... 1996 197,500 140,000 -- -- 25,000 1,680
President of the
Electromechanical 1995 180,000 110,000 -- -- 25,000 1,302
and Industrial
Materials Groups 1994 170,000 75,000 -- -- 40,000 1,284
</TABLE>
- --------
(1) The amounts reported represent the Company's contribution ($1,200 each) to
The AMETEK Savings and Investment Plan for each of the individuals listed
above and the dollar value of premiums paid by the Company with respect to
term life insurance for the benefit of each of the named executive
officers.
(2) Refer to page 41 for present position with the Company effective January
10, 1997.
42
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table provides details regarding stock options granted to the
named executive officers in 1996. In addition, the table provides the
hypothetical gains or "option spreads" that would result for the respective
options based on assumed rates of annual compounded stock price appreciation
of 5% and 10% from the date the options were granted through their expiration
dates. No stock appreciation rights ("SARs") were granted to the named
executive officers in 1996.
STOCK OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(/2/)
----------------------------------------------------------------- ---------------------
PERCENTAGE OF TOTAL MARKET
NUMBER OF OPTIONS/SARS PRICE
SECURITIES UNDERLYING GRANTED TO AND
OPTION/SARS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#)(/1/) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
---- --------------------- ------------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Blankley...... 80,000 11.35 17.375 04/08/2006 874,164 2,215,302
Frank S. Hermance....... 100,000 14.18 17.375 04/08/2006 1,092,704 2,769,128
George E. Marsinek...... 30,000 4.25 17.375 04/08/2006 327,811 830,738
John J. Molinelli....... 30,000 4.25 17.375 04/08/2006 327,811 830,738
Albert J. Neupaver...... 25,000 3.55 17.375 04/08/2006 273,176 692,282
</TABLE>
- --------
(1) The options granted in 1996 to Messrs. Blankley, Hermance, Marsinek,
Molinelli, and Neupaver are exercisable after the first anniversary of the
date of the grant (April 8, 1996) during each of the four succeeding
twelve-month periods only to the extent of twenty-five percent of the
total number of shares optioned. In all cases, optioned shares that may
have been but were not purchased during any one twelve-month period may be
purchased during any one or more succeeding twelve-month periods up to the
expiration date of the option. Options generally become fully exercisable
in the event of the holder's death, retirement or termination of
employment in connection with a change in control.
(2) The amounts represent certain assumed rates of appreciation. Actual gains,
if any, on stock option exercises are dependent on future performance of
the Company's Common Stock. There can be no assurance that the rates of
appreciation reflected in this table will be achieved.
The following table illustrates stock option and SARs exercised by the named
executive officers during 1996 and the aggregate amounts realized by each such
officer. In addition, the table shows the aggregate number of unexercised
options and SARs that were exercisable and unexercisable as of December 31,
1996, and the values of "in-the-money" stock options and SARs on December 31,
1996, which represent the positive difference between the market price of the
Company's Common Stock and the exercise price of such options/SARs.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND OPTION/SAR VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Blankley...... 93,750 761,719 201,250 211,250 1,463,281 1,203,750
Frank S. Hermance....... 20,000 151,719 77,500 147,500 611,562 743,750
George E. Marsinek...... 0 0 57,500 77,500 417,187 428,750
John J. Molinelli....... 6,000 44,000 63,750 68,750 515,468 373,281
Albert J. Neupaver...... 12,000 102,000 53,250 63,750 413,656 350,781
</TABLE>
43
<PAGE>
DEFINED BENEFIT AND ACTUARIAL PLANS
The Employees' Retirement Plan of AMETEK, Inc. (the "Retirement Plan") is a
noncontributory defined benefit pension plan under which contributions are
actuarially determined. The following table sets forth the estimated annual
benefits, expressed as a single life annuity, payable upon retirement
(assuming normal retirement at age 65) under the Retirement Plan for
individuals with the indicated years of service and at the indicated
compensation levels (without taking into account statutory restrictions
incorporated in the Retirement Plan and described below):
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFITS BASED ON
YEARS OF SERVICE AT NORMAL RETIREMENT AGE (1)
AVERAGE -------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$150,000...................... 58,800 62,600 66,500 66,500 66,500
200,000...................... 79,200 84,300 89,400 89,400 89,400
250,000...................... 99,600 106,000 112,400 112,400 112,400
300,000...................... 120,000 127,700 135,300 135,300 135,300
350,000...................... 140,400 149,300 158,300 158,300 158,300
400,000...................... 160,800 171,000 181,200 181,200 181,200
450,000...................... 181,200 192,700 204,200 204,200 204,200
500,000...................... 201,600 214,400 227,100 227,100 227,100
550,000...................... 222,000 236,000 250,100 250,100 250,100
600,000...................... 242,400 257,700 273,000 273,000 273,000
650,000...................... 262,800 279,400 296,000 296,000 296,000
700,000...................... 283,200 301,100 318,900 318,900 318,900
</TABLE>
- --------
(1) Benefit amounts assume a participant reaches age 65 in 1997; for younger
participants, the benefit amounts are less than the amounts indicated
above.
The annual compensation taken into account for any plan year is generally
equal to the participant's salary and any bonus accrued during the plan year
as reported in the Summary Compensation Table. Compensation in excess of
certain amounts prescribed by the Secretary of the Treasury ($160,000 for
1997) cannot be taken into account under the Retirement Plan. The individuals
named in the Summary Compensation Table are subject to this limitation.
However, in accordance with a nonqualified supplemental pension arrangement,
the Company has agreed to provide to Mr. Blankley a benefit in an amount equal
to the excess of the annual pension benefit that would be payable to him under
the terms of the Retirement Plan in the absence of statutory restrictions over
the amount actually payable under the Retirement Plan. The benefit is limited
to the projected excess payable at age 65 determined as of May 21, 1991.
Pursuant to an agreement entered into with Mr. Blankley, a restricted stock
award has been granted under the 1991 Stock Incentive Plan of AMETEK, Inc. for
a number of shares of the Company's Common Stock having a fair market value on
the date of grant equal to 50% of the present value of the projected benefit
under the supplemental pension arrangement; the remaining portion of the
benefit will be payable in cash, directly out of the Company's general assets.
At December 31, 1996, the executives named in the Summary Compensation Table
had the following years of credited service under the Retirement Plan: Mr.
Blankley--37; Mr. Hermance--6; Mr. Marsinek--32; Mr. Molinelli--28, and
Mr. Neupaver--20.
In addition, for retirements occurring in 1997, the maximum annual pension
benefit payable at normal retirement age is restricted, by law, to the greater
of $125,000 or the amount of such benefit determined under the Retirement Plan
and prior existing law as of December 31, 1982. The $125,000 limit is adjusted
annually by the Secretary of the Treasury to reflect increases in the cost of
living.
Compensation of Directors
The annual rate of compensation for services as a nonemployee director of
the Company was revised effective January 1, 1996, to $35,000 per year plus
$2,500 for each meeting attended. Mr. Blankley, the only employee director of
the Company in 1996, did not receive any compensation for his services as a
director.
44
<PAGE>
Pursuant to a Retirement Plan for Directors (the "Directors Plan"), the
Company has agreed to provide retirement benefits and death benefits to those
directors who have not accrued benefits under the Employees' Retirement Plan
of AMETEK, Inc. and who have completed at least three years of service as a
director or officer of the Company. Effective January 1, 1997, the Directors
Plan was amended to limit participation to those Directors who became members
of the Board of Directors prior to January 1, 1997. The retirement benefit
payable under the Directors Plan is an annual amount equal to 100% of the
highest annual rate of compensation for directors during the director's period
of service on the Board of Directors; however, the benefit is reduced
proportionately if the participant has less than five years of service. The
Company shall satisfy its obligations arising under the Directors Plan
exclusively from its general assets. All of the current directors other than
Mr. Blankley are participants in the Directors Plan and each of these
participants, other than Messrs. Malone and Steinmann, has accrued an annual
retirement benefit of $50,000. Mr. Steinmann has accrued an annual retirement
benefit of $30,000, and Mr. Malone has not yet accrued any benefit under the
Directors Plan.
Pursuant to a Death Benefit Program for Directors (the "Directors Program"),
the Company has entered into individual agreements with certain directors. The
agreements require the Company to pay death benefits to directors' designated
beneficiaries and to pay benefits to the directors under certain
circumstances. The Directors Program currently provides for a benefit, payable
for ten years, in an annual amount equal to 100% of the highest annual rate of
compensation during the director's period of service on the Board of
Directors, commencing at death or the later of age 70 or retirement; however,
with respect to directors who became participants after January 1, 1989, the
directors must complete at least five years of service as a director before
they become eligible to receive a benefit upon the later of age 70 or
retirement. Active directors also have a group term life insurance benefit of
$50,000. To fund benefits under the Directors Program, the Company has
purchased individual life insurance policies on the lives of certain of the
covered directors. The Company retains the right to terminate any or all of
the Directors Program agreements under certain circumstances. All of the
current directors other than Mr. Blankley are participants in the Directors
Program.
Employment Contracts and Termination, Severance and Change-In-Control
Arrangements
Pursuant to an agreement with the Company, Mr. Blankley will be entitled to
a severance benefit in the event that his employment is terminated either by
the Company without cause or by Mr. Blankley for good reason within 18 months
after a Change-In-Control (as defined below), in an amount equal to 2.99 times
his average taxable compensation (as defined under Section 280G of the
Internal Revenue Code of 1986, as amended ("the Code")) from the Company
during the five preceding taxable years. The benefit is subject to reduction,
if necessary, to prevent any "excess parachute payment" within the meaning of
Section 280G of the Code. For purposes of the agreement, a "Change-In-Control"
means the acquisition of 30% or more of the voting stock of the Company by any
party other than the Company (or its affiliates), or a change in the members
of the Board of Directors, within any two-year period, such that the members
at the beginning of the period cease to constitute a majority (unless the
change is approved by two-thirds of those who are members at the beginning of
the period). Assuming that a Change-In-Control, followed by a termination of
employment, occurred on January 31, 1997, $2,629,030 would be payable to Mr.
Blankley pursuant to the agreement.
Pursuant to a Supplemental Senior Executive Death Benefit Program (the
"Program"), the Company has entered into individual agreements with certain
executives. The agreements require the Company to pay death benefits to their
designated beneficiaries and to pay benefits to the executives under certain
circumstances. If a covered executive dies before retirement or before age 65
while on disability retirement, the executive's beneficiary will receive
monthly payments from the date of the executive's death until the date he or
she would have attained age 80, but not less than for 15 years (the 15-year
minimum guarantee does not apply to executives whose inclusion in the Program
is approved after December 31, 1986). The specified dollar amount of the
payments is determined on the basis of the executive's salary and age. In
addition, the standard death benefit payable for participants in the Program
from the Company's group term life insurance policy was revised effective
January 1, 1996, to two times the executive's annual salary, limited to
$200,000. If a covered executive retires, or reaches age 65 while on
disability retirement, the Program provides for an annual benefit of one-tenth
of an amount equal to the lesser of (a) twice the executive's average annual
base salary for the last five full years
45
<PAGE>
of service, rounded off to the next highest multiple of $50,000 or (b) a
maximum amount specified in the agreement. The highest maximum amount
specified in the existing agreements is $1,000,000. The benefit is payable
monthly over a period of 10 years to the executive or the executive's
beneficiary. The payments will commence for retirees at age 70 or death,
whichever is earlier. However, if the executive retires after age 70, the
payments commence on retirement.
To fund benefits under the Program, the Company has purchased individual
life insurance policies on the lives of certain of the covered executives. The
Company retains the right to terminate all of the Program agreements under
certain circumstances. Messrs. Blankley, Hermance, Marsinek, Molinelli, and
Neupaver are participants in the Program.
Compensation Committee Interlocks and Insider Participation
Sheldon S. Gordon, Charles D. Klein, James R. Malone and Elizabeth R. Varet
constitute the Compensation Committee. Mr. Klein and Ms. Varet are managing
directors of American Securities, L.P., an investment banking firm.
The law firm of Stroock & Stroock & Lavan LLP, of which Mr. Cole is a
member, rendered during 1996 and continues to render services as General
Counsel to the Company and its subsidiaries. For 1996, Stroock & Stroock &
Lavan LLP received $438,000 for such services. The investment banking firm of
American Securities, L.P., and affiliates of American Securities, L.P.,
including Oak Hall Capital Advisors, L.P., rendered during 1996 and continue
to render financial advisory, investment management and other services to the
Company. For 1996, American Securities, L.P. and its affiliates received
$907,088 in the aggregate for such services. American Securities, L.P. is
owned indirectly, through family trusts of which Ms. Varet and Mr. Cole are
cotrustees, by Ms. Varet and members of her family.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Ownership
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned at January 31, 1997, by each director, by each of
the executive officers included in the Summary Compensation Table, and by all
directors and executive officers of the Company as a group, and the percentage
of the outstanding shares of Common Stock so owned by each such person and
such group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(/1/)
(NUMBER OF SHARES)
---------------------------------------------
SOLE VOTING SHARED
AND VOTING OR
INVESTMENT INVESTMENT RIGHT TO PERCENTAGE
NAME POWER(/2/) POWER(/3/) ACQUIRE(/4/) TOTAL OF CLASS
---- ----------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Walter E. Blankley....... 84,952 48,567 178,750 312,269 *
Lewis G.
Cole/(5)//(11)/......... 10,000 514,588 -- 524,588 1.6%
Helmut N.
Friedlaender/(6)/....... 48,500 30,400 -- 78,900 *
Sheldon S. Gordon........ 30,000 -- -- 30,000 *
Frank S. Hermance........ 20,000 -- 77,500 97,500 *
Charles D.
Klein/(7)//(11)/........ 50,000 6,600 -- 56,600 *
James R. Malone/(8)/..... 20,000 -- -- 20,000 *
George E. Marsinek....... 5,218 -- 57,500 62,718 *
John J. Molinelli........ 22,892 -- 63,750 86,642 *
Albert J. Neupaver....... 9,840 -- 53,250 63,090 *
David P.
Steinmann/(9)//(11)/..... 34,700 94,264 -- 128,964 *
Elizabeth Rosenwald
Varet/(10)//(11)/....... 65,800 1,071,808 -- 1,137,608 3.5%
All directors and
executive officers as a
group, consisting of 16
persons, including
individuals named
above/(11)/............. 425,314 1,162,319 463,575 2,051,208 6.3%
</TABLE>
46
<PAGE>
- --------
* Represents less than 1% of the outstanding shares of Common Stock of the
Company.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the vote) and/or sole
or shared investment power (including the power to dispose or direct the
disposition) with respect to the security through any contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, beneficial ownership disclosed consists of sole voting and
investment power.
(2) Reported in this column are shares (including certain restricted shares)
with respect to which directors and officers have sole voting and
investment power.
(3) Reported in this column are other shares with respect to which directors
and officers have or share voting and/or investment power, including
shares directly owned by certain relatives with whom they are presumed to
share voting and/or investment power; however, beneficial ownership may be
disclaimed. Although shared beneficial ownership is included in each of
the individual totals, these shares are reported only once in the total
for all directors and executive officers as a group.
(4) Reported in this column are shares that executive officers have a present
right to acquire or are acquirable within 60 days of January 31, 1997,
through the exercise of stock options awarded under AMETEK, Inc. Stock
Option Plans.
(5) Mr. Cole has shared voting and investment power with respect to 514,588
shares, as to 4,000 shares of which such power is shared with Messrs.
Klein and Steinmann and others, and as to 510,588 shares of which such
power is shared with Ms. Varet and others.
(6) Mr. Friedlaender has shared voting and investment power with respect to
30,400 shares. Of these, 15,200 shares are owned by a trust of which Mr.
Friedlaender is a trustee; Mr. Friedlaender disclaims beneficial ownership
of such shares.
(7) Mr. Klein has shared voting and investment power with respect to 6,600
shares, as to 4,000 shares of which such power is shared with Messrs. Cole
and Steinmann and others and as to 2,600 shares of which such power is
shared with Mr. Steinmann and others.
(8) Includes 6,667 shares held pursuant to a restricted stock award under the
1991 Stock Incentive Plan.
(9) Mr. Steinmann has shared voting and investment power with respect to
94,264 shares, as to 82,720 shares of which such power is shared with Ms.
Varet and others, as to 2,600 shares of which such power is shared with
Mr. Klein and others, as to 4,944 shares of which such power is shared
with others and as to 4,000 shares of which such power is shared with
Messrs. Cole, and Klein and others.
(10) Includes 10,000 shares owned by a trust of which Ms. Varet's husband is a
beneficiary and as to which Ms. Varet disclaims any beneficial ownership.
Ms. Varet has shared voting and investment power with respect to
1,061,808 shares, as to 510,588 shares of which such power is shared with
Mr. Cole and others as to 468,500 shares of which such power is shared
with others, and as to 82,720 shares of which such power is shared with
Mr. Steinmann and others.
(11) Mr. Steinmann is an executive officer and director and Mr. Klein is a
portfolio manager of Oak Hall Capital Advisors, L.P., an investment
manager of (i) the AMETEK, Inc. Employees' Master Retirement Trust, which
holds among its assets 571,400 shares, and (ii) AMETEK Foundation, Inc.,
which holds among its assets 55,800 shares; none of these shares has been
included in the above table. Oak Hall Capital Advisors, L.P. is an
affiliate of American Securities, L.P.
The following table sets forth the only entities known to the Company to be
beneficial owners of more than five percent of the outstanding Common Stock of
the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- ----------
<S> <C> <C> <C>
FMR Corp. Sole dispositive, but no voting
82 Devonshire Street power for(/1/)................... 3,982,100 shares 12.4%
Boston, MA 02109-3614
Sole voting and dispositive
power for........................ 76,200
-----------
TOTAL(/1/)...................... 4,058,300 shares
===========
Gabelli Asset Management Sole voting and dispositive
Company power for........................ 2,500 shares
International Advisory
Services Ltd.
c/o Appleby, Spurling &
Kempe
Cedar House, 41 Cedar
Avenue
Hamilton HM12, Bermuda
Gabelli Funds, Inc. Sole voting and dispositive
One Corporate Center power for........................ 774,700 shares
Rye, NY 10580-1434
GAMCO Investors, Inc. Sole voting power for 3,495,900
One Corporate Center shares but sole dispositive power
Rye, NY 10580-1434 for.............................. 3,790,900 shares
---------
TOTAL(/2/)..................... 4,568,100 shares 14.0%
=========
</TABLE>
- --------
(1) Based on Schedule 13(G) filed on February 14, 1997.
(2) Based on Schedule 13(D) filed on January 16, 1996, Mr. Mario J. Gabelli is
deemed to have beneficial ownership of these shares.
47
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the disclosure provided under Compensation Committee
Interlocks and Insider Participation on page 46.
Indebtedness of Management
Subsequent to December 31, 1996, an interest-free $500,000 loan was made to
Philip A. Goodrich, Senior Vice President--Corporate Development as an equity
advance to purchase a home near the Corporate Office in Paoli, Pennsylvania as
part of his relocation arrangements. This loan is currently outstanding and is
similar to others granted to relocated employees under the Company's
Relocation Policy. Such a loan is usually settled immediately upon sale of a
relocated employee's former residence.
48
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits filed.
1. and 2.
Financial statements and schedules are shown in the index and other
information on page 19 of this report.
3. Exhibits
Exhibits are shown in the index on page 51 of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
49
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
AMETEK, INC.
Dated: March 7, 1997
By /s/ Walter E. Blankley
----------------------------------
WALTER E. BLANKLEY, CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Walter E. Blankley Chairman of the March 7, 1997
- -------------------------------------
WALTER E. BLANKLEY Board and Chief
Executive Officer
(Principal
Executive Officer)
/s/ Frank S. Hermance President and Chief March 7, 1997
- -------------------------------------
FRANK S. HERMANCE Operating Officer
/s/ John J. Molinelli Senior Vice March 7, 1997
- -------------------------------------
JOHN J. MOLINELLI President-- Chief
Financial Officer
(Principal
Financial Officer)
/s/ Robert R. Mandos, Jr. Comptroller (Principal March 7, 1997
- -------------------------------------
ROBERT R. MANDOS, JR. Accounting Officer)
/s/ Lewis G. Cole Director March 7, 1997
- -------------------------------------
LEWIS G. COLE
/s/ Helmut N. Friedlaender Director March 7, 1997
- -------------------------------------
HELMUT N. FRIEDLAENDER
/s/ Sheldon S. Gordon Director March 7, 1997
- -------------------------------------
SHELDON S. GORDON
/s/ Charles D. Klein Director March 7, 1997
- -------------------------------------
CHARLES D. KLEIN
/s/ James R. Malone Director March 7, 1997
- -------------------------------------
JAMES R. MALONE
/s/ David P. Steinmann Director March 7, 1997
- -------------------------------------
DAVID P. STEINMANN
/s/ Elizabeth R. Varet Director March 7, 1997
- -------------------------------------
ELIZABETH R. VARET
50
<PAGE>
INDEX TO EXHIBITS
ITEM 14(A) 3)
<TABLE>
<CAPTION>
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
<C> <C> <S> <C>
3.1 Composite Certificate of Incorporation of Exhibit 3 to June 30,
AMETEK, Inc., 1994 10-Q, SEC File No.
as amended to and including April 26, 1994. 1-168.
3.2 By-laws of the Company. Exhibit (3)b) to 1987
10-K, SEC File No. 1-
168.
4.1 Rights Agreement, dated July 26, 1989, between Exhibit 4 to Form 8-K
the dated July 28, 1989, SEC
Company and the Chase Manhattan Bank, N.A. File No. 1-168.
(the "Rights Agreement").
4.2 Amendment No. 1 to the Rights Agreement. Exhibit 4.5 to 1992 10-
K, SEC File No. 1-168.
4.3 Certificate of Designation, Preferences and Exhibit (4b) to June 30,
Rights of 1989 10-Q, SEC File No.
Series A Junior Participating Preferred Stock. 1-168.
4.4 Indenture dated as of March 15, 1994 between the Exhibit 4 to March 31,
Company and Corestates Bank N.A., as Trustee, 1994 10-Q, SEC File No.
relating to the Company's 9 3/4% Senior Notes 1-168.
due 2004.
4.5 Credit Agreement among the Company, Various Exhibit 10.36 to 1993
Lending 10-K.
Institutions, Bank of Montreal, Corestates Bank,
N.A.,
and PNC Bank, National Association, as Co-
Agents,
and the Chase Manhattan Bank, N.A., as
Administrative
Agent (the "Credit Agreement").
4.6 First Amendment to the Credit Agreement. Exhibit 10 to March 31,
1994 10-Q.
4.7 Second Amendment to the Credit Agreement. Exhibit 10 to September
30, 1994 10-Q, SEC File
No.
1-168.
4.8 Third Amendment to the Credit Agreement. Exhibit 4 to March
31,1995 10-Q, SEC File
No. 1-168.
4.9 Fourth Amendment to the Credit Agreement. Exhibit 4.1 to March 31,
1995 10-Q, SEC File No.
1-168.
4.10 Credit Agreement dated August 2, 1995, among the Exhibit 4 to September
Company, Various Lending Institutions, Bank of 30, 1995 10-Q, SEC File
Montreal, Corestates Bank, N.A., and PNC Bank, No.
National Association, as Co-Agents, and The 1-168.
Chase
Manhattan Bank, N.A., as Administrative Agent.
4.11 First Amendment to Credit Agreement dated Exhibit 4.1 to September
August 22, 1995. 30, 1995 10-Q, SEC File
No.
1-168.
4.12 Credit Agreement dated August 2, 1995, amended Exhibit 4 to September
and restated as of September 12, 1996. 30, 1996 10-Q, SEC File
No.
1-168.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
<C> <C> <S> <C>
10.1 The 1991 Stock Incentive Plan of AMETEK, Inc. Annex A to 1991 Proxy
(the "1991 Plan").* Statement, SEC File No.
1-168.
10.2 Amendment No. 1 to the 1991 Plan.* Exhibit 10.2 to 1993 10-
K, SEC File No. 1-168.
10.3 Amendment No. 2 to the 1991 Plan.* Exhibit 10.3 to 1994 10-
K.
10.4 Amendment No. 3 to the 1991 Plan. * X
10.5 The 1987 Employees' Non-Qualified Stock Option Annex B to 1991
and
Stock Appreciation Rights Plan (the "1987 Proxy Statement.
Plan").*
10.6 Amendment No. 1 to the 1987 Plan.* Exhibit 10.4 to 1993 10-
K.
10.7 Amendment No. 2 to the 1987 Plan. * X
10.8 The 1983 Employees' Incentive Stock Option Plan Exhibit 10.5 to 1993 10-
(the "1983 Plan").* K.
10.9 Amendment No. 1 to the 1983 Plan.* Exhibit (19)a) to
September 30, 1987 10-Q,
SEC File No. 1-168.
10.10 Amendment No. 2 to the 1983 Plan.* Exhibit (10)e) to 1987
10-K.
10.11 Amendment No. 3 to the 1983 Plan.* Exhibit (10)h) to 1989
10-K, SEC File No. 1-
168.
10.12 Amendment No. 4 to the 1983 Plan.* Exhibit 10.9 to 1993 10-
K.
10.13 The 1981 Employees' Non-Qualified Stock Option Exhibit 10.7 to 1991 10-
and Stock Appreciation Rights Plan (the "1981 K.
Plan").*
10.14 Amendment No. 1 to the 1981 Plan.* Exhibit (10)g) to 1987
10-K.
10.15 Amendment No. 2 to the 1981 Plan.* Exhibit (10)k) to 1989
10-K.
10.16 Amendment No. 3 to the 1981 Plan.* Exhibit (10)i) to 1988
10-K, SEC File No. 1-
168.
10.17 Amendment No. 4 to the 1981 Plan.* Exhibit 10.14 to 1993
10-K.
10.18 Amendment No. 5 to the 1981 Plan.* X
10.19 Employees' Retirement Plan of AMETEK, Inc., as Exhibit 10.15 to 1993
restated January 1, 1989 and amended to December 10-K.
31,
1993 (the "Retirement Plan").*
10.20 Amendment No. 1 to the Retirement Plan.* Exhibit 10.17 to 1994
10-K.
10.21 Amendment No. 2 to the Retirement Plan.* Exhibit 10.18 to 1994
10-K.
10.22 Amendment No. 3 to the Retirement Plan.* Exhibit 10.19 to 1995
10-K.
10.23 Amendment No. 4 to the Retirement Plan.* X
10.24 Amendment No. 5 to the Retirement Plan.* X
10.25 AMETEK, Inc. Retirement Plan for Directors, Exhibit 10.16 to 1993
dated April 28, 1983 (the "Directors Plan").* 10-K.
10.26 Amendment to the Directors Plan.* Exhibit 10.20 to 1994
10-K.
10.27 Second Amendment to the Directors Plan.* X
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
<C> <C> <S> <C>
10.28 Third Amendment to the Directors Plan.* Exhibit (10)v) to 1987
10-K.
10.29 AMETEK, Inc. Death Benefit Program for Exhibit (10)y) to 1987
Directors, 10-K.
pursuant to which the Company has entered into
agreements, restated January 1, 1987, with
certain
directors and one former director of the Company
(the "Directors Program").*
10.30 Amendment No. 1 to the Directors Program.* Exhibit (10)z) to 1987
10-K.
10.31 The AMETEK Savings and Investment Plan, as Exhibit 10.31 to 1992
restated 10-K.
and amended to October 1, 1992 (the "Savings
Plan").*
10.32 Amendment No. 1 to the Savings Plan.* Exhibit 10.23 to 1993
10-K.
10.33 Amendment No. 2 to the Savings Plan.* Exhibit 10.27 to 1994
10-K.
10.34 Amendment No. 3 to the Savings Plan.* Exhibit 10.28 to 1994
10-K.
10.35 Amendment No. 4 to the Savings Plan.* Exhibit 10.29 to 1994
10-K.
10.36 Amendment No. 5 to the Savings Plan.* Exhibit 10.30 to 1994
10-K.
10.37 Amendment No. 6 to the Savings Plan.* Exhibit 10.32 to 1995
10-K.
10.38 Amendment No. 7 to the Savings Plan.* Exhibit 10.33 to 1995
10-K.
10.39 The AMETEK Savings and Investment Plan, as X
restated
and amended to January 1, 1997 (the "Savings
Plan").*
10.40 Reorganization and Distribution Agreement by and Exhibit (2) to Form 8-K
between the Company and Ketema, Inc. (the dated November 30, 1988,
"Reorganization and Distribution Agreement"). SEC File No. 1-168.
10.41 Agreements between the Company and Ketema, Inc. Exhibit 10.56 to 1991
amending certain provisions of the 10-K.
Reorganization
and Distribution Agreement.
10.42 Benefits Agreement by and between the Company Exhibit (10)ss) to 1988
and 10-K.
Ketema, Inc.
10.43 Tax Agreement by and between the Company Exhibit (10)tt) to 1988
and Ketema, Inc. 10-K.
10.44 Support Services Agreement by and between the Exhibit (10)uu) to 1988
Company and Ketema, Inc. 10-K.
10.45 Form of Severance Benefit Agreement between the Exhibit (10)ww) to 1989
Company and certain executives of the Company.* 10-K.
10.46 Form of Restricted Stock Agreement between the Exhibit 10.59 to 1991
Company and certain directors of the Company, 10-K.
dated
as of February 27, 1991.*
10.47 Form of Restricted Stock Agreement between the Exhibit 10.60 to 1991
Company and certain executives of the Company, 10-K.
dated as of May 21, 1991.*
10.48 Form of Supplemental Retirement Benefit Exhibit 10.61 to 1991
Agreement 10-K.
between the Company and certain executives of
the
Company, dated as of May 21, 1991.*
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
<C> <C> <S> <C>
10.49 Supplemental Senior Executive Death Benefit Exhibit 10.41 to 1992
Plan, effective as of January 1, 1992 10-K.
(the "Senior Executive Plan").*
10.50 Amendment No. 1 to the Senior Executive Plan.* Exhibit 10.42 to 1992
10-K.
10.51 Senior Executive Split Dollar Death Benefit Exhibit 10.43 to 1992
Plan, dated as of December 15, 1992.* 10-K.
10.52 The 1995 Stock Incentive Plan of Ametek, Inc. Annex A to 1995 Proxy
(the "1995 Plan").* Statement.
10.53 Amendment No. 1 to the 1995 Plan.* Exhibit 10 to June 30,
1995 10-Q, SEC File No.
1-168.
10.54 Amendment No. 2 to the 1995 Plan.* X
10.55 Amendment No. 3 to the 1995 Plan.* X
12 Statement regarding computation of ratio of X
earnings to fixed charges.
21 Subsidiaries of the Registrant. X
23 Consent of Independent Auditors. X
27 Financial Data Schedule. X
99 Letter to the holders of the Company's Common Exhibit (21) to June 30,
Stock, dated July 31, 1989 (including 1989 10-Q.
Summary of Rights).
</TABLE>
- --------
* Management contract or compensatory plan required to be filed pursuant to
Item 601 of Regulation S-K.
54
<PAGE>
Exhibit 10.4
------------
Amendment No. 3
to the
1991 Stock Incentive Plan of
AMETEK, Inc.
WHEREAS, AMETEK, Inc. (the "Corporation") has adopted the 1991 Stock
Incentive Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, Section 19 of the Plan permits the Corporation to amend the
Plan; and
WHEREAS, the Corporation now desires to amend the Plan in certain
respects;
NOW THEREFORE, the Plan is hereby amended as follows:
follows:
NOW THEREFORE, the Plan is hereby amended as follows:
1. The first sentence of Section 13 of the Plan is amended to read,
in its entirety, as follows:
"If a holder of an Option and/or Rights shall voluntarily or
involuntarily leave the employ of the Corporation and its Affiliates, the Option
and Rights of such holder shall terminate forthwith, except that the holder
shall have until the expiration of 3 months (3 business days in the case of
Incentive Stock Options granted before November 20, 1996)from the cessation of
the holder's employment with the Corporation and its Affiliates (without
<PAGE>
regard to any period of severance) to exercise any unexercised Option and/or
Rights the holder could have exercised on the day on which he left the employ of
the Corporation and Affiliates."
2. The provisions of this Amendment No. 3 shall be effective for
terminations occurring on and after November 20, 1996.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 12th day of December, 1996.
AMETEK, Inc.
By:/s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ------------------------
Donna F. Winquist
(Seal)
<PAGE>
Exhibit 10.7
------------
Amendment No. 2
to the
1987 Employees' Incentive Stock Option Plan
of AMETEK, Inc.
WHEREAS, AMETEK, Inc. (the "Corporation") has adopted the 1987
Employees' Incentive Stock Option Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, Section 19 of the Plan permits the Corporation to amend the
Plan; and
WHEREAS, the Corporation now desires to amend the Plan in certain
respects;
NOW THEREFORE, the Plan is hereby amended as follows:
1. The first sentence of Section 13 of the Plan is amended to read,
in its entirety, as follows:
"If a holder of an Option and/or Rights shall voluntarily or
involuntarily leave the employ of the Corporation and its Affiliates, the Option
and Rights of such holder shall terminate forthwith, except that the holder
shall have until the expiration of 3 months (3 business days in the case of
Incentive Stock Options granted before November 20, 1996)from the cessation of
the holder's employment with the Corporation and its Affiliates (without regard
to any period of severance)to exercise any unexercised Option and/or Rights the
holder could have
<PAGE>
exercised on the day on which he left the employ of the Corporation and
Affiliates."
2. The provisions of this Amendment No. 2 shall be effective for
terminations occurring on and after November 20, 1996.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 12th day of December, 1996.
AMETEK, Inc.
By: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
<PAGE>
Exhibit 10.18
-------------
Amendment No. 5
to the
AMETEK, Inc. 1981 Employees' Nonqualified
Stock Option and Stock Appreciation Rights Plan
WHEREAS, AMETEK, Inc. (the "Corporation") has adopted the AMETEK, Inc.
1981 Employees' Nonqualified Stock Option and Stock Appreciation Rights Plan
(the "Plan"); and
WHEREAS, Section 16 of the Plan permits the Corporation to amend the
Plan; and
WHEREAS, the Corporation now desires to amend the Plan in certain
respects;
NOW THEREFORE, the Plan is hereby amended as follows:
1. The first sentence of Section 13 of the Plan is amended to read,
in its entirety, as follows:
"If a holder of an Option and/or Rights shall voluntarily or
involuntarily leave the employ of the Corporation and its Affiliates, the Option
and Rights of such holder shall terminate forthwith, except that the holder
shall have until the expiration of 3 months (3 business days in the case of
Incentive Stock Options granted before November 20, 1996)from the cessation of
the holder's employment with the Corporation and its Affiliates (without regard
to any period of severance) to exercise any unexercised Option and/or Rights the
holder could have exercised on the day on which he left the employ of the
Corporation and Affiliates."
<PAGE>
2. The provisions of this Amendment No. 5 shall be effective for
terminations occurring on and after November 20, 1996.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 12th day of December, 1996.
AMETEK, Inc.
By: /s/ Robert W. Yannarell
------------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
<PAGE>
Exhibit 10.23
-------------
AMENDMENT
to the
EMPLOYEES' RETIREMENT PLAN OF AMETEK, INC.
------------------------------------------
Amendment No. 4
----------------
WHEREAS, there was adopted and made effective as of December 29, 1942,
the Employees' Retirement Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, the Plan was amended and restated in its entirety most
recently effective January 1, 1989; and
WHEREAS, Section 9.2 of the Plan provides that AMETEK, Inc. ("AMETEK")
may amend the Plan at any time, and from time to time; and
WHEREAS, AMETEK now desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 1.2 of the Plan is amended by adding the following at
-----
the end of the section to read as follows:
"Notwithstanding the foregoing, in the case of a lump sum distribution
pursuant to Section 4.5(d) or an involuntary lump sum payment pursuant to
Section 4.4(e), the single sum present value shall be calculated using the
applicable mortality table promulgated under Code Section 417(e)(3) as in
effect on the first day of the Plan Year and the applicable interest rate
promulgated under Code Section 417(e)(3) for the fourth calendar month
preceding the first day of the plan quarter during which the annuity
starting date occurs."
<PAGE>
SECOND: Section 3.5 is amended by adding the following sentence
------
to read in its entirety as follows:
"Notwithstanding the foregoing, if a Participant incurs a termination, is
entitled to a Deferred Vested Pension pursuant to Section 4.4(a), receives
an Immediate Lump Sum Payment pursuant to Section 4.4(e) and subsequently
resumes service with the Employer or an Affiliated Company, his Credited
Service accumulated prior to his Severance Period shall be restored to him
for the sole purpose of determining his nonforfeitable right to his Accrued
Annual Pension (but not the amount of his Accrued Annual Pension) and, to
the extent required to obtain five years of Compensation in order to
compute Average Annual Compensation, compensation earned during his prior
service with the Employer or an Affiliated Company shall be considered as
having been received from the Company."
THIRD: Section 4.4 is amended by adding a new subsection (e)
-----
to read in its entirety as follows:
"(e) Involuntary Lump Sum Payment. If at any time a Participant or
----------------------------
Former Participant has incurred a termination but has not begun to receive
payments and is entitled to a Deferred Vested Pension that has an Actuarial
Equivalent present value of less than $3,500, the Actuarial Equivalent
present value of the Accrued Annual Pension payable at Normal Retirement
Date for the life of the Participant or Former Participant shall be paid to
such Participant or Former Participant in a lump sum in lieu of, and in
full satisfaction of, his benefit under this Plan. Neither the consent of
the Participant, Former Participant nor his spouse shall be necessary to
make such payment. Upon the making of such payment, neither the
Participant, Former Participant nor his spouse shall have any further
benefit under this Plan.
Effective as of December 1st of each Plan Year, the Committee
shall recalculate the Actuarial Equivalent present value of the benefit of
each Participant or Former Participant who has incurred a termination and
is entitled to a Deferred Vested Pension, but whose benefits are not yet in
pay status, to determine whether the Actuarial Equivalent present value of
the benefit is less than $3,500 in
<PAGE>
which case such benefit shall be paid to the Participant or Former
Participant in accordance with the provisions of this Section 4.4(e)."
FOURTH: The last sentence of subsection 4.5(d) is deleted and the
------
following is substituted:
"In no event shall the lump sum payable under Subsection (d) be less than
the lump sum applicable to the Accrued Annual Pension as of November 30,
1996, where such lump sum is calculated using the mortality table that
would have been used under the Plan as of November 30, 1996 and on interest
rate equal to less of (i) 8% compounded annually, or (ii) the interest rate
that would be used by the Pension Benefit Guaranty Corporation to determine
the present value of a lump sum distribution upon a plan termination as of
the last date of the calendar quarter preceding the distribution."
FIFTH: The provisions of this Amendment 4 shall be effective December
-----
1, 1996.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 13th day of November, 1996.
AMETEK, Inc.
By: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
(Seal)
<PAGE>
Exhibit 10.24
-------------
AMENDMENT
to the
EMPLOYEES' RETIREMENT PLAN OF AMETEK, INC.
------------------------------------------
Amendment No. 5
---------------
WHEREAS, there was adopted and made effective as of December 29, 1942,
the Employees' Retirement Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, the Plan was amended and restated in its entirety most
recently effective January 1, 1989; and
WHEREAS, Section 9.2 of the Plan provides that AMETEK, Inc. ("AMETEK")
may amend the Plan at any time, and from time to time; and
WHEREAS, AMETEK now desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 1.18 of the Plan is amended in its entirety to read as
-----
follows:
"1.18. 'Employee' shall mean each person who is included on a
--------
salaried payroll of the Employer and who receives Compensation from the
Employer, which is subject to withholding for United States federal income
tax purposes; provided, however, that the term 'Employee' shall in no event
include any person who is a leased employee with respect to the Employer
within the meaning of Section 414(n) or (o) of the Code or an Employee
employed at the Dixson Division. Notwithstanding the foregoing, 'Employee'
shall not include any person whose date of hire is on and after January 1,
1997 nor any person who returns to
<PAGE>
employment with the Employer or Affiliated Company following a Severance
From Service Date occurring on and after January 1, 1997. Notwithstanding
the foregoing, the term 'Employee' shall not include any individual
characterized by the Company as an 'independent contractor,' no matter how
characterized by the Internal Revenue Service, other governmental agency or
court."
SECOND: Article II of the Plan is amended in its entirety to read as
------
follows:
"ARTICLE II"
PARTICIPATION
-------------
2.1. Participation as of January 1, 1997. Subject to Section 2.3,
-----------------------------------
each Employee who was eligible to participate in the Plan as of December
31, 1996 shall be a Participant in the Plan as of January 1, 1997, provided
he is still an Employee as of such date.
2.2. Other Employees. Subject to Section 2.3, any Employee, who is
---------------
hired by the Employer or an Affiliated Company prior to January 1, 1997 and
not referred to in Section 2.1 shall become a Participant on the January
1st or July 1st next following the date on which:
(a) the Employee has attained age 21, and
(b) completed one year of Credited Service taking into
consideration the provisions of Article VI;
provided, that such person is an Employee as of such January 1st or July
1st, as the case may be.
2.3. Employees Not Eligible to Participate. Notwithstanding any
-------------------------------------
other provision of the Plan to the contrary, an Employee shall not be
eligible to participate in the Plan if he is a participant in, eligible to
participate in, or covered by any other pension, stock bonus or profit
sharing plan (including participation as a Retirement Participant, but not
including participation as a Participant, in The AMETEK Savings and
Investment Plan) which is qualified under the provisions of Section 401(a)
of the Code and which is maintained by the Employer or to which the
Employer contributes.
<PAGE>
2.4. Participation - One Year Period of Severance. If an individual
--------------------------------------------
is reemployed as an Employee after he incurs a One Year Period of Severance
and:
(a) the Credited Service earned by the individual prior to his
Severance from Service Date is disregarded pursuant to Section 3.6, he
shall be deemed a new Employee and he shall not qualify for participation
in this Plan.
(b) the Credited Service earned by the individual prior to his
Severance from Service Date is restored pursuant to Section 3.6, he shall
qualify for participation in this Plan on the date he again becomes an
Employee (subject to Section 2.3), provided that he completes a year of
Credited Service after he is reemployed in the one year period beginning
with the first date following his Severance From Service Date on which he
performs an Hour of Service.
2.5. Transfer of Employment. If an Employee would be a Participant
----------------------
but for his being a participant in, eligible to participate in, or covered
by, any other pension, stock bonus or profit sharing plan (including
participation as a Retirement Participant, but not including participation
as a Participant, in The AMETEK Savings and Investment Plan) which is
qualified under the provisions of Section 401(a) of the Code and which is
maintained by the Employer or to which the Employer contributes, he shall
immediately become a Participant in this Plan on the first day he ceases
being a participant in, eligible to participate in, or covered by such
other qualified plan, provided he is still an Employee on such date.
2.6. Termination of Participation. A Participant shall cease to be a
----------------------------
Participant as of the earliest of (a) the date he ceases to be an Employee,
(b) the date he becomes a participant in, eligible to participate in, or in
a category of employees covered by, any other pension, stock bonus or
profit-sharing plan (other than as a Participant, but not a Retirement
Participant in The AMETEK Savings and Investment Plan) which is qualified
under the provisions of Section 401(a) of the Code and which is maintained
by the Employer or to which the Employer contributes, or (c) his Severance
From Service Date, and he shall be entitled to such benefits, if any, as he
is entitled to under this Plan based upon his Credited Service and Accrued
Annual Pension as of the date he ceases to be a Participant.
<PAGE>
2.7. Participant Information. The Employer shall from time to time
-----------------------
furnish the Committee with relevant information with regard to the
Employees eligible for participation in this Plan, including, without
limitation, information as to their names, dates of birth, Employment
Commencement Dates, compensation and periods of service. The Committee
shall rely upon such information and shall be under no obligation to make
inquiry with regard to the accuracy thereof."
THIRD: Subsection 3.6 of the Plan is amended in its entirety to
-----
read as follows:
"3.6. Credited Service for Certain Absences. Notwithstanding
-------------------------------------
anything to the contrary contained in this Article III, periods of absence
of a Participant or Former Participant on or after January 1, 1976 due to
(a) an authorized leave of absence in excess of twelve months but not in
excess of twenty-four months, either with or without pay, or (b) voluntary
or involuntary service in the Armed Forces of the United States in excess
of twelve months, shall be deemed to be Credited Service (and no Severance
From Service Date shall be deemed to have occurred), provided that the
Participant or Former Participant returns to service with the Employer or
an Affiliated Company as an Employee (subject to Section 2.3) immediately
after such authorized leave of absence or within the time after his
discharge from the Armed Forces in which, as a matter of law, he has re-
employment rights, as the case may be. Failure of the Participant or
Former Participant to return to service with the Employer or an Affiliated
Company as an Employee (subject to Section 2.3) within the time specified
in this Section 3.7 shall cause such period of absence to be treated as if
the Participant's service was severed pursuant to Subsection 3.2(a)(ii)."
FOURTH: The provisions of this Amendment 5 shall be effective January
------
1, 1997.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this third day of January, 1997.
<PAGE>
AMETEK, Inc.
By: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannerell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
<PAGE>
Exhibit 10.27
-------------
Second Amendment
to the
AMETEK, INC.
RETIREMENT PLAN FOR DIRECTORS
____________________________
WHEREAS, the AMETEK, Inc. Retirement Plan for Directors (the "Plan") was
adopted, effective January 1, 1983; and
WHEREAS, Section 7 of the Plan provides that AMETEK, Inc. (the "Company")
may amend the Plan at any time or from time to time; and
WHEREAS, the Company now desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 3 is hereby amended by deleting the last paragraph thereof
-----
and by substituting the following paragraph in its stead:
"Notwithstanding the foregoing, a Participant's monthly benefit
shall be reduced one-fifth (1/5) for each Year of Service less than
five (5)."
SECOND: Subsection (b) of Section 4 is hereby amended to read in its
------
entirety as follows:
"(b) In the event that a Participant dies after he has attained
age 55 and completed 5 Years of Service but before payment of his
benefits has commenced, and the Participant was married on the date of
his death, his surviving spouse shall receive a monthly benefit for
the remainder of her lifetime equal to the benefit the surviving
spouse would have received if payment of the Participant's benefit had
commenced on the day before his death in the form of a joint and 50%
survivor annuity pursuant to Section 4(a) of the Plan. If a
Participant dies (i) prior to attaining age 55 and completing 5 Years
of Service; (ii) who was not married on the date of his death or,
(iii) after payment of his benefits has commenced, and such benefits
are being paid for his life only, all benefit payments shall cease and
no death or additional benefits shall be provided under the Plan."
<PAGE>
THIRD: The amendments contained herein shall be effective as of October 1,
-----
1986 for Participants who first become eligible for the payment of benefits or
who die on or after that date.
FOURTH: Except to the extent hereinabove set forth, the Plan shall remain
------
in full force and effect without change or modification.
IN WITNESS WHEREOF, the Company has caused this amendment to be duly
executed this 25th day of March, 1987.
AMETEK, INC.
By: /s/ Allan Kornfeld
------------------
Allan Kornfeld
<PAGE>
Exhibit 10.39
-------------
Amendment and Restatement
of
THE AMETEK SAVINGS AND INVESTMENT PLAN
--------------------------------------
WHEREAS, there was adopted and made effective as of October 1, 1984,
The AMETEK Savings and Investment Plan (the "Plan"); and
WHEREAS, the Plan was subsequently amended and restated in its
entirety, effective October 1, 1992; and
WHEREAS, Section 10.1 of the Plan provides that AMETEK, Inc.
("AMETEK") may amend the Plan at any time or from time to time; and
WHEREAS, AMETEK now desires to amend and restate the Plan, in its
entirety, to incorporate a profit-sharing feature in the Plan to benefit certain
employees, to incorporate all prior amendments and to conform the Plan to recent
changes in applicable law;
NOW, THEREFORE, the Plan is hereby amended and restated in its
entirety, effective January 1, 1997, to incorporate a profit-sharing feature in
the Plan to benefit certain employees, to incorporate all prior amendments and
to conform the Plan to recent changes in applicable law. To the extent that an
earlier effective date of a Plan provision is required by applicable law, the
provision shall be effective as of such earlier date. The provisions of the
Plan as in effect prior to January 1, 1997, shall continue to be applicable to
all persons who retired or otherwise terminated their employment with AMETEK
prior to January 1, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS AND CONSTRUCTION.............................. 1
ARTICLE II - PARTICIPATION............................................ 12
2.1 Prior Eligibility............................................ 12
2.2 Eligibility for Other Employees Retirement Participant....... 12
2.3 Ineligible Employees......................................... 13
2.4 Participant Information...................................... 13
2.5 Employee Acceptance.......................................... 14
ARTICLE III - SERVICE................................................. 15
3.1 Year of Service.............................................. 15
3.2 Hours of Service............................................. 15
3.3 Severance From Service Date.................................. 15
3.4 Absence of Less Than Twelve Months........................... 16
3.5 Severance from Service....................................... 16
ARTICLE IV - CONTRIBUTIONS............................................ 18
4.1 Deferral Election............................................ 18
4.2 Employer Deferral and Matching Contributions................. 19
4.3 Employer Contributions on Behalf of Retirement Participants.. 20
4.4 Nondiscrimination Requirements............................... 22
4.5 Rollovers and Transfers...................................... 26
4.6 Non-Forfeitability of Certain Accounts....................... 28
ARTICLE V - INDIVIDUAL ACCOUNTS....................................... 29
5.1 Participant Accounts......................................... 29
5.2 Valuation of Accounts........................................ 29
5.3 Employer Contributions Considered Made on Last Day of Plan
Year......................................................... 30
5.4 Valuation.................................................... 30
5.5 Limitation on Annual Additions............................... 30
5.6 Allocations Do Not Create Rights............................. 35
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI - PAYMENT OF BENEFITS...................................... 36
6.1 Retirement, Death, Disability or Termination of Employment... 36
6.2 Attainment of Age 59-1/2..................................... 37
6.3 Beneficiary Designation...................................... 37
6.4 Form of Payment.............................................. 39
6.5 Limitations on Commencement or Duration of Benefit Payments.. 42
6.6 Cash-Out of Benefits......................................... 45
6.7 Qualified Domestic Relations Orders.......................... 45
ARTICLE VII - LOANS TO PARTICIPANTS AND WITHDRAWALS................... 47
7.1 Loans........................................................ 47
7.2 Hardship Distribution........................................ 50
ARTICLE VIII - COMMITTEE AND PLAN ADMINISTRATOR....................... 53
8.1 Committee - Authority........................................ 53
8.2 Appointment.................................................. 53
8.3 Death, Resignation or Removal of Committee Member............ 53
8.4 Written Notice of Appointment, Resignation or Removal........ 53
8.5 Action By Committee.......................................... 54
8.6 Employment of Agents......................................... 54
8.7 No Committee Member Compensation............................. 54
8.8 Committee Powers............................................. 54
8.9 Claims for Benefits.......................................... 55
8.10 Liability for Contributions.................................. 57
8.11 Plan Administrator........................................... 57
8.12 Compensation and Expenses of Plan Administrator.............. 57
8.13 Allocation of Duties......................................... 58
8.14 Participation of Committee Members and Plan Administrator.... 58
8.15 Books and Records............................................ 58
8.16 Fiduciary Standard........................................... 58
8.17 Indemnification.............................................. 58
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX - INVESTMENT OF PLAN ASSETS................................ 60
9.1 Contributions Held in Trust.................................. 60
9.2 Investment Funds............................................. 60
9.3 Investment of Contributions.................................. 60
9.4 Changes in Investment Elections.............................. 61
9.5 Insurance Contract........................................... 62
9.6 Common Stock Fund............................................ 62
9.7 Appointment of Investment Manager............................ 63
ARTICLE X - AMENDMENT, TERMINATION OR TRANSFER OF ASSETS.............. 64
10.1 Amendment of Termination..................................... 64
10.2 Termination of Plan.......................................... 64
10.3 Distribution of Assets....................................... 65
10.4 Affiliates................................................... 65
10.5 Amendment to Vesting Schedule................................ 66
10.6 Merger of Plan............................................... 66
ARTICLE XI - TOP HEAVY PLANS.......................................... 68
11.1 Definitions.................................................. 68
11.2 Minimum Contributions........................................ 71
11.3 Coordination with Defined Benefit Plan....................... 72
11.4 Maximum Benefits............................................. 72
ARTICLE XII - MISCELLANEOUS........................................... 74
12.1 No Rights Implied............................................ 74
12.2 Assignment and Alienation.................................... 74
12.3 No Diversion of Trust Assets................................. 74
12.4 Exclusive Benefit............................................ 75
12.5 No Employment Contract....................................... 75
12.6 Fiduciaries.................................................. 75
12.7 Incapacity................................................... 75
12.8 Governing Law................................................ 75
</TABLE>
<PAGE>
THE AMETEK SAVINGS AND INVESTMENT PLAN
--------------------------------------
ARTICLE I
---------
DEFINITIONS AND CONSTRUCTION
----------------------------
The following words and phrases shall have the meanings set forth
below unless the context clearly indicates otherwise:
1.1. "Accounts" shall mean the Deferral Election Account, the Employer
--------
Matching Contribution Account, the Retirement Account and the Rollover
Contribution Account, or as many as are applicable, maintained on behalf of a
Participant or Retirement Participant in accordance with this Plan.
1.2. "Average Contribution Percentage" shall mean the average of the
-------------------------------
Contribution Percentages of a group of Participants.
1.3. "Average Deferral Percentage" shall mean the average of the Deferral
---------------------------
Percentages of a group of Participants.
1.4. "Adjustment Factor" shall mean the cost-of-living adjustment factor
-----------------
prescribed by the Secretary of the Treasury under Section 415(d) of the Code as
applied for Plan Years beginning after December 31, 1987 and as applied to such
items and in such manner as the Secretary shall provide.
1.5. "Affiliate" shall mean any corporation that is, along with the
---------
Company, a member of a controlled group of corporations as defined in Section
414(b) of the Code) or any other trade or business (whether or not incorporated)
which, along with the Company, is under common control (as defined in Section
414(c) of the Code) or any other trade or business which is a member of an
"affiliated service group" (as such term is defined in Section 414(m) of the
Code or in regulations under Section 414(o) of the Code) of which the Company is
also a member.
1.6. "Alternate Payee" shall mean an "alternate payee"
---------------
as defined in Section 414(p) of the Code.
1.7. "Annual Valuation Date" shall mean the 31st day of December in each
---------------------
year.
1.8. "Beneficiary" shall mean the person or persons designated by a
-----------
Participant, Former Participant, Retirement Participant or Former Retirement
Participant, in accordance with Section 6.3, as the person or persons entitled
to receive upon the death of such Participant, Former Participant, Retirement
Participant or Former Retirement Participant any benefit under the provisions of
this Plan.
1.9. "Board of Directors" shall mean the Board of Directors of the
------------------
Company.
<PAGE>
1.10. "Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
1.11. "Committee" shall mean the Administrative Committee appointed and
---------
serving pursuant to Article VIII.
1.12. "Common Stock Fund" shall have the meaning set forth in Section 9.6.
-----------------
1.13. "Company" shall mean AMETEK, Inc., a Delaware corporation.
-------
1.14. "Compensation" shall mean an Employee's fixed salary, base pay,
------------
commissions, bonuses and overtime paid or made available to the Employee during
the Plan Year in consideration for his personal services actually rendered to
the Employer, unreduced by any amounts contributed to the Plan on behalf of a
Participant pursuant to the Participant's Deferral Election under Section 4.1
hereof. Compensation shall not include merit awards, gifts, loans, fees,
insurance and pension benefits, severance benefits (paid in any form), stock or
stock options, or stock appreciation rights. Notwithstanding the foregoing,
Compensation is intended to qualify as compensation determined under regulations
published at 1.415-2(d)(2) and 1.415-2(d)(3) under the Code and modified by
regulations published at 1.414(s)-(1)(c)(3) and 1.414(s)-(1)(c)(4) under the
Code.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
Any reference in this Plan to the limitation under section 401(a)(17) of
the Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
1.15. "Contribution Percentage" shall mean the ratio of the sum of
-----------------------
Employer Matching Contributions and the Employer Retirement Incentive
Contributions made on behalf of a Participant or a Retirement Participant for a
Plan Year to the
<PAGE>
Participant's or the Retirement Participant's Compensation for such Plan Year.
1.16. "Deferral Amount" shall mean the amount by which a Participant has
---------------
reduced his Compensation pursuant to a Deferral Election.
1.17. "Deferral Election" shall mean an election which a Participant has
-----------------
made to contribute to the Plan pursuant to Section 4.1.
1.18. "Deferral Election Account" shall mean a separate Account maintained
-------------------------
for each Participant who has elected to make a Deferral Election, consisting of
the amount contributed pursuant to the Participant's Deferral Election plus any
earnings of the Trust and realized and unrealized gains and losses allocable to
such Account, but less any amounts previously distributed to the Participant,
Former Participant or Beneficiary for whom the Account is maintained.
1.19. "Deferral Percentage" shall mean the ratio of the Deferral Amount
-------------------
for the Plan Year to the Participant's Compensation for such Plan Year.
1.20. "Disability" shall mean a disability of a Participant or a
----------
Retirement Participant as determined under the terms of the defined benefit
pension plan maintained by the Company or an Affiliate under which the
Participant or Retirement Participant participated in immediately prior to his
disability. If a Participant or Retirement Participant does not participate in
a defined benefit pension plan immediately prior to his disability, Disability
shall mean a disability which entitles the Participant or the Retirement
Participant to disability benefits from Social Security; provided, however, that
the Participant's or the Retirement Participant's disability occurs while he is
employed by the Company or an Affiliate.
1.21. "Effective Date" shall mean October 1, 1984.
--------------
1.22. "Employee" shall mean any person classified as a regular Employee,
--------
who is on the payroll of the Employer and whose wages from the Employer are
subject to withholding for United States Federal income tax purposes; provided,
however, that Employee shall not include any person who is hired as a Temporary
Employee or Intern. Notwithstanding the foregoing, the term Employee shall not
include any individual characterized by the Company or Affiliate as an
"independent contractor," no matter how characterized by the Internal Revenue
Service, other governmental agency or a court.
1.23. "Employer" shall mean the Company and any Affiliate of the Company
--------
which adopts this Plan pursuant to Section 10.4 hereof.
<PAGE>
1.24. "Employer Contributions" shall mean the contributions made by the
----------------------
Employer pursuant to Section 4.2(b), Section 4.3(a) and 4.3(b).
1.25. "Employer Matching Contribution Account" shall mean a separate
--------------------------------------
Account maintained for each Participant, consisting of the Participant's share
of Employer Matching Contributions, plus any earnings of the Trust and any
realized or unrealized gains and losses allocable to such Account, but less any
amounts previously distributed to the Participant, Former Participant or
Beneficiary for whom the Account is maintained.
1.26. "Employer Matching Contribution" shall mean a profit-sharing
------------------------------
contribution made to a Participant's Employer Contribution Account pursuant to
Section 4.2(b).
1.27. "Employer Incentive Retirement Contribution" shall mean a profit-
------------------------------------------
sharing contribution made to a Retirement Participant's Retirement Account
pursuant to Section 4.3(b).
1.28. "Employer Retirement Contribution" shall mean a profit-sharing
--------------------------------
contribution made to a Retirement Participant's Retirement Account pursuant to
Section 4.3(a).
1.29. "Employment Commencement Date" shall mean the date (whether before
----------------------------
or after the Effective Date) on which the Employee first performs an Hour of
Service as an Employee, except as otherwise provided in Section 3.5 with respect
to a One Year Period of Severance.
1.30. "Entry Date" shall mean the first day of January, April, July and
----------
October of any Plan Year.
1.31. "ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
1.32. "Former Participant" shall mean a person who has ceased to be a
------------------
Participant but who is entitled to immediate or deferred benefits under this
Plan.
1.33. "Former Retirement Participant" shall mean a person who has ceased
-----------------------------
to be a Retirement Participant but who is entitled to immediate or deferred
benefits under this Plan.
1.34. "Highly Compensated Employee" shall mean, for Plan Years commencing
---------------------------
on and after January 1, 1997, an Employee of the Company or an Affiliate who
performs an Hour of Service and who:
(a) was at any time a Five Percent Owner (within the meaning of
Section 11.1(c)) during the Plan Year or the Look-Back Year; or
<PAGE>
(b) for the Look-Back Year (i) received Total Compensation in excess
of $80,000 multiplied by the Adjustment Factor.
An Employee is not taken into account for purposes of this Section 1.29 if he
has completed a Period of Service of less than six months, is normally credited
with less than 17-1/2 Hours of Service per week, normally works less than six
months during the year, has not reached age 21.
For purposes of this Section 1.29, the following definitions shall apply:
"Total Compensation" shall mean the Employee's "compensation" as defined in
Subsection 5.5(f); and
"Look-Back Year" shall mean the twelve (12) month period immediately
preceding the Plan Year.
1.35. "Hour of Service" shall have the meaning defined in Section 3.2.
---------------
1.36. "Insurance Contract" shall mean an insurance policy issued to the
------------------
Trustee for the benefit of a Participant pursuant to Section 9.5.
1.37. "Intern" shall mean a student who is employed by the Company or
------
Affiliate while attending school or during his or her breaks from school or any
other individual who is classified as an "intern" in accordance with the
Company's or Affiliate's regular employment practices and policies.
1.38. "Investment Funds" shall mean the funds comprising the Trust Fund.
----------------
1.39. "Leased Employees" shall mean those individuals described in Section
----------------
414(n)(2) of the Code employed by the Company or any Affiliate; provided,
however, if such individual employees constitute 20% or less of such non-highly
compensated work force of the Company or any Affiliate then the term "Leased
Employees" means only those individuals who are not covered by a plan described
in Section 414(n)(5) of the Code.
1.40. "Limitation Year" shall mean the Plan Year.
---------------
1.41. "Mandatory Distribution Date" shall have the meaning set forth in
---------------------------
Section 6.5(a).
1.42. "Normal Retirement Age" shall mean a Participant's or Former
---------------------
Participant's 65th birthday. For purposes of a Retirement Participant, Normal
Retirement Age shall mean shall mean the later of a Retirement Participant's
65th birthday or the fifth
<PAGE>
(5th) anniversary of the Retirement Participant's commencement of participation
in the Plan.
1.43. "One Year Period of Severance" shall have the meaning set forth in
----------------------------
Section 3.5.
1.44. "Participant" shall mean an Employee who has met the requirements
-----------
for participation in, and has signified his acceptance of, this Plan, pursuant
to the provisions of Article II.
1.45. "Period of Service" shall mean a period of service performed for an
-----------------
Employer by an Employee commencing on the Employee's Employment Commencement
Date and ending on his Severance from Service Date.
1.46. "Period of Severance" shall mean the period commencing on an
-------------------
Employee's Severance From Service Date and ending on the date he again performs
an Hour of Service for the Employer as an Employee.
1.47. "Plan" shall mean The AMETEK Savings and Investment Plan, as it is
----
embodied herein and as it may be amended from time to time.
1.48. "Plan Administrator" shall mean the person, group of persons, firm
------------------
or corporation serving as plan administrator pursuant to Section 8.11.
1.49. "Plan Year" shall mean the twelve consecutive month period
---------
commencing January 1st and ending the following December 31st.
1.50. "Qualified Domestic Relations Order" shall mean a judgment, decree
----------------------------------
or order (including approval of a property settlement agreement) made pursuant
to a state domestic relations law (including a community property law) which:
(a) relates to the provision of child support, alimony payments or
marital property rights to a spouse, former spouse, child or other dependent of
a Participant or a Retirement Participant (the "Alternate Payee");
(b) creates or recognizes the existence of the Alternate Payee's
right to, or assigns to the Alternate Payee the right to receive all or a
portion of the benefits payable to a Participant or a the Retirement Participant
under this Plan;
(c) specifies (A) the name and last known mailing address (if any) of
the Participant or the Retirement Participant and each Alternate Payee covered
by the order, (B) the amount or percentage of the Participant's or the
Retirement Participant's Plan benefits to be paid to the Alternate Payee, or the
manner in which such amount or percentage is to be determined, and (C) the
<PAGE>
number of payments or the period to which the order applies and each plan to
which the order relates; and
(d) does not require the Plan to (A) provide any type or form of
benefit, or any option not otherwise provided under the Plan, (B) provide
increased benefits, or (C) pay benefits to the Alternate Payee under a prior
Qualified Domestic Relations Order. A Qualified Domestic Relations Order may
provide that distribution commence on or after the date on which the Participant
or Retirement Participant attains, or would have attained the earlier of (A) the
date on which the Participant or the or Retirement Participant is entitled to a
distribution under the Plan or (B) the date on which the Participant or
Retirement Participant attains age 50, regardless of whether the Participant or
Retirement Participant has incurred a Severance From Service Date.
Notwithstanding the foregoing, a Qualified Domestic Relations Order may provide
that distribution commence as soon as administratively practicable following its
determination as a Qualified Domestic Relations Order regardless of whether the
Participant or Retirement Participant has incurred a Severance From Service
Date, if the Order directs (A) that the payment of the benefits be determined as
if the Participant or Retirement Participant had retired on the date on which
payment is to begin under such Order, taking into account only the balance
standing to the Participant's or Retirement Participant's credit in his Accounts
on such date, and (B) that the payment be made in a form in which such benefits
may be paid under the Plan to the Participant or Retirement Participant other
than in the form of a joint and survivor annuity with respect to the Alternate
Payee and his subsequent spouse.
1.51. "Retirement Account" shall mean a separate Account maintained for
------------------
each Retirement Participant or Former Retirement Participant, consisting of the
Employer Retirement Contribution and the Company Incentive Retirement
Contribution made pursuant to pursuant to Section 4.3 plus any earnings of the
Trust and realized or unrealized gains or losses allocable to such Retirement
Account, but less any amounts previously distributed to the Retirement
Participant, Former Retirement Participant or Beneficiary for whom the Account
is maintained.
1.52. "Retirement Participant" shall mean an Employee who has met the
----------------------
requirements set forth in Sections 2.2(b) and 2.3(b).
1.53. "Rollover Contribution" shall mean a contribution which meets the
---------------------
requirements of Section 4.5(b) as modified by Section 4.5(c).
1.54. "Rollover Contribution Account" shall mean a separate Account
-----------------------------
maintained for each Participant or Retirement Participant who has elected to
make a Rollover Contribution pursuant to Section 4.5, consisting of the Rollover
Contribution plus any earnings of the Trust and realized or unrealized gains or
losses allocable to such Account, but less any amounts previously distributed to
the Participant, Former Participant, Retirement
<PAGE>
Participant, Former Retirement Participant or Beneficiary for whom the Account
is maintained.
1.55. "Severance From Service Date" shall have the meaning set forth in
---------------------------
Section 3.3.
1.56. "Taxable Wage Base" for a Plan Year with respect to a Retirement
-----------------
Participant shall mean the contribution and benefit base in effect under Section
230 of the Social Security Act on the first day of the Plan Year for which
allocations of Employer Contributions are made. The Taxable Wage Base level
shall be deemed to be the full amount of such Taxable Wage Base even though (a)
a Retirement Participant's Compensation may include less than a full year's
Compensation because of either his participation commencing after the first day
of the Plan Year or his experiencing a Severance From Service Date prior to the
end of the Plan Year or (b) because a Retirement Participant's Compensation for
a Plan Year does not exceed the Taxable Wage Base.
1.57. "Temporary Employee" shall mean an individual who is hired by the
------------------
Company or Affiliate (rather than an agency) for a specific position for a
designated length of time which is normally not more than 24 consecutive months
in duration and who is committed to leave the employment of the Company or
Affiliate at the conclusion of such period.
1.58. "Trust" shall mean The AMETEK Savings and Investment Trust, as
-------
amended from time to time.
1.59. "Trust Fund" shall mean the assets held by the Trustee for the
----------
benefit of the Participants, Retirement Participants, Former Participants,
Former Retirement Participants and their Beneficiaries, but not including any
Plan assets theretofore set aside for distribution of benefits to or with regard
to Participants, Retirement Participants, Former Participants, Former
Retirement Participants or Beneficiaries.
1.60. "Trustee" shall mean the trustee or trustees appointed by the
-------
Company to hold the assets of the Plan, as provided in Section 9.1 and the
Trust, and any successor trustee or trustees as the Company from time to time
may designate.
1.61. "Valuation Date" shall mean the last business day of each month, and
--------------
any other date as determined by the Committee, that is closer to the event
requiring valuation of a Participant's or Retirement Participant's Accounts
under the Plan.
1.62. "Year of Service" shall have the meaning set forth in Section 3.1.
---------------
Except when otherwise indicated by the context, any masculine terminology
used herein also includes the feminine and neuter, and vice versa, and the
definition of any term herein in
<PAGE>
the singular shall also include the plural, and vice versa. The words "hereof,"
"herein," "hereunder," and other similar compounds of the word "here" shall mean
and refer to the entire Plan and not to any particular provision or section. All
references to Articles and Sections shall mean and refer to Articles and
Sections contained in this Plan, unless otherwise indicated.
In determining time periods within which an event or action is to take
place for purposes of the Plan, no fraction of a day shall be considered and any
act, the performance of which would fall on a Saturday, Sunday, holiday or other
non-business day, may be performed on the next following business day.
It is the intention of the Employer that the Plan be qualified under the
provisions of Sections 401(a), 401(k), 401(m) and 501(a) of the Code and under
ERISA, and all provisions of this Plan shall be construed and interpreted in
light of that intention.
The titles and headings of Articles and Sections are intended for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
<PAGE>
ARTICLE II
----------
PARTICIPATION
-------------
2.1. Prior Eligibility. Each Employee who, as of December 31, 1996, was a
-----------------
Participant in the Plan, shall continue to be a Participant in the Plan as of
January 1, 1997, and for so long as he continues to meet the eligibility
requirements for being a Participant.
2.2. Eligibility for Other Employees.
-------------------------------
a. Participant. Any other Employee, who is not an ineligible
-----------
employee as described in Section 2.3(a), shall become a Participant in the Plan
as of the Entry Date which follows his date of hire by at least thirty-one (31)
days and is on or after the date on which he first attains age 21, provided he
signifies his acceptance of the Plan in accordance with Section 2.5. Any
Employee who is an ineligible employee as described in Section 2.3(a), but who
on or after January 1, 1997 becomes an eligible employee and meets the
requirements of the previous sentence, shall become a Participant on the next
Entry Date which is at least thirty-one (31) days from his most recent date of
hire. An Employee shall remain a Participant as long as he continues to meet the
requirements of this Section 2.2(a).
b. Retirement Participant. Any Employee hired on or after January
----------------------
1, 1997 or rehired following a Severance From Service Date on or after January
1, 1997, who is not an ineligible employee as described in Section 2.3(b), shall
become a Retirement Participant in the Plan as of the Entry Date which follows
his date of hire by at least thirty-one (31) days and is on or after the date on
which he first attains age. Any Employee who is an ineligible employee as
described in Section 2.3(b), but who on or after January 1, 1997 becomes an
eligible employee and meets the requirements of the previous sentence, shall
become a Retirement Participant on the next Entry Date which is at least thirty-
one (31) days from his most recent date of hire. An Employee shall remain a
Retirement Participant as long as he continues to meet the requirements of this
Section 2.2(b).
<PAGE>
2.3. Ineligible Employees.
--------------------
a. Participant. Notwithstanding Sections 2.1 or 2.2, an Employee
-----------
shall not be eligible to be a Participant in this Plan if (i) he is a Leased
Employee, unless the participation of such Leased Employee in the Plan is
required so that the Plan meets the applicable requirements of Section 414(n)(3)
of the Code, (ii) he is an hourly paid employee of the Technical Motors Division
of AMETEK, Inc. at locations in Simi Valley (Ventura County, California) or
Tijuana, Mexico, provided, however, that effective October 1, 1994, this
provision shall not apply to employees at Simi Valley in Leadperson, Material
Coordinators, Set-up Persons, QC Inspectors, Maintenance and Shipping/Receiving
Clerks job classifications; or (iii) he is an employee whose terms and
conditions of employment are determined pursuant to the terms of a collective
bargaining agreement; unless the collective bargaining agreement provides for
the inclusion of such Employee in the Plan, in which case the Employee will be
eligible to participate in the Plan, pursuant to Section 2.2, on the later of
the date specified in the collective bargaining agreement or the next January
1st which is on or after the date he completes the eligibility requirements set
forth in Section 2.2.
b. Retirement Participant. Notwithstanding Sections 2.1 and 2.2
----------------------
above, an Employee shall not be eligible to be a Retirement Participant in this
Plan if (i) he is a Leased Employee, unless the retirement participation of such
Leased Employee in the Plan is required so that the Plan meets the applicable
requirements of Section 414(n)(3) of the Code, (ii) he is an active participant
in a defined benefit pension plan sponsored by Company or Affiliate, (iii) he is
an hourly paid employee of the Technical Motors Division of AMETEK, Inc. at
locations in Simi Valley (Ventura County, California) or Tijuana, Mexico; or (v)
he is an employee whose terms and conditions of employment are determined
pursuant to the terms of a collective bargaining agreement; unless the
collective bargaining agreement provides for the inclusion of such Employee in
the Plan, in which case the Employee will become a Retirement Participant in
the Plan on the date specified in the collective bargaining agreement.
2.4. Participant Information. The Employer shall from time to time
-----------------------
furnish the Committee, the Trustee and the Plan Administrator with relevant
information with respect to Employees who are or become eligible for
participation in the Plan, Participants, Retirement Participants, Former
Participants, Former Retirement Participants and Beneficiaries, including
without limitation, information as to their names, compensation, dates of birth,
Employment Commencement Dates, Hours of Service, Periods of Service, retirements
and deaths or other causes for termination of employment. The Committee, the
Trustee and the Plan Administrator may rely upon such information and shall be
under no obligation to make inquiry with regard to the accuracy thereof.
<PAGE>
2.5. Employee Acceptance. Each Employee who meets the requirements for
-------------------
participation in this Plan shall be so notified in writing by the Plan
Administrator. An Employee shall become a Participant if he signifies his
acceptance of the Plan and the benefits hereof by filing with the Committee his
written application for participation in the Plan on a form supplied by the
Committee and by agreeing to make a Deferral Election pursuant to Section 4.1.
If an Employee does not file his application when he is first eligible to make a
Deferral Election, such Employee shall become a Participant as of the Entry Date
following or coinciding with the receipt by the Committee of such application,
provided he continues to meet the eligibility requirements on such Entry Date.
<PAGE>
ARTICLE III
-----------
SERVICE
-------
3.1. Year of Service. A Participant or a Retirement Participant shall be
---------------
credited with a Year of Service for each 12 consecutive month Period of Service
beginning with his Employment Commencement Date, and anniversaries thereof. For
purposes of this Plan, any service performed by an Employee for the Company or
any Affiliate shall be considered to be service performed by an Employee for an
Employer.
3.2. Hours of Service. An Hour of Service shall mean an hour for which an
----------------
Employee is directly or indirectly paid, or entitled to payment, by the
Employer, for the performance of duties. Hours of Service shall include each
hour for which back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by the Employer, and such hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made. Hours of Service shall also include each hour for which the
Employee is directly or indirectly paid, or entitled to payment, by the Employer
for reasons (such as vacation, sickness or temporary disability) other than for
the performance of duties during the applicable computation period.
3.3. Severance From Service Date. An Employee's Severance from Service
---------------------------
Date shall mean the earlier of:
(a) the date the Employee quits, retires, is discharged or dies; or
(b) the later of:
(i) the first anniversary of the first date of a period during
which the Employee remains continuously absent from service with the
Employer, either with or without pay, for any reason other than those
set forth in Section 3.3(a) (including, but not limited to, periods
of sick leave or temporary layoff); or
(ii) the second anniversary of the first date of a period of
continuous absence from service with the Employer, for reason of
((a)) the pregnancy of the Employee, ((b)) the birth of the
Employee's child, ((c)) the placement of a child with the Employee in
connection with the adoption of such child by the Employee or ((d))
caring for such child for a period beginning immediately following
such birth or placement.
(c) Notwithstanding anything contained in Section 3.3(b) to the
contrary, if an Employee is continuously absent
<PAGE>
from service with the Employer for more than one year for a reason described in
Section 3.3(b)(ii), the period between the first and second anniversaries of the
Employee's first date of absence shall not be treated as a Year of Service for
any purpose under this Plan.
3.4. Absence of Less Than Twelve Months. If a Participant's or a
----------------------------------
Retirement Participant's service as an Employee is severed pursuant to Section
3.3(a) but he resumes service as an Employee of the Employer within 12 months of
his Severance from Service Date the intervening Period of Severance shall be
deemed to be a Period of Service.
3.5. Severance from Service.
----------------------
(a) One Year Period of Severance. A One Year Period of Severance
----------------------------
shall occur when an Employee or former Employee does not perform an Hour of
Service as an Employee within the 12 month period beginning on his Severance
from Service Date.
(b) Participation After a One Year Period of Severance. A
--------------------------------------------------
Participant or a Retirement Participant who incurs a One Year Period of
Severance shall again become a Participant or a Retirement Participant on his
new Employment Commencement Date. For this purpose, the new Employment
Commencement Date shall be the date following the Participant's or a Retirement
Participant's re-employment on which he first performs an Hour of Service for
the Employer. If the Employee again becomes a Participant or a Retirement
Participant in the Plan, his Years of Service completed prior to his One Year
Period of Severance will be taken into account to determine the vested
percentage of his Employer Matching Contribution Account and Retirement Account,
unless:
(i) at the time he incurs a One Year Period of Severance he
does not have a nonforfeitable interest in his Employer Matching
Contribution Account and Retirement Account, respectively, if any,
and
(ii) the Employee has at least five consecutive One Year
Periods of Severance.
<PAGE>
ARTICLE IV
----------
CONTRIBUTIONS
-------------
4.1. Deferral Election.
-----------------
(a) Election. For each Plan Year, each Participant may make a
--------
Deferral Election pursuant to which the Participant shall direct the Employer to
reduce the Participant's Compensation and to contribute to the Plan, on the
Participant's behalf, the amount by which the Participant's Compensation has
been so reduced.
(b) Amount of Deferral. A Participant may make a Deferral Election
------------------
in an amount (in multiples of 1%) equal to not less than 1% nor more than 14% of
his Compensation for the Plan Year. Such contribution shall be made by payroll
deduction at the regular payroll period applicable to the Participant, or
deducted from any special, non-recurring payment of Compensation made to the
Participant.
(c) Committee's Approval. A Participant's Deferral Election shall
--------------------
be subject to the approval (or partial approval) of the Committee. The
Committee's approval shall not be given:
(i) if the Participant's Deferral Amount for the Plan Year
would exceed $7,000, multiplied by the Adjustment Factor;
(ii) if the Deferral Election results in prohibited
discrimination in favor of an Employee who is a Highly Compensated
Employee;
(iii) if the Deferral Amount, taken together with the Employer
Contributions made on behalf of the Participant for the Limitation
Year under this Plan and any other defined benefit or defined
contribution plan, exceeds 25% of the Participant's "compensation"
(as defined in Section 5.5(f) hereof) for the Limitation Year; or
(iv) if the Committee otherwise determines that the election is
in excess of the amounts permitted by the Code.
In making its determination, the Committee shall apply the provisions of this
Section 4.1(c) and the applicable provisions of the Code and the regulations and
rulings promulgated thereunder. If, as a result of subsequent events, a Deferral
Election which has been previously approved by the Committee would later result
in contributions in excess of the amount permitted under this Section 4.1(c),
the Committee may revoke, in whole or in part, its prior approval and may
require the
<PAGE>
Participant to reduce his Deferral Election in order to prevent such excess.
4.2. Employer Deferral and Matching Contributions.
--------------------------------------------
(a) Deferral Amounts. The Employer shall contribute to the Plan, on
----------------
behalf of each Participant, the amount by which the Participant has elected to
reduce his Compensation pursuant to his Deferral Election in accordance with
Section 4.1. Notwithstanding any other provisions of the Plan to the contrary,
the maximum amount which the Employer shall contribute on behalf of any
Participant pursuant to such Participant's Deferral Election for any Plan Year
shall not exceed $7,000, multiplied by the Adjustment Factor.
(b) Employer Matching Contributions. The Employer shall contribute
-------------------------------
on behalf of each Participant who has a Deferral Election in effect during each
payroll processing period, an amount equal to 33-1/3% of the amount contributed
on behalf of such Participant pursuant to such Participant's Deferral Election
which does not exceed 6% of his Compensation. In no event shall the amount
contributed, pursuant to this Section 4.2(b) on behalf of any Participant exceed
$1,200 in a Plan Year. The Employer may, in the sole discretion of its Board of
Directors, make the Employer Matching Contribution hereunder at any time during
the Plan Year, or, following the end of the Plan Year, within the time
prescribed by law for filing the Employer's Federal income tax return (including
extensions thereof) for its taxable year which coincides with, or ends within,
such Plan Year. The amount of the Employer's contribution for a Plan Year shall
be reduced by the amount of any forfeitures that may have arisen under Section
6.1(b) during such Plan Year. In the event that a Participant receives a
distribution of excess Deferral Elections under Section 4.4 or 5.5 and any
Employer Matching Contributions allocated to the Participant by reason of such
distributed Deferral Elections remain in the Participant's Accounts after
application of Section 4.4(b) or (c), the Participant shall forfeit such
Employer Matching Contributions (plus earnings thereon determined in the manner
described in Section 4.4(g). Amounts forfeited shall be used to reduce future
Employer Matching Contributions under this Section 4.2(b).
(c) Deferral Election - Discontinuance, Variation and Resumption. A
------------------------------------------------------------
Deferral Election, if approved by the Committee, shall continue in effect until
changed or revoked by the Participant. A Participant may make, discontinue or
change a Deferral Election, effective as of any Entry Date during the Plan Year,
by filing a form with the Committee at least 30 days prior to such date
indicating his instructions with respect thereto; provided, however, that a
Participant may completely discontinue a Deferral Election, effective as of the
first day of any month by filing a form with the Committee at least 30 days
prior to such date. The Committee may modify or waive the 30 day advance notice
requirements of this Section 4.3 if it finds, in its sole
<PAGE>
discretion, that such modification or waiver is appropriate under the
circumstances to further the purposes of this Plan. All changes in a Deferral
Election are subject to approval by the Committee in accordance with Section
4.1(c).
4.3. Employer Contributions on Behalf of Retirement Participants. The
-----------------------------------------------------------
following contributions shall be made by the Employer, solely for the benefit of
Retirement Participants, regardless of whether the Employer has current or
accumulated earnings or profits for the taxable year ending with or within the
Plan Years:
(a) Employer Retirement Contributions. For each Plan Year, the
---------------------------------
Employer shall contribute on behalf of each Retirement Participant a percentage
of the Compensation earned during the portion of the Plan Year that the Employee
was a Retirement
<PAGE>
Participant based upon the table set forth below. Contributions shall be made
for each payroll processing period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Total of Employee's Percentage of Percentage of
Age Plus Full Years Compensation, Up to Compensation
of Service Taxable Wage Base Exceeding Taxable
Wage Base
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than 50 3.00% 5.00%
- -------------------------------------------------------------------------------
50 or more, but less than 65 4.00% 6.00%
- -------------------------------------------------------------------------------
65 or more, but less than 75 5.00% 7.00%
- -------------------------------------------------------------------------------
75 or more 6.00% 8.00%
- -------------------------------------------------------------------------------
</TABLE>
For purposes of this Section 4.3 (a), a Retirement Participant's age and full
Years of Service shall be the age and full Years of Service, not rounded, of the
Retirement Participant on the first day of the Plan Year.
(b) Employer Incentive Retirement Contributions. If a Retirement
-------------------------------------------
Participant has elected a Deferral Election equal to or greater than 6% of his
Compensation during any payroll processing period, the Employer shall contribute
on behalf of such Retirement Participant for such payroll processing period an
amount equal to 1% of that Retirement Participant's Compensation to such
Participant's Retirement Account.
Solely for purposes of this Section 4.1(b), a Retirement Participant whose
Deferral Election is suspended as a result of his reaching the limit set forth
in Section 4.1(c)(i) shall be deemed to have in effect, for the suspension
period, the Deferral Election that was in effect immediately prior to the
suspension. The amount of the Employer's Contributions for a Plan Year shall be
reduced by the amount of any forfeitures that may have arisen under Section
6.1(b) during the Plan Year.
(c) Limitation on Contributions. Notwithstanding any other
---------------------------
provision of the Plan to the contrary, the Employer shall not make any
contributions to the Plan pursuant to Section 4.2 or 4.3 on behalf of a
Participant if such contributions would exceed the limitations of Section 5.5.
(d) Limitation on Contributions on Behalf of Highly Compensated
-----------------------------------------------------------
Employees. Notwithstanding any other provision of the Plan to the contrary, the
- ---------
Employer shall not make any contributions to the Plan pursuant to Section 4.2 or
this Section 4.3 on behalf of a Participant who is a Highly Compensated Employee
that would exceed the limitations of Section 4.4.
4.4. Nondiscrimination Requirements.
------------------------------
<PAGE>
(a) Deferral Percentage Test. The Average Deferral Percentage in
------------------------
each Plan Year for all Participants who are Highly Compensated Employees shall
not exceed the greater of:
(i) the Average Deferral Percentage for all Participants who
are non-Highly Compensated Employees for the preceding Plan Year
multiplied by 1.25; or
(ii) the lesser of: (A) the Average Deferral Percentage for all
Participants who are non-Highly Compensated Employees for the
preceding Plan Year multiplied by two or (B) the Average Deferral
Percentage for all Participants who are non-Highly Compensated
Employees plus two percentage points.
For purposes of the Average Deferral Percentage test, the Deferral Percentage of
any Participant who is a Highly Compensated Employee and is eligible to receive
qualified nonelective contributions (within the meaning of Section 401(m)(4)(C)
of the Code) or elective deferrals (within the meaning of Section 401(m)(4)(B)
of the Code) under two or more plans that are qualified under Section 401(a) and
401(k) of the Code and that are maintained by the Company or an Affiliate shall
be determined as if all such contributions and elective deferrals were made
under a single plan.
(b) Employer Contribution Percentage Test. The Average Contribution
-------------------------------------
Percentage in each Plan Year for all Participants who are Highly Compensated
Employees shall not exceed the greater of:
(i) the Average Contribution Percentage for all Participants
who are non-Highly Compensated Employees for the preceding Plan Year
multiplied by 1.25; or
(ii) the lesser of (A) the Average Contribution Percentage for
all Participants who are non-Highly Compensated Employees for the
preceding Plan Year multiplied by two or (B) the Average Contribution
Percentage for all Participants who are non-Highly Compensated
Employees plus two percentage points.
For purposes of the Average Contribution Percentage test, the Contribution
Percentage of any Participant who is a Highly Compensated Employee and is
eligible to receive matching contributions (within the meaning of Section
401(m)(4)(A) of the Code) under two or more plans that are qualified under
Sections 401(a) of the Code and that are maintained by the Company or any
Affiliate shall be determined as if all such contributions were made under a
single plan.
(c) Aggregate Limit. The sum of the Average Deferral Percentage and
---------------
the Average Contribution Percentage for a Plan Year, computed under Subsections
(a) and (b), of Participants who are Highly Compensated Employees shall not
exceed the greater of:
<PAGE>
(i) the sum of:
(A) 1.25 multiplied by the greater of (1) the Average Deferral
Percentage of Participants who are non-Highly Compensated Employees
or (2) the Average Contribution Percentage of Participants who are
non-Highly Compensated Employees; and
(B) two plus the lesser of (1) or (2) in clause (A) above;
provided, however that in no event may this amount exceed two times
the lesser of (1) or (2) in clause (A) above; or
(ii) the sum of :
(A) 1.25 multiplied by the lesser of (1) the Average Deferral
Percentage of Participants who are non-Highly Compensated Employees
or (2) the Average Contribution Percentage of Participants who are
non-Highly Compensated Employees; and
(B) two plus the greater of (1) or (2) in clause (A) above;
provided, however that in no event may this amount exceed two times
the greater of (1) or (2) in clause (A) above.
The application of this Section 4.4(c) shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
(d) Special Participant Rule. For purposes of Subsection (a), (b)
------------------------
and (c), the term "Participants" includes Employees eligible to participate in
the Plan in accordance with Article II whether or not they elected to
participate in the Plan or make a Deferral Election. For Plan Years commencing
on and after January 1, 1999, "Participants" shall not include Employees who are
non-Highly Compensated Employees and who have not attained age 21 and who have
completed less than 1 Year of Service before the last day of the Plan Year.
(e) Corrections.
-----------
(i) In the event the Plan Administrator determines that the
nondiscrimination requirement of Subsection (a) has not been
satisfied in a Plan Year after Deferral Amounts have been allocated
to Participants' Accounts, the Plan Administrator shall reduce the
Average Deferral Percentage for the Highly Compensated Employees to
the extent required to enable the Plan to satisfy at least one of the
tests in Subsection (a). The reduction shall be accomplished by
reducing the Deferral Amount of the Highly Compensated Employee with
the highest Deferral Amount
<PAGE>
to the extent required to cause the Deferral Amount of such Highly
Compensated Employee to equal the next highest Deferral Amount of all
other Highly Compensated Employees. The Plan Administrator shall
repeat this reduction process until the nondiscrimination requirement
of Subsection (a) is met.
(ii) In the event the Plan Administrator determines that the
nondiscrimination requirement of Subsection (b) has not been
satisfied in a Plan Year after Employer Matching Contributions have
been allocated to Participants' Accounts, the Plan Administrator
shall reduce the Average Contribution Percentage for the Highly
Compensated Employees to the extent required to enable the Plan to
satisfy at least one of the tests in Subsection (b). The reduction
shall be accomplished by reducing the Employer Matching Contributions
of the Highly Compensated Employee with the highest Employer Matching
Contributions to the extent required to cause the Employer Matching
Contributions of such Highly Compensated Employee to equal the next
highest Employer Matching Contributions of all other Highly
Compensated Employees. The Plan Administrator shall repeat this
reduction process until the nondiscrimination requirement of
Subsection (b) is met.
(iii) In the event the Plan Administrator determines that the
nondiscrimination requirement of Subsection (c) has not been
satisfied in a Plan Year after Deferral Amounts and Employer Matching
Contributions have been allocated to Participants' Accounts, the Plan
Administrator shall reduce the Average Deferral Percentage and/or the
Average Contribution Percentage (as determined under Subsection
4.4(f) below) for the Highly Compensated Employees to the extent
required to enable the Plan to satisfy at the tests in Subsection
(c). The reduction shall be accomplished in the same manner as is set
forth in Sections 4.4(a) and 4.4(b), whichever is appropriate.
(f) Corrective Distributions. If the Plan Administrator determines
------------------------
that Deferral Amounts or Employer Matching Contributions in excess of the amount
permitted under Subsections (a), (b) or (c) were made to the Plan, then the Plan
Administrator will cause the Trustee to make a corrective distribution of any
such excess (and income allocable thereto as computed in accordance with
Subsection (g)) to the Highly Compensated Employees within 12 months of the
close of the Plan Year to which the excess is attributed based on the excess
amounts determined under Subsection (e). Such a distribution is not subject to
spousal consent. In the case of a corrective distribution required hereunder
because of an excess arising
<PAGE>
under Subsection (c), reductions shall first be made from the Highly Compensated
Employees' Deferral Amounts and then from their Employer Matching Contributions,
if necessary.
(g) Income Attributable to Excess Contributions. The income
-------------------------------------------
attributable to excess Deferral Amounts or Employer Matching Contributions as
determined in accordance with Subsection (e) shall be an amount equal to the sum
of:
(i) the earnings or losses allocated to Deferral Amounts or
Employer Matching Contributions, as applicable, for the preceding
Plan Year multiplied by a fraction the numerator of which is the
excess determined in accordance with Subsection (e), as applicable,
on behalf of the Participant for the preceding Plan Year and the
denominator of which is the portion of the Participant's Account
attributable to Deferral Elections or Employer Matching
Contributions, as applicable, as of the last day of the preceding
Plan Year, reduced by earnings and increased by losses for the
preceding Plan Year; plus
(ii) the earnings or losses allocated to Deferral Amounts, or
Employer Matching Contributions, as applicable for the period between
the end of the preceding Plan Year and the last day of the month
preceding the distribution date multiplied by a fraction determined
under the method described in clause (i) above.
(h) Coordination Rule. Excess Deferral Elections determined with
-----------------
respect to a Plan Year that shall be distributed in accordance with Section (f)
shall be reduced by any excess deferrals, previously distributed to such
Participant for the Participant's taxable year ending with or within such Plan
Year.
4.5. Rollovers and Transfers.
-----------------------
(a) Rollover Contribution - General. Subject to such terms and
-------------------------------
conditions as the Committee may establish from time to time, a Participant or a
Retirement Participant (or an Employee who is not eligible to participate in the
Plan solely because he has failed to satisfy the age and service requirements of
Section 2.2, and who, for purposes of his Rollover Contribution only, shall be
considered a Participant or a Retirement Participant in the Plan) may at any
time make a Rollover Contribution to this Plan, which shall be allocated to the
Participant's or the Retirement Participant's Rollover Contribution Account when
received by the Trustee. Such Participant or Retirement Participant shall submit
a written certification from the trustees, plan administrator or party
maintaining the Eligible Retirement Plan from which the Rollover Contribution
was distributed, in a form satisfactory to the Committee, that the contribution
qualifies as a Rollover Contribution. The Committee and the Trustee shall be
entitled to rely upon such
<PAGE>
certification. Notwithstanding the above, if the Committee subsequently
determines that any Rollover Contribution previously made to the Plan by a
Participant or Retirement Participant is not a valid Rollover Contribution, the
Committee shall return to the Participant or the Retirement Participant, as soon
as administratively possible, the amount of the invalid Rollover Contribution,
together with earnings attributable to the Rollover Contribution.
(b) Rollover Contribution - Defined. A contribution shall qualify
-------------------------------
as a Rollover Contribution if:
(i) it represents an Eligible Rollover Distribution to the
Participant or a Retirement Participant under a retirement plan
qualified under Section 401(a) of the Code;
(ii) it represents the balance to the credit of the Participant
or Retirement Participant in an individual retirement account or
annuity (as described in Section 408 of the Code) created solely to
receive amounts described in Subsection (i) above, and to which no
other contributions were made by the Employee; or
(iii) it represents a direct transfer to the Trustee from an
Eligible Retirement Plan described in Subsection (i), above, of all
or a portion of the benefit to which the Employee was entitled under
such Eligible Retirement Plan.
For purposes of this Section 4.5, Eligible Rollover Distribution and Eligible
Retirement Plan shall have the meanings set forth in Section 6.4(e).
(c) Limitation. A Rollover Contribution shall not include any
----------
amount which constituted an employee contribution, whether voluntary or
mandatory, made by the Employee to a plan described in Subsection (b)(i), unless
such employee contribution is transferred to the Plan pursuant to Section
4.5(b)(iii).
4.6. Non-Forfeitability of Certain Accounts. A Participant's rights to
--------------------------------------
his Deferral Election Account and his Rollover Contribution Account, if any,
shall, at all times, be 100% nonforfeitable. The Forfeitability of a
Participant's rights to his Matching Contribution Account and, if applicable, a
Retirement Participant's rights to his Retirement Account shall be determined in
accordance with the provisions of Section 6.1(b).
<PAGE>
ARTICLE V
---------
INDIVIDUAL ACCOUNTS
-------------------
5.1. Participant Accounts. The Committee shall maintain a Deferral
--------------------
Election Account, a Matching Contribution Account, a Retirement Account and a
Rollover Contribution Account, if applicable, in the name of each Participant or
Retirement Participant.
5.2. Valuation of Accounts. As of each Valuation Date, the Committee
---------------------
shall:
(a) First, add to each of the Participant's or Retirement
-----
Participant's Accounts the Deferral Amounts and Employer Contributions made
during the preceding month which are then allocable to each such Account and
subtract all distributions made to Participants or Retirement Participants since
the last preceding Valuation Date;
(b) Next, allocate to the Accounts of each Participant, Retirement
----
Participant, Former Participant or Former Retirement Participant who has elected
to invest in any Investment Fund, other than in an Insurance Contract each item
of income, expense, gain and loss accruing to such Fund among the Accounts of
Participants, Retirement Participants, Former Participant or Former Retirement
Participant electing to invest, or having an investment, in such Fund in the
same proportion to the value, as of the last preceding Valuation Date, that the
portion of each such Account so invested bears to the value of the portion of
all such Accounts which are invested in such Fund. If any portion of a
Participant's, Retirement Participant's, Former Participant or Former Retirement
Participant's Account is invested in an Insurance Contract, any item of income,
expense, gain or loss attributable to such Insurance Contract shall be allocated
to his Account or Accounts which is so invested.
(c) With respect to a Participant or Retirement Participant whose
employment with the Employer terminates for any reason during a month, the
Committee may (A) value such Participant's or Retirement Participant's Accounts,
in accordance with the provisions of this Section 5.2, as of the last day of the
month in which such termination occurs, and (B) value the portion of the
Participant's or Retirement Participant's Accounts, if any, which is invested in
the Common Stock Fund as of the date on which such shares are sold.
5.3. Employer Contributions Considered Made on Last Day of Plan Year. For
---------------------------------------------------------------
purposes of this Article V, the Employer's contributions made pursuant to
Section 4.2(b), 4.3(a) or 4.3(b) for any Plan Year will be considered to have
been made on the last day of that Plan Year, regardless of when paid to the
Trustee.
<PAGE>
5.4. Valuation. The Trustee shall have prepared, on a daily basis, a
---------
valuation of each Investment Fund and each Participant's, Retirement
Participant's, Former Participant's or Former Retirement Participant's Accounts,
the same to be available to each Participant, Retirement Participant, Former
Participant or Former Retirement Participant. Within a reasonable time after the
close of each month, the Trustee shall prepare or cause to be prepared a
statement of the condition of the Trust Fund, setting forth all investments,
receipts, disbursements, and other transactions effected during such month, and
showing all the assets of the Trust Fund and the cost and fair market value
thereof. The items of information in the statement shall be shown separately for
each investment vehicle maintained in the Investment Fund. This statement shall
be delivered to the Committee and the Plan Administrator. The Plan Administrator
shall then cause to be prepared, and the Trustee shall deliver to each
Participant, Retirement Participant, Former Participant or Former Retirement
Participant, a quarterly report disclosing the status of his Accounts in the
Trust Fund.
5.5. Limitation on Annual Additions.
------------------------------
(a) General. Notwithstanding any other provision of the Plan, the
-------
Annual Addition to a Participant's or Retirement Participant's Accounts for any
Limitation Year may not exceed an amount equal to the lesser of:
(i) the greater of (A) $30,000 or (B) 1/4th of the defined
benefit dollar limitation set forth in Section 415(b)(1) of the Code as in
effect for the Limitation Year; or
(ii) 25% of the Participant's or Retirement Participant's
compensation for the Limitation Year.
(b) Coordination with Defined Benefit Plan. In the event that an
--------------------------------------
Employee is a participant in both a defined benefit plan (whether or not
terminated) and a defined contribution plan maintained by the Employer (or a
Related Employer), the sum of the Defined Benefit Plan Fraction plus the Defined
Contribution Plan Fraction may not exceed 1.0.
(c) Defined Benefit Plan Fraction - Defined. For purposes of this
---------------------------------------
Section 5.5, "Defined Benefit Plan Fraction" with respect to a defined benefit
pension plan shall mean, for any Limitation Year, a fraction:
(i) the numerator of which is the Participant's or Retirement
Participant 's projected annual benefit under such defined benefit
pension plan (determined as of the close of such year); and
(ii) the denominator of which is the lesser of (A) the product
of 1.25 times $90,000 multiplied by the Adjustment Factor; provided,
however, that such adjusted dollar limit shall not become effective
for
<PAGE>
purposes of this Plan for Limitation Years ending prior to the
January 1st of the calendar year for which such adjustment is
announced, or (B) the product of 1.4 times 100% of the Participant's
or Retirement Participant's actual compensation for the three
consecutive years of participation in such defined benefit pension
plan during which he received the greatest aggregate compensation
from the Employer or any Related Employer.
(d) Defined Contribution Plan Fraction - Defined. For purposes of
--------------------------------------------
this Section 5.5, "Defined Contribution Plan Fraction" shall mean, for any
Limitation Year, a fraction:
(i) the numerator of which is the sum of the Annual Additions
credited to the Participant's or Retirement Participant 's Accounts
under this Plan and all other defined contribution plans maintained by
the Employer or any Related Employer in such Limitation Year and for
all prior Limitation Years; and
(ii) the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and for each
prior Limitation Year: (A) the product of 1.25 times the dollar
limitation under Subsection (a)(i), as in effect for such Limitation
Year, or (B) the product of 1.4 times 25% of the Participant's or
Retirement Participant 's compensation for such year.
Subsections (b), (c) and (d) shall not apply to Limitation Years commencing on
and after January 1, 1999.
(e) Annual Additions - Defined. For purposes of this Section 5.5,
--------------------------
the term "Annual Addition" means, for each Limitation Year, the sum of:
(i) the portion of the contribution (other than a contribution
made pursuant to a Participant's or Retirement Participant's Deferral
Election) made by the Employer (or a Related Employer) for such
Limitation Year under this Plan and any defined contribution plan;
plus
(ii) the amount, if any, contributed on behalf of the
Participant pursuant to the Participant's Deferral Election for such
Limitation Year under this Plan or any other defined contribution
plan maintained by the Employer or a Related Employer; plus
(iii) the amount of forfeitures, if any, allocated to the
Participant's account for such Limitation Year under this Plan or any
other defined contribution plan maintained by the Employer or a
Related Employer; plus
<PAGE>
(iv) the amount, if any, of the Participant's voluntary
contributions made under a defined contribution plan maintained by
the Employer or a Related Employer for such Limitation Year.
The term "Annual Addition" shall not include any Rollover Contribution or any
earnings allocable to any Account thereunder and, for any Limitation Year
beginning before January 1, 1987, shall not include the greater of (i)
Participant contributions not in excess of 6% of the Participant's compensation
for such Limitation Year or (ii) 50% of the Participant's employee contribution
for such Limitation Year.
(f) Compensation - Defined. Solely for purposes of Section 5.5, the
----------------------
term "compensation" shall mean a Participant's or Retirement Participant's
wages, salaries, fees for professional services, and other amounts received for
personal services actually rendered in the course of employment with the
Employer or a Related Employer (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of percentage of profits,
commissions on insurance premiums, tips, bonuses and for Plan Year's commencing
on and after January 1, 1998, contributions made at the Employee's election to
employee benefit plans pursuant to Section 125, 401(k) and 403(b) of the Code).
Except as provided in the preceding sentence for Plan Years beginning on and
after January 1, 1998, the term "compensation" shall not include contributions
made by the Employer or a Related Employer to this or to any other plan of
deferred compensation to the extent that, before the application of the
limitations of Section 415 of the Code, such contributions are not includible in
the gross income of the Participant for the taxable year in which contributed,
nor contributions made by the Employer or a Related Employer to a Simplified
Employee Pension described in Section 408(k) of the Code, to the extent such
contributions are deductible by the Participant under Section 219 of the Code,
nor any amounts realized on the exercise of a non-qualified or incentive stock
option, or when restricted stock (or property) held by a Participant either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture, nor distributions from a deferred compensation plan (except from an
unfunded non-qualified plan when includible in gross income), nor amounts
realized from the sale, exchange or other disposition of stock acquired under an
incentive stock option, nor any amounts which receive special tax benefits, such
as premiums for group term life insurance, to the extent not includible in the
gross income of the Participant for Federal income tax purposes.
(g) Other Plans. For purposes of applying the limitations of this
-----------
Section 5.5, all defined benefit plans maintained by the Employer or a Related
Employer (whether or not terminated) are to be treated as one defined benefit
plan, and all defined contribution plans maintained by the Employer or a
<PAGE>
Related Employer (whether or not terminated) are to be treated as one defined
contribution plan. Any contributions to the Employer's defined benefit plan made
by an Employee shall be deemed to be made under a separate defined contribution
plan.
(h) Related Employer - Defined. For purposes of this Section 5.5,
--------------------------
the term "Related Employer" shall mean any other corporation that is, along with
the Employer, a member of a controlled group of corporations (as defined in
Section 414(b) of the Code, as modified by Section 415(h) thereof) or any other
trades or businesses (whether or not incorporated) which, along with the
Employer, are under common control (as defined in Section 414(c) of the Code as
modified by Section 415(h) thereof) or any other employer that forms, along with
the Employer, an "affiliated service group" (as such term is defined in Section
414(m) of the Code or in regulations under Section 414(o)).
(i) Return of Excess Annual Additions. If a Participant's or Retirement
---------------------------------
Participant 's Annual Addition exceeds the amounts specified above:
(i) The Plan shall distribute Deferral Election contributions
to the Participant or Retirement Participant to the extent an excess
exists, together with earning on such excess amounts. The Committee
shall make such distribution in a lump sum as soon as
administratively possible after the excess is determined.
(ii) Employer Matching Contributions and Employer Incentive
Retirement Contributions based on the Deferral Election contributions
above shall be forfeited in the Plan Year in which the Deferral
Elections are distributed. Employer Matching Contributions and
Employer Incentive Retirement Contributions are based on distributed
Deferral Election contributions to the extent that Deferral Election
contributions to the extent that Employer Matching Contributions and
Employer Incentive Retirement Contributions would have been reduced
if the Participant or Retirement Participant had made Deferral
Election contributions for the Plan Year equal to undistributed
Deferral Election contributions.
(iii) Deferral Election contributions and Employer Matching
Contributions which are forfeited under (ii) above shall not be
counted in determining whether the limit in Code Section 402(g) has
been exceeded or in performing the nondiscrimination tests in Section
4.4 of this Plan.
<PAGE>
5.6. Allocations Do Not Create Rights. No Participant or Retirement
--------------------------------
Participant shall acquire any right to or interest in any specific asset of the
Trust Fund merely as a result of the allocations provided for in the Plan.
<PAGE>
ARTICLE VI
----------
PAYMENT OF BENEFITS
-------------------
6.1. Retirement, Death, Disability or Termination of Employment.
----------------------------------------------------------
(a) Retirement, Death or Disability. A Participant or Retirement
-------------------------------
Participant shall be 100% vested in his Accounts upon reaching Normal Retirement
Age, Disability or death. Should any Participant or Retirement Participant
retire(within the meaning of the preceding sentence) or die, an amount equal to
the value of his Accounts shall be payable to the Participant, Former
Participant, Retirement Participant, Former Retirement Participant or his
Beneficiary, as the case may be, in accordance with the provisions of Section
6.4.
(b) Termination of Employment. Upon a Participant's termination of
-------------------------
employment with the Employer, either voluntarily or involuntarily, prior to his
Normal Retirement Age (other than by reason of death, or early or Disability
retirement) he shall be entitled to 100% of the value of his Deferral Election
Account and his Rollover Contribution Account, if any. In addition, such
Participant shall also be entitled to 100% of the value of his Matching
Contribution Account, to the extent attributable to amounts contributed on
behalf of the Participant for Plan Years ending on or before December 31, 1986.
Such Participant shall also be entitled to 100% of the value of his Matching
Contribution Account, to the extent attributable to amounts contributed on
behalf of the Participant for Plan Years beginning on or after January 1, 1987,
if, as of the date of his termination, he has completed 3 Years of Service. If
such Participant has not completed 3 Years of Service he shall forfeit the
entire amount outstanding to his credit in his Matching Contribution Account as
of the last day of the Plan Year in which he terminates employment. A Retirement
Participant shall also be entitled to 100% of the value of his Retirement
Account, if, as of the date of his termination, he has completed 5 Years of
Service. If such Retirement Participant has not completed 5 Years of Service he
shall forfeit the entire amount outstanding to his credit in his Retirement
Account as of the last day of the Plan Year in which he terminates employment.
The value of all Accounts shall be determined and payable in accordance with the
provisions of Sections 5.2, 5.3 and 6.5. Amounts forfeited in any Plan Year
pursuant to this Section 6.1(b) shall be applied to reduce Matching
Contributions made pursuant to Section 4.2(b) for such Plan Year.
(c) Restoration of Benefits. If a Former Participant or Former
-----------------------
Retirement Participant again begins to participate in the Plan before he incurs
5 consecutive One Year Periods of Severance, then, on or before the last day of
the Plan Year which follows the Plan Year in which the Former Participant or
Former Retirement Participant again begins to participate in the Plan, the
Employer shall make an additional contribution to the Plan,
<PAGE>
on his behalf, which is equal to the dollar amount which was forfeited. Such
additional contribution shall be allocated to the Former Participant's Employer
Matching Contribution Account or Former Retirement Participant's Retirement
Account and his vested right to the amount so contributed shall be determined in
accordance with Section 6.1(b) based upon his Years of Service completed both
prior to and subsequent to his Period of Severance.
6.2. Attainment of 59-1/2. If a Participant attains age 59-1/2 and
--------------------
remains in the service of the Employer, he may elect to have the value of his
Deferral Election Account and Employer Matching Account (determined in
accordance with Sections 5.2 and 5.3 and valued as of the Valuation Date
coincident with or next succeeding the date of his election or, pursuant to
procedures which the Committee may, in its sole discretion, adopt, as of the
last day of the month in which he files his election), to the extent of his
nonforfeitable right to such Accounts, paid to him in a lump sum as soon as
practicable following the date as of which his Accounts are valued. The
Participant may make such an election by filing a written notice with the
Committee, on a form acceptable to the Committee. Notwithstanding such
withdrawal, the Participant may also elect to continue to participate in the
Plan if he otherwise remains eligible.
6.3. Beneficiary Designation. If a Participant, Retirement Participant,
-----------------------
Former Participant or Former Retirement Participant has a spouse, his spouse
shall be his Beneficiary, unless the Participant, Retirement Participant, Former
Participant or Former Retirement Participant designates someone other than his
spouse as his Beneficiary (other than as a contingent Beneficiary) and his
spouse consents to such designation pursuant to this Section 6.3. If the
Participant, Retirement Participant, Former Participant, or Former Retirement
Participant does not have a spouse, or if the spouse consents, the Participant,
Retirement Participant, Former Participant or Former Retirement Participant
shall have the right to designate someone other than his spouse as his
Beneficiary. In all events, the Participant, Retirement Participant, Former
Participant or Former Retirement Participant shall have the right to designate a
contingent Beneficiary. Each such designation shall be in writing, filed with
the Committee, and shall be in such form as may be required by the Committee. If
a married Participant, Retirement Participant, Former Participant or Former
Retirement Participant designates someone other than his spouse as his
Beneficiary (other than as a contingent Beneficiary), such Beneficiary
designation shall not be effective unless (a) the spouse consents to such
Beneficiary designation, in writing, and her consent is witnessed by a Plan
representative or notary public, or (b) the Participant, Retirement Participant,
Former Participant or Former Retirement Participant demonstrates, to the
satisfaction of the Committee, that he is not married or his spouse cannot be
located. The Committee shall determine which Beneficiary, if any, shall have
been validly designated. If no Beneficiary has been validly designated, or if
the designated Beneficiaries predecease the
<PAGE>
Participant, Retirement Participant, Former Participant or Former Retirement
Participant, then the amount, if any, payable upon the Participant's Retirement
Participant's, Former Participant's or Former Retirement Participant's death
shall be paid:
(a) to the Participant's, Retirement Participant's, Former
Participant's or Former Retirement Participant's surviving spouse; or, if there
is none,
(b) to the Participant's, the Retirement Participant's, Former
Participant's or Former Retirement Participant's children and issue of deceased
children, in equal shares, per stirpes; or if there are none,
(c) to the Participant's, the Retirement Participant's the Former
Participant's or Former Retirement Participant's parents, in equal shares, or to
the survivor thereof; or if there are none,
(d) to the legal representative(s) of the Participant's, the
Retirement Participant's, the Former Participant's or the Former Retirement
Participant's estate.
<PAGE>
6.4. Form of Payment.
---------------
(a) Retired or Disabled Participants. A Participant or a Former
--------------------------------
Participant hired prior to January 1, 1997 or a Participant who is not a
Retirement Participant who has terminated his employment on or after his Normal
Retirement Age or because he was Disabled, may elect, in writing, in a form
satisfactory to the Committee, to receive his benefit under the Plan in one of
the following methods:
(i) by a lump sum payment; or
(ii) by payment in equal monthly, quarterly or semi-annual
installments over a period not in excess of 15 years in which event
the remaining balance held in the Former Participant's Accounts shall
be held and invested in accordance with Section 9.2 pursuant to the
instructions of the Former Participant. Payment shall be made not
less often than semi-annually to such Participant or Former
Participant of the installments as they fall due, plus such earnings
as may have been credited on the amount so deposited or invested less
an annual administrative fee in an amount determined by the Trustee.
In the event of the death of the Participant or the Former
Participant prior to completion of the designated number of payments,
such payments shall be paid to his Beneficiary until the designated
number of payments has been completed.
(b) Retirement Participants. A Retirement Participant or Former
-----------------------
Retirement Participant who has terminated his employment on or after his Normal
Retirement Age or because he was Disabled shall be entitled to receive an
immediate distribution or a direct transfer to another plan of the value of his
Accounts.
(c) Terminated Participants. Upon a Participant's or a Retirement
-----------------------
Participant's termination of employment with the Employer, either voluntarily or
involuntarily, prior to his Normal Retirement Age (other than by reason of his
death or Disability), he shall be entitled to receive an immediate distribution
or a direct transfer to another plan of the value of his Accounts, pursuant to
Section 6.1; provided he returns a completed benefit distribution form to the
Committee prior to the last day of the twelfth (12th) calendar month following
his termination of employment. If the Participant or the Retirement Participant
does not elect to receive either a distribution or a direct transfer of the
value of his Accounts upon his termination of employment, the Participant or
Retirement Participant will be eligible to elect a distribution of the value of
his Accounts at any time after his attainment of age 55, but not later than his
Mandatory Distribution Date as determined under Section 6.5.
Until benefits are distributed, a Participant's or a Retirement
Participant's Accounts shall be held and invested in
<PAGE>
accordance with Section 9.2 pursuant to the instructions of the Former
Participant or Former Retirement Participant.
(d) Death of a Participant or Retirement Participant. If a
------------------------------------------------
Participant, Former Participant, Retirement Participant or Former Retirement
Participant dies prior to the date payment of his benefit begins, the value of
his Accounts shall be paid to his Beneficiary as soon as practicable following
his death. Benefits shall be paid in a lump sum.
(e) Amount and Form of Payment. The present value of the payments
--------------------------
to the Participant or Retirement Participant pursuant to this Section 6.5 must
be greater than 50% of the present value of the total payments to be made to the
Participant or Retirement Participant and his Beneficiary. Any distribution made
pursuant to this Plan shall be made in cash except that if, as of the date the
Participant or Retirement Participant terminates his employment, part of his
Accounts is invested in the Common Stock Fund or in shares of any other
Investment Fund, and if the Participant's, Retirement Participant's, Former
Participant's or Former Retirement Participant's benefit is to be paid in the
form of a lump sum pursuant to this Section 6.4 then the Participant, Retirement
Participant, Former Participant or Beneficiary to whom such payment is made may
elect to have that portion of the Accounts which is so invested paid in common
stock or shares held in each such Fund; provided, however, that cash will be
paid in lieu of any fractional shares allocated to the Participant's, or
Retirement Participant's, Retirement Participant's, Former Participant's or
Former Retirement Participant's Accounts.
(f) Direct Rollover. Notwithstanding any provision of the Plan to
---------------
the contrary, that would otherwise limit a Distributee's election under this
subsection, a Distributee may elect, at the time and in the manner prescribed by
the Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Participant or
Retirement Participant in a Direct Rollover.
For purposes of subsection (e) of this Section 6.4, the following
definitions shall apply:
(i) An Eligible Rollover Distribution is any distribution of
all or any portion of the balance to the credit of the Distributee,
except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the designated beneficiary, or
for a specified period of ten years or more; any distribution to the
extent such distribution is required under Section 401(a)(9) of the
Code; and the portion of any distribution that is not includible
<PAGE>
in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(ii) An Eligible Retirement Plan is an individual retirement
account described in Section 408 of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code or a qualified
trust described in Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of
an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(iii) A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a Qualified Domestic Relation Order, as
defined in section 414(p) of the Code, are Distributees with regard
to the interest of the spouse or former spouse.
(iv) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the distributee.
6.5. Limitations on Commencement or Duration of Benefit Payments.
-----------------------------------------------------------
(a) Commencement of Benefits
------------------------
(i) For Plan Years Commencing Prior to January 1, 1997 and
--- ------------------------------------------------------
Five Percent Owners of the Company or Affiliate. Notwithstanding any
-----------------------------------------------
provision of the Plan to the contrary, the payment of benefits to
each Participant, Former Participant, Retirement Participant or
Former Retirement Participant shall commence not later than the April
1st following the taxable year in which the Participant, Former
Participant, Retirement Participant or Former Retirement Participant
attains age 70-1/2, which date shall be known as such Participant's,
Retirement Participant's, Former Participant's or Former Retirement
Participant's Mandatory Distribution Date. Such payments shall be
made:
((a)) on or before such date;
((b)) beginning by such date, over the life of such
Participant, Retirement Participant, Former Participant or Former
Retirement Participant or over the lives of the Participant,
Retirement
<PAGE>
Participant, Former Participant or Former Retirement Participant and
his Beneficiary; or
((c)) beginning by such date, over a period which may
not extend beyond the life expectancy of such Participant, Former
Participant, Retirement Participant or Former Retirement Participant
or the joint life expectancy of the Participant, Former Participant,
Retirement Participant or Former Retirement Participant and his
Beneficiary.
If benefits have commenced pursuant to this Section 6.5(a)(i) to a Participant
prior to December 31, 1996 and, as of December 31, 1996, the Participant is
employed by the Company or an Affiliate, the Participant shall make an election
either to continue receiving benefits or to cease benefits for Plan Years
commencing on and after January 1, 1997. In the event that a Participant elects
to cease receiving benefits, benefits shall commence to the Participant pursuant
to Section 6.5(a)(ii).
(ii) For Plan Years Commencing On and After January 1, 1997.
------------------------------------------------------
Notwithstanding any provision of the Plan to the contrary and subject
to Section 6.5(a)(i), the payment of benefits to each Participant,
Retirement Participant, Former Participant or Former Retirement
Participant shall commence on the April 1st following the later of
the calendar year in which the Participant, Retirement Participant,
Former Participant or Former Retirement Participant attains the later
of age 70-1/2 or the calendar year in which he retires. Such payments
shall be made:
((a)) on or before such date;
((b)) beginning by such date, over the life of such
Participant, Retirement Participant, Former Participant or Former
Retirement Participant or over the lives of the Participant,
Retirement Participant, Former Participant or Former Retirement
Participant and his Beneficiary; or
((c)) beginning by such date, over a period which may
not extend beyond the life expectancy of such Participant, Retirement
Participant, Former Participant or Former Retirement Participant and
the joint life expectancy of the Participant, Former Participant,
Retirement Participant, Former Retirement Participant and his
Beneficiary.
Notwithstanding the foregoing, the payment of benefits to each Participant who
attained age 70-1/2 prior to January 1, 1988 and is not a Five Percent Owner (as
defined in Section 11.1(c)) shall commence on the later of the April 1st
following the taxable year in which (i) he attains age 70-1/2 or (ii) he
retires.
<PAGE>
(b) Maximum Duration of Death Benefits. If a Participant,
----------------------------------
Retirement Participant, Former Participant or Former Retirement Participant dies
before his entire interest is distributed to him or if a distribution has
commenced to his surviving spouse and such surviving spouse dies but before the
entire remaining interest is distributed to such surviving spouse, then if any
benefit remains payable under this Plan with respect to such deceased
Participant, Retirement Participant, Former Participant or Former Retirement
Participant, such remaining benefit shall be distributed to his Beneficiary:
(i) within five years after the death of the Participant,
Retirement Participant, Former Participant or Former Retirement
Participant (or the death of his surviving spouse, as the case may
be); or
(ii) over the life of such Beneficiary, or over a period no
longer than the life expectancy of such Beneficiary (determined no
more frequently than once during a Plan Year, if the Beneficiary is
the surviving spouse, or, if not, calculated as of the date payments
begin); provided, that if the Beneficiary is the surviving spouse of
the deceased Participant, Retirement Participant, Former Participant
or Former Retirement Participant, such payments begin on or before
the date on which the Participant, Retirement Participant, Former
Participant or Former Retirement Participant would have attained age
70-1/2 if he had lived; and, provided further, that if the
Beneficiary is not the surviving spouse, such payments begin no later
than within 1 year of the Participant's, Retirement Participant's,
Former Participant's or Former Retirement Participant's death, or the
death of the surviving spouse, if the surviving spouse dies before
benefit payments begin, as the case may be.
The provisions of this Subsection (b) shall not apply if distribution of the
Participant's, Retirement Participant's, Former Participant's or Former
Retirement Participant's interest had commenced prior to the death of the
Participant, Retirement Participant, the Former Participant or Former Retirement
Participant, or his spouse, as the case may be, in accordance with a form of
benefit payment which satisfies Subsection (a)(iii) and payment of such interest
continues to be made pursuant thereto. All benefits payable under this Section
6.5 shall satisfy the incidental death benefit rule of Section 401(a)(9)(G) of
the Code by determining the life expectancies of the Participant or Retirement
Participant and his Beneficiary with reference to proposed Treasury Regulation
Section 1.401(a)(9)-2.
(c) Additional Limitations. Notwithstanding anything to the
----------------------
contrary contained in this Section 6.5, the payment of benefits hereunder to a
Participant, Retirement Participant, Former Participant or Former Retirement
Participant shall
<PAGE>
commence not later than the 60th day after the close of the Plan Year in which
the latest of the following events occurs:
(i) his attainment of age 65;
(ii) the tenth anniversary of the year in which the Participant
or Retirement Participant began to participate in the Plan; or
(iii) the termination of the Participant's or Retirement
Participant's service with the Employer or an Affiliate;
provided, however, that the Participant, Retirement Participant, Former
Participant or Former Retirement Participant may elect to defer the commencement
of the payment of benefits hereunder until any time prior to the April 1st
following the calendar year in which he attains age 70-1/2.
6.6. Cash-Out of Benefits. Notwithstanding anything contained in
--------------------
this Plan to the contrary, if the value of a Participant's, Retirement
Participant's, Former Participant's or Former Retirement Participant's Account
is $3,500 or less, the Committee shall pay such benefit in a single lump sum as
soon as practicable after the retirement, termination, Disability or death of
the Participant, Retirement Participant, Former Participant or Former Retirement
Participant, and any such distribution to the Participant, Retirement
Participant, Former Participant, Former Retirement Participant or his
Beneficiary, as the case may be, shall be in complete discharge of the Plan's
obligation with respect to such benefit. A Participant who terminated employment
prior to being entitled to 100% of his Employer Matching Contribution Account or
Retirement Account, shall be deemed to have received the entire distribution of
such Accounts as of his termination of employment.
6.7. Qualified Domestic Relations Orders. If the Plan Administrator
-----------------------------------
has determined that a domestic relations order which pertains to the benefits
under this Plan of a Participant, Retirement Participant, Former Participant or
Former Retirement Participant is a Qualified Domestic Relations Order, then the
amount of benefits otherwise payable under this Plan to such Participant,
Retirement Participant, Former Participant or Former Retirement Participant, or
his Beneficiary, as the case may be, shall be reduced by the value of any
amounts paid or payable pursuant to such Order.
<PAGE>
ARTICLE VII
-----------
LOANS TO PARTICIPANTS AND WITHDRAWALS
-------------------------------------
7.1. Loans.
-----
(a) General. The Committee shall be authorized to administer a loan
-------
program under the Plan, pursuant to this Section 7.1. A Participant may borrow a
portion of his Accounts, but not including any balance in his Retirement
Account, in accordance with the following procedures, terms and conditions:
(i) In order to borrow any portion of his Accounts, but not
including any balance in his Retirement Account, the Participant
shall file a written application with the Committee and shall sign a
written form, prescribed by the Committee, authorizing the Employer
to deduct from such Participant's pay for each month during the term
of the loan, amounts determined in accordance with such schedule of
repayment as may be determined appropriate by the Committee in order
to repay the principal and accrued interest due under the loan. In
determining a schedule of repayment of any loan under this Plan, the
Committee shall provide for substantially level amortization of such
loan (with payments not less frequently than quarterly), over the
term of the loan. Loan proceeds shall be distributed to the
Participant as soon as administratively practicable following
application.
(ii) The aggregate total of all outstanding loans to a
Participant under this Plan shall be in an amount specified by the
Participant, which amount shall not be less than $1,000 nor more than
50% of the nonforfeitable value of such Participant's Accounts, but
not including any balance in his Retirement Account, determined on
the date of the loan application; provided, however, that any loan
amount, when added to the highest outstanding balance of loans from
the Plan during the one-year period ending on the day before the date
on which such loan is made, shall not exceed $50,000.
(iii) Any loan to a Participant under this Plan shall be made at
an interest rate fixed by the Committee, determined as of the date of
the loan application. The Committee shall ascertain a reasonable rate
of interest each month, with respect to loans granted in the following
month, which shall provide the Plan with a return commensurate with,
and be determined on the basis of, the interest rates charged by
commercial lending institutions for loans which would be made under
similar circumstances.
<PAGE>
(iv) The aggregate total of all outstanding loans to a
Participant under this Plan shall be adequately secured by up to 50%
of the non-forfeitable value of the Participant's Accounts, but not
including any balance in his Retirement Account. In addition to said
value of the Participant's Accounts, the Committee may require the
Participant to post additional security if it believes such security
is necessary or desirable in order to adequately secure the loan. If,
because of a decrease in the value of the Participant's Accounts, but
not including any balance in his Retirement Account, or for any other
reason, the Committee believes the loan to be inadequately secured,
it shall either require the Participant to post security in addition
to the value of such Accounts or demand accelerated repayment of the
loan. The types of security that may be required to be posted shall
include, but not be limited to, certificates of deposit, stocks,
short-term bonds and other short-term securities and their cash
equivalents.
(v) Any loan to a Participant under this Plan shall contain
such default provisions as may be determined appropriate by the
Committee, including the provision that if an event of default occurs
and is not cured within 30 days, the unpaid principal and accrued
interest due under the loan shall be declared immediately payable in
full and may be charged back against the Participant's Accounts as a
distribution at the earliest time that the Participant is entitled to
receive a distribution under this Plan. A failure to make a scheduled
payment, or the filing of an application for a benefit distribution
(other than a hardship withdrawal pursuant to Section 7.2) under this
Plan, shall constitute events of default.
(vi) A loan origination fee, in an amount determined by the
Committee annually, will be charged to each Participant obtaining a
loan and will be deducted from the loan proceeds.
(b) Allocation of Loans. The written instrument evidencing any loan
-------------------
made pursuant to this Section 7.1 shall be held by the Trustee for the benefit
of the Participant to whom the loan was made and not for the Trust Fund as a
whole, and the Participant's interest in Investment Funds, other than the Common
Stock Fund or an Insurance Contract will be reduced by a like amount, in the
same proportion that his interest in each such Investment Fund bears to the
amount of the loan.
<PAGE>
(c) Aggregation of Loans. For purposes of determining whether the
--------------------
dollar limitations of Section 7.1(a) have been met, the Committee shall take
into account the unpaid principal amount of any loan(s) made to the Participant
under the provisions of any employee benefit plan to which contributions have
been made on his behalf by the Employer or an Affiliate.
(d) Number of Outstanding Loans. Effective January 1, 1995, a
---------------------------
Participant may have up to two (2) outstanding loans from his Accounts at any
given time. If a Participant already has an outstanding loan from his Accounts,
he may request a second loan, provided that (i) the request is made no sooner
than six (6) months after the initial loan request and (ii) the limits described
in subsection (a) are not exceeded by the total of the two loans.
(e) Maximum Term of Loans. The Committee may not permit a
---------------------
Participant to borrow any part of the value of the Participant's Accounts, but
not including any balance in his Retirement Account, pursuant to Section 7.1
unless the Participant is required, by the terms of the loan, to repay the
amount borrowed within 5 years of the date of the loan. Notwithstanding the
foregoing, if the Participant borrows from his Accounts, but not including any
balance in his Retirement Account, under the provisions of this Section 7.1 and
the proceeds of such loan will be used by the Participant to acquire any
dwelling unit which, within a reasonable period of time, is to be used as a
principal residence of the Participant, then the maximum term of the loan need
not be restricted to five years and the loan shall be repaid within a
reasonable period of time, as fixed by the Committee in the loan papers at the
time the loan is made. At the time the loan is made, the Committee shall
determine whether a dwelling unit will be used as a principal residence within
a reasonable period of time.
(f) Allocation of Payments. Each payment by the Participant to the
----------------------
Trustee in repayment of any outstanding loan(s) shall be allocated (i) first, to
repay any amount which may have been borrowed under the terms of any Insurance
Contracts allocated to the Participants Accounts if such loan was originally
charged against such Insurance Contracts and (ii) second, to the portion of the
Participant's Accounts invested in the Investment Funds in the same proportion
as any new contributions on behalf of the Participant would be allocated between
the Investment Funds.
(g) A Participant may repay any outstanding principal and accrued
interest due under the loan without being charged with any prepayment penalty at
any time after the six month period beginning on the date that the loan was
made. No penalty will apply to prepayments.
7.2. Hardship Distribution.
---------------------
<PAGE>
(a) General. As of the last day of any month, a Participant shall be
-------
entitled to receive a hardship distribution from his Deferral Election Account
if he establishes, to the satisfaction of the Committee or as provided in
Subsection (b) or Subsection (c), that (i) he has an immediate and heavy
financial need and (ii) the distribution is necessary to satisfy such financial
need. In no event, however, shall the amount which is distributed to a
Participant exceed the lesser of the amount required to meet such financial
need, as determined by the Committee, or the balance of the Participant's
Accounts as of December 31, 1988 plus the Participant's Deferral Amounts made
after December 31, 1988 (reduced by any prior distributions of such amounts).
The amount of an immediate and heavy financial need may include any amounts
necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution. In order to make a
withdrawal pursuant to this Section 7.2, the Participant shall file with the
Committee a written application, on a form acceptable to the Committee, at least
30 days prior to the date on which the Participant wishes to make a withdrawal,
setting forth the reasons for the withdrawal request, the amount he wishes to
withdraw and such other information as the Committee may require. In
administering the provisions of this Section 7.2, the Committee shall act in a
uniform, non-discriminatory manner, and all Participants shall be treated
similarly under similar circumstances.
(b) Immediate and Heavy Financial Need. For the purposes of this
----------------------------------
Section 7.2, a distribution will be deemed to be on account of an immediate and
heavy financial need within the meaning of Subsection (a)(i) if it is for:
(i) Medical care expenses (within the meaning of Section
213(d) of the Code) previously incurred by the Participant, the
Participant's spouse or the Participant's dependents or prepayment of
medical care expenses necessary for such persons to obtain such care.
(ii) Costs directly related to the purchase (excluding mortgage
payments) of the Participant's principal residence.
(iii) Payment of tuition, related educational fees, and room and
board expenses, for the next 12 months of post-secondary education for
the employee, or the employee's spouse, children, or dependents (as
defined in Section 152 of the Code);
(iv) Payments necessary to prevent eviction from, or
foreclosure of a mortgage on, the Participant's principal residence.
(c) Distribution Deemed Necessary. For purposes of Subsection
-----------------------------
(a)(ii), a distribution shall be treated as necessary
<PAGE>
to satisfy an immediate and heavy financial need of a Participant, if, and only
if, the Participant has obtained all distributions (other than hardship
distributions) and all nontaxable loans available to him under this Plan
(provided that such available loan amount equals or exceeds the financial need)
and any other plan maintained by the Company or any Affiliate. Notwithstanding
the preceding sentence, a Participant may satisfy Subsection (a)(ii), without
obtaining all nontaxable loans available to him under the Plan, by demonstrating
to the Committee that he lacks other resources that are reasonably available to
satisfy his heavy and immediate financial need, provided, that the Committee
determines that requiring the Participant to obtain a loan under the Plan would
impair the Participant's ability to obtain additional funds from other sources
which are necessary to satisfy the same financial need, or in and of itself
impose an additional hardship on the Participant.
(d) Suspension and Limitation of Deferral Elections. A Participant
-----------------------------------------------
who receives a hardship distribution pursuant to this Section 7.2 shall have his
Deferral Elections suspended for a one year period commencing on the date of
receipt of the hardship distribution, and the Participant's Deferral Election
for the Plan Year following the Plan Year of the hardship distribution shall be
limited to the amount described in Section 402(g) of the Code as in effect for
such following year, reduced by the amount of the Participant's Deferral
Elections made for the Plan Year of the hardship distribution prior to the
beginning of the one year suspension.
(e) Members of Reserve Units. A Participant, who is a member of a
------------------------
reserve unit of the armed forces of the United States that is called to active
duty, shall not be subject to the loan requirements deemed necessary to meet the
requirements of subsection (c) in order to receive a hardship distribution from
the Plan.
<PAGE>
ARTICLE VIII
------------
COMMITTEE AND PLAN ADMINISTRATOR
--------------------------------
8.1. Committee - Authority. The Administrative Committee (the
---------------------
"Committee") shall have the authority to control and manage the operation and
administration of this Plan (other than the authority to manage and control the
assets of the Plan), except to the extent such powers have been allocated to the
Trustee or a Plan Administrator, or delegated to any other person pursuant to
the Plan or the Trust. The Committee and the Plan Administrator shall be "named
fiduciaries" within the meaning of Section 402 of ERISA.
8.2. Appointment. The Committee shall consist of at least 3 persons, all
-----------
of whom shall be appointed by the Board of Directors, to serve at its pleasure.
The members may, but need not be, officers or directors of the Company. If, at
any time, there shall be fewer than 3 members, the Board of Directors shall
appoint one or more new members so that there are at least 3 members. The
appointment of a Committee member shall become effective upon delivery of his
acceptance in writing of such appointment to the Company and to each other
Committee member, if any, then acting under this Plan.
8.3. Death, Resignation or Removal of Committee Member. A Committee
-------------------------------------------------
member shall cease to be such upon his death, resignation, removal by the Board
of Directors or being declared legally incompetent. Any Committee member may
resign by notice in writing mailed or delivered to the Company and to the
remaining member or members. Any one or all of the Committee members may be
removed by the Board of Directors by delivery to the affected member or members,
with copies to the other members then acting, of an instrument executed by the
Company evidencing the action taken by the Board of Directors to remove such
member or members.
8.4. Written Notice of Appointment, Resignation or Removal. A copy of any
-----------------------------------------------------
instrument evidencing the acceptance of appointment, resignation or removal of a
Committee member shall be filed with the records of this Plan and shall be
deemed a part of this Plan.
8.5. Action By Committee. Any and all acts may be taken and decisions may
-------------------
be made hereunder by a majority of the Committee members then acting. The
Committee may make any decision or take any action at a meeting duly called and
held, or by written documents signed by the minimum number of Committee members
empowered to take action or make decisions at that time, as hereinabove
provided. The members may delegate to each or any of their number authority to
perform ministerial acts or to sign documents on behalf of the Committee, and a
document so signed shall be conclusively presumed to be the action of the
Committee.
<PAGE>
8.6. Employment of Agents. The Committee may enlist the services of such
--------------------
agents, representatives and advisers as they may deem advisable to assist them
in the performance of their duties under this Plan, including, but not by way of
limitation, custodial agents for the Trust Fund and attorneys and accountants.
8.7. No Committee Member Compensation. The Committee members shall serve
--------------------------------
without compensation, as such, but the reasonable expenses incurred by the
Committee, including reasonable fees and expenses of custodial agents,
attorneys, accountants and other advisers, shall be paid from the Trust Fund and
shall be allocated between principal and income as the Committee may determine;
provided, however, that the Company may, in its own discretion, pay all or part
of such expenses.
8.8. Committee Powers. The Committee shall have the specific powers
----------------
elsewhere herein granted to it and shall have such other powers as may be
necessary in order to enable it to discharge its responsibilities with respect
to this Plan, including, but not by way of limitation, the sole discretionary
authority to do the following:
(a) To interpret and construe this Plan and to determine all
questions arising under this Plan, other than those specifically reserved
elsewhere herein for determination by the Company or the Plan Administrator, and
to correct any defect or supply any omission or reconcile any inconsistency in
this Plan in such manner and to such extent as they shall deem expedient to
effectuate the purposes and intent of this Plan;
(b) To determine all questions of eligibility and status and rights
of Participants, Retirement Participants and others under this Plan, either
directly or on appeal. The Committee shall have the exclusive discretionary
authority to determine eligibility for benefits under the Plan, to construe the
terms of the Plan, to make factual determinations and to determine any question
which may arise in connection with the operation or the administration of the
Plan. The actions and the decisions of the Committee shall be conclusive and
binding upon the Employer and any and all Participants, Retirement Participants,
Former Participants, Former Retirement Participants, spouses, Beneficiaries,
Alternate Payees and their respective heirs, distributees, executors,
administrators, or assignees; subject, however, to the right of Participants,
Former Participants, Retirement Participants, Former Retirement Participants
spouses, Beneficiaries, Alternate Payees and their respective heirs,
distributees, executors, administrators, or assignees to file a written claim
under the Claims Procedure as set forth in Section 8.9;
(c) To authorize and make, or cause to be made, payment of all
benefits and expenses which become payable under this Plan;
<PAGE>
(d) To adopt and to amend from time to time such by-laws and rules
and regulations as they shall deem necessary for the administration of this
Plan, which are not inconsistent with the terms and provisions of this Plan.
(e) To establish reasonable procedures to determine whether a
domestic relations order is a Qualified Domestic Relations Order and for
payments to be made pursuant to such Order. Any payment made by the Committee
pursuant to a Qualified Domestic Relations Order shall reduce, by a like amount,
the amount otherwise payable under the Plan to the Participant, Retirement
Participant, Former Participant or Former Retirement Participant to whom such
Order relates or his Beneficiary, as the case may be.
8.9. Claims for Benefits. A Participant, Retirement Participant,
-------------------
Retirement Participant, Former Participant, Former Retirement Participant or
Beneficiary ("Claimant") shall file a claim for benefits with the Committee at
the time and in the manner prescribed by it. The Committee shall provide
adequate notice in writing to any Claimant whose claim for benefits under the
Plan has been denied. Such notice must be sent within 90 days of the date the
claim is received by the Committee, unless special circumstances warrant an
extension of time for processing the claim. Such extension shall not exceed 90
days and no extension shall be allowed unless, within the initial 90 day period,
the Claimant is sent a notice of extension indicating the special circumstances
requiring the extension and specifying a date by which the Committee expects to
render its final decision. The Committee's notice of denial to the Claimant
shall set forth:
(a) The specific reason or reasons of the denial;
(b) Specific references to pertinent Plan provisions on which the
Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the
material or information is needed;
(d) A statement that the claimant may:
(i) request a review upon written application to the Committee;
(ii) review pertinent Plan documents; and
(iii) submit issues and comments in writing; and
(e) The name and address of the Committee's delegate to whom the
Claimant may forward his appeal.
Any appeal that the Claimant wishes to make from the adverse determination must
be made, in writing, to the Committee, within 60 days after receipt of the
Committee's notice of denial of
<PAGE>
benefits. The Committee's notice must further advise the Claimant that his
failure to appeal the action to the Committee in writing within the 60-day
period will render the Committee's determination final, binding, and conclusive.
If the Claimant should appeal to the Committee, he or his duly authorized
representative, may submit, in writing, whatever issues and comments he, or his
duly authorized representative, feel are pertinent. The Committee shall re-
examine all facts related to the appeal and make a final determination as to
whether the denial of benefits is justified under the circumstances. The
Committee shall advise the Claimant, in writing, of its decision on his appeal,
the specific reasons for the decision, and the specific Plan provisions on which
the decision is based. The notice of the decision shall be given within 60 days
of the Claimant's written request for review, unless special circumstances (such
as a hearing) would make the rendering of a decision within the 60-day period
unfeasible, but in no event shall the Committee render a decision on an appeal
from the denial of a claim for benefits later than 120 days after receipt of a
request for review. If an extension of time for review is required because of
special circumstances, written notice of the extension shall be furnished to the
Claimant prior to the date the extension period commences.
8.10. Liability for Contributions. The Committee shall not be responsible
---------------------------
for the determination or collection of any contributions which may be or become
payable under this Plan.
8.11. Plan Administrator. The Board of Directors may designate in writing
------------------
the Committee, or a person, who may but need not be a Committee member, or a
corporation which may but need not be the Company, to act as the Plan
Administrator hereunder. The appointment of a Plan Administrator shall be
effective upon delivery of written acceptance of such appointment to the Company
and the Committee. The Board of Directors may from time to time revoke such
designation by notice in writing mailed or delivered to the Plan Administrator,
and the Plan Administrator may resign by notice in writing mailed or delivered
to the Company. Any designation, acceptance, resignation or removal of the Plan
Administrator shall be deemed a part of this Plan. The Company shall be the
Plan Administrator unless a Plan Administrator has been appointed pursuant to
this Section 8.11. The Plan Administrator shall have those responsibilities
assigned to the "plan administrator" by ERISA, the Code, any other applicable
law, any regulations issued pursuant to any of the foregoing, and the provisions
of this Plan.
8.12. Compensation and Expenses of Plan Administrator. Unless the Plan
-----------------------------------------------
Administrator is a firm or corporation, the Plan Administrator shall serve
without compensation; provided, however, that the reasonable expenses incurred
by the Plan Administrator hereunder shall be paid from the Trust Fund except to
the extent that the Company, in its own discretion, pays all or part of such
expenses. If the Plan Administrator is a firm or corporation, its compensation
shall be determined by written
<PAGE>
agreement between it and the Company and shall be paid from the Trust Fund
unless the Company, in its own discretion, pays all or part of such
compensation. If the Company is the Plan Administrator, it shall serve without
compensation and shall bear its own expenses.
8.13. Allocation of Duties. The Committee and the Plan Administrator may
--------------------
further allocate their fiduciary responsibilities with respect to this Plan
among themselves, and may designate one or more other persons, firms or
corporations to carry out such fiduciary responsibilities under this Plan. Any
allocation or designation pursuant to this Section 8.13 shall be in writing and
shall constitute a part of this Plan.
8.14. Participation of Committee Members and Plan Administrator. Nothing
---------------------------------------------------------
contained in this Plan shall preclude a Committee member or Plan Administrator
from becoming a Participant or a Retirement Participant in this Plan, if he be
otherwise eligible, but he shall not be entitled to vote or to act upon or to
sign any document relating to his own participation in this Plan.
8.15. Books and Records. The Committee shall maintain appropriate records
-----------------
of all actions taken. The Committee and the Plan Administrator shall submit,
make available or deliver on request to governmental agencies or
instrumentalities, the Company and other Employers, Participants, Former
Participants, Retirement Participants, Former Retirement Participants,
Beneficiaries and other persons entitled thereto, such reports, documents or
records as may be required by law, or as they may otherwise deem appropriate.
The Company may, at any time, inspect the records of the Committee and the Plan
Administrator.
8.16. Fiduciary Standard. The Committee and the Plan Administrator shall
------------------
exercise their powers in accordance with rules applicable alike to all similar
cases, and they shall discharge all their powers and duties hereunder in
accordance with the terms of this Plan, solely in the interests of Participants,
Retirement Participants, Former Participants, Former Retirement Participants and
Beneficiaries, and for the exclusive purpose of providing benefits to such
persons, with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of like character and
with like aims.
8.17. Indemnification. To the extent permitted by law, the Company shall
---------------
indemnify and save each Committee Member, each former Committee Member, the Plan
Administrator and each former Plan Administrator if, while serving as such, he
is or was an Employee (each such person being herein called an "Indemnitee"),
and their respective heirs and legal representatives, harmless from and against
any loss, cost or expense including reasonable attorney's fees (collectively,
"liability") which any such person may incur individually, jointly, or jointly
and severally, aris-
<PAGE>
ing out of or in connection with the administration of this Plan, including,
without limitation of the foregoing, any liability which may arise out of or in
connection with the management and control of the Trust Fund, unless such
liability is determined to be due to willful breach of the Indemnitee's
responsibilities under this Plan, under ERISA, or other applicable law.
<PAGE>
ARTICLE IX
----------
INVESTMENT OF PLAN ASSETS
-------------------------
9.1. Contributions Held in Trust. All contributions under this Plan shall
---------------------------
be paid to the Trustee. The Trustee shall have the exclusive authority and
discretion to accept such sums of money and such other property as shall from
time to time be paid or delivered to it pursuant to this Plan and, except to the
extent provided in Sections 9.2 and 9.3, to hold, invest, re-invest and
distribute the Trust Fund in accordance with the provisions of this Plan and the
Trust.
9.2. Investment Funds. The Trust Fund shall consist of separate
----------------
Investment Funds selected by the Committee. The Committee may, in its
discretion, establish additional funds and may terminate any fund from time to
time. The Investment Funds may include, but shall not be limited to, collective
or commingled trust funds maintained by the Trustee or another bank or trust
company acceptable to the Trustee or investment companies regulated under the
Investment Company Act of 1940. The Investment Funds may, in whole or in part,
be invested in any common, collective, or commingled trust fund maintained by
the Trustee or another bank or trust company acceptable to the Trustee, which is
invested principally in property of the kind specified for that particular
Investment Fund and which is maintained for the investment of the assets of
plans and trusts which are qualified under the provision of Section 401(a) of
the Code and exempt from Federal taxation under provisions of Section 501(a) of
the Code, and during such period of time as an investment through any such
medium exists the declaration of trust of such trust shall constitute a part of
the Trust.
9.3. Investment of Contributions. Each Participant, Retirement
---------------------------
Participant, Former Participant or Former Retirement Participant shall direct
that his contributions be paid into and invested, in whole percentages, in any
one or more of the Investment Funds, provided that the sum of such percentages
does not exceed 100%. In the event that a Participant or Retirement Participant
elected prior to July 1, 1987 to invest part of his contributions in an
Insurance Contract, the amount to be invested in accordance with the preceding
sentence shall first be reduced by the dollar amount of his contributions to the
Insurance Contract. Notwithstanding the foregoing, a Participant or Retirement
Participant may not elect to have more than 25% of any future contributions made
to the Plan on his behalf, which are not invested in Insurance Contracts,
invested in the Common Stock Fund. At the time the Participant or Retirement
Participant elects to make contributions to the Plan, he shall file an election
with the Committee specifying the investment vehicle or vehicles in which his
contributions will be invested.
9.4. Changes in Investment Elections. A Participant, Retirement
-------------------------------
Participant, Former Participant or Former Retirement
<PAGE>
Participant who has elected to have all or part of his Accounts invested in any
vehicle maintained in the Investment Fund, other than an Insurance Contract, can
change his election on a daily basis and elect to have his Accounts or any
future contributions made to the Plan on his behalf which are not invested in an
Insurance Contract, invested in any of the available Investment Funds, with such
investment changes to be completed as soon as administratively practicable
following the request. Notwithstanding the foregoing, a Participant or
Retirement Participant may not elect to have amounts transferred from any
Investment Fund to the AMETEK Common Stock Fund in an amount which would cause
the value of his Accounts allocated to the AMETEK Common Stock Fund to exceed
25% of the value of his Accounts allocated to all of the Investment Funds
(except for those amounts that are invested in an Insurance Contract.) A
Participant or Retirement Participant may elect to change the portion of each
Account invested in an Insurance Contract and have such amounts invested in
either of the investment vehicles maintained in the Investment Fund, within the
limits specified in this Section 9.4, only at the times and to the extent
permitted in the Insurance Contract. If a Participant does not elect to have all
or part of his Accounts invested in an Insurance Contract at the time he becomes
a Participant in the Plan, he may subsequently elect to have all or part of his
Accounts invested in an Insurance Contract, but only if the insured party
satisfies the insurance carrier's requirements for coverage. Whenever amounts
have to be transferred because of a change in the Participant's election, the
Trustee or the Investment Manager, as the case may be, shall make such transfer
as soon as is practicable. Notwithstanding any other provision of the Plan, a
Participant may not make an initial election on or after July 1, 1987 to have
any part of his Accounts invested in an Insurance Contract. If any Employee
makes a Rollover Contribution to the Plan of the distribution of his benefit
under the AMETEK, Inc. Employee Stock Ownership Plan in connection with the
termination and liquidation thereof, then, notwithstanding any other provision
of this Section 9.4, the 25% limitations applicable to contributions and
allocations of amounts to be invested in the Common Stock Fund shall be waived
to such extent as may be necessary to enable the entire amount of any such
Rollover Contribution to be invested in, and remain allocable to, the Common
Stock Fund.
9.5. Insurance Contract. At the time he elects to participate in the
------------------
Plan, the Participant may elect to have all or part of each of his Accounts
invested in one or more Insurance Contracts, including, but not limited to,
universal life insurance policies issued by a licensed insurance carrier. The
premiums for such Insurance Contracts shall be paid from the amounts then
allocated to the Participant's Accounts, as designated by the Participant, from
future contributions made on behalf of the Participant and from any amounts paid
with respect to the Insurance Contract. In the event that such amounts are
insufficient to pay any premiums due on the Insurance Contract, the Committee
shall notify the Participant and the Insurance Contract shall be surrendered to
the insurance company and the
<PAGE>
proceeds shall be invested in either the Fixed Income Fund, the Equity Fund or
the Common Stock Fund as the Participant so elects within the limitations
specified in this Section 9.5, after being notified by the Committee that the
Insurance Contract has been surrendered. Alternatively, the Participant may
elect to have the Trustee pay the premiums on such Insurance Contract from the
portion of the Participant's Accounts invested in the Fixed Income Fund or the
Equity Fund or the Common Stock Fund. Notwithstanding the preceding, in the case
of each Participant, (i) the aggregate premiums paid for term life insurance
under any Insurance Contract may not exceed twenty-five percent (25%), nor may
the aggregate premiums paid for whole life insurance under any Insurance
Contract exceed fifty percent (50%) of the aggregate contributions allocated to
the Participant's Deferral Election Account and his Matching Contribution
Account plus the amounts allocated to his Rollover Contribution Account, if any,
at any particular time; and (ii) the Trustee, either on or before the
Participant's termination of employment with the Employer, shall either convert
the entire value of an Insurance Contract into cash or an annuity or distribute
the Insurance Contract to the Participant, provided such contract is
nontransferable.
9.6. Common Stock Fund. The Trustee shall invest and reinvest the assets
-----------------
of the Common Stock Fund in the common stock of the Company, par value $1.00
(the "Common Stock"). Any dividends paid with respect to the Common Stock shall
be reinvested in additional shares. Shares of Common Stock may be acquired from
the Company, from other shareholders or on the open market; provided, however,
that in no event shall the Trustee pay more than fair market value for the
Common Stock. Notwithstanding any provision of the Plan or the Trust to the
contrary, on all corporate matters requiring shareholder approval, each
Participant, Former Participant, Retirement Participant or Former Retirement
Participant who has elected to invest part of his Accounts in the Common Stock
Fund shall have the right to direct the Trustee how to vote any Common Stock
allocated to his Accounts. Prior to the holding of any special or annual meeting
of the Company's shareholders, the Committee shall distribute to each
Participant, Former Participant, Retirement Participant or Former Retirement
Participant all proxy materials and a proxy form of ballot on which the
Participant, Former Participant, Retirement Participant or Former Retirement
Participant can direct the Trustee as to the voting of shares of Common Stock
allocated to his Accounts. Any and all fractional shares of Common Stock
allocated to the Participant's, Former Participant's, Retirement Participant's
or Former Retirement Participant's Accounts shall be combined with other
fractional shares of other Participants, Former Participants, Retirement
Participants or Former Retirement Participants and shall be voted, to the extent
possible, to reflect the direction of Participants, Former Participants,
Retirement Participants or Former Retirement Participants holding such
fractional shares. Shares of Common Stock for which no instructions are received
shall be voted, for or against, by the Trustee in the same proportion as the
shares for which the Trustee has received
<PAGE>
instructions from the Participant, Former Participant, Retirement Participant or
Former Retirement Participant.
9.7. Appointment of Investment Manager. The Board of Directors may, from
---------------------------------
time to time, appoint one or more Investment Managers to manage, invest and
reinvest the Trust Fund, or such part or parts of the Trust Fund as is specified
in such appointment. Any appointment made pursuant to this Section 9.4 may be
revoked or modified by the Board of Directors at any time and a new appointment
made hereunder.
<PAGE>
ARTICLE X
---------
AMENDMENT, TERMINATION OR TRANSFER OF ASSETS
--------------------------------------------
10.1. Amendment or Termination. The Board of Directors, at a regular
------------------------
meeting or by unanimous written consent, may amend, terminate or suspend this
Plan at any time or from time to time by an instrument in writing duly executed
in the name of the Company and delivered to the Committee; provided, however,
that
(a) No amendment shall provide for the use of the assets of this
Plan or any part thereof other than for the exclusive benefit of Participants,
Retirement Participants, Former Participants, Former Retirement Participants and
Beneficiaries;
(b) No amendment shall deprive any Participant, Former Participant,
Retirement Participant, Former Retirement Participant or Beneficiary of any of
the benefits which are vested in him or to which he is entitled under this Plan
by reason of the prior Years of Service, death, Disability or termination of
employment of such Participant, Retirement Participant, Former Participant or
Former Retirement Participant; and
(c) Without limiting the generality of the foregoing and
notwithstanding anything to the contrary in this Plan contained, this Plan may
be amended at any time and from time to time in any respect so as to qualify
this Plan as exempt pursuant to Sections 401 and 501(a) of the Code and like
provisions of subsequent Revenue Acts, and to comply with the provisions of
ERISA, regardless of whether any such amendment may change, alter or amend the
relative benefits under this Plan of any Participant, Retirement Participant,
Former Participant, Former Retirement Participant or Beneficiary.
10.2. Termination of Plan. This Plan shall cease and come to an end,
-------------------
although the Trust Fund shall continue to be held by the Trustee for
distribution in accordance with Section 10.3, if and when
(a) It is declared terminated in a writing executed in the name of
the Company and delivered to the Trustees; or
(b) The Company is dissolved or liquidated or disposes of
substantially all of its assets without provision for continuation of this Plan
by any successor person, firm or corporation.
10.3. Distribution of Assets. Upon termination of this Plan, or complete
----------------------
discontinuance of contributions to this Plan, the proportionate interest of each
Participant or Retirement Participant in the Trust Fund shall become
nonforfeitable. Upon
<PAGE>
partial termination of this Plan the nonforfeitable rights shall be applicable
only to the portion of this Plan that is terminated and only to those
Participants or Retirement Participants affected by the partial termination.
Except as otherwise provided by ERISA, there shall first be set aside amounts
due to Former Participants or Former Retirement Participants which were not
previously paid pursuant to the provisions of Article VI, and the amount to
which any such Former Participants or Former Retirement Participants is entitled
as hereinabove provided shall be paid to him or his duly designated Beneficiary,
as the case may be. The proportionate interest of each Participant or Retirement
Participant in the remaining assets of the Trust Fund shall then be determined
in accordance with Sections 5.2 and 5.3 except that the value of such
proportionate interest shall be determined as of the date of termination of this
Plan. There shall be paid to each Participant, Retirement Participant or his
duly designated Beneficiary, as the case may be, the benefit thus determined
pursuant to this Section 10.3, plus his proportionate share of any earnings
thereon, or less his proportionate share of any losses thereon, if applicable.
Provision for the payment of benefits pursuant to this Section 10.3 may be made
at the direction of the Company, by continuing the Trust Fund in existence and
making provision therefrom for benefit distributions in accordance with the
terms of this Plan, by immediate and full distribution from the Trust Fund of
Participants' or Retirement Participants' Accounts, or by any combination
thereof.
10.4. Affiliates.
----------
(a) Adoption by Affiliates. Any affiliate may, subject to the
----------------------
approval of the Company, adopt and become a party to this Plan by resolution of
its Board of Directors, certified copies of which shall be delivered to the
Company, the Committee, the Trustee and the Plan Administrator. The effective
date of any such adoption shall be the first day of a calendar month as is fixed
in the resolution of adoption.
(b) Withdrawal by Affiliate. Any one or more of the Employers shall
-----------------------
be entitled to withdraw from this Plan without the consent or approval of any
one or more of the remaining Employers. Any Employer shall be deemed to have
withdrawn from this Plan in the event it loses its corporate or other legal
existence by dissolution or merger. In the event of such withdrawal from this
Plan of an Employer while this Plan continues for any one or more of the other
Employers, if the obligations hereunder of the withdrawing Employer are not
assumed by any one or more of the remaining Employers, it shall be deemed that
this Plan has been terminated with respect to such withdrawing Employer and in
such event the Committee or the Trustee, as the case may be, shall perform the
acts set forth in Section 10.3 with respect to the part of the Trust Fund
representing the Accounts of the Participants, Retirement Participants, Former
Participants or Former Retirement Participants employed by the withdrawing
Employer; provided, however, that if any Participant
<PAGE>
of a withdrawing Employer is immediately employed by any other Employer then he
shall continue as a Participant or Retirement Participant under this Plan.
10.5. Amendment to Vesting Schedule. If any amendment changes the method
-----------------------------
for determining the nonforfeitable percentage of the value of a Participant's or
Retirement Participant Accounts, the Committee shall give written notice
thereof, within sixty (60) days of the later of the date on which such amendment
was adopted or became effective, to each Participant or Retirement Participant
who has completed three or more Years of Service prior to the sixtieth day
following the later of (i) the date he receives notice of such amendment, (ii)
the date the amendment is adopted, or (iii) the date the amendment becomes
effective. Such Participant or Retirement Participant may elect to have his
nonforfeitable percentage determined without regard to the amendment by filing a
written request with the Committee within sixty (60) days of the later of the
dates specified in clauses (i), (ii) and (iii) of this Section 10.5. Such
election shall be irrevocable.
10.6. Merger of Plan. This Plan shall not be merged or consolidated with,
--------------
nor shall any assets or liabilities be transferred to, any other plan, unless
the benefits payable to each Participant, Retirement Participant, Former
Participant, Former Retirement Participant and Beneficiary, if the transferee
plan were terminated immediately after such action, would be equal to or greater
than the benefits to which he would have been entitled if this Plan had been
terminated immediately before such action.
<PAGE>
ARTICLE XI
----------
TOP HEAVY PLANS
---------------
11.1. Definitions. For purposes of this Article XI, the following
-----------
definitions shall apply unless the context clearly indicates otherwise:
(a) "Aggregation Group" shall mean a group of plans consisting of
-----------------
all plans of the Company or any Affiliate in which one or more Key Employees are
participants, whether or not such plans are terminated and whether or not such
plans are sponsored by a corporation, and all other plans maintained by the
Company or any Affiliate that enable any plan in which a Key Employee is a
participant to comply with the coverage and nondiscrimination requirements of
Sections 401(a)(4) and 410 of the Code; and all plans of the Company or an
Affiliate which the Company designates as part of the Aggregation Group,
provided the resulting Aggregation Group meets the coverage and
nondiscrimination requirements of Sections 401(a)(4) and 410 of the Code.
(b) "Determination Date" shall mean the last day of the preceding
------------------
Plan Year, and in the case of the first Plan Year, the last day of such Plan
Year.
(c) "Five Percent Owner" shall mean:
------------------
(i) any person who owns, or is considered as owning, within the
meaning of Section 318 of the Code, as modified by Section 416
thereof, more than 5% of the outstanding stock of the Company or any
Affiliate or more than 5% of the total combined voting power of all
of the stock of the Company or any Affiliate; or
(ii) if the Affiliate is not a corporation, any person who owns,
or is considered as owning, within the meaning of Section 416 of the
Code, more than 5% of the capital or profits of the Affiliate.
For purposes of this Subsection (c), the Company and each Affiliate shall not be
treated as a single employer, and a person's ownership interest in the Company
or any such Affiliate shall not be aggregated.
(d) "Key Employee" shall mean any individual who is, or was at any
------------
time during the Plan Year ending with the Determination Date or any of the four
preceding Plan Years:
(i) an Officer, but only if the individual's Total
Compensation exceeds 1.5 times the dollar limit set forth in Section
415(c)(1)(A) of the Code, as adjusted for increases in the cost-of-
living;
<PAGE>
(ii) a Top Ten Owner, but only if the individual's Total
Compensation exceeds the dollar limit set forth in Section
415(c)(1)(A) of the Code, as adjusted for increases in the cost-of-
living;
(iii) a Five Percent Owner;
(iv) a One Percent Owner whose Total Compensation exceeds
$150,000; or
(v) the Beneficiary of any individual described in clauses (i)
through (iv) of this Subsection (d).
(e) "Non-Key Employee" shall mean each individual who is an employee
----------------
of the Company or an Affiliate but who is not a Key Employee.
(f) "Officer" shall mean an individual who is an executive in the
-------
regular and continued service of the Company or an Affiliate; provided, however,
that the number of employees who are considered Officers for purposes of this
Section 11.1 shall not exceed:
(i) three, if the number of employees of the Company and
Affiliates does not exceed 30;
(ii) 10% of the number of employees of the Company and
Affiliates, if the number of employees is more than 30 but less than
500; and
(iii) 50, if the number of employees of the Company and
Affiliates is 500 or more.
If the number of Officers exceeds the limits set forth in this Subsection (f),
then the Officers having the highest annual Total Compensation among all
Officers, during the Plan Year ending with the Determination Date and the four
preceding Plan Years, shall be considered Key Employees.
(g) "One Percent Owner" shall have the same meaning as Five Percent
-----------------
Owner, except that "1%" shall be substituted for "5%", wherever the latter term
appears in Subsection (c).
(h) "Super Top-Heavy Plan" shall have the same meaning as "Top-Heavy
--------------------
Plan," except that "90%" shall be substituted for "60%" wherever the latter term
appears in Subsection (i).
(i) "Top-Heavy Plan." This Plan shall be considered a Top-Heavy
--------------
Plan for any Plan Year, if, as of the Determination Date,
(i) the Plan is not part of an Aggregation Group and the
present value of the accrued benefits of Key Employees participating
in the Plan exceeds 60% of the
<PAGE>
present value of the cumulative accrued benefits of all Participants
or Retirement Participants in the Plan, or
(ii) the Plan is part of an Aggregation Group and the present
value of the account balances and accrued benefits of Key Employees
participating in the Aggregation Group exceeds 60% of the present
value of the cumulative account balances and accrued benefits of all
participating employees in the Aggregation Group,
as computed in each case in accordance with Section 416 of the Code. For
purposes of this Subsection (i), a Participant's or Retirement Participant 's
accrued benefit or account balance shall not include any tax free rollover (as
described in Section 402(a)(5)(A) or Section 408(d)(3) of the Code) or plan-to-
plan transfer which (1) is made from the Plan (or, if applicable, plans which
are part of the Aggregation Group) if the plan to which the tax free rollover or
plan-to-plan transfer is made is an employee benefit plan which is maintained by
the Company or an Affiliate and the tax free rollover or plan-to-plan transfer
is not initiated by the Participant or Retirement Participant or (2) is made to
any plan which is part of the Aggregation Group if the plan from which the tax
free rollover or plan-to-plan transfer is made is an employee benefit plan which
is not maintained by the Company or an Affiliate and the tax free rollover or
plan-to-plan transfer is initiated by the Participant or the Retirement
Participant. The present value of the cumulative account balances or accrued
benefit of any Participant, Retirement Participant, Former Participant or Former
Retirement Participant shall also include any distributions from the Plan (or,
if applicable, from any plan in the Aggregation Group) made to the Participant,
Retirement Participant, Former Participant or Former Retirement Participant or
his Beneficiary during the Plan Year ending with the Determination Date and any
of the four preceding Plan Years. Solely for purposes of determining if the
Plan, or any other plan included in a required Aggregation Group of which this
Plan is a part, is Top-Heavy, the accrued benefit of a Non-Key Employee shall be
determined under the method, if any, that uniformly applies for accrual purposes
under all plans maintained by Affiliates, or if there is no such method, as if
such benefit accrued not more rapidly than the shortest accrual rate permitted
under the fractional accrual rule of Section 411(b)(1)(C) of the Code.
(j) "Top Ten Owner" shall mean one of the ten employees owning, or
-------------
considered as owning, within the meaning of Section 318 of the Code, the
greatest interest in the Company or an Affiliate, but only if such employee owns
at least a 0.5% interest in the Company or the Affiliate. For purposes of this
Subsection (j), if two employees have the same ownership interest in the Company
or the Affiliate, the employee with the greater Total Compensation shall be
considered as owning the larger interest in the Company or the Affiliate.
<PAGE>
(k) "Total Compensation" shall mean the Employee's 'compensation' as
------------------
defined in Subsection 5.5(f).
11.2. Minimum Contributions. For each Plan Year during which the Plan is
---------------------
a Top-Heavy Plan, the amount of Employer Contributions allocated to the Matching
Contribution Account of each Non-Key Employee who has satisfied the eligibility
requirements of Article II hereof, and who is still in the service of the
Employer as of the last day of the Plan Year, shall be an amount at least equal
to the lesser of:
(a) 3% of the Non-Key Employee's Total Compensation for the Plan
Year; or
(b) a percentage which is equal to the highest percentage of Total
Compensation contributed by the Employer on behalf of any Key Employee.
The amount the employer is required to contribute on behalf of each Non-Key
Employee pursuant to this Section 11.2 shall be reduced by the amount of any
Employer Contribution made on behalf of such Non-Key Employee with respect to
such Plan Year pursuant to the provisions of this Plan or any contribution
(other than an elective deferral) to other defined contribution plan maintained
by the Employer.
11.3. Coordination with Defined Benefit Plan. In the event that a Non-Key
--------------------------------------
Employee who is entitled to receive a contribution under Section 11.2 is also
entitled to receive a minimum benefit pursuant to Section 416 of the Code under
a defined benefit pension plan maintained by the Employer, and the Non-Key
Employee does not accrue a benefit under such defined benefit pension plan
which, together with the Non-Key Employee's minimum contribution provided under
Section 11.2 hereof, satisfies the requirements of Section 416 of the Code, the
amount of Matching Contributions allocated to the Matching Contribution Account
of such Non-Key Employee shall equal the lesser of:
(a) 5% of the Non-Key Employee's Total Compensation for the Plan
Year; or
(b) the percentage necessary in order that the Non-Key Employee
receive the minimum combined benefits under this Plan and such benefit pension
plan to which he is entitled under Section 416 of the Code.
Notwithstanding the foregoing, the amount allocated to the Employer Contribution
Account of each Non-Key Employee shall be reduced by the amount of any Employer
Contribution made on behalf of such Non-Key Employee with respect to such Plan
Year pursuant to 11.2 or any other provision of this Plan or any other defined
contribution plan maintained by the Employer.
11.4. Maximum Benefits. If, in any Limitation Year in which the Plan is a
----------------
Top-Heavy Plan, a Participant or Retirement
<PAGE>
Participant also participates in one or more defined benefit plans maintained by
the Employer or an Affiliate (as defined in Section 5.5(h)), then for purposes
of Sections 5.5(c) and (d) respectively, the phrase "1.0" shall be substituted
for the phrase "1.25" wherever the latter phrase appears. Notwithstanding the
preceding, the provisions of this Section 11.4 shall not apply if the Plan is
not a Super Top-Heavy Plan and the Employer contributes, on behalf of each Non-
Key Employee who is entitled to receive a benefit under Section 11.2, an amount
at least equal to 1% of the Participant's or Retirement Participant's Total
Compensation for the Plan Year. The amount contributed on behalf of each Non-Key
Employee under this Section 11.4 shall be in addition to any contribution made
on his behalf pursuant to Sections 11.2 or 11.3 hereof, whichever is applicable,
but shall be reduced by the amount by which:
(a) any Employer Contributions made on behalf of such Non-Key
Employee with respect to such Plan Year under the provisions of this Plan or any
other defined contribution plan maintained by the Employer, exceed
(b) the contributions made on his behalf under Sections 11.2 and
11.3 hereof.
<PAGE>
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1. No Rights Implied. Nothing herein contained shall be deemed to give
-----------------
any Participant, Retirement Participant, Former Participant, Former Retirement
Participant or Beneficiary an interest in any specific property of this Plan or
of the Trust Fund or any interest other than his right to receive payment in
accordance with the provisions of this Plan.
12.2. Assignment and Alienation. The interest in this Plan of a
-------------------------
Participant, Retirement Participant, Former Participant, Former Retirement
Participant or Beneficiary shall not be subject to assignment or transfer or
otherwise be alienable either by voluntary or involuntary act of such person, or
by operation of law, nor shall it be subject to attachment, execution,
garnishment, sequestration or other seizure under any legal, equitable or other
process other than pursuant to the terms of a Qualified Domestic Relations Order
(pursuant to Section 6.7) or in satisfaction of a federal tax levy. If any
Participant, Retirement Participant, Former Participant, Former Retirement
Participant or Beneficiary shall attempt to or shall alienate, sell, transfer,
pledge or otherwise encumber any amount to which he is or might become entitled,
or if by reason of the bankruptcy or insolvency of any such person or the
issuance of any garnishment, writ of execution or other court process, or other
event happening at any time, any amount otherwise payable hereunder to such
person should devolve upon anyone else or would not be enjoyed by him, the
Committee, in its absolute discretion, may terminate such interest and may hold
or apply it to or for the benefit of such Participant, Retirement Participant,
Former Participant, Former Retirement Participant or Beneficiary, or as the case
may be, the spouse, children or other dependents of such person, in such manner
as the Committee may deem proper.
12.3. No Diversion of Trust Assets. Anything contained in this Plan to
----------------------------
the contrary notwithstanding, it shall be impossible at any time for any part of
the corpus or income of the Trust Fund or of any segregated share of the assets
of this Plan to be used for or diverted to purposes other than for the exclusive
benefit of Participants, Retirement Participants, Former Participants, Former
Retirement Participants or Beneficiaries, and no part thereof shall ever revert
to the Company or any of the Employers.
12.4. Exclusive Benefit. This Plan is created for the exclusive benefit
-----------------
of Participants, Retirement Participants, Former Participants, Former Retirement
Participants and Beneficiaries and shall be interpreted in a manner consistent
with its being an employees' trust as defined in Section 401 of the Code.
<PAGE>
12.5. No Employment Contract. This Plan shall not be construed as
----------------------
creating any contract of employment between the Employer and any Employee; and
the Employer shall have the same control over its employees as though this Plan
had never been executed.
12.6. Fiduciaries. Any person or group of persons may serve in more than
-----------
one fiduciary capacity with respect to this Plan.
12.7. Incapacity. In the event that the Committee finds that any
----------
Participant, Retirement Participant, Former Participant, Former Retirement
Participant or Beneficiary is unable to care for his affairs due to illness or
accident, any payments due to such Participant, Retirement Participant, Former
Participant, Former Retirement Participant or Beneficiary under this Plan may be
made to his duly appointed legal representative. The Committee may, in its
discretion, make such payments to a child, parent or spouse of such Participant,
Retirement Participant, Former Participant, Former Retirement Participant or
Beneficiary, or to any other person with whom he resides or who is charged with
his care. Any payment or payments so made shall be in complete discharge of the
liability under this Plan therefor.
12.8. Governing Law. This Plan shall be construed according to the laws
-------------
of the Commonwealth of Pennsylvania, where it is made and where it shall be
enforced, except to the extent such laws have been superseded by ERISA.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed in
its corporate name by a duly authorized officer and its corporate seal to be
affixed on this third day of January, 1997.
AMETEK, INC.
BY: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
ATTEST:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
[SEAL]
<PAGE>
APPENDIX I
SPECIAL PROVISIONS RELATING TO CERTAIN
FOR EMPLOYEES OF DIXSON, INC.
1. The provisions of this Appendix IX shall apply to each employee
of AMETEK, Inc. ("AMETEK"), who (i) was an employee of Primera Trading
Company Inc. (formerly known as Dixson, Inc. (the "Predecessor Employer"))
immediately prior to the acquisition by the Company of certain assets of
the Predecessor Employer and (ii) transfer employment to AMETEK in
connection with the purchase of certain assets of Dixson. Such persons
shall hereinafter be referred to as "Covered Employees" for purposes of
this Appendix IX.
2. Each Covered Employee who has attained age 21 shall be eligible
to participate in the Plan, effective April 1, 1995, in accordance with,
and subject to, all of the terms, conditions and provisions of the Plan.
3. Any Covered Employee not referred to in Section 2 of this
Appendix IX shall be eligible to participate in the Plan on the January 1st
coincident with or next following the date such Covered Employee first
satisfies the eligibility requirements set forth in Article III of the
Plan.
4. For purposes of determining any Covered Employee's nonforfeitable
right to his Employer Matching Contribution Account and his Retirement
Account pursuant to Section 6.1 of the Plan, the Years of Service of such
Covered Employee shall be deemed to have commenced on the first day of the
most recent period of continuous service with Predecessor Employer.
5. Defined terms used in this Appendix IX shall have the same
meaning as the identical defined terms as used in The AMETEK, Inc. Savings
and Investment Plan.
<PAGE>
APPENDIX II
SPECIAL PROVISIONS RELATING TO CERTAIN
EMPLOYEES OF THE MICROFOAM DIVISION
-----------------------------------
1. Notwithstanding any other provision of the Plan to the contrary, each
Participant who was an Employee in the Company's Microfoam Division and who
transferred his employment on the closing date of the sale of the Microfoam
Division to Astro-Valcour, Inc. ("Microfoam Participant"), pursuant to the Asset
Purchase Agreement dated March 21, 1995, shall be entitled to one hundred
percent (100%) of his Employer Matching Contribution Account regardless of the
number of Years of Service he completed prior to the closing date of the sale.
2. Notwithstanding any other provision of the Plan to the contrary,
effective as of June 1, 1995 the Insurance Contract applicable to each Microfoam
Participant, or beneficiary thereof, is closed and the assets therein liquidated
pursuant to the instruction of each such Microfoam Participant.
3. Defined terms used in this Appendix X shall have the same meaning as
the identical defined terms as used in The AMETEK, Inc. Savings and Investment
Plan.
<PAGE>
Exhibit 10.54
-------------
Amendment No. 2
to the
1995 Stock Incentive Plan of
AMETEK, Inc.
WHEREAS, AMETEK, Inc. (the "Corporation") has adopted the 1995 Stock
Incentive Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, Section 19 of the Plan permits the Corporation to amend the
Plan; and
WHEREAS, the Corporation now desires to amend the Plan in certain
respects;
NOW THEREFORE, the Plan is hereby amended as follows:
1. Section 5 of the Plan is amended by deleting the last sentence
from the section and substituting therefore:
"In addition to the foregoing, each Non-Employee Director whose initial
election to the Board of Directors is after the date of the adoption of the
Plan by the Board of Directors (other than any Non-Employee Director who is
a partner of the law firm then retained as general counsel to the
Corporation) shall be granted a Non-Qualified Stock Option of 20,000
shares. Such Non-Employee Director shall be eligible to participate in the
Plan only for the foregoing purposes."
2. Subsection (d) of Section 10 of the Plan is deleted from the Plan
in its entirety.
3. The provisions of this Amendment No. 2 shall be effective as of
April 27, 1995.
<PAGE>
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 19th day of March, 1996.
AMETEK, Inc.
By: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
<PAGE>
Exhibit 10.55
-------------
Amendment No. 3
to the
1995 Stock Incentive Plan of
AMETEK, Inc.
WHEREAS, AMETEK, Inc. (the "Corporation") has adopted the 1995 Stock
Incentive Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, Section 19 of the Plan permits the Corporation to amend the
Plan; and
WHEREAS, the Corporation now desires to amend the Plan in certain
respects;
NOW THEREFORE, the Plan is hereby amended as follows:
1. The first sentence of Section 13 of the Plan is amended to read,
in its entirety, as follows:
"If a holder of an Option and/or Rights shall voluntarily or
involuntarily leave the employ of the Corporation and its Affiliates, the Option
and Rights of such holder shall terminate forthwith, except that the holder
shall have until the expiration of 3 months (3 business days in the case of
Incentive Stock Options granted before November 20, 1996)from the cessation of
the holder's employment with the Corporation and its Affiliates (without regard
to any period of severance) to exercise any unexercised Option and/or Rights the
holder could have
<PAGE>
exercised on the day on which he left the employ of the Corporation and
Affiliates."
2. The provisions of this Amendment No. 3 shall be effective for
terminations occurring on and after November 20, 1996.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer, and its corporate seal to
be affixed on this 12th day of December, 1996.
AMETEK, Inc.
By: /s/ Robert W. Yannarell
-----------------------
Robert W. Yannarell
Attest:
/s/ Donna F. Winquist
- ---------------------
Donna F. Winquist
(Seal)
<PAGE>
EXHIBIT 12
----------
AMETEK, Inc.
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
EARNINGS: 1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income from continuing operations $42,777 ($8,089) $36,619 $43,757 $51,190
Income tax expense (benefit) 21,352 (4,472) 21,144 25,500 27,470
Interest expense - gross 20,197 18,580 22,295 20,317 19,670
Capitalized interest (476) (977) (677) (142) (599)
Amortization of debt financing costs 196 173 1,385 1,221 136
Interest portion of rental expense(1) 1,210 1,467 1,466 1,633 2,097
--------- --------- --------- --------- ---------
Adjusted earnings $85,256 $6,682 $82,232 $92,286 $99,964
========= ========= ========= ========= =========
FIXED CHARGES:
Interest expense, net of capitalized interest $19,721 $17,603 $21,618 $20,175 $19,071
Capitalized interest 476 977 677 142 599
Amortization of debt financing costs 196 173 1,385 1,221 136
Interest portion of rental expense(1) 1,210 1,467 1,466 1,633 2,097
-------- -------- -------- -------- --------
Fixed charges $21,603 $20,220 $25,146 $23,171 $21,903
======== ======== ======== ======== ========
RATIO OF ADJUSTED EARNINGS TO
-------- -------- -------- -------- --------
FIXED CHARGES 3.9x - (2) 3.3x 4.0x 4.6x
======== ======== ======== ======== ========
</TABLE>
______________________________
(1) Estimated to be 1/3 of total rent expense.
(2) Earnings from continuing operations in 1993 were insufficient to cover
fixed charges by approximately $13.5 million.
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF AMETEK, INC.
<TABLE>
<CAPTION>
State or other Percentage of
jurisdiction of voting securities
Name of subsidiary incorporation or owned by its
and name under which it does business organization immediate parent*
------------------------------------- ------------ -----------------
<S> <C> <C>
AFIMO S.A.M...................................... Monaco 100%
AmeSpace, Inc.................................... Delaware 100%
AMETEK Aerospace Products Inc.................. Delaware 100%
AMETEK (Bermuda) Ltd............................. Bermuda 100%
AMETEK (Canada) Inc.............................. Canada 100%
AMETEK (FSC), Inc................................ U.S. Virgin Islands 100%
AMETEK, G.m.b.H.................................. Germany 100%
AMETEK Precision Instruments Europe, G.m.b.H... Germany 100%
AMETEK IMTSA, S.A. de C.V........................ Mexico 100%
AMETEK Lamb Motores de Mexico, S.A. de C.V....... Mexico 100%
AMETEK Mexicana, S.A............................. Mexico 100%
AMETEK Precision Instruments France, S.A.R.L..... France 100%
AMETEK Precision Instruments (UK) Ltd............ England 100%
AMETEK Filters Ltd............................. England 100%
APIC International S.A........................... France 100%
APIC Filter, G.m.b.H........................... Germany 55%
EMA Corp......................................... Delaware 100%
AMETEK Holdings B.V............................ Netherlands 100%
AmeKai Hong Kong............................. Hong Kong 50%
AMETEK Denmark A/S........................... Denmark 100%
AMETEK Elektromotory CR S.R.O................ Czech Republic 95%
AMETEK (Italia) S.r.l........................ Italy 100%
AMETEK Singapore Private Ltd................. Singapore 100%
AmeKai Singapore Pte., Ltd................. Singapore 50%
AmeKai Meter (Xiamen) Co., Ltd........... China 100%
AmeKai Taiwan Co., Ltd..................... Taiwan 50%
AMETEK Motors Asia Pte. Ltd................ Singapore 100%
AMETEK Motors (Shanghai) Co., Ltd........ China 100%
WEBAK B.V...................................... Netherlands 100%
</TABLE>
_______
* Exclusive of directors' qualifying shares and shares held by nominees as
required by the laws of the jurisdiction of incorporation.
<PAGE>
Exhibit 23
-----------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Registration Nos. 33-60647, 33-40223, and 2-97434) pertaining to the
1995 Stock Incentive Plan of AMETEK, Inc; 1991 Stock Incentive Plan, 1987
Employees' Stock Incentive Plan, 1983 Employees' Incentive Stock Option Plan,
and 1981 Employees' Non-Qualified Stock Option and Stock Appreciation Rights
Plan of AMETEK, Inc., and to The AMETEK Savings and Investment Plan,
respectively, and in the related Prospectuses, of our report dated January 22,
1997, except for Note 15, as to which the date is February 5, 1997, with respect
to the financial statements of AMETEK, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
Philadelphia, PA
March 6, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF AMETEK, INC. AT DECEMBER 31, 1996, AND THE
CONSOLIDATED STATEMENT OF INCOME OF AMETEK, INC. FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,051
<SECURITIES> 6,441
<RECEIVABLES> 131,587
<ALLOWANCES> 5,375
<INVENTORY> 94,413
<CURRENT-ASSETS> 246,972
<PP&E> 448,957
<DEPRECIATION> 256,241
<TOTAL-ASSETS> 537,915
<CURRENT-LIABILITIES> 185,971
<BONDS> 150,333
0
0
<COMMON> 342
<OTHER-SE> 129,156
<TOTAL-LIABILITY-AND-EQUITY> 537,915
<SALES> 868,661
<TOTAL-REVENUES> 868,661
<CGS> 669,784
<TOTAL-COSTS> 669,784
<OTHER-EXPENSES> 27,760
<LOSS-PROVISION> 168
<INTEREST-EXPENSE> 19,071
<INCOME-PRETAX> 78,660
<INCOME-TAX> 27,470
<INCOME-CONTINUING> 51,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,190
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 0
</TABLE>
