<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended: December 31, 1999
Commission File Number: 0-4791
PAUL MUELLER COMPANY
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(exact name of registrant as specified in its charter)
Missouri
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(state or other jurisdiction of incorporation or organization)
44-0520907
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(I.R.S. Employer Identification No.)
1600 West Phelps, Springfield, Missouri 65802
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(address of principal executive offices) (Zip Code)
(417) 831-3000
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(registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
- ----------------------- -------------------------------------------
(title of each class) (name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $1 per share
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all re-
ports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days: Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K: [X]
The aggregate market value of the voting stock of the Registrant
held by nonaffiliates on February 29, 2000, was $27,141,380. As of
March 10, 2000, there were 1,174,021 shares of common stock, $1 par
value, of the Registrant outstanding.
Portions of the Proxy Statement for the annual meeting of shareholders
to be held May 1, 2000, are incorporated by reference into Part III.
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PART I
ITEM 1. - DESCRIPTION OF BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
The Registrant was incorporated under the laws of Missouri
in 1946 as the successor to a business begun in 1940
to perform general sheet metal work, primarily for the
building industry. In the mid-1940's, the Registrant
expanded its operations to include the manufacture of
poultry processing equipment and stainless steel cheese-
making vats for dairy plants. The Registrant, in 1955,
began manufacturing stainless steel milk coolers for dairy
farms and in 1960 began manufacturing stainless steel
storage tanks and discontinued its sheet metal operations.
The Registrant purchased a water purification product line
in January 1987. Today, the Registrant is one of the
world's largest manufacturers of milk coolers for dairy
farms. The Registrant is also one of the nation's leading
manufacturers of custom-made stainless steel processing
equipment for the food, dairy, beverage, chemical, pharma-
ceutical, and other industries. The Registrant's products
are incorporated into a wide variety of industrial applica-
tions, including food and beverage processing, pharmaceu-
tical and chemical processing, water distillation, heat
transfer, HVAC, heat recovery, process cooling, and thermal
energy storage. The Registrant opened a microbrewery and
brewpub operation in December 1997 to showcase its brewery
technology capability and expand its marketing of brewery
systems.
The Registrant entered into a license agreement in February
1994 under which it acquired the rights to manufacture and
market evaporator assemblies used in liquid-ice systems.
The agreement provides the Registrant an exclusive license
to manufacture and to sell or to sublicense its rights for
the following applications: HVAC; gas turbine; process
cooling of food and chemicals; and concentration of milk,
fruit juices and acid solutions. The exclusive license is
restricted to specific territories defined by application.
The license is exclusive until expiration of the patents,
but may become nonexclusive if royalties fail to equal
specified minimum levels for any calendar year. The
Registrant is also the sole licensee of the technology for
milk cooling on dairy farm applications with no minimum
annual royalties required. The Registrant began manufac-
turing and marketing equipment in 1995.
The Registrant has a license agreement with a Dutch company
which allows for the production and sale of milk coolers
in Europe and which provides royalties for the Registrant.
The license can be terminated by either party on 60-days
written notice.
The Registrant entered into a license agreement in April
1998 under which it acquired the right to manufacture and
market cross-flow heat exchangers on an exclusive basis
in the U.S. and Canada. The license is subject to the
licensor's nonexclusive right and license to sell cross-
flow heat exchangers in the U.S. and Canada for food,
dairy, and beverage applications. The Registrant also has
a nonexclusive right to manufacture and sell cross-flow
heat exchangers in any country outside the U.S. and Canada.
The agreement has an initial term of five years and will
automatically renew unless either party provides a one-year
notification of nonrenewal. The Registrant is required to
purchase only from the licensor the components necessary to
fabricate the cross-flow heat exchanger as long as it has
exclusivity.
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The Registrant formed Mueller Field Operations, Inc., a
wholly owned subsidiary, during 1998 to perform field
fabrication, installation, and erection services.
The Registrant established a joint venture during 1999
when it acquired 50% of the common stock of Mueller Montana
de Mexico, S.A. de C.V., a Mexican fabricator of processing
equipment.
B. FINANCIAL INFORMATION ABOUT SEGMENTS
Information about the earnings data by segment and sales
by product category are covered in Note 6 of the Notes to
Consolidated Financial Statements found in Part II, Item 8,
and is incorporated herein by reference.
C. NARRATIVE DESCRIPTION OF BUSINESS
The Registrant's segments include Dairy Farm Equipment and
Industrial Equipment.
The Dairy Farm Equipment segment includes standard products
that are built to stock and are available for sale from
inventory. The Dairy Farm Equipment segment sells milk-
cooling and storage equipment and accessories, refrigera-
tion units, and heat recovery equipment for use on dairy
farms to independent dealers for resale. Sales are made
to the domestic and export markets.
The Industrial Equipment segment includes products that
are designed and built to customer specifications. The
Industrial Equipment segment sells the following products
directly to industrial customers: food, beverage, chemi-
cal, and pharmaceutical processing equipment; tank
components; industrial heat transfer equipment; pure
water equipment; thermal energy storage equipment; and
commercial refrigeration equipment. Food processing
equipment includes stainless steel storage and mixing
tanks, food processors, cookers and coolers, and a variety
of other custom-fabricated tanks. Beverage processing
equipment includes stainless steel storage and fermen-
tation tanks, brewhouse equipment, and other special
equipment for breweries, wineries, distilleries, and soft-
drink bottlers. Chemical and pharmaceutical processing
equipment includes stainless steel and other alloy pressure
vessels. Other industrial equipment products include water
purification equipment, heat transfer equipment, thermal
energy storage equipment, and commercial refrigeration
equipment.
The Industrial Equipment segment includes sales to the
domestic and export markets.
Raw materials used in the fabrication of Registrant's
products are readily available from sources in the United
States. The Registrant purchases components from two
German vendors under agreements for its heat transfer
product line.
Patents held by the Registrant generally are not considered
significant to the successful conduct of each segment's
business. Trademarks are registered for the Registrant's
name for certain products sold in the Industrial Equipment
segment and for the products sold in the Dairy Farm Equip-
ment segment in the key markets served by the Registrant.
Trademarks are considered significant to the successful
conduct of the Dairy Farm Equipment segment business. Key
license agreements that are maintained by the Registrant
have been discussed in Section A above.
3
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In general, the seasonality of the Registrant's business
segments is not material.
The Registrant carries a significant inventory of standard
sizes of stainless steel coil and plate used in the manu-
facture of its products. For large Industrial Equipment
orders that will be completed over several months, stain-
less steel is specifically ordered for the project. The
Registrant provides extended payment terms primarily for
export orders with payment secured generally by a letter
of credit and to qualifying domestic Dairy Farm Equipment
dealers. The Registrant requires down payments and/or
progress payments on significant Industrial Equipment
orders.
Sales of the Registrant's products are distributed among
several customers, and sales to any one customer are not
significant to total consolidated sales. Sales to any
one customer did not exceed 10% of the Registrant's
consolidated sales during 1999. However, the Dairy Farm
Equipment segment has a customer, the loss of which would
have an adverse effect on that segment's profitability.
The backlog of sales was approximately $37,041,000 at
February 29, 2000, compared to approximately $29,958,000 at
February 28, 1999. It is anticipated that substantially
all of the February 29, 2000, backlog will be shipped
during the current fiscal year.
In the Industrial Equipment segment, there are several
competitors, most of which are smaller than the Registrant.
Many Industrial Equipment projects are bid among several
possible suppliers, which tends to make pricing very compe-
titive. The principal methods of competition are price,
quality, delivery and service. In the Dairy Farm Equipment
segment, there are relatively few competitors, and the
Registrant is one of the largest manufacturers of dairy
farm milk coolers in the world.
Stainless steel prices increased during the fourth quarter
of 1999; and the mills have implemented another price
increase of 5%-7% effective in February 2000, with further
increases expected. Also, due to the increase in and the
volatility of prices of nickel and chromium, stainless
steel suppliers are operating on a policy of price-in-
effect-at-time-of-shipment; and they have implemented
substantial surcharges. The higher prices for stainless
steel may have an adverse impact on order entry and the
Registrant may be unable to fully recoup the higher steel
cost in sales to customers, both of which would have an
unfavorable effect on profitability.
The Registrant spent $1,100,000 in 1999, $978,900 in 1998,
and $719,200 in 1997 on research activities relating to the
development of new products or services and the improvement
of existing products or services. Sixteen full-time admin-
istrative employees are engaged in this activity.
It is not anticipated that compliance with Federal, State
and local provisions, which have been enacted or adopted
regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment,
will have a material effect upon the capital expenditures,
earnings or competitive position of the Registrant and its
subsidiaries.
The total number of employees at December 31, 1999, was 876
for the Registrant and its wholly owned subsidiaries.
4
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As previously reported, the labor contract with the Sheet
Metal Workers Union (which covers a portion of the em-
ployees at the Springfield, Missouri, plant) expired on
June 11, 1994. Extensive negotiations were conducted with
union representatives, but a new contract was not achieved.
The International Union called a strike against the Regis-
trant that began on July 25, 1995; and the largest number
of employees participating was approximately 185 during the
fourth quarter of 1995. A substantial number of employees
returned to work during 1996; and currently, there are
only 17 employees participating. No action has been taken
by the union to prevent nonstriking employees from working.
The Registrant implemented the provisions of its revised
and final offer effective April 1, 1996, which remains open
for the union's acceptance; and no further negotiations are
scheduled.
The union has filed several unfair labor practice com-
plaints against the Registrant. As a result of these
charges, hearings were held before administrative law
judges of the National Labor Relations Board (NLRB) in
August of 1996, November of 1997, December of 1998, and
November of 1999. The decisions of these hearings (except
for one minor issue) have all been appealed to the NLRB.
A final determination of all charges pending may take two
to three years. However, management believes, based on
an evaluation by counsel, there is no material financial
exposure to the Registrant.
The Registrant currently employs about 850 people, of
which approximately 390 are represented by the Sheet Metal
Workers Union. The Registrant has facilities located in
Springfield, Missouri, and Osceola, Iowa. There are
approximately 750 employees assigned to the Springfield
facility; and at the Osceola facility, there are an addi-
tional 100 employees, none of which are represented by a
labor union.
D. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Information about the amounts of export sales is covered
in Note 6 of the Notes to Consolidated Financial Statements
found in Part II, Item 8, and is incorporated herein by
reference.
ITEM 2. - PROPERTIES
The Registrant's primary domestic manufacturing facilities are
located in Springfield, Missouri, and occupy approximately
720,000 square feet on 50 acres of land. These facilities are
owned by the Registrant, as is all of the equipment it uses.
The original section of the present Springfield plant was built
in 1950 and consisted of 23,720 square feet. Since then, the
Registrant has added to this facility many times in the course
of a continuing program for enlarging and modernizing its
facilities and increasing its capabilities. An addition of
approximately 14,100 square feet was made in 1981. The latest
addition of about 6,000 square feet was made in 1999.
In February 1987, the Registrant acquired an additional manufac-
turing facility in Osceola, Iowa, which contains approximately
216,000 square feet.
In February 1997, the Registrant purchased land and a building,
which contains about 21,000 square feet, in downtown Springfield,
Missouri, for the purpose of operating a microbrewery and brewpub.
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ITEM 3. - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business or mat-
ters for which insurance coverage is adequate, which involves
the Registrant, nor is any director, officer or any management
security holder involved in any litigation that could adversely
affect the Registrant.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant did not submit any matter to a vote of security
holders, through a solicitation of proxies or otherwise, during
the fourth quarter of 1999.
ITEM 10. (from PART III) - EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Position(s) with Registrant
------------------- --- -------------------------------------
<S> <C> <C>
Paul Mueller<F1> 84 Chairman of the Board and Director
Daniel C. Manna<F1> 53 President and Director
Donald E. Golik<F1> 56 Senior Vice President and Chief Finan-
cial Officer, Secretary and Director
<FN>
<F1> Individual has been employed by the Registrant for more than the
past five years.
</FN>
</TABLE>
Each of the above officers was elected to serve until the next
annual meeting of the Board of Directors, which will be held
on May 1, 2000, and until his successor shall have been duly
elected and qualified or until his earlier resignation or
removal.
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PART II
ITEM 5. - MARKET PRICE FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The Registrant's common stock is traded on The Nasdaq Stock
Market(R) under the symbol MUEL. As of December 31, 1999,
there were approximately 260 shareholders of record and approxi-
mately 700 beneficial shareholders.
Market high and low prices and quarterly cash dividends in 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 Quarter Ended 1998 Quarter Ended
------------------------------ ------------------------------
Mar 31 Jne 30 Spt 30 Dec 31 Mar 31 Jne 30 Spt 30 Dec 31
------ ------ ------ ------ ------ ------ ------ ------
MARKET PRICE OF STOCK
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High... 40-3/8 35-3/4 36 33-1/4 43 41 43-3/4 42
Low.... 33-3/8 31 31-1/4 28-5/8 36-3/4 36-1/4 37 36-13/16
<CAPTION>
CASH DIVIDENDS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Declared
per
share.. $0.60 $0.60 $0.60 $0.60 $0.60 $0.60 $0.60 $0.60
</TABLE>
ITEM 6. - SELECTED FINANCIAL DATA
<TABLE>
SELECTED FINANCIAL DATA - FIVE-YEAR SUMMARY
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales.... $92,571,835 $89,745,547 $86,693,022 $83,950,990 $78,375,636
Net income... $ 1,870,659 $ 3,134,301 $ 2,944,540 $ 4,424,019 $ 1,954,653
Basic &
diluted
earnings
per common
share....... $ 1.60 $ 2.68 $ 2.52 $ 3.79 $ 1.67
Common shares
outstanding. 1,174,021 1,168,021 1,168,021 1,168,021 1,168,021
Dividends
declared
per common
share....... $ 2.40 $ 2.40 $ 2.40 $ 2.10 $ 2.00
Total assets. $55,622,768 $55,137,271 $56,547,290 $53,184,971 $54,678,904
Long-term
debt........ $ 162,366 $ 161,434 $ 161,434 $ 161,434 $ 161,434
</TABLE>
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ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain information discussed in Management's Discussion and
Analysis of Operating Results and Financial Condition contains
statements regarding matters that are not historical facts, but
rather are forward-looking statements. These statements are
based on current financial and economic conditions and current
expectations, and they involve risk and uncertainties. Actual
future results may differ materially, depending on a variety
of factors. These factors, some of which are identified in
the discussion accompanying such forward-looking statements,
include, but are not limited to, milk prices, feed costs, wea-
ther conditions, dairy farm consolidation and other factors
affecting the profitability of dairy farmers, the price of
stainless steel, actions of competitors, labor strife, the
Registrant's execution of internal performance plans, economic
conditions in key export markets, the level of capital expen-
ditures in the U.S. economy, and other changes to business
conditions.
OPERATING RESULTS
Although sales were higher for 1999 compared to 1998, this was
offset by lower margins and higher operating expense. Also,
the settlement of a lawsuit adversely affected 1999 results.
SALES - Comparative consolidated sales for the past three
years were as follows:
<TABLE>
<CAPTION>
Sales
------------------------------
(in thousands of dollars)
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Dairy Farm Equipment.... $ 23,946 $ 19,193 $ 22,390
Industrial Equipment.... 68,626 70,553 64,303
-------- -------- --------
$ 92,572 $ 89,746 $ 86,693
======== ======== ========
</TABLE>
Sales of Dairy Farm Equipment increased by $4,753,000 during
1999 compared to 1998. All of the improvement was attributable
to sales in the domestic market, which were up by 42%, as export
sales declined from the prior year. Economic conditions in the
domestic dairy industry were favorable, which accounted for a
significant increase in milk production during 1999 as milk
prices for most of the year were relatively high and feed costs
remained low. Also contributing to the increase in production
was a buildup in the number of dairy cows and higher output per
cow. These conditions led to the significantly higher sales of
milk-cooling and storage equipment. With the favorable economic
conditions, unit sales of milk coolers in the domestic market
increased by approximately 45% during 1999 compared to 1998.
Export sales of Dairy Farm Equipment, on the other hand, experi-
enced a decline of 15% during 1999, with a 25% decline in the
number of milk-cooling units sold. The reduction in sales
related directly to the continuing economic problems in key
foreign markets, coupled with the strength of the U.S. dollar
during 1999. The decline in export sales was primarily due to
decreased sales to countries in Asia, North America, Europe,
and Africa.
During 1998, Dairy Farm Equipment sales decreased by $3,197,000
compared to 1997; and 46% of the decline was attributable to
domestic operations, with the balance from reduced export sales.
Although the average milk price during 1998 was at an all-time
high and feed costs were reasonable, the number of milk coolers
sold in the domestic market decreased by 21% from the prior
year. The starting backlog of Dairy Farm Equipment for 1998
was 30% lower than the prior year; and during the first half
of 1998, there was a soft market due to declining milk prices
and unfavorable weather conditions in the major dairying areas
of the U.S. Additionally, there were concerns about U.S.
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governmental involvement in milk prices. Although milk prices
increased significantly during the last half of the year and
feed costs remained reasonable, milk production increased only
slightly from the prior year; and milk-cooling and storage
equipment sales lagged. Export sales of Dairy Farm Equipment
experienced a decline of 23% during 1998, with a 22% decline in
the number of milk-cooling units sold. The reduction in sales
related directly to economic problems in key foreign markets,
coupled with a strong U.S. dollar. The decline in export sales
was primarily due to decreased sales to countries in South
America, Europe, Africa, and North America.
For 2000, domestic milk production is expected to increase again
as feed costs should remain favorable. The average milk price
for the year is anticipated to be considerably below the average
milk price for 1999. Milk prices will remain low until produc-
tion can be brought more in balance with demand. With these
conditions, order entry of Dairy Farm Equipment is expected to
decline during 2000 from the levels experienced during 1999.
In spite of the 2000 outlook, domestic shipments will be at
reasonable levels as the backlog at December 31, 1999, was sub-
stantially higher than the December 31, 1998, backlog. Dairy
Farm Equipment exports for 2000 are expected to improve some-
what. This is primarily true for Europe, Asia, and Latin
America as these economic regions appear to be in various
stages of recovery, and the outlook has improved from a year
ago.
In the domestic Dairy Farm Equipment market, the number of
dairy farms continues to decline as small, high-production-cost
dairies are eliminated. This process leaves fewer but larger
dairy farm operations with the need for larger milk-cooling and
storage capacity. The Registrant is well positioned to meet
the cooling and storage requirements of the changing market-
place, and any impact on revenues and profitability will depend
upon the rate at which farm consolidation continues.
In spite of the fact that order entry for the Industrial Equip-
ment segment reached a record level during 1999, sales of
Industrial Equipment declined by $1,927,000, or a reduction of
approximately 3% from the prior year. Although order entry
during 1999 for the Industrial Equipment segment increased by
14% over the prior year, shipments during 1999 were adversely
affected by several factors. Backlog at the beginning of 1999
for the Industrial Equipment segment was 11% lower than at the
beginning of the preceding year. Additionally, processing
equipment (our most significant product line within the Indus-
trial Equipment segment) began 1999 with a backlog that was 30%
lower than the preceding year. Furthermore, during 1999, pro-
duction was hampered by customer delays and changes to orders
that had been entered, which resulted in a fluctuating workload
and poor shop labor efficiency. Also, the timing of order
entry during 1999, particularly for processing equipment, was
such that there were periods of low work and then insufficient
time for several large projects to be completed and shipped by
year-end.
During 1998, sales of Industrial Equipment were $70,553,000, or
an increase of about 10% from the preceding year. The improve-
ment was primarily attributable to processing equipment sales,
which increased by 25% over 1997. The improvement in sales was
a direct result of a higher backlog of processing equipment at
the beginning of 1998, coupled with an increase in order entry
of over 7% for the whole Industrial Equipment segment during
1998 compared to 1997. The increase in processing equipment
sales for 1998 primarily related to an export order for brewery
equipment. Although most Industrial Equipment product lines
recorded sales increases during 1998, some product lines experi-
enced declines due to the impact of the Asian financial crisis.
Looking forward to 2000, the Industrial Equipment segment is
beginning with a backlog of $28,242,000, an increase of 41%
over the prior year-end. Although growth in the U.S. economy
is expected to slow somewhat during 2000 and interest rates are
expected to be higher, the outlook is for capital spending to
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<PAGE> 10
increase. However, even with the economic outlook that is anti-
cipated, we foresee very competitive conditions continuing for
our Industrial Equipment segment during 2000 with respect to
pricing and delivery, particularly for large projects. Although
it appears that the Asian financial crisis has improved, the
rates of recovery of countries in that region vary signifi-
cantly; and this could have an adverse impact on order entry
and sales of certain products included in the Industrial Equip-
ment segment that are sold in the Asian market. Another factor
that may have an adverse impact on the results of 2000 opera-
tions is the cost of stainless steel. The mills increased
prices twice during 1999 and have implemented a 5%-7% increase
effective in February 2000, and further increases are expected.
Also, due to the increase in and the volatility of the market
prices of nickel and chromium, steel suppliers are operating
on a policy of price-in-effect-at-time-of-shipment; and they
have implemented substantial surcharges. The higher stainless
steel prices may adversely affect our order entry, and we may
be unable to fully recoup the higher steel costs in sales to
our customers, both of which would have an unfavorable effect
on profitability. Additionally, as the Registrant's inventories
are recorded on the last-in, first-out (LIFO) method, continuing
escalation in stainless steel prices may require provisions to
increase the LIFO reserve that would adversely affect profita-
bility.
As previously reported, the labor contract with the Sheet Metal
Workers Union (which covers a portion of the employees at the
Springfield, Missouri, plant) expired on June 11, 1994. Exten-
sive negotiations were conducted with union representatives,
but a new contract was not achieved. The International Union
called a strike that began on July 25, 1995; and the largest
number of employees participating was approximately 185 during
the fourth quarter of 1995. A substantial number of employees
returned to work during 1996; and currently, there are only 17
employees participating. No action has been taken by the union
to prevent nonstriking employees from working. The Registrant
implemented the provisions of its revised and final offer
effective April 1, 1996, which remains open for the union's
acceptance; and no further negotiations are scheduled.
The union has filed several unfair labor practice complaints
against the Registrant. As a result of these charges, hearings
were held before administrative law judges of the National
Labor Relations Board (NLRB) in August of 1996, November of 1997,
December of 1998, and November of 1999. The decisions of these
hearings (except for one minor issue) have all been appealed to
the NLRB. A final determination of all charges pending may take
two to three years. However, management believes, based on an
evaluation by counsel, there is no material financial exposure
to the Registrant.
The Registrant currently employs about 850 people, of which
approximately 390 are represented by the Sheet Metal Workers
Union. The Registrant has facilities located in Springfield,
Missouri, and Osceola, Iowa. There are approximately 750 em-
ployees assigned to the Springfield facility; and at the Osceola
facility, there are an additional 100 employees, none of which
are represented by a labor union.
Sales backlog totaled $34,533,000 at December 31, 1999, versus
$22,008,000 and $25,579,000 at the end of 1998 and 1997, respec-
tively. The backlog of the Industrial Equipment segment was
$28,242,000, $20,081,000, and $22,500,000 at the end of 1999,
1998, and 1997, respectively, with the remaining balance in
each year attributable to the Dairy Farm Equipment segment.
Substantially all of the December 31, 1999, backlog will be
shipped during the current year.
OPERATING INCOME - Operating income for 1999 was $3,155,000
versus $3,890,000 for 1998. Although sales were higher for 1999
compared to 1998 and there was a reduction in the required LIFO
reserve which had the effect of increasing operating income by
$1,127,000, operating income was adversely affected by lower
10
<PAGE> 11
margins and higher operating expenses. Overall, margins were
lower for 1999 compared to 1998. The product line contributing
to lower overall margins was processing equipment, our largest
product line. Processing equipment margins were lower due to
very competitive pricing conditions, the addition of field
fabrication work that has inherently lower margins, and plant
labor efficiency that was adversely affected by the fluctuating
workload during 1999.
Operating expenses for 1999 were also higher than those for 1998.
Manufacturing burden was approximately 7% higher for 1999 com-
pared to 1998. This was due to a higher level of production
during 1998 than during 1999, which resulted in a greater
deferral of manufacturing burden in inventory in 1998 versus
1999. Selling, general, and administrative expenses were higher
in 1999 compared to 1998, as expenditures were higher for per-
sonnel costs, warranty and service, medical expenses, and
product development costs. Additionally, selling, general,
and administrative expenses were higher due to the increased
activity of Mueller Field Operations, Inc.
Operating income for 1998 was $3,890,000 compared to $3,535,000
for the prior year. Although sales and gross profit improved
during 1998, operating profit was adversely affected by a LIFO
provision and higher operating expenses. The improvement in
gross profit was primarily due to processing equipment as sales
were higher than for the prior year; and gross margins increased
due to higher quality orders, coupled with improved plant labor
efficiency. The inventory level at the end of 1998 was greater
than at the end of 1997, which necessitated an increase in the
required LIFO reserve; and this had the effect of decreasing
operating income by $730,000. On the other hand, for 1997,
there was a reduction in the required LIFO reserve; and this had
the effect of increasing operating income by $440,000. Selling,
general, and administrative expenses were higher in 1998 com-
pared to 1997 as expenditures were higher for personnel, manufac-
turers' representative's commission, travel expenses, medical
expenses, and product development costs.
The profitability of the Industrial Equipment segment is lower
than that for the Dairy Farm Equipment segment as generally all
Industrial Equipment projects are engineered-to-order. The
projects require much greater support from the sales, engineer-
ing, and manufacturing areas and a higher degree of skill to
fabricate. Also, the risks of manufacturing are greater because
the products are custom-designed and built; and the chances of
misinterpretation, errors, and mistakes are, in general, much
greater than with a standard product. Many of the Industrial
Equipment projects are bid among several possible suppliers,
which tends to make pricing very competitive. On the other
hand, the Dairy Farm Equipment segment sells standard products;
and engineering designs have been well defined and manufacturing
methods have been refined for efficiency. The proprietary
nature of the products also permits more attractive pricing.
There are relatively few competitors, and the Registrant is one
of the largest manufacturers of dairy farm milk coolers.
Inflation is a factor that affects the cost of operations, and
the Registrant seeks ways to minimize the effect on operating
results. To the extent permitted by competitive conditions,
higher material prices, labor costs, and operating costs are
passed on to the customer by increasing prices. The Registrant
uses the LIFO method of accounting for inventories; and under
this method, the cost of products sold, as reported in the
financial statements, approximates the current replacement cost.
Additionally, the Registrant uses accelerated depreciation
methods in charging depreciation expense to current operations,
which, to a certain extent, reflects the effect of the increased
cost of replacement productive capacity.
OTHER INCOME (EXPENSE) - The average level of investable funds
was lower during 1999 compared to 1998, which resulted in lower
interest income. During 1998, the average level of investable
11
<PAGE> 12
funds and the average interest rate both were lower compared to
1997, which resulted in a lower level of interest income.
Other, net for 1999 was adversely affected by the settlement
of a lawsuit. The Registrant was the defendant in a breach-of-
contract/breach-of-warranty lawsuit concerning reactor vessels
sold in 1992 in Tarrant County, Texas (Alcon Laboratories, Inc.
-vs- Paul Mueller Company). At the trial, the Registrant re-
ceived an adverse decision in September of 1997, and the final
judgment awarded damages, interest, and attorney's fees totaling
$1,700,000 to the plaintiff. The decision also provided that
interest at 10% compounded annually would accrue on the judgment
amount until paid. Management believed that this decision was
incorrect and, based on advice of legal counsel, appealed the
decision. A decision on the appeal was rendered by the Court
of Appeals on May 27, 1999; and the trial court's decision was
upheld. After consultation with legal counsel, the Registrant
decided not to pursue an additional appeal. On June 21, 1999,
the Registrant was able to reach a settlement with Alcon Labora-
tories, Inc., in the amount of $1,875,000. As a result of the
settlement, the Registrant increased its reserve by $734,000 to
fully accrue for its liability.
Other, net for 1999 was also adversely affected by lower results
from the trucking operation and royalty income. Other, net
for 1998 improved over 1997, as 1997 included a provision of
$775,000 made for the estimated liability for the Alcon Labora-
tories, Inc., lawsuit after the September 1997 trial court
decision.
PROVISION FOR INCOME TAXES - The effective tax rates for 1999,
1998, and 1997 were 23.1%, 28.5%, and 25.4%, respectively. The
effective tax rates for 1999, 1998, and 1997 were below the
statutory rate (34%) primarily as a result of the lower effec-
tive tax rate for the Registrant's foreign sales corporation,
tax-exempt interest, and tax credits.
YEAR 2000 ISSUE - The Registrant experienced no significant
Year 2000 problems. The AS/400 computer operating system and
all major business systems, including the financial, design
engineering, and manufacturing software systems, functioned
properly. A few minor problems were encountered, but they were
corrected immediately. All noninformation technology systems
and equipment within the Registrant's facilities performed
without problems. To date, the Registrant has not experienced
any problems with either suppliers or customers.
The cost associated with the remediation and testing effort
consisted primarily of personnel costs that were expensed as
incurred and funded by operating cash flows. Personnel costs
incurred in 1997 and 1998 were approximately $200,000 in total.
These costs for 1999 were approximately $30,000. Management
also purchased approximately $30,000 of software and hardware
for the remediation project, which have been capitalized and
are being depreciated in accordance with Registrant policies.
Management closely monitored the progress of key vendors as to
their Year 2000 compliance, and it was not necessary to increase
stocking levels of essential raw materials and purchased compo-
nents.
FINANCIAL CONDITION
LIQUIDITY - CAPITAL RESOURCES - Working capital was
$18,223,000 at December 31, 1999, compared to $19,424,000 at
December 31, 1998. The current ratio, a measure of liquidity,
was 2.20 at December 31, 1999, versus 2.39 at December 31, 1998.
The Registrant has no significant amount of long-term debt.
Net cash provided by operations was $2,928,000 in 1999 compared
to $2,495,000 in 1998 and $5,473,000 in 1997. The 1999 cash
flow was primarily attributable to net income, depreciation and
12
<PAGE> 13
amortization expense, and an increase in advance billings. The
1998 cash flow was primarily attributable to net income and to
depreciation and amortization expense. The 1997 cash flow was
primarily attributable to net income, an increase in current
liabilities, and depreciation and amortization expense.
Capital expenditures for the most recent three years were
$2,520,000 in 1999, $4,769,000 in 1998, and $7,777,000 in
1997. Capital expenditures during 1999 and 1998 included a
substantial portion to improve production efficiency and reduce
through-put time. Capital expenditures for 1997 included the
establishment of a microbrewery/brewpub operation in Spring-
field, Missouri, and the addition of a corporate aircraft.
The microbrewery/brewpub was developed in support of the Re-
gistrant's efforts to expand its marketing of brewery systems.
The corporate aircraft was purchased to facilitate travel,
primarily in the marketing of the Registrant's products.
The level of capital expenditures for 2000 is initially planned
at $1,000,000. Anticipated expenditures will be primarily for
critical plant equipment to enhance capabilities, maintain
quality, and improve efficiency. Depending on the level of
business and operating needs, it may be necessary to request
authorization for additional expenditures from the Board of
Directors.
The Registrant has a $3,000,000 bank-borrowing facility that
expires on September 8, 2000, none of which is currently used.
Management believes that cash flow provided by operations and
the cash and investment position will continue to be sufficient
to satisfy the Registrant's working capital requirements, normal
capital expenditure levels, and anticipated dividends. A policy
of requiring down payments and progress payments on large Indus-
trial Equipment orders provides a favorable effect on cash flows.
Management expects internally generated funds to be sufficient
to finance operations, and this is consistent with historical
performance.
Market risks relating to the Registrant's operations result pri-
marily from changes in foreign-exchange rates, interest rates,
as well as stainless steel prices. The Registrant periodically
enters into foreign-exchange forward or spot contracts to hedge
the exposure to foreign-currency-denominated purchase transac-
tions. Forward contracts generally have maturities of less
than three months. Foreign-currency-denominated purchases were
$3,700,000, $3,700,000, and $2,200,000 for 1999, 1998, and 1997,
respectively. There were no foreign-exchange forward contracts
outstanding or currencies held at December 31, 1999 or 1998.
The Registrant's financial instruments that are exposed to
interest rate risks consist of available-for-sale investments
that are recorded at market value and were $2,295,696 and
$5,254,224 at December 31, 1999, and December 31, 1998, respec-
tively.
Available-for-sale investments are maintained in high-quality
securities that consist of tax-exempt bonds, a taxable bond
fund, and a taxable variable rate preferred stock fund. Tax-
exempt bonds generally have maturities of from three to twelve
months. Unrealized holding gains and losses were not material
as of December 31, 1999 or 1998, and there were no significant
realized gains or losses during 1999, 1998, or 1997. The Regis-
trant does not use financial instruments for trading purposes.
The risk of significant changes in stainless steel pricing for
Industrial Equipment segment projects that extend over several
months is managed by contracting for the stainless steel at the
time the project is obtained.
Concentration of credit risk, with respect to receivables, is
limited due to the large number of customers and their disper-
sion across a wide geographic area. The Registrant performs
credit evaluations of all new customers and periodically
reviews the financial condition of existing customers. For
Industrial Equipment segment orders, down payments and/or
progress payments are generally required based on the dollar
13
<PAGE> 14
value of the order and customer creditworthiness. Foreign
receivables generally are secured by irrevocable letters of
credit confirmed by a major U.S. bank.
Statement of Financial Accounting Standards (SFAS) No. 137,
"Accounting for Derivative Instruments and Hedging Activities -
deferral of the effective date of FASB Statement No. 133" issued
in June 1999 and effective for the Registrant's 2001 fiscal
year, is not expected to have a material effect on the Regis-
trant's financial position or results of operations.
ITEM 7.A. - QUALITATIVE AND QUANTITATIVE DISCLOSURES
ABOUT MARKET RISK
Certain information concerning market risk is set forth in
Item 7, page 13, and is incorporated herein by reference.
Other disclosure requirements are not submitted because they
are not applicable or they are not material.
14
<PAGE> 15
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents (Note 1).................. $ 699,936 $ 1,358,060
Available-for-sale investments,
at market (Note 1)............................ 2,295,696 5,254,224
Accounts and notes receivable, less reserve of
$518,414 in 1999 and $641,899 in 1998 for
doubtful accounts (Note 1).................... 18,811,372 16,030,138
Inventories (Note 1) -
Raw materials and components.................... $ 6,794,576 $ 6,256,675
Work-in-process................................. 3,114,494 1,808,244
Finished goods.................................. 1,149,512 2,247,814
----------- -----------
$11,058,582 $10,312,733
Prepayments....................................... 570,322 437,607
----------- -----------
Total Current Assets...................... $33,435,908 $33,392,762
Property, Plant and Equipment - at cost (Note 1) -
Land and land improvements........................ $ 3,323,629 $ 3,087,283
Buildings......................................... 13,731,764 13,228,773
Shop equipment.................................... 29,486,115 28,702,060
Transportation, office, and other equipment....... 12,614,093 13,016,281
Construction-in-progress.......................... 599,660 752,855
----------- -----------
$59,755,261 $58,787,252
Less - Accumulated depreciation................... 41,301,338 39,998,560
----------- -----------
$18,453,923 $18,788,692
Other Assets (Notes 1, 2, and 3).................... 3,732,937 2,955,817
----------- -----------
$55,622,768 $55,137,271
=========== ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Accounts payable.................................. $ 3,484,162 $ 3,077,192
Accrued expenses -
Income taxes (Note 3)........................... 230,365 214,520
Payrolls........................................ 2,165,912 2,532,346
Vacations....................................... 2,045,825 1,931,177
Other........................................... 695,671 1,700,454
Advance billings.................................. 6,591,154 4,513,524
----------- -----------
Total Current Liabilities................. $15,213,089 $13,969,213
Other Long-Term Liabilities (Note 2)................ 1,401,052 1,159,798
Contingencies (Note 5)
Shareholders' Investment:
Common stock, par value $1 per share -
Authorized 20,000,000 shares -
Issued 1,348,325 shares in 1999
and 1,342,325 shares in 1998.................. $ 1,348,325 $ 1,342,325
Preferred stock, par value $1 per share -
Authorized 1,000,000 shares -
no shares issued.............................. - -
Paid-in surplus................................... 4,495,728 4,306,728
Retained earnings................................. 35,969,849 36,913,240
----------- -----------
$41,813,902 $42,562,293
Less - Treasury stock, 174,304 shares, at cost.... 2,554,033 2,554,033
Deferred compensation (Note 7)............. 172,250 -
Accumulated other comprehensive income..... 78,992 -
----------- -----------
$39,008,627 $40,008,260
----------- -----------
$55,622,768 $55,137,271
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
16
<PAGE> 17
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales.............................. $92,571,835 $89,745,547 $86,693,022
Cost of Sales (Note 1)................. 71,155,331 68,173,874 66,826,192
----------- ----------- -----------
Gross profit......................... $21,416,504 $21,571,673 $19,866,830
Selling, General & Administrative
Expenses (Note 1).................... 18,261,099 17,682,108 16,331,730
----------- ----------- -----------
Operating income..................... $ 3,155,405 $ 3,889,565 $ 3,535,100
Other Income (Expense):
Interest income...................... $ 322,327 $ 403,564 $ 704,965
Interest expense..................... (10,054) (14,635) (15,930)
Other, net (Note 4).................. (964,729) 104,807 (276,595)
----------- ----------- -----------
$ (652,456) $ 493,736 $ 412,440
----------- ----------- -----------
Income before provision
for income taxes............... $ 2,502,949 $ 4,383,301 $ 3,947,540
Provision for Income Taxes (Note 3).... 577,000 1,249,000 1,003,000
----------- ----------- -----------
Income before Equity in
Loss of Joint Venture............. $ 1,925,949 $ 3,134,301 $ 2,944,540
Equity in Loss of
Joint Venture (Note 1)............ (55,290) - -
----------- ----------- -----------
Net Income............................. $ 1,870,659 $ 3,134,301 $ 2,944,540
=========== =========== ===========
Basic & Diluted Earnings
per Common Share (Note 1)............ $ 1.60 $ 2.68 $ 2.52
====== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended December 31, 1999, 1998, and 1997
<CAPTION>
Common Paid-in Retained Treasury
Stock Surplus Earnings Stock
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance - 12-31-96.... $ 1,342,325 $ 4,306,728 $36,440,899 $(2,554,033)
Add (Deduct):
Net income.......... - - 2,944,540 -
Dividends - $2.40
per common share.. - - (2,803,250) -
----------- ----------- ----------- -----------
Balance - 12-31-97.... $ 1,342,325 $ 4,306,728 $36,582,189 $(2,554,033)
Add (Deduct):
Net income.......... - - 3,134,301 -
Dividends - $2.40
per common share.. - - (2,803,250) -
----------- ----------- ----------- -----------
Balance - 12-31-98.... $ 1,342,325 $ 4,306,728 $36,913,240 $(2,554,033)
Add (Deduct):
Net income.......... - - 1,870,659 -
Other comprehensive
income, net
of tax:
Unrealized loss
on investments.. - - - -
Foreign currency
translation
adjustment...... - - - -
Comprehensive
income............. - - - -
Dividends - $2.40
per common share.. - - (2,814,050) -
Restricted stock
issued............ 6,000 189,000 - -
Amortization........ - - - -
----------- ----------- ----------- -----------
Balance, 12-31-99..... $ 1,348,325 $ 4,495,728 $35,969,849 $(2,554,033)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
(continuation of table above)
Accumulated
Other
Deferred Comprehen-
Compensation sive Loss Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance - 12-31-96.... $ - $ - $39,535,919
Add (Deduct):
Net income.......... - - 2,944,540
Dividends - $2.40
per common share.. - - (2,803,250)
----------- ----------- -----------
Balance - 12-31-97.... $ - $ - $39,677,209
Add (Deduct):
Net income.......... - - 3,134,301
Dividends - $2.40
per common share.. - - (2,803,250)
----------- ----------- -----------
Balance - 12-31-98.... $ - $ - $40,008,260
Add (Deduct):
Net income.......... - - 1,870,659
Other comprehensive
income, net
of tax:
Unrealized loss
on investments.. - (66,066) (66,066)
Foreign currency
translation
adjustment...... - (12,926) (12,926)
-----------
Comprehensive
income............. - - $ 1,791,667
Dividends - $2.40
per common share.. - - (2,814,050)
Restricted stock
issued............ (195,000) - 0
Amortization........ 22,750 - 22,750
----------- ----------- -----------
Balance, 12-31-99..... $ (172,250) $ (78,992) $39,008,627
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
17
<PAGE> 18
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................... $ 1,870,659 $ 3,134,301 $ 2,944,540
Adjustments to reconcile net income
to net cash provided by
operating activities:
Equity in loss of joint venture.... 55,290 - -
Bad debt expense (recovery)........ 13,579 (4,834) (16,744)
Depreciation and amortization...... 2,914,562 2,687,894 2,296,292
(Gain) on sales of equipment....... (7,878) (8,328) (41,523)
Changes in assets and liabilities -
Decrease in interest receivable.. 49,298 70,684 58,230
(Increase) decrease in accounts
and notes receivable........... (2,794,813) 87,935 (767,926)
(Increase) in inventories........ (745,849) (2,280,324) (2,047,385)
(Increase) decrease in
prepayments.................... (86,323) 36,823 (71,170)
Decrease (increase) in
other assets................... 173,866 511,984 (102,047)
Increase (decrease) in
accounts payable............... 406,970 (1,218,492) 2,012,787
(Decrease) increase in
accrued expenses............... (1,240,724) 129,148 156,745
Increase (decrease) in
advance billings............... 2,077,630 (711,488) 1,139,860
Increase (decrease) in other
long-term liabilities.......... 241,254 59,762 (88,363)
----------- ----------- -----------
Net Cash Provided by
Operating Activities......... $ 2,927,521 $ 2,495,065 $ 5,473,296
Cash Flows (Requirements) from
Investing Activities:
Proceeds from maturities
of investments..................... $ 9,814,379 $15,508,981 $20,780,000
Purchases of investments............. (7,010,016) (12,486,663) (14,580,000)
Investment in joint venture.......... (1,082,793) - -
Proceeds from sales of equipment..... 26,920 10,923 87,768
Additions to property,
plant, and equipment............... (2,520,085) (4,768,523) (7,776,935)
----------- ----------- -----------
Net Cash (Required) by
Investing Activities......... $ (771,595) $(1,735,282) $(1,489,167)
Cash Flows (Requirements)
from Financing Activities:
Dividends paid....................... $(2,814,050) $(2,803,250) $(2,803,250)
----------- ----------- -----------
Net Cash (Required) by
Financing Activities......... $(2,814,050) $(2,803,250) $(2,803,250)
----------- ----------- -----------
Net (Decrease) Increase in Cash........ $ (658,124) $(2,043,467) $ 1,180,879
Cash and Cash Equivalents
at Beginning of Year................. 1,358,060 3,401,527 2,220,648
----------- ----------- -----------
Cash and Cash Equivalents
at End of Year....................... $ 699,936 $ 1,358,060 $ 3,401,527
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
(1) SUMMARY OF ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION -- Paul Mueller Company (Registrant)
specializes in the manufacture of high-quality stainless steel
tanks and industrial processing equipment. The Registrant serves
the food, beverage, chemical, pharmaceutical and other process
industries and the dairy farm market. The financial statements
include the accounts of the Registrant and its wholly owned sub-
sidiaries: Mueller International Sales Corporation, a foreign
sales corporation (FSC); Mueller Transportation, Inc.; and
Mueller Field Operations, Inc. (Companies). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
JOINT VENTURE - On August 17, 1999, the Registrant established
a joint venture when it acquired 50% of the common stock of
Mueller Montana de Mexico, S.A. de C.V. (Mueller Montana), a
Mexican fabricator of processing equipment, for a price of
$1,083,000. One-half of the price was a contribution to the
capital of Mueller Montana for the benefit of all shareholders
and the balance was paid to former shareholders. The investment
in the joint venture was not material to the Registrant's
financial position or results of operations. The investment
is included in other assets on the Consolidated Balance Sheets.
USE OF ESTIMATES - The preparation of financial statements,
in conformity with generally accepted accounting principles,
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
REVENUE RECOGNITION AND RETAINAGES - Revenue from sales of
manufactured products is recognized upon passage of title to the
customer, which generally coincides with shipment. Contracts
with some customers provide for a portion of the sales amount
to be retained by the customer for a period of time after comple-
tion of the contract. Retainages included in accounts receivable
were $635,200 at December 31, 1999, and $102,600 at December 31,
1998.
INVENTORIES - The Registrant's inventories are recorded at the
lower of cost on a last-in, first-out (LIFO) basis or market.
Cost of subsidiary inventories is determined on a first-in,
first-out (FIFO) method, and they are not significant to the
Consolidated Financial Statements. Cost includes material, labor,
and manufacturing burden required in the production of products.
Under the first-in, first-out (FIFO) method of accounting, which
approximates current cost, Registrant inventories would have
been $6,282,819, $7,409,602, and $6,679,563, higher than those
reported at December 31, 1999, 1998, and 1997, respectively.
RESEARCH AND DEVELOPMENT - Research and development expenses
are charged to expense as incurred and were $1,100,000 in 1999,
$978,900 in 1998, and $719,200 in 1997.
DEPRECIATION POLICIES - The Companies provide for depreciation
expense using principally the double-declining balance method
for new items and the straight-line method for used items. The
economic useful lives for the more significant items within each
property classification are as follows:
19
<PAGE> 20
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Buildings................................... 40
Land improvements........................... 10 - 20
Shop equipment.............................. 5 - 10
Transportation, office and other equipment.. 3 - 10
</TABLE>
Maintenance and repairs are charged to expense as incurred. The
cost and accumulated depreciation of assets retired are removed
from the accounts, and any resulting gains or losses are re-
flected in net income currently.
EARNINGS PER COMMON SHARE - The following table sets forth the
computation of basic and diluted earnings per common share:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income............................ $1,870,659 $3,134,301 $2,944,540
========== ========== ==========
Shares for basic earnings per
Common share - Weighted average
shares outstanding.................. 1,168,021 1,168,021 1,168,021
Effect of restricted stock issued..... 254 - -
---------- ---------- ----------
Shares for diluted earnings per
common share - Adjusted weighted
average shares outstanding.......... 1,168,275 1,168,021 1,168,021
========== ========== ==========
Basic earnings per common share....... $ 1.60 $ 2.68 $ 2.52
====== ====== ======
Diluted earnings per common share..... $ 1.60 $ 2.68 $ 2.52
====== ====== ======
</TABLE>
COMPREHENSIVE INCOME - The Registrant has adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Compre-
hensive Income," which establishes standards for reporting and
the display of comprehensive income and its components.
The components of accumulated other comprehensive loss for the
year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Unrealized net loss on investments,
net of tax benefit of $38,801............................... $(66,066)
Foreign currency translation adjustment,
net of tax benefit of $7,591................................ (12,926)
--------
Accumulated other comprehensive loss.......................... $(78,992)
========
INVESTMENTS - The Registrant classifies its investments in tax-
exempt bonds, a taxable bond fund, and a taxable variable rate
preferred stock fund as available-for-sale and records them at
market value. These securities are a part of the Registrant's
asset/liability management program and may be sold in response
to capital or liquidity needs. Investments in tax-exempt
bonds generally have maturities from three to twelve months.
Available-for-sale investments on the accompanying Consolidated
Balance Sheets at December 31, 1999 and 1998, include:
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Tax-exempt bonds........................ $ 1,770,955 $ 3,625,000
Taxable bond fund....................... 497,497 552,682
Taxable preferred stock fund............ - 1,000,000
Accrued interest........................ 27,244 76,542
----------- -----------
$ 2,295,696 $ 5,254,224
=========== ===========
</TABLE>
20
<PAGE> 21
Unrealized holding gains and losses were not material at December
31, 1999 or 1998, and there were no significant realized gains or
losses during 1999, 1998, or 1997.
STATEMENTS OF CASH FLOWS - For purposes of the Statements of
Cash Flows, the Registrant considers investments with a maturity
of three months or less to be cash equivalents.
Interest and income tax payments for each of the three years
during the period ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Interest payments.......... $ 10,000 $ 14,600 $ 15,900
Income tax payments........ $ 139,000 $1,420,500 $1,601,700
</TABLE>
SHAREHOLDERS' INVESTMENT - The following table sets forth the
analysis of common stock issued and held as treasury stock:
Shares
------------------
Common
Stock Treasury
Issued Stock
--------- -------
Balance, December 31, 1996.................. 1,342,325 174,304
--------- -------
Balance, December 31, 1997.................. 1,342,325 174,304
--------- -------
Balance, December 31, 1998.................. 1,342,325 174,304
Restricted stock issued..................... 6,000 -
--------- -------
Balance, December 31, 1999.................. 1,348,325 174,304
========= =======
(2) RETIREMENT PLANS:
The Registrant has a Profit Sharing and Retirement Savings Plan
[401(k) plan] in which substantially all employees are eligible
to participate. The plan provides for a match of employees' con-
ributions up to a specified limit. The plan also has a profit-
sharing feature whereby an additional match is made if the net
income reaches predetermined levels established annually by the
Board of Directors. The funds of the plan are deposited with an
insurance company and are invested at the employee's option in
one or more investment funds. The Registrant's contributions to
the plan were $422,200 for 1999, $415,300 for 1998, and $336,500
for 1997.
The Registrant has pension plans covering substantially all em-
loyees. Benefits under the plans are based either on final
average pay or a flat benefit formula. Total pension expense
under the plans was $723,300 in 1999, $781,800 in 1998, and
$659,900 in 1997. Management's policy is to fund pension expense
that is currently deductible for tax purposes.
The following table sets forth the required disclosures for the
pension plans at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Change in Benefit Obligation
Benefit obligation at beginning of year....... $32,532,200 $29,600,900
Service cost.................................. 1,234,400 1,172,900
Interest cost................................. 2,332,200 2,129,600
Actuarial (gain) loss......................... (4,133,900) 731,800
Benefits paid and expenses.................... (1,241,400) (1,103,000)
----------- -----------
Benefit obligation at end of year............. $30,723,500 $32,532,200
=========== ===========
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Change in Plan Assets
Fair value of plan assets
at beginning of year........................ $36,293,600 $33,008,900
Actual return on plan assets.................. 2,420,900 3,699,500
Employer contribution......................... 706,800 688,200
Benefits paid and expenses.................... (1,241,400) (1,103,000)
----------- -----------
Fair value of plan assets at end of year...... $38,179,900 $36,293,600
=========== ===========
Reconciliation
Funded status................................. $ 7,456,400 $ 3,761,400
Unrecognized net actuarial (gain)............. (8,111,700) (4,269,900)
Unrecognized transition (asset)............... (459,900) (810,400)
Unrecognized prior service cost............... 1,771,100 1,991,300
----------- -----------
Prepaid benefit cost.......................... $ 655,900 $ 672,400
=========== ===========
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Components of Pension Expense
Service cost..................... $ 1,234,400 $ 1,172,900 $ 1,005,400
Interest cost.................... 2,332,200 2,129,600 1,927,300
Expected return on plan assets... (2,712,500) (2,388,500) (2,141,900)
Amortization of
transition (asset)............. (350,500) (350,500) (350,500)
Amortization of
prior service cost............. 220,200 220,200 220,200
Recognized net actuarial (gain).. (500) (1,900) (600)
----------- ----------- -----------
Pension expense.................. $ 723,300 $ 781,800 $ 659,900
=========== =========== ===========
</TABLE>
Prepaid pension assets of $2,405,500 and $2,377,500 at December
31, 1999 and 1998, respectively, are included in other assets on
the accompanying Consolidated Balance Sheets. Pension liabili-
ties of $1,749,600 and $1,705,100 at December 31, 1999 and 1998,
respectively, are included in current and other long-term lia-
bilities on the accompanying Consolidated Balance Sheets.
The weighted average expected long-term rate of return on plan
assets used in the determination of annual pension expense was
8.5% for 1999, 1998, and 1997. The weighted average assumed
discount rate used to measure the benefit obligation was 8% at
December 31, 1999, and 7% at December 31, 1998. The assumed rate
of compensation increase used to measure the benefit obligation
was 4.5% at December 31, 1999 and 1998, for the applicable plan.
(3) INCOME TAXES:
The provision for taxes on income from operations includes:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current tax expense........... $ 201,600 $1,037,200 $1,087,800
Deferred, net................. 375,400 211,800 (84,800)
---------- ---------- ----------
$ 577,000 $1,249,000 $1,003,000
========== ========== ==========
</TABLE>
The deferred tax consequences of temporary differences in report-
ing items for financial statement and income tax purposes are
recognized. A net deferred tax liability of $42,600 at December
31, 1999, is included in other long-term liabilities, and a net
deferred tax asset of $320,000 at December 31, 1998, is included
in other assets on the accompanying Consolidated Balance Sheets.
The income tax effect of temporary differences comprising the
22
<PAGE> 23
deferred tax assets and deferred tax liabilities in the accom-
panying Consolidated Balance Sheets is a result of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Insurance............................. $ 90,800 $ 69,800
Vacation.............................. 681,000 637,200
Warranty.............................. 18,500 18,500
Doubtful accounts..................... 191,800 237,500
Healthcare benefits................... 176,900 164,300
Lawsuit............................... - 383,500
Other................................. 130,300 126,000
---------- ----------
$1,289,300 $1,636,800
========== ==========
Deferred Tax Liabilities:
Depreciation.......................... $ 815,300 $ 658,300
Pensions.............................. 439,100 510,300
Other................................. 77,500 148,200
---------- ----------
$1,331,900 $1,316,800
========== ==========
</TABLE>
A reconciliation between the statutory federal income tax rate
(34%) and the effective rate of income tax expense for each of
the three years during the period ended December 31, 1999,
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
Amount % Amount % Amount %
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Statutory federal
income tax......... $ 851,000 34.0 $1,490,300 34.0 $1,342,200 34.0
Increase (decrease)
in taxes resulting
from:
State tax, net of
federal benefit... 49,500 2.0 65,400 1.5 53,700 1.4
Tax-exempt
interest.......... (40,400) (1.6) (71,100) (1.6) (137,400) (3.5)
Tax credits........ (261,100)(10.4) (27,200) (0.6) (22,200) (0.5)
FSC exempt income.. (98,400) (3.9) (170,900) (3.9) (138,700) (3.5)
Other, net......... 76,400 3.0 (37,500) (0.9) (94,600) (2.5)
---------- ---- ---------- ---- ---------- ----
$ 577,000 23.1 $1,249,000 28.5 $1,003,000 25.4
========== ==== ========== ==== ========== ====
</TABLE>
(4) LAWSUIT SETTLEMENT:
The Registrant was the defendant in a breach-of-contract/breach-
of-warranty lawsuit concerning reactor vessels sold in 1992
in Tarrant County, Texas (Alcon Laboratories, Inc. -vs- Paul
Mueller Company). As a result of a trial that ended in September
1997, the Registrant received an adverse decision; and the final
judgment awarded damages, interest, and attorney's fees totaling
$1,700,000 to the plaintiff. The decision also provided that
interest at 10% compounded annually would accrue on the judgment
amount until paid.
Management believed the decision was incorrect and, based on the
advice of legal counsel, appealed the decision. A decision on
the appeal was rendered by the Court of Appeals on May 27, 1999,
and the trial court's decision was upheld. After consultation
with legal counsel, the Registrant decided not to pursue an
additional appeal.
On June 21, 1999, the Registrant was able to reach a settlement
with Alcon Laboratories, Inc., in the amount of $1,875,000. As
a result of the settlement, the Registrant increased its reserve
23
<PAGE> 24
for the lawsuit in the second quarter to fully accrue for its
liability. The addition to the reserve was $734,000, and it is
included in other, net on the Consolidated Statements of Income.
(5) CONTINGENCIES:
The Registrant is involved in other legal proceedings incident
to the conduct of its business. It is management's opinion that
none of these matters will have a materially adverse effect on
the consolidated financial position, results of operations, or
cash flows.
The Registrant employs nearly 850 people, of which approximately
390 are represented by the Sheet Metal Workers Union. The Inter-
national Union called a strike beginning July 25, 1995, and cur-
rently 17 employees are participating. The Registrant has unfair
labor practice charges pending before the National Labor Rela-
tions Board, and the final determination of these charges may
take two to three years. However, management believes, based
on evaluation by counsel, that there is no material financial
exposure to the Registrant.
(6) SEGMENT DATA:
The Registrant has two reportable segments: Industrial Equipment
and Dairy Farm Equipment. The Registrant's Industrial Equipment
segment sells the following products directly to industrial cus-
tomers: food, beverage, chemical, and pharmaceutical processing
equipment; industrial heat transfer equipment; pure water equip-
ment; thermal energy storage equipment; and commercial refrigera-
tion equipment. The Registrant's Dairy Farm Equipment segment
sells milk-cooling and storage equipment and accessories, refri-
geration units, and heat-recovery equipment for use on dairy
farms to independent dealers for resale.
Management evaluates performance and allocates resources based
on operating income or loss before income taxes. The accounting
policies of the reportable segments are the same as those des-
cribed in Summary of Accounting Policies in Note 1 to these
Consolidated Financial Statements. There were no significant
intersegment sales.
The Registrant's reportable segments are managed separately
because they offer different products. Industrial Equipment
products have been aggregated because they are designed and
built to a customer's specifications, and they use common pro-
cesses and resources in the manufacturing operation. The long-
term financial performance of the product lines included in the
Industrial Equipment segment is affected by similar economic
conditions. The Dairy Farm Equipment segment includes standard
products that are built to stock and are available for sale from
inventory. The demand for Dairy Farm Equipment products relates
to the economic factors that influence the profitability of
dairy farmers.
<TABLE>
<CAPTION>
1999
--------------------------------------------------
Dairy Farm Industrial Other /
Equipment Equipment Corporate Consolidated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues from
external customers... $23,945,695 $68,626,140 $ - $92,571,835
Depreciation and
amortization expense. $ 513,628 $ 2,102,469 $ 298,465 $ 2,914,562
Income (expense)
before income tax.... $ 3,178,878 $ (9,715) $ (666,214) $ 2,502,949
Assets ............... $11,231,703 $35,812,296 $ 8,578,769 $55,622,768
Additions to property,
plant and equipment.. $ 285,793 $ 2,099,130 $ 135,162 $ 2,520,085
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
1998
--------------------------------------------------
Dairy Farm Industrial Other /
Equipment Equipment Corporate Consolidated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues from
external customers... $19,192,965 $70,552,582 $ - $89,745,547
Depreciation and
amortization expense. $ 506,320 $ 1,866,868 $ 314,706 $ 2,687,894
Income (expense)
before income tax.... $ 2,472,637 $ 2,105,629 $ (194,965) $ 4,383,301
Assets................ $10,761,132 $32,806,912 $11,569,227 $55,137,271
Additions to property,
plant and equipment.. $ 426,789 $ 4,030,797 $ 310,937 $ 4,768,523
<CAPTION>
1997
--------------------------------------------------
Dairy Farm Industrial Other /
Equipment Equipment Corporate Consolidated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues from
external customers... $22,390,144 $64,302,878 $ - $86,693,022
Depreciation and
amortization expense. $ 780,138 $ 1,176,630 $ 339,524 $ 2,296,292
Income before
income tax........... $ 3,454,940 $ 272,869 $ 219,731 $ 3,947,540
Assets................ $11,987,432 $27,857,839 $16,702,019 $56,547,290
Additions to property,
plant and equipment.. $ 1,236,037 $ 6,067,429 $ 473,469 $ 7,776,935
</TABLE>
Revenues from external customers by product category for the three
years ended December 31, 1999, were:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Milk-cooling & storage equipment... $21,444,848 $17,144,400 $20,455,089
Processing equipment............... 44,006,909 47,613,127 38,066,204
Other industrial equipment......... 27,120,078 24,988,020 28,171,729
----------- ----------- -----------
$92,571,835 $89,745,547 $86,693,022
=========== =========== ===========
</TABLE>
Revenues by geographic location are attributed to countries based
on the location of the customer and for the three years ended
December 31, 1999, were:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
United States...................... $75,222,015 $65,914,311 $67,996,277
North America...................... 8,153,251 6,935,491 6,065,359
Asia & the Far East................ 4,352,378 13,385,745 7,665,046
Other areas........................ 4,844,191 3,510,000 4,966,340
----------- ----------- -----------
$92,571,835 $89,745,547 $86,693,022
=========== =========== ===========
</TABLE>
During the years presented, 1998 included export sales to Japan
($10,358,984) that were in excess of 10% of consolidated sales.
Substantially all long-lived assets owned by the Registrant and
its subsidiaries are located in the United States.
During 1999, 1998, and 1997, sales to any one customer were not
in excess of 10% of consolidated sales.
25
<PAGE> 26
(7) LONG-TERM INCENTIVE PLAN:
Under the 1999 Long-Term Incentive Plan (the Plan), two types
of awards are provided for executives and key employees: re-
stricted stock and nonqualified stock options. An aggregate
of 180,000 shares of common stock can be issued under the Plan,
with 55,000 shares being the aggregate maximum number of shares
that may be granted as restricted stock.
In May 1999, 6,000 shares of restricted stock were granted to
certain executives and key employees, and they will vest five
years after grant. Compensation expense was computed by multi-
plying the number of shares granted by the fair market value of
the common stock on the date of grant. The expense is being
recognized ratably over the vesting period.
In May 1999, nonqualified stock options for 20,400 shares of
common stock were granted; and there have been no changes in out-
standing options as of December 31, 1999. These stock options
have an exercise price of $36.00 per share, which was above fair
market value on the date of grant. The awards vest and are exer-
cisable five years after the date of grant, and they must be
exercised no later than ten years from the date of grant.
The Registrant applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," to account for
employee stock options. Accordingly, no compensation expense
has been recognized for nonqualified stock options.
Pro forma net income and earnings-per-share information (as
required by SFAS No. 123, "Accounting for Stock-Based Compensa-
tion") has been determined as if the Registrant had accounted
for employee stock options under the fair value method described
by SFAS No. 123.
The fair value of these options was estimated at the date of
grant using the Black-Scholes Option Pricing Model with the
following weighted average assumptions for 1999: expected life
of option - 7.5 years, expected price volatility of the Regis-
trant's common stock - 53.4%, expected dividend yield - 7.4%,
and risk-free interest rate - 5.8%. The fair value of options
granted during 1999 was $8.60 per option.
The Black-Scholes Option Pricing Model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and that are fully transferable. In addition,
option-pricing models require the input of subjective assump-
tions, including the expected stock price volatility. Because
the Registrant's options have characteristics different from
those of traded options, the model, in the opinion of management,
does not necessarily provide a reliable single measure of the
fair value of its options.
For purposes of pro forma disclosures, the estimated fair value
of the options is being amortized to expense ratably over the
vesting period. The pro forma disclosures, required by SFAS No.
123, are not likely to be representative of the effects on re-
ported net income or losses for future years. The Registrant's
pro forma information follows:
1999
----------
Pro forma net income.............. $1,856,848
==========
Pro forma earnings per share -
Basic....................... $1.59
Diluted..................... $1.59
26
<PAGE> 27
<TABLE>
FINANCIAL HIGHLIGHTS BY QUARTER (UNAUDITED)
(In Thousands, Except Per Share Data)
<CAPTION>
Quarter Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
--------------- --------------- --------------- ---------------
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------- ------- ------- -------
<F2> <F3> <F4>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.... $18,884 $17,424 $24,181 $24,810 $23,603 $25,126 $25,904 $22,386
Gross
profit<F1>.. $ 4,398 $ 4,793 $ 5,968 $ 6,875 $ 4,399 $ 5,970 $ 6,652 $ 3,934
Net income
(loss)...... $ 167 $ 701 $ 466 $ 1,684 $ (150)$ 1,117 $ 1,388 $ (368)
Earnings
(loss) per
common
share....... $ 0.14 $ 0.60 $ 0.40 $ 1.44 $(0.13) $ 0.96 $ 1.19 $(0.32)
<FN>
<F1> Because the inventory determination under the LIFO method can
only be made at the end of each fiscal year based on the inven-
tory levels and costs at that point, interim LIFO determinations
must be based on management's estimate of expected year-end
inventory levels and costs.
<F2> On June 21, 1999, the Registrant settled its breach-of-contract/
breach-of-warranty lawsuit for $1,875,000. As a result of the
settlement, the Registrant increased its reserve for the lawsuit
to fully accrue for the liability. Net income for the three
months ended June 30, 1999, was unfavorably affected by the
increase in the reserve of $462,000, after tax, or $0.40 per
share.
<F3> Net income for the fourth quarter of 1999 was favorably affected
by a LIFO adjustment and unfavorably affected by large health-
care claims. The effect of the LIFO adjustment increased net
income by $836,000, or $0.72 per share. The healthcare claims
decreased net income by $218,000, or $0.19 per share.
<F4> Net income for the fourth quarter of 1998 was unfavorably
affected by a LIFO adjustment and by large healthcare claims.
The effect of the LIFO adjustment decreased net income by
$284,000, or $0.24 per share, and the healthcare claims de-
creased net income by $328,000, or $0.28 per share.
</FN>
</TABLE>
27
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Paul Mueller Company:
We have audited the accompanying consolidated balance sheets of
PAUL MUELLER COMPANY (a Missouri corporation) AND SUBSIDIARIES as of
December 31, 1999 and 1998, and the related consolidated statements
of income, shareholders' investment, and cash flows for each of the
three years in the period ended December 31, 1999. 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 dis-
closures in the financial statements. An audit also includes asses-
sing 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 financial statements referred to above pre-
sent fairly, in all material respects, the financial position of Paul
Mueller Company and Subsidiaries as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Schedule II is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Kansas City, Missouri,
February 11, 2000
ITEM 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting principles or
financial statement disclosure with the independent public
accountants
28
<PAGE> 29
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to Directors of the Registrant required by Item
10 is included on pages 6, 7, and 8 of the Registrant's Proxy
Statement for the annual meeting of shareholders to be held
May 1, 2000, and is incorporated herein by reference. The
information concerning executive officers is set forth on page
6 of Part I hereof.
ITEM 11. - EXECUTIVE COMPENSATION
Information as to executive compensation required by Item 11 is
included on pages 11 and 12 of the Registrant's Proxy Statement
for the annual meeting of shareholders to be held May 1, 2000,
and is incorporated herein by reference.
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information as to security ownership of certain beneficial
owners and management required by Item 12 is included on pages
4 and 7 of the Registrant's Proxy Statement for the annual meet-
ing of shareholders to be held May 1, 2000, and is incorporated
herein by reference.
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to certain relationships and related transactions
required by Item 13 is included on page 8 of the Registrant's
Proxy Statement for the annual meeting of shareholders to be
held May 1, 2000, and is incorporated herein by reference.
29
<PAGE> 30
PART IV
ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
A. The financial statements and schedules, required under
Part II - Item 8, are as follows:
1. The consolidated financial statements of the Registrant
and its subsidiaries, for the year ended December 31,
1999:
- Consolidated Balance Sheets..........December 31, 1999
and 1998
- Consolidated Statements of Income....For years ended
December 31, 1999,
1998 and 1997
- Consolidated Statements of
Shareholders' Investment.............For years ended
December 31, 1999,
1998 and 1997
- Consolidated Statements of
Cash Flows...........................For years ended
December 31, 1999,
1998 and 1997
- Notes to Consolidated
Financial Statements.................December 31, 1999,
1998 and 1997
- Financial Highlights by Quarter......For years ended
December 31, 1999
and 1998
- Report of Independent
Public Accountants
2. Additional financial statement schedules included herein:
- Schedule II - Valuation and
Qualifying Accounts.............................Page 32
- All other schedules are not submitted because they
are not applicable or not required, or because the
required information is included in the financial
statements notes or thereto.
3. The exhibits set forth in the Exhibit Index found on pages
33 through 35.
B. No reports on Form 8-K were filed by the Registrant during
The last quarter of 1999.
30
<PAGE> 31
SIGNATURES -
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PAUL MUELLER COMPANY
DATE March 10, 2000 BY /S/ DANIEL C. MANNA
-------------- -------------------------------------
Daniel C. Manna
President
(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.
DATE March 10, 2000 BY /S/ DANIEL C. MANNA
-------------- -------------------------------------
Daniel C. Manna
President and Director
(Chief Executive Officer)
DATE March 10, 2000 BY /S/ PAUL MUELLER
-------------- -------------------------------------
Paul Mueller
Chairman of the Board
and Director
DATE March 10, 2000 BY /S/ DONALD E. GOLIK
-------------- -------------------------------------
Donald E. Golik
Senior Vice President, Chief Financial
Officer, Secretary and Director
DATE March 10, 2000 BY /S/ GERALD A. COOK
-------------- -------------------------------------
Gerald A. Cook
Director
DATE March 10, 2000 BY /S/ DAVID T. MOORE
-------------- -------------------------------------
David T. Moore
Director
DATE March 10, 2000 BY /S/ WILLIAM B. JOHNSON
-------------- -------------------------------------
William B. Johnson
Director
DATE March 10, 2000 BY /S/ WILLIAM R. PATTERSON
-------------- -------------------------------------
William R. Patterson
Director
31
<PAGE> 32
<TABLE>
SCHEDULE II
PAUL MUELLER COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<CAPTION>
Balance at Charged to Charged Balance
Beginning Costs and to Other at End of
of Period Expenses Accounts Deductions Period
-------- -------- -------- -------- --------
RESERVE FOR
DOUBTFUL ACCOUNTS
<S> <C> <C> <C> <C> <C>
12-31-99.... $641,899 $(85,087) $ - $ 38,398<F1> $518,414
12-31-98.... $559,261 $125,703 $ - $ 43,065<F1> $641,899
12-31-97.... $698,036 $(82,689) $ - $ 56,086<F1> $559,261
<FN>
<F1> Accounts written off during the year.
</FN>
</TABLE>
32
<PAGE> 33
<TABLE>
EXHIBIT INDEX
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
(3) ARTICLES OF INCORPORATION AND BY-LAWS -
(a) The Restated Articles of Incorporation of the Regis-
trant filed with the Secretary of State on May 20, 1991,
and the Restated By-Laws of the Registrant dated May 6,
1991, attached as Exhibit (3), page 19, of the Regis-
trant's Form 10-K for the year ended December 31, 1991,
are incorporated herein by reference.
(b) The following amendments were attached as Exhibit (3)
of the Registrant's Form 10-Q for the quarter ended
September 30, 1999, and are incorporated herein by
reference:
<C> CAPTION
Description Page No.
--------------------------------------------- --------
<S><C> <C>
1. Amendment One to the Restated Bylaws of
Paul Mueller Company, adopted May 6, 1991,
was approved by the Board of Directors on
May 1, 1995............................... 16
2. Amendment Two to the Restated Bylaws of
Paul Mueller Company, adopted May 6, 1991,
was approved by the Board of Directors on
October 27, 1999.......................... 17
<S> <C> <C>
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS -
(a) A specimen stock certificate (unlimited denomination)
representing shares of the common stock, par value $1
per share, attached as Exhibit (4), page 69, of the
Registrant's Form 10-K for the year ended December 31,
1981, is incorporated herein by reference.
(b) The Shareholder Rights Plan, dated January 29, 1991,
between Paul Mueller Company and United Missouri Bank
of Kansas City, N.A., is incorporated by reference to
Form 8-A under the Securities Exchange Act of 1934,
dated January 31, 1991, and filed with the Securities
and Exchange Commission on February 1, 1991.
(10) MATERIAL CONTRACTS -
(a) The Paul Mueller Company Noncontract Employees Retire-
ment Plan, amended and restated effective January 1,
2000, and adopted by the Board of Directors of the
Registrant on January 27, 2000......................... 36
33
<PAGE> 34
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
(b) The Exclusive License Agreement between Registrant
and Superstill Technology, Inc., dated January 9, 1992,
Addendum No. 1 dated January 28, 1992, and Addendum
No. 2 dated June 15, 1992, were attached as Exhibit
(10), page 30, of the Registrant's Form 10-K for the
year ended December 31, 1996, and is incorporated
herein by reference.
(c) The following Material Contracts, attached as Exhibit
(10) of the Registrant's Form 10-Q for the quarter
ended September 30, 1995, are incorporated herein by
reference:
<C> CAPTION
Description Page No.
--------------------------------------------- --------
<S><C> <C>
1. The Paul Mueller Company Tax Savings Plan
and Trust, effective January 1, 1996, and
and adopted by the Board of Directors on
August 2, 1995............................ 11
2. The Paul Mueller Company Dependent Care
Assistant Plan, effective January 1, 1996,
and adopted by the Board of Directors on
August 2, 1995............................ 22
<S> <C> <C>
(d) The Paul Mueller Company Employee Benefit Plan, amended
and restated effective June 1, 1998, and adopted by the
Trustees on August 5, 1998, was attached as Exhibit
(10), page 33, of the Registrant's Form 10-Q for the
quarter ended September 30, 1998, and is incorporated
herein by reference.
(e) The Paul Mueller Company Profit Sharing and Retirement
Savings Plan, restated effective January 1, 1993, and
adopted by the Trustees on June 22, 1994, was attached
as Exhibit (10), page 15, of the Registrant's Form
10-K for the year ended December 31, 1994. The First
Amendment, effective September 1, 1997, was executed
on August 14, 1997, was attached as Exhibit (10), page
32, of the Registrant's Form 10-K for the quarter ended
December 31, 1997, and is incorporated herein by refer-
ence.
(f) The Paul Mueller Company Contract Employees Retirement
Plan, restated effective January 1, 1992, and adopted
November 17, 1992, was attached as Exhibit (10), page
22, of the Registrant's Form 10-K for the year ended
December 31, 1992, and is incorporated herein by refer-
ence. Amendment Number One, effective September 19,
1994, was executed October 20, 1994, and Amendment
Number Two, effective January 1, 1993, was executed
December 2, 1994, and both were attached as Exhibit
(10), page 67, of the Registrant's Form 10-K for the
year ended December 31, 1994, and are incorporated
herein by reference. Amendment Number Three, executed
April 10, 1996, was attached as Exhibit (10), page 10,
of the Registrant's Form 10-Q for the quarter ended
March 31, 1996, and is incorporated herein by reference.
Amendment Number Four, executed July 26, 1996, was
attached as Exhibit (10), page 11, of the Registrant's
Form 10-Q for the quarter ended September 30, 1996,
and is incorporated herein by reference
34
<PAGE> 35
<CAPTION>
Number Description Page No.
- ------ ----------------------------------------------------------- --------
<S> <C> <C>
(g) The Agreement and Declaration of Trust for the Paul
Mueller Company Employee Benefit Plan dated May 2, 1988,
attached as Exhibit (10), page 107, of the Registrant's
Form 10-K for the year ended December 31, 1988, is in-
corporated herein by reference.
(h) The following Executive Compensation Plans and Arrange-
ments:
i. The Paul Mueller Company 1999 Long-Term Incentive
Plan, effective January 26, 1999, and adopted by
the Board of Directors of the Registrant on January
26, 1999, was attached as Exhibit A to the Regis-
trant's 1999 Proxy Statement filed with the Commis-
sion on March 26, 1999, and is incorporated herein
by reference.
ii. The Paul Mueller Company Supplemental Executive Re-
tirement Plan, effective January 1, 1996, adopted
by the Board of Directors on February 8, 1996, was
attached as Exhibit (10), page 30, of the Regis-
trant's Form 10-K for the year ended December 31,
1995, and is incorporated herein by reference.
iii. The Executive Short-Term Incentive Plan, adopted
January 31, 1995, attached as Exhibit (10), page 71,
of the Registrant's Form 10-K for the year ended
December 31, 1994, is incorporated herein by refer-
ence.
(21) SUBSIDIARIES OF THE REGISTRANT............................. 110
(27) FINANCIAL DATA SCHEDULE AS OF DECEMBER 31, 1999............ 111
</TABLE>
35
<PAGE> 36
PAUL MUELLER COMPANY
NONCONTRACT EMPLOYEES RETIREMENT PLAN
Restated as of January 1, 2000
<PAGE> 37
PAUL MUELLER COMPANY
NONCONTRACT EMPLOYEES RETIREMENT PLAN
On July 3, 1957, Paul Mueller Company, a corporation organized
and existing under the laws of the State of Missouri, adopted the
"Paul Mueller Company Employee Pension Trust." On July 3, 1972,
this document was amended and restated to create separate documents
entitled "Paul Mueller Company Employee Retirement Plan" and "1972
Amendment to Paul Mueller Company Employee Pension Trust." The
Plan has since been amended and restated, becoming the "Paul Mueller
Company Salaried and Clerical Employees Retirement Plan" as of
July 1, 1976, and the "Paul Mueller Company Noncontract Employees
Retirement Plan" as of January 1, 1996. The Trust has also been
amended and restated from time to time.
Effective as of January 1, 2000 (and such other dates as are
specified herein), Paul Mueller Company hereby amends, restates, and
combines both documents to read as set forth herein. The provisions
of this restated document shall apply only to Employees having at
least one Hour of Service on or after the applicable effective date.
It is intended that the Plan continue to qualify under Section 401(a)
of the Internal Revenue Code of 1986, and that the Trust remain
exempt from tax under Section 501(a) of such Code. The Plan and
Trust set forth in this document, and all subsequent amendments
hereto, shall be known as the "Paul Mueller Company Noncontract
Employees Retirement Plan."
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<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE IV DEFINITIONS........................................ 1
1.01 Accrued Benefit.................................... 1
1.02 Actuarially Equivalent............................. 2
1.03 Affiliated Employer................................ 2
1.04 Authorized Absence................................. 2
1.05 Average Monthly Compensation....................... 3
1.06 Beneficiary........................................ 3
1.07 Benefit Commencement Date.......................... 3
1.08 Board.............................................. 3
1.09 Code............................................... 3
1.10 Committee.......................................... 3
1.11 Company............................................ 3
1.12 Compensation....................................... 3
1.13 Contingent Annuitant............................... 4
1.14 Continuous Service................................. 4
1.15 Contract Employee Plan............................. 5
1.16 Contract Employee Plan Coverage.................... 5
1.17 Disability......................................... 5
1.18 Early Retirement Date.............................. 5
1.19 Effective Date..................................... 5
1.20 Eligible Employee.................................. 5
1.21 Eligible Spouse.................................... 5
1.22 Employee........................................... 5
1.23 Employer........................................... 6
1.24 Employment Commencement Date....................... 6
1.25 ERISA.............................................. 6
1.26 Hours of Service................................... 6
1.27 Late Retirement Date............................... 7
1.28 Normal Form........................................ 7
1.29 Normal Retirement Age.............................. 7
1.30 Normal Retirement Date............................. 7
1.31 Participant........................................ 7
1.32 Period of Service.................................. 7
1.33 Period of Severance................................ 7
1.34 Plan............................................... 8
1.35 Plan Year.......................................... 8
1.36 Present Value...................................... 8
1.37 Prior Plan......................................... 8
1.38 Prior Plan Participant............................. 8
1.39 Retire or Retirement............................... 8
1.40 Retirement Date.................................... 8
1.41 Severance from Service Date........................ 8
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<PAGE> 39
1.42 Trust.............................................. 8
1.43 Trustee............................................ 8
1.44 Trust Fund......................................... 8
1.45 Years of Credited Service.......................... 8
1.46 Years of Eligibility Service....................... 9
1.47 Years of Service................................... 9
1.48 Years of Vesting Service........................... 9
ARTICLE II SERVICE............................................ 10
2.01 Years of Service................................... 10
2.02 Years of Eligibility Service....................... 10
2.03 Years of Vesting Service........................... 10
2.04 Years of Credited Service.......................... 11
ARTICLE III ELIGIBILITY FOR PARTICIPATION...................... 12
3.01 Initial Eligibility................................ 12
3.02 Reemployed Former Participants..................... 12
3.03 Other Reemployed Employees......................... 12
ARTICLE IV BENEFITS FOR PARTICIPANTS.......................... 14
4.01 Normal Retirement Benefit.......................... 14
4.02 Early Retirement Benefit........................... 14
4.03 Late Retirement Benefit............................ 14
4.04 Termination Benefit................................ 15
4.05 Disability Benefit................................. 15
ARTICLE V DEATH BENEFITS..................................... 17
5.01 Death Before Benefit Payment Commencement Date..... 17
5.02 Death After Benefit Payment Commencement Date...... 18
5.03 Special Rules Applicable to Death Benefits......... 18
ARTICLE VI PAYMENT OF BENEFITS................................ 19
6.01 Automatic Form of Payment.......................... 19
6.02 Optional Forms of Payment.......................... 19
6.03 Lump-Sum Payments.................................. 19
6.04 Election Procedures................................ 20
ARTICLE VII CALCULATION OF ACCRUED BENEFIT..................... 22
7.01 In General......................................... 22
7.02 TRA '86 Participants............................... 22
7.03 OBRA '93 Participants.............................. 23
7.04 Adjusting Frozen Benefits.......................... 24
7.05 Payment Offsets.................................... 24
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<PAGE> 40
ARTICLE VIII OTHER PROVISIONS AFFECTING BENEFITS................ 25
8.01 No Assignment...................................... 25
8.02 Merger of Plans.................................... 25
8.03 Nonduplication of Benefits......................... 25
8.04 Qualified Domestic Relations Orders................ 25
8.05 Funding Policy and Contributions................... 26
8.06 Nondeductible Contributions........................ 26
8.07 Mistaken Contributions............................. 27
8.08 Section 415 Limitations............................ 27
8.09 Special Distribution Requirements Under Code
Section 401(a)(9)................................ 27
8.10 Special Distribution Requirements Under Code
Section 401(a)(14)............................... 29
8.11 Restrictions on Benefits for Certain Employees..... 30
8.12 Restrictions on Benefits During
Liquidity Shortfall.............................. 31
8.13 Incapacity......................................... 32
8.14 Identity of Payee and Amount of Benefits........... 32
8.15 Direct Rollovers................................... 32
8.16 Effect of Qualified Military Service............... 33
ARTICLE IX TRANSFER FROM ONE COMPANY PLAN TO ANOTHER.......... 34
9.01 From this Plan to Contract Employee Plan........... 34
9.02 From Contract Employee Plan to this Plan........... 35
9.03 Examples Showing Benefit Calculations for
Employees Transferring Between Plans............. 35
ARTICLE X SPECIAL PROVISIONS APPLICABLE TO PRIOR PLAN
PARTICIPANTS..................................... 37
10.01 Special Provisions................................. 37
10.02 Offset For Insurance or Annuity Payments........... 39
ARTICLE XI REEMPLOYMENT AFTER RETIREMENT...................... 40
11.01 While Receiving Annuity Payments................... 40
11.02 After Receiving Lump-Sum Payment................... 41
11.03 Continued Employment Beyond
Normal Retirement Date........................... 43
ARTICLE XII TOP-HEAVY RULES.................................... 44
12.01 Exclusion of Employees Covered by Collective
Bargaining Agreements............................ 44
12.02 Determination of Top-Heavy Status.................. 44
12.03 Minimum Vesting Requirement for Top-Heavy Years.... 45
12.04 Minimum Normal Retirement Benefit for
Top-Heavy Years.................................. 45
12.05 Top-Heavy Definitions.............................. 46
12.06 Construction....................................... 50
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<PAGE> 41
ARTICLE XIII PLAN ADMINISTRATION................................ 51
13.01 Retirement Committee............................... 51
13.02 Actions of the Committee........................... 51
13.03 Plan Interpretation................................ 51
13.04 Compensation and Expenses.......................... 52
13.05 Reliance on Experts................................ 52
13.06 Co-Fiduciary Responsibility........................ 52
13.07 Indemnification.................................... 52
13.08 Plan Fiduciary..................................... 53
ARTICLE XIV TRUST PROVISIONS................................... 54
14.01 Appointment of Trustee............................. 54
14.02 Title to Assets.................................... 54
14.03 Scope of Trustee's Responsibility.................. 54
14.04 Trustee's Powers................................... 55
14.05 Action by Trustee.................................. 57
14.06 Distributions to Participants...................... 57
14.07 Recordkeeping...................................... 57
14.08 Final Accounting................................... 58
14.09 Trustee's Compensation............................. 58
14.10 Plan and Trust Expenses............................ 58
14.11 Trustee's Liability................................ 59
14.12 Investment Manager................................. 59
14.13 Custodian.......................................... 60
14.14 Proxy and Other Voting............................. 60
14.15 Amendment of Trust Provisions...................... 60
14.16 Plenary Power of the Committee..................... 60
14.17 Exclusive Benefit.................................. 61
ARTICLE XV CLAIMS AND APPEALS PROCEDURES...................... 62
15.01 Filing a Claim..................................... 62
15.02 Deciding a Claim................................... 62
15.03 Appealing a Claim.................................. 62
15.04 Deciding an Appeal................................. 63
ARTICLE XVI AMENDMENT AND TERMINATION.......................... 64
16.01 Power to Amend..................................... 64
16.02 Method of Amendment................................ 64
16.03 Power to Terminate................................. 64
16.04 Full Vesting....................................... 64
16.05 Disposition of Assets upon Complete Termination.... 64
16.06 Transfer of Liabilities to PBGC.................... 65
16.07 Spinoff of Employer................................ 65
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<PAGE> 42
ARTICLE XVII MISCELLANEOUS...................................... 66
17.01 Governing Law...................................... 66
17.02 Severability....................................... 66
17.03 Headings........................................... 66
- vi -
<PAGE> 43
ARTICLE I
DEFINITIONS
1.01 "Accrued Benefit" shall mean a monthly benefit, payable in the
Normal Form and starting on a Participant's Normal or Late
Retirement Date, equal to the benefit determined in accordance
with Article VII and based on the Participant's Years of
Credited Service and Average Monthly Compensation as of the
date such benefit is being determined. A Participant's
Accrued Benefit shall not be less than his or her Accrued
Benefit in any prior year.
1.02 "Actuarially Equivalent" shall mean, in the case of a form of
benefit differing in time, period, or manner of payment from
the Normal Form, having the same present value on the Benefit
Commencement Date. For this purpose, the following assump-
tions shall be used:
(a) MORTALITY TABLE -- The mortality table used by the Pen-
sion Benefit Guaranty Corporation for healthy lives as
of the Assumption Determination Date. The resultant
Actuarially Equivalent factors shall be sex-blended 95%
male and 5% female.
(b) INTEREST DISCOUNT FACTOR -- Either (i) or (ii), below,
whichever yields the larger benefit:
(i) The interest discount factor used by the Pension
Benefit Guaranty Corporation to value immediate
annuities as of the Assumption Determination Date,
applied to the Participant's Accrued Benefit as of
October 1, 1995, with the balance of the Partici-
pant's Accrued Benefit not taken into account, or
(ii) Seven percent, applied to the Participant's entire
Accrued Benefit.
The "Assumption Determination Date" applicable to the determi-
nation of Actuarially Equivalent values shall be the first
day of the calendar quarter preceding the calendar quarter in
which occurs a Participant's Benefit Commencement Date.
Notwithstanding the above, the determination of an Actuarially
Equivalent amount (other than a nondecreasing life annuity
payable for a period not less than the life of a Participant
or, in the case of an annuity payable to a surviving spouse,
the life of that surviving spouse) shall be made in accordance
with Section 417(e)(3)(A) of the Code. In making such determi-
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<PAGE> 44
nation under Code Section 417(e)(3)(A), the Administrator
shall use the following assumptions:
(y) MORTALITY TABLE -- The mortality table published by the
Internal Revenue Service pursuant to Section 417(e)(3)
of the Code, determined as of the Benefit Commencement
Date.
(z) INTEREST DISCOUNT FACTOR -- The annual interest rate on
30-year Treasury Securities, as published by the Internal
Revenue Service, for the month of December that next
precedes the Plan Year in which occurs the Benefit Com-
mencement Date.
The interest and mortality factors described in Paragraphs (y)
and (z), above, shall also be used in determining whether any
benefit payable in a form other than a straight life annuity
complies with Section 415(b) of the Code.
1.03 "Affiliated Employer" shall mean, with respect to an Employer,
each trade or business required to be aggregated with the
Employer under any of Code Sections 414(b), (c), (m) or (o).
1.04 "Authorized Absence" shall mean any absence authorized by an
Employer or Affiliated Employer under its standard personnel
practices, provided that (i) all employees in similar circum-
stances are treated alike in the granting of such absences,
and (ii) an employee returns to work within the period speci-
fied for his or her Authorized Absence.
1.05 "Average Monthly Compensation" shall mean 1/60th of a Partici-
pant's Compensation during the 60 consecutive calendar months
of highest Compensation during his or her most recent 120
months of Compensation (considering only Compensation received
while an Eligible Employee). The exceptions to this rule are
as follows:
(a) In the case of a Participant who has at least 60, but
not 120, months of Compensation as an Eligible Employee,
his or her entire period of Compensation as an Eligible
Employee shall be used to determine the 60 consecutive
months of highest Compensation.
(b) In the case of a Participant who has fewer than 60 months
of Compensation as an Eligible Employee, his or her
Average Monthly Compensation shall be computed as the
average monthly Compensation received during his or her
entire period of Compensation as an Eligible Employee.
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<PAGE> 45
(c) In the case of a Disability Benefit, a Participant's
Average Monthly Compensation shall be determined in
accordance with this Section, but as modified by Sec-
tion 4.05.
1.06 "Beneficiary" shall mean any person (including any corpora-
tion, foundation, trust, estate or fiduciary) designated by a
Participant to receive any amounts payable under the Plan on
account of the Participant's death before receiving the number
of guaranteed payments elected under Article VI.
1.07 "Benefit Commencement Date" shall mean the first day of the
first period for which a benefit is payable under the Plan.
1.08 "Board" shall mean the Board of Directors of the Company.
1.09 "Code" shall mean the Internal Revenue Service Code of 1986,
as amended.
1.10 "Committee" shall mean the Retirement Committee appointed by
the Board to administer the Plan, in accordance with Section
13.01.
1.11 "Company" shall mean Paul Mueller Company, a Missouri corpora-
tion, and any successors thereto.
1.12 "Compensation" shall mean a Participant's regular, monthly
rate of pay from his or her Employer as of the first day of
each month, including any amounts excludable from the Partici-
pant's taxable income under Code Sections 125 or 401(k), but
excluding any overtime pay, bonuses, commissions, severance
pay, and all other forms of special remuneration. In the case
of a Participant whose regular rate of pay is expressed on a
weekly basis, the Committee shall determine a monthly rate of
pay by multiplying such weekly rate by 52/12. In the case of
a Participant whose regular rate of pay is expressed on an
hourly basis, the Committee shall determine a monthly rate of
pay by multiplying such hourly rate by 40, and then multi-
plying the result by 52/12. Each Participant's Compensation
shall be subject, however, to the following limitations:
(a) JANUARY 1, 1989, TO DECEMBER 31, 1993. For Plan Years
beginning after December 31, 1988, but before December
31, 1993, a Participant's annual Compensation shall be
limited to the "TRA '86 Annual Compensation Limit" for
each calendar year. The "TRA '86 Annual Compensation
Limit" for each such year is as follows:
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<PAGE> 46
Calendar TRA '86 Annual
Year Compensation Limit
-------- ------------------
1989 $200,000
1990 $209,200
1991 $222,220
1992 $228,860
1993 $235,840
If Compensation earned during any prior Plan Year is
taken into account in determining a Participant's bene-
fits accruing in a Plan Year beginning after December 31,
1988, but before December 31, 1993, the Participant's
Compensation for that prior Plan Year shall be subject to
the TRA '86 Annual Compensation Limit in effect for the
later Plan Year (i.e., the Plan Year in which the bene-
fits are accrued).
(b) AFTER DECEMBER 31, 1993. For Plan Years beginning after
December 31, 1993, a Participant's annual Compensation
shall be limited to the "OBRA '93 Annual Compensation
Limit" for each calendar year. The "OBRA '93 Annual
Compensation Limit" is $150,000, as adjusted by the
Commissioner of the Internal Revenue Service for in-
creases 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 shall apply to any Plan
Year beginning in such calendar year. If Compensation
earned during any prior Plan Year is taken into account
in determining a Participant's benefits accruing in a
Plan Year beginning after December 31, 1993, the Partici-
pant's Compensation for that prior Plan Year shall be
subject to the OBRA '93 Annual Compensation Limit in
effect for that prior Plan Year. For this purpose, the
OBRA '93 Annual Compensation Limit for any Plan Year be-
ginning before December 31, 1993, is $150,000, unadjusted
for any subsequent increases in the cost of living.
1.13 "Contingent Annuitant" shall mean an individual designated by
a Participant to receive any payments under a joint and survi-
vor annuity following the Participant's death.
1.14 "Continuous Service" shall mean an employee's Period of Ser-
vice prior to July 1, 1976, but disregarding any period after
a termination of employment for any reason other than Retire-
ment, Disability, or Authorized Absence.
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<PAGE> 47
1.15 "Contract Employee Plan" shall mean the Paul Mueller Company
Contract Employees Retirement Plan, as amended from time to
time, and any predecessor or successor thereto.
1.16 "Contract Employee Plan Coverage" shall mean coverage under
the Contract Employee Plan.
1.17 "Disability" shall mean a physical or mental condition of a
Participant resulting from bodily injury, disease, or a mental
disorder which entitles the Participant to long-term disabil-
ity payments under any long-term disability plan of his or
her Employer (or which would entitle the Participant to such
benefit if he or she were eligible for the long-term disabil-
ity plan).
1.18 "Early Retirement Date" shall mean the first day of the month
coincident with or immediately following a Participant's
attainment of age 55 and completion of 10 Years of Vesting
Service.
1.19 "Effective Date" shall mean July 3, 1957. The effective date
of this restatement is January 1, 2000.
1.20 "Eligible Employee" shall mean any Employee, other than an
Employee who is either:
(a) compensated on a retained or fee basis; or
(b) represented for collective bargaining purposes, unless
the bargaining agreement calls for such Employee's parti-
cipation in this Plan.
1.21 "Eligible Spouse" shall mean a Participant's surviving legal
spouse who (a) is married to the Participant on the earlier
of the Participant's Benefit Commencement Date or the date of
the Participant's death, and (b) was married to the Partici-
pant for at least one year prior to the date of the Partici-
pant's death.
1.22 "Employee" shall mean any person who is determined in good
faith by an Employer to be a common-law employee of that Em-
ployer, including officers but not including directors unless
they are also officers or other employees of the Employer.
In no event shall the term Employee include a person who is
a leased employee, within the meaning of Section 414(n)(2) of
the Code, or an individual who is determined in good faith by
the Company to be an independent contractor. If, for any
period of time, an individual has been determined in good
faith by an Employer not to be a common-law employee, and a
court or government agency subsequently makes a determination
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<PAGE> 48
that the individual was in fact a common-law employee during
that period of time, then (i) such determination shall not en-
title the individual to any retroactive rights under the Plan,
and (ii) the individual's prospective rights under the Plan
shall be determined solely in accordance with the terms of the
Plan.
1.23 "Employer" shall mean the Company, Mueller Field Operations,
Inc., Mueller Transportation, Inc., and any other Affiliated
Employer which (i) is authorized by the Board to participate
in this Plan, and (ii) elects to participate by action of its
board of directors.
1.24 "Employment Commencement Date" shall mean the date on which
an Employee first performs an Hour of Service for an Employer
or Affiliated Employer or, if later, the date on which the
Employee first performs an Hour of Service for an Employer or
Affiliated Employee following a Period of Severance.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.26 "Hours of Service" shall include each hour for which an Em-
ployee is:
(a) directly or indirectly paid, or entitled to payment, by
an Employer or Affiliated Employer for the performance
of duties during the applicable computation period;
(b) directly or indirectly paid, or entitled to payment, by
an Employer or Affiliated Employer because of a period
of time during which no duties are performed (regardless
of whether the employment relationship has terminated),
for example, due to vacation, holiday, illness, incapa-
city, lay-off, jury duty, military duty, or approved
leave of absence, during the applicable computation
period; or
(c) awarded (or has reached an agreement for) back pay by an
Employer or Affiliated Employer (to be credited to the
computation period or periods to which such award or
agreement pertains), regardless of mitigation of damages;
provided, however, that the same Hours of Service shall not be
credited twice under (a), (b) or (c), above. Hours of Service
shall be credited on the basis of any method permitted under
Section 2530.200b-2(b) and (c) of Department of Labor Regula-
tions and applied in a uniform and non-discriminatory manner.
To the extent required under Section 414(n) of the Code, an
individual shall also be credited with Hours of Service for
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<PAGE> 49
hours during which he or she performs services as a "leased
employee" of an Employer or Affiliated Employer.
1.27 "Late Retirement Date" shall mean the first day of the month
coincident with or immediately following the date (after the
Participant's Normal Retirement Date) on which a Participant
retires from all Employers and Affiliated Employers.
1.28 "Normal Form" shall mean a form of benefit distribution in
which monthly payments are made to a Participant for his or
her lifetime, commencing on his or her Normal or Late Retire-
ment Date and ending with the month of his or her death.
1.29 "Normal Retirement Age" shall mean the date of a Participant's
65th birthday or, if later, the fifth anniversary of the Par-
ticipant's commencement of participation in the Plan.
1.30 "Normal Retirement Date" shall mean the first day of the month
coincident with or immediately following a Participant's
attainment of Normal Retirement Age.
1.31 "Participant" shall mean any Eligible Employee who is or be-
comes eligible to participate in the Plan in accordance with
Article II, and who has not yet received a distribution of his
or her entire vested Accrued Benefit.
1.32 "Period of Service" shall mean the period from an employee's
Employment Commencement Date to his or her Severance from
Service Date, measured in complete and partial years. Partial
years shall be computed by counting the number of days, giving
31 days for each complete calendar month, and dividing the
total number of days (up to 365) by 365. If an employee has
separate Periods of Service, they shall be aggregated in
determining his or her total Period of Service.
1.33 "Period of Severance" shall mean the period of time from an
employee's Severance from Service Date to the employee's new
Employment Commencement Date; provided, however, that in
determining whether prior Years of Service shall be disre-
garded for purposes of eligibility or vesting, any employee
who is absent from work by reason of pregnancy, childbirth,
adoption, or child care immediately following a birth or adop-
tion shall be deemed not to have begun any Period of Sever-
ance until the date that is twelve months following the date
on which such absence actually began.
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<PAGE> 50
1.34 "Plan" shall mean the Paul Mueller Company Noncontract Em-
ployees Retirement Plan, as set forth in this document and as
amended from time to time.
1.35 "Plan Year" shall mean the 12-month period beginning on Janu-
ary 1 and ending on December 31; provided, however, that prior
to December 31, 1979, the Plan Year began on July 1 and ended
on the following June 30.
1.36 "Present Value" shall mean the Actuarially Equivalent lump-sum
value of a Participant's Accrued Benefit as of any date of
determination. Such Present Value shall be determined in
accordance with the assumptions set forth in Paragraphs 1.02(y)
and (z).
1.37 "Prior Plan" shall mean the version of the Plan in effect
prior to July 3, 1972.
1.38 "Prior Plan Participant" shall mean a Participant who partici-
pated in the Prior Plan.
1.39 "Retire" or "Retirement" shall refer to a Participant's ter-
mination of employment with all Employers and Affiliated
Employers on or after his or her Early Retirement Date.
1.40 "Retirement Date" shall mean the date a Participant Retires,
for any reason other than Disability.
1.41 "Severance from Service Date" shall mean the earlier of:
(a) The date an employee quits, Retires, is discharged, or
dies; or
(b) The first anniversary of the beginning of an absence from
service with an Employer or Affiliated Employer (with or
without pay) for any reason other than quit, Retirement,
discharge, or death.
1.42 "Trust" shall mean the trust incident to this Plan, as set
forth in Article XIV hereof.
1.43 "Trustee" shall mean the trustee (or committee of trustees),
from time to time, of the Trust.
1.44 "Trust Fund" shall mean the property held, from time to time,
by the Trustee under the terms and provisions of the Trust.
1.45 "Years of Credited Service" shall have the meaning set forth
in Section 2.04.
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<PAGE> 51
1.46 "Years of Eligibility Service" shall have the meaning set
forth in Section 2.02.
1.47 "Years of Service" shall have the meaning set forth in Section
2.01.
1.48 "Years of Vesting Service" shall have the meaning set forth in
Section 2.03.
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<PAGE> 52
ARTICLE II
SERVICE
2.01 YEARS OF SERVICE. A Participant's "Years of Service" shall
include the following:
(a) INDIVIDUALS EMPLOYED ON OR AFTER JANUARY 1, 1998. In the
case of an individual who is an employee of an Employer
at any time on or after January 1, 1998, the employee's
Period of Service. If such an employee, before becoming
even partially vested in his or her Accrued Benefit,
incurs a Period of Severance of five or more years, the
employee's prior Period of Service shall be disregarded.
(b) OTHER INDIVIDUALS. In the case of any individual who is
not an employee of an Employer at any time on or after
January 1, 1998, the sum of the following amounts:
(i) The employee's Continuous Service prior to July 1,
1976;
(ii) The employee's Period of Service from July 1, 1976,
through December 31, 1984; provided, however, that
if such an employee, before becoming at least 25%
vested in his or her Accrued Benefit, incurs a
Period of Severance that is equal to or greater
than the number of his or her prior Years of Ser-
vice, those prior Years of Service shall be disre-
garded; and
(iii) The employee's Period of Service from January 1,
1985, through the date of determination; provided,
however, that if such an employee, before becoming
even partially vested in his or her Accrued Bene-
fit, incurs a Period of Severance of five or more
years, his or her prior Years of Service shall be
disregarded.
2.02 YEARS OF ELIGIBILITY SERVICE. A Participant's "Years of Eli-
gibility Service" shall be equal to his or her Years of
Service.
2.03 YEARS OF VESTING SERVICE. A Participant's "Years of Vesting
Service" shall be equal to his or her Years of Service; pro-
vided, however, that:
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<PAGE> 53
(a) For any employee with no Hour of Service after December
31, 1984, any Years of Service prior to his or her 22nd
birthday shall be disregarded;
(b) For any employee with one or more Hours of Service after
December 31, 1984, any Years of Service prior to his or
her 18th birthday shall be disregarded; and
(c) Any employee's service with Babson Bros. Co. (currently,
Westfalia.Surge LLC) prior to February 25, 1987, shall
be considered.
2.04 YEARS OF CREDITED SERVICE. A Participant's "Years of Credited
Service" shall be equal to his or her Years of Service; pro-
vided, however, that:
(a) Only employment with an Employer following that Em-
ployer's adoption of the Plan shall be considered; and
(b) No more than 35 Years of Service shall be considered.
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<PAGE> 54
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
3.01 INITIAL ELIGIBILITY. Every Eligible Employee on January 1,
2000, who was a Participant in the Plan on December 31, 1999,
shall continue to be a Participant under the restated provi-
sions of the Plan. Every Eligible Employee who has met the
following requirements on January 1, 2000, shall become a
Participant on that date. Each other Eligible Employee shall
become a Participant after January 1, 2000, on the first day
of the month coinciding with or next following the date when
he or she:
(a) Is not eligible, or is no longer eligible, for Contract
Employee Plan Coverage;
(b) Has completed one Year of Eligibility Service; and
(c) Has attained his or her 21st birthday;
provided, however, that no Employee shall accrue a benefit
under this Plan unless he or she has completed at least one
Hour of Service while a Participant in the Plan.
3.02 REEMPLOYED FORMER PARTICIPANTS. A reemployed Employee who was
formerly a Participant in the Plan, but who then incurred a
Period of Severance of at least one year, shall again become
a Participant after completing an additional one-year Period
of Service (assuming he or she is then an Eligible Employee
who is not eligible for Contract Employee Plan Coverage).
Upon completing such additional one-year Period of Service,
the Eligible Employee's participation in the Plan shall be
retroactively effective as of his or her most recent Employ-
ment Commencement Date. If a former Participant has not
incurred a Period of Severance of at least one year, he or
she shall again become a Participant in the Plan immediately
upon his or her reemployment by an Employer (assuming he or
she is then an Eligible Employee who is not eligible for Con-
tract Employee Plan Coverage).
3.03 OTHER REEMPLOYED EMPLOYEES. A reemployed Employee who was not
formerly a Participant in the Plan, but who would have been a
Participant had he or she not been eligible for Contract Em-
ployee Plan Coverage, and who then incurred a Period of Sever-
ance of at least one year, shall become a Participant after
completing an additional one-year Period of Service (assuming
he or she is then an Eligible Employee who is not eligible for
Contract Employee Plan Coverage). Upon completing such addi-
tional one-year Period of Service, the Eligible Employee's
participation in the Plan shall be retroactively effective as
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<PAGE> 55
of his or her most recent Employment Commencement Date. If
such a reemployed Employee has not incurred a Period of Sever-
ance of at least one year, he or she shall become a Partici-
pant in the Plan immediately upon his or her reemployment by
an Employer (assuming he or she is then an Eligible Employee
who is not eligible for Contract Employee Plan Coverage).
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<PAGE> 56
ARTICLE IV
BENEFITS FOR PARTICIPANTS
4.01 NORMAL RETIREMENT BENEFIT. A Participant who Retires on his
or her Normal Retirement Date shall be entitled to a "Normal
Retirement Benefit," in accordance with the following provi-
sions:
(a) BENEFIT AMOUNT. A Participant's Normal Retirement Bene-
fit shall be equal to his or her Accrued Benefit.
(b) BENEFIT COMMENCEMENT DATE. A Participant may elect that
his or her Normal Retirement Benefit commence as of his
or her Normal Retirement Date or the first day of any
month thereafter, but not later than the Participant's
"Required Beginning Date," as defined in Section 8.09.
(c) FORM OF PAYMENT. A Participant's Normal Retirement Bene-
fit shall be paid in accordance with the provisions of
Article VI.
4.02 EARLY RETIREMENT BENEFIT. A Participant who Retires on his or
her Early Retirement Date shall be entitled to an "Early Re-
tirement Benefit," in accordance with the following provisions:
(a) BENEFIT AMOUNT. A Participant's Early Retirement Benefit
shall be equal to his or her Accrued Benefit, reduced by
0.5% for each month by which the Participant's Benefit
Commencement Date precedes his or her Normal Retirement
Date.
(b) BENEFIT COMMENCEMENT DATE. A Participant may elect that
his or her Early Retirement Benefit commence as of his or
her Early Retirement Date or the first day of any month
thereafter, but no later than the Participant's "Required
Beginning Date," as defined in Section 8.09.
(c) FORM OF PAYMENT. A Participant's Early Retirement Bene-
fit shall be paid in accordance with the provisions of
Article VI.
4.03 LATE RETIREMENT BENEFIT. A Participant who retires after his
or her Normal Retirement Date shall be entitled to a "Late
Retirement Benefit," in accordance with the following provi-
sions:
(a) BENEFIT AMOUNT. A Participant's Late Retirement Benefit
shall be equal to his or her Accrued Benefit.
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<PAGE> 57
(b) BENEFIT COMMENCEMENT DATE. A Participant may elect that
his or her Late Retirement Benefit commence as of his or
her Late Retirement date or the first day of any month
thereafter, but not later than the Participant's "Re-
quired Beginning Date," as defined in Section 8.09.
(c) FORM OF PAYMENT. A Participant's Late Retirement Benefit
shall be paid in accordance with the provisions of Arti-
cle VI.
4.04 TERMINATION BENEFIT. A Participant who terminates employment
with all Employers and Affiliated Employers, other than on
account of Retirement, death, or Disability, may be entitled
to a "Termination Benefit," in accordance with the following
provisions:
(a) BENEFIT AMOUNT. A Participant's Termination Benefit, if
payable on the Participant's Normal Retirement Date,
shall be equal to the Participant's Accrued Benefit as
of such date, multiplied by the following percentage,
based on his or her total Years of Vesting Service:
Years of Vested
Vesting Service Percentage
--------------- ----------
Fewer than 5 0%
5 or more 100%
(b) BENEFIT COMMENCEMENT DATE. A Participant may elect that
his or her Termination Benefit commence as of his or her
Normal Retirement Date or the first day of any month
thereafter, but no later than the Participant's "Required
Beginning Date," as defined in Section 8.09. Moreover,
any Participant with ten or more Years of Vesting Service
may elect that his or her Termination Benefit commence as
of his or her Early Retirement Date or the first day of
any subsequent month prior to his or her Normal Retire-
ment Date, provided that any Termination Benefit commenc-
ing prior to the Participant's Normal Retirement Date
shall be adjusted in accordance with the provisions of
Paragraph 4.02(a).
(c) FORM OF PAYMENT. A Participant's Termination Benefit
shall be paid in accordance with the provisions of Arti-
cle VI.
4.05 DISABILITY BENEFIT. A Participant whose employment with all
Employers and Affiliated Employers is terminated on account
of Disability prior to his or her Normal Retirement Date,
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<PAGE> 58
either while actively employed or while on an Authorized Ab-
sence, and whose Disability continues until his or her Normal
Retirement Date, shall be entitled to a "Disability Benefit,"
in accordance with the following provisions:
(a) BENEFIT AMOUNT. A Participant's Disability Benefit shall
be equal to his or her Accrued Benefit as of his or her
Normal Retirement Date, based on the Participant's total
Years of Credited Service (including the period of Dis-
ability) and his or her Average Monthly Compensation
(determined as though the Participant's Compensation
throughout the period of Disability had remained at its
highest monthly rate during the 24 months immediately
preceding the Participant's termination of employment due
to Disability). The amount of any Disability Benefit
shall be reduced, however, by any concurrent payments
made to the Participant under the Paul Mueller Company
Long-Term Disability Program.
(b) BENEFIT COMMENCEMENT DATE. A Participant's Disability
Benefit shall commence as of his or her Normal Retirement
Date.
(c) FORM OF PAYMENT. A Participant's Disability Benefit
shall be paid in accordance with the provisions of Arti-
cle VI.
(d) RECOVERY FROM DISABILITY. The Committee shall have the
right to verify the continuance of a Participant's Dis-
ability from time to time prior to the Participant's
attainment of his or her Normal Retirement Age, at rea-
sonable intervals, by requiring that the Participant
undergo a medical examination by a physician or physi-
cians designated by the Committee. A Participant who
recovers from a Disability prior to his or her Normal
Retirement Date shall be subject to the following rules:
(i) If the Participant immediately returns to work as
an Employee, his or her period of Disability shall
be counted as a Period of Service and his or her
Compensation shall be deemed to have continued at
the rate described in Paragraph 4.05(a).
(ii) If the Participant does not immediately return to
work as an Employee, he or she shall receive no
credit for either Years of Service or Compensation
for the period of Disability, but shall instead be
treated as any other terminated Employee.
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<PAGE> 59
ARTICLE V
DEATH BENEFITS
5.01 DEATH BEFORE BENEFIT PAYMENT COMMENCEMENT DATE. Upon the
death of a vested Participant prior to his or her Benefit
Commencement Date, a "Death Benefit" shall be payable to the
Participant's Eligible Spouse (if any), in accordance with
the following provisions:
(a) BENEFIT AMOUNT. The monthly amount of a Death Benefit
(payable in the form described in Paragraph 5.01(c)),
shall be equal to the amount that would be payable as
a survivor annuity under the 50% Joint and Survivor
Annuity option described in Paragraph 6.01(d) if:
(i) In the case of a Participant who dies on or after
the earliest date on which the Participant could
have elected to begin receiving a Retirement Bene-
fit (the "earliest retirement date") such Partici-
pant had Retired and begun receiving a 50% Joint
and Survivor Annuity as of the date of the Parti-
cipant's death; or
(ii) In the case of a Participant who dies before his
or her earliest retirement date, such Participant
had:
(A) Terminated employment on the date of his or
her death,
(B) Survived to his or her earliest retirement
date,
(C) Begun receiving a 50% Joint and Survivor
Annuity as of that earliest retirement date,
and
(D) Died on the day after his or her earliest
retirement date.
(b) BENEFIT COMMENCEMENT DATE. An Eligible Spouse may elect
that his or her Death Benefit commence as of the later of
the Participant's earliest retirement date or the first
day of the month following the month of the Participant's
death. The Eligible Spouse may also elect to defer the
commencement of any Death Benefit to the first day of any
month thereafter, but not later than the Participant's
Normal Retirement Date.
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<PAGE> 60
(c) FORM OF PAYMENT. A Death Benefit shall be paid in the
form of a monthly annuity, commencing as of the date
elected by the Eligible Spouse (within the constraints
described in Paragraph 5.01(b)) and ending with the month
in which such Spouse dies.
5.02 DEATH AFTER BENEFIT PAYMENT COMMENCEMENT DATE. If a Partici-
pant dies after his or her Benefit Commencement Date, no Death
Benefit shall be payable, except as provided under the terms
of the distribution option in effect at the time of the Parti-
cipant's death.
5.03 SPECIAL RULES APPLICABLE TO DEATH BENEFITS. Notwithstanding
the preceding provisions of this Article V, the Plan's payment
of any Death Benefit shall be subject to the following limita-
tions:
(a) SMALL DEATH BENEFITS. If the Present Value of a Death
Benefit, as of the date of a Participant's death, does
not exceed $5,000 (and did not exceed $5,000 at the time
of any prior distribution date), the Present Value of
that Death Benefit shall be paid to the Participant's
Eligible Spouse in a single lump-sum payment, as soon
as administratively practicable following the Committee's
notification of the Participant's death. In such event,
the Eligible Spouse may neither elect to defer the pay-
ment of the Death Benefit, nor to receive the Death
Benefit in any other form of distribution.
(b) NONVESTED PARTICIPANTS. No Death Benefit shall be pay-
able with respect to any Participant who dies prior to
obtaining a vested interest in his or her Accrued Benefit.
(c) NO ELIGIBLE SPOUSE. No Death Benefit shall be payable
with respect to any Participant who dies prior to his or
her Benefit Commencement Date and while he or she has no
Eligible Spouse.
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<PAGE> 61
ARTICLE VI
PAYMENT OF BENEFITS
6.01 AUTOMATIC FORM OF PAYMENT. In the case of a married Partici-
pant, the automatic form of payment for any benefit described
in Article IV shall be a 50% Joint and Survivor Annuity, with
the Participant's surviving spouse as the Contingent Annuitant.
In the case of an unmarried Participant, the automatic form of
payment for any benefit described in Article IV shall be a
Single-Life Annuity payable in the Normal Form.
6.02 OPTIONAL FORMS OF PAYMENT. Subject to the election procedures
described in Section 6.04, a Participant may elect to receive
any benefit described in Article IV under any of the following
optional forms of payment, each of which shall be Actuarially
Equivalent to the Normal Form:
(a) A Single-Life Annuity;
(b) A Single-Life Annuity with a 60-Month Guarantee;
(c) A Single-Life Annuity with a 120-Month Guarantee;
(d) A 50% Joint and Survivor Annuity;
(e) A 100% Joint and Survivor Annuity; or
(f) In the case of a Participant whose Benefit Commencement
Date precedes his or her 62nd birthday, a Social Security
Equalization Annuity. Under this option, the Participant
would receive larger monthly payments until the date he
or she is first eligible to receive Social Security re-
tirement benefits, and then smaller monthly payments (or
none at all) after such date and for the remainder of his
or her lifetime, with the goal of providing substantially
level overall retirement benefits both before and after
the Participant's 62nd birthday.
6.03 LUMP-SUM PAYMENTS. Under the following circumstances, a Par-
ticipant may elect, or shall be required, to receive a single
lump-sum payment of his or her entire vested Accrued Benefit:
(a) ELECTIVE LUMP-SUM PAYMENTS. If, at the time a Partici-
pant terminates employment with all Employers and Affili-
ated Employers, the Present Value of the Participant's
vested Accrued Benefit exceeds $5,000, but does not
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<PAGE> 62
exceed $10,000, the Participant may elect to receive
that Present Value amount in the form of a single lump-
sum payment. If the Participant has an Eligible Spouse,
any such election shall be subject to the election pro-
cedures described in Section 6.04. This lump-sum pay-
ment may be elected either immediately upon termination
of employment or at any time thereafter, so long as the
Present Value of the Participant's vested Accrued Benefit
does not exceed $10,000 on the Participant's Benefit
Commencement Date.
(b) MANADATORY CASH-OUTS. If, at the time a Participant ter-
minates employment with all Employers and Affiliated
Employers, the Present Value of the Participant's vested
Accrued Benefit does not exceed $5,000, such Present
Value shall be paid to the Participant in a single lump-
sum payment, as soon as administratively practicable
following such termination of employment. Any Partici-
pant who terminates employment before becoming vested
in any portion of his or her Accrued Benefit shall be
deemed to have received a lump-sum payment of his or her
entire vested Accrued Benefit immediately upon such ter-
mination of employment.
6.04 ELECTION PROCEDURES. A Participant may make any election
under this Section 6.04 at any time within 90 days prior to
his or her Benefit Commencement Date (the "election period").
The Committee shall provide each Participant, not less than
30 days and not more than 90 days before his or her Benefit
Commencement Date, an election form for the purpose of making
any elections under this Section 6.04, together with a written
explanation of the terms and conditions and general effects
of such elections, the rights of the Participant's Eligible
Spouse to consent to such elections, and the relative values
of the various optional forms of payment under the Plan. Any
such election must be received by the Committee prior to the
Participant's Benefit Commencement Date. Any such election
may be revoked, in writing, by the Participant prior to his
or her Benefit Commencement Date, and after such election has
been revoked, another election may be made during the election
period. The number of such revocations shall not be limited.
(a) SPOUSAL CONSENT REQUIREMENTS. Notwithstanding the fore-
going, if the Participant has an Eligible Spouse, the
Participant's election, amendment or revocation of an
election of an optional form of payment, or designation
of a Beneficiary or Contingent Annuitant other than such
spouse, shall be effective only by filing, together with
such election, amendment or revocation, the written
consent of the Participant's spouse, which consent
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<PAGE> 63
acknowledges the effect of such election, amendment or
revocation and is witnessed by a Plan representative or
notary public; provided that such election, amendment or
revocation shall be deemed effective without such spousal
consent if the Participant evidences to the Committee
that he or she has no Eligible Spouse or that such spouse
cannot reasonably be located. Any such spousal consent
shall bind only the spouse who executes it. Any spousal
consent to an election naming a Beneficiary or Contingent
Annuitant other than such Eligible Spouse shall not be
effective unless the election designates a specific alter-
nate Beneficiary or Contingent Annuitant, including any
class of Beneficiaries or any contingent Beneficiaries,
which may not be changed without spousal consent. Addi-
tionally, any spousal consent shall not be effective
unless the election designates a form of benefit payment
which may not be changed without spousal consent.
(b) WAIVER OF WAITING PERIOD. Notwithstanding anything here-
in to the contrary, a Participant who receives the writ-
ten explanation described above may elect a Benefit
Commencement Date which is less than 30 days after such
written explanation is provided to the Participant,
provided that:
(i) The written explanation clearly indicates that the
Participant has a right to at least 30 days to
consider whether to waive the automatic form of
payment and consent to some other form of payment;
(ii) If the Participant elects such an earlier Benefit
Commencement Date, he or she is permitted to revoke
the election until the later of the Benefit Com-
mencement Date elected, or the date which is eight
days after the date on which the written explana-
tion is provided; and
(iii) Distribution to the Participant does not commence
prior to the eighth day after the date on which the
written explanation is provided.
A Participant's election to waive the 30-day waiting
period described above shall also apply to the waiting
period described in Question and Answer 2 of Treasury
Regulation Section 1.402(f)-1.
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<PAGE> 64
ARTICLE VII
CALCULATION OF ACCRUED BENEFIT
7.01 IN GENERAL. For any Participant who is neither a "TRA '86
Participant" nor an "OBRA '93 Participant," the Participant's
Accrued Benefit shall be equal to the difference between the
amounts calculated under Paragraphs (a) and (b), as follows,
but subject to the minimum described in Paragraph (c). Other
limitations on, or adjustments to, a Participant's Accrued
Benefit are described in the remaining Sections of this Arti-
cle VII.
(a) Years of Credited Service (up to 35) x (.0090 x Average
Monthly Compensation up to $650 plus .0150 x Average
Monthly Compensation over $650), less
(b) The basic amount of any monthly pension to which the
Participant is entitled to date from Contract Employee
Plan Coverage, actuarially adjusted for any difference
between the Normal Form under this Plan and the normal
form of pension provided under the Contract Employee
Plan.
(c) With respect to those employees as of May 20, 1988, whose
participation in the Contract Employee Plan ceased, or
whose eligibility for such participation ceased, due to
the decertification of the International Association of
Machinists and Aerospace Workers, Springfield Lodge No.
1316, the sum of the Accrued Benefit under this Plan and
the Accrued Pension under the Contract Employee Plan
shall not be less than the Accrued Pension determined as
if the provisions of the Contract Employee Plan as of
December 31, 1988, had remained in effect.
7.02 TRA '86 PARTICIPANTS. The Accrued Benefit of each "TRA '86
Participant" shall be the greater of:
(a) The Participant's Accrued Benefit determined under the
Plan's current benefit formula at the time the determi-
nation is made, as applied to the Participant's total
Years of Credited Service, or
(b) The sum of:
(i) The Participant's Accrued Benefit as of December
31, 1988, frozen in accordance with Treasury Regu-
lation Section 1.401(a)(4)-13; provided, however,
that in determining the Participant's Accrued
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<PAGE> 65
Benefit as of December 31, 1988, the Participant's
Compensation shall not be limited to either the
TRA '86 Annual Compensation Limit or the OBRA '93
Annual Compensation Limit, and
(ii) The Participant's Accrued Benefit determined under
the Plan's benefit formula in effect at the time
the determination is made, as applied to the Par-
ticipant's Years of Credited Service during Plan
Years beginning after December 31, 1988.
A "TRA '86 Participant" means any Participant whose current
Accrued Benefit as of any date after December 31, 1988, is
based on Compensation for a Plan Year beginning before
December 31, 1988, that exceeded the TRA '86 Annual Compensa-
tion Limit.
7.03 OBRA '93 PARTICIPANTS. The Accrued Benefit of each "OBRA '93
Participant" shall be the greater of:
(a) The Accrued Benefit determined under the Plan's benefit
formula in effect at the time the determination is made,
as applied to the Participant's total Years of Credited
service, or
(b) The sum of:
(i) The Participant's Accrued Benefit as of December
31, 1993, frozen in accordance with Treasury Regu-
lation Section 1.401(a)(4)-13; provided, however,
that in determining the Participant's Accrued
Benefit as of December 31, 1993, the Participant's
Compensation shall not be limited to the OBRA '93
Annual Compensation Limit; provided, further, how-
ever, that, except with respect to any portion of
such Participant's Accrued Benefit that was frozen
under subparagraph 7.02(b)(i) as of December 31,
1988, the Participant's Compensation shall be
limited to the TRA '86 Annual Compensation Limit,
and
(ii) The Participant's Accrued Benefit determined under
the Plan's benefit formula in effect at the time
the determination is made, as applied to the Par-
ticipant's Years of Credited Service during Plan
Years beginning after December 31, 1993.
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<PAGE> 66
An "OBRA '93 Participant" means any Participant whose current
Accrued Benefit of any date after December 31, 1993, is based
on Compensation for a Plan Year beginning before December 31,
1993, that exceeded $150,000.
7.04 ADJUSTING FROZEN BENEFITS. Any TRA '86 Participant's Accrued
Benefit frozen as of December 31, 1988, and any OBRA '93 Par-
ticipant's Accrued Benefit frozen as of December 31, 1993,
shall be adjusted to reflect increases in the Participant's
Compensation after December 31, 1993, if the result would be
to increase the Participant's frozen Accrued Benefit. No
such adjustment shall be made, however, unless permitted
under Treasury Regulation Section 1.401(a)(17)-1. Thus, for
example, the definition of Compensation used in making any
such adjustment shall be the same as that in effect on the
date the Participant's Accrued Benefit was frozen, except
that such definition shall not be subject to the TRA '86
Annual Compensation Limit and shall be subject to the OBRA
'93 Annual Compensation Limit in effect at the time the
adjustment is made.
7.05 PAYMENT OFFSETS. In the event a Participant's Accrued Benefit
begins to be distributed because of the application of Section
8.09, the Actuarially Equivalent value of any such distributed
amounts shall, on an annual basis, be offset against any cur-
rent or future increase in the Participant's Accrued Benefit
due to the Participant earning additional Years of Credited
Service or having a higher Average Monthly Compensation.
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<PAGE> 67
ARTICLE VIII
OTHER PROVISIONS AFFECTING BENEFITS
8.01 NO ASSIGNMENT. No benefit under the Plan shall in any manner
or to any extent be assignable or transferable by any Partici-
pant, Beneficiary or Contingent Annuitant under the Plan, or
be subject to attachment, garnishment or other legal process,
except through a qualified domestic relations order described
in Section 8.04. No attempted assignment or transfer of any
benefit under the Plan shall be recognized.
8.02 MERGER OF PLANS. In the case of any merger or consolidation
with, or transfer of assets or liabilities to, any other plan,
each Participant (if such plan then terminates) shall receive
a benefit immediately after the merger, consolidation or
transfer that is equal to or greater than the benefit he or
she would have been entitled to receive immediately before
the merger, consolidation or transfer (if the Plan had then
terminated).
8.03 NONDUPLICATION OF BENEFITS. A Participant shall not be en-
titled to the payment of more than one type of benefit under
this Plan. For example, a Participant may not receive both
an Early Retirement Benefit and a Termination Benefit. In the
event a Participant would otherwise be entitled to payment of
more than one type of benefit, the Participant shall elect
which of the two he or she is to receive.
8.04 QUALIFIED DOMESTIC RELATIONS ORDERS. Payments pursuant to
a domestic relations order shall be made under the Plan in
accordance with the following rules and any supplemental pro-
cedures adopted by the Committee:
(a) GENERAL RULE. Notwithstanding any other provision to
the contrary, the Plan may make payment to an "alternate
payee" under a "qualified domestic relations order" at
any time specified in such order, whether before, at, or
after a Participant's "earliest retirement age" (as such
terms are defined in section 414(p) of the Code), pro-
vided that any such payment before a Participant's ear-
liest retirement age shall be subject to the following
conditions:
(i) The order must either provide for, or permit the
Plan and alternate payee to agree to, such an early
payment;
(ii) The payment must constitute a single-sum payment
of all Plan benefits to which the alternate payee
may become entitled under the terms of the order;
and
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<PAGE> 68
(iii) if the order so provides, any such payment that
exceeds $5,000 shall be made only with the alter-
nate payee's written consent.
Unless the context clearly requires a contrary interpre-
tation, any order providing for a single-sum payment to
an alternate payee as of a Participant's "earliest re-
tirement age" shall be construed as providing for such
payment to be made on the date which is as soon as
administratively practicable after the Committee has
determined that the order constitutes a qualified domes-
tic relations order.
(b) EFFECT ON PARTICIPANT'S BENEFITS. In the event that
payments to a Participant's alternate payee under a
qualified domestic relations order commence after or at
the same time as that Participant's benefit payments
under the Plan, the benefit payments to the Participant
shall be reduced by any amounts paid simultaneously to
the alternate payee. In the event that payments to a
Participant's alternate payee under a qualified domestic
relations order commence before the Participant's benefit
payments under the Plan, the benefit payments to the Par-
ticipant shall be reduced by the sum of (i) the Actuari-
ally Equivalent amount of the payments already made to
the alternate payee, plus (ii) any amounts paid simul-
taneously to the alternate payee.
8.05 FUNDING POLICY AND CONTRIBUTIONS. The funding policy for the
Plan shall be established by the Committee or its designee. T
he Committee shall determine the contributions that shall be
made to the Plan by the Employers, and the time at which such
contributions shall be made. Participants, Beneficiaries and
Contingent Annuitants shall not have any interest in contri-
butions to the Plan, or in any particular assets of the Plan,
and shall not have the right to demand that any particular
contributions be made.
8.06 NONDEDUCTIBE CONTRIBITIONS. Notwithstanding the provisions
of Section 14.17, to the extent that any contribution to the
Plan could be deductible by an Employer under Section 404 of
the Code, such contribution is expressly conditioned upon its
deductibility under such Section. If any part of a contribu-
tion may not be deducted, the Committee shall direct that the
nondeductible contribution, though not in excess of the maxi-
mum amount permitted to be returned under the Code, be re-
turned to the Employer that made the contribution.
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<PAGE> 69
8.07 MISTAKEN CONTRIBUTIONS. Notwithstanding the provisions of
Section 14.17, if any contribution is made by an Employer
under a mistake of fact, the Committee shall direct that the
mistaken contribution, though not in excess of the maximum
amount permitted to be returned under the Code, be returned
to the Employer that made the contribution.
8.08 SECTION 415 LIMITATIONS. The benefits provided under this
Plan, together with the benefits provided under any other de-
fined benefit plan maintained by an Employer or Affiliated
Employer that is required to be aggregated with this Plan for
purposes of Code Section 415, shall not exceed the limita-
tions prescribed in Section 415(b) of the Code (which shall
be deemed to include, for purposes of this Section 8.08, any
other statute that relates to the Section 415 limitations).
The provisions of Code Section 415 are hereby incorporated by
reference. For purposes of Code Section 415, the "limitation
year" shall be the Plan Year of this Plan.
8.09 SPECIAL DISTRIBUTION REQUIREMENTS UNDER CODE SECTION 401(a)(9).
This Section sets forth rules concerning when distributions
must begin and over what period of time they must be made.
All distributions required under this Section shall be deter-
mined and made in accordance with Section 401(a)(9) of the
Code and any guidance issued thereunder. Any rules concerning
the timing or duration of benefits found in other provisions
of the Plan shall be altered only to the extent necessary to
avoid violating the rules of this Section. In no event shall
these rules be read to provide any option as to the time, man-
ner, or duration of benefits in addition to those found in
other provisions of the Plan. The distribution rules of this
Section are as follows:
(a) DISTRIBUTION MUST COMMENCE BY REQUIRED BEGINNING DATE.
In no event shall any distribution with respect to a
Participant commence later than the Participant's Re-
quired Beginning Date.
(b) MAXIMUM DISTRIBUTION PERIOD. In no event shall distribu-
tion with respect to a Participant be made over a period
extending beyond the later of (i) the life of the Parti-
cipant and the beneficiary designated by him or her (if
any), or (ii) the life expectancy of the Participant or
the joint life expectancies of the Participant and the
beneficiary designated by him or her (if any).
(c) DEATH OF PARTICIPANT AFTER BENEFIT COMMENCE DATE. If a
Participant dies after distribution of the Participant's
benefit has begun, but before the Participant's entire
benefit has been distributed, the remaining portion of
that benefit shall be distributed at least as rapidly
as under the method of distribution (consistent with
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<PAGE> 70
Paragraph (b), above) being used at the time of the Par-
ticipant's death.
(d) DEATH OF PARTICIPANT BEFORE BENEFIT COMMENCEMENT DATE.
If a Participant dies before distribution of the Partici-
pant's benefit has begun, any distributions payable after
the death of the Participant shall meet one of the fol-
lowing requirements:
(i) If distributions are payable to the surviving
spouse of a Participant, such distributions shall
commence no later than the date on which the Par-
ticipant would have attained age 70 1/2 (or within
one year after the date of the Participant's death,
if the Participant had already attained age 70 1/2
as of the date of death) and shall be paid over the
life of such spouse or a period not extending be-
yond the life expectancy of such spouse.
(ii) If distributions are payable to any beneficiary
other than a surviving spouse, such distributions
shall commence within one year after the date of
the Participant's death and shall be paid over the
life of such beneficiary or a period not extending
beyond the life expectancy of such beneficiary.
(iii) In all other cases, all distributions shall be made
within five years of the death of the Participant.
(e) ACCRUAL OF ADDITIONAL BENEFITS AFTER BENEFIT COMMENCEMENT
DATE. In the event a Participant accrues additional
benefits under the Plan after payment of such Partici-
pant's benefit commences pursuant to Paragraph (a)
hereof, such additional benefits shall be separately
identified and begin to be paid to the Participant,
beginning with the first payment interval ending in
the calendar year following the calendar year in which
the additional benefits are accrued.
(f) REQUIRED BEGINNING DATE. The "Required Beginning Date"
for a Participant is the first day of April of the calen-
dar year following the calendar year in which occurs the
later of the Participant's Retirement or attainment of
age 70 1/2; provided, however, that the Required Begin-
ning Date for a Participant who is a "five percent owner"
(as defined in Section 401(a)(9) of the Code) is the
first day of April of the calendar year following the
calendar year in which the Participant attains age
70 1/2.
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<PAGE> 71
(g) SPECIAL RULES. Any Participant who attains age 70 1/2
prior to January 1, 2001, may elect to begin receiving
his or her benefit as of the first day of April of the
calendar year following the calendar year in which he
or she attains age 70 1/2, even if he or she is still
employed at that time. If a Participant Retires after
the calendar year in which he or she attains age 70 1/2:
(i) all optional forms of benefit available to the Par-
ticipant at age 70 1/2 shall remain available at his or
her Retirement, and (ii) his or her benefit shall be
actuarially adjusted, to the extent required under Sec-
tion 401(a)(9)(C)(iii) of the Code, to take into account
the period after age 70 1/2 in which the Participant was
not receiving a benefit under the Plan.
(h) LIMITS ON PAYMENTS TO YOUNG CONTINGENT ANNUITANTS. In
the event that a Participant's beneficiary is not the
Participant's spouse, payments to be made on or after
the Participant's Required Beginning Date to the benefi-
ciary after the Participant's death must not at any time
exceed the applicable percentage of the annuity payment
for such period that would have been payable to the Par-
ticipant using the table set forth in Question and Answer
A-6 of Proposed Treasury Regulation Section 1.401(a)(9)-2.
In the event that the Participant elects a benefit option
that fails to satisfy this rule, the Participant may
elect a different benefit option satisfying the rule.
If the Participant fails to do so by his or her Benefit
Commencement Date, the Participant shall be deemed to
have elected a 50% Joint and Survivor Annuity under
which the Participant's Eligible Spouse is the Contin-
gent Annuitant, if the Participant has such a Spouse,
or a Single Life Annuity, if the Participant does not
have such a spouse.
8.10 SPECIAL DISTRIBUTION REQUIREMENTS UNDER CODE SECTION
401(a)(14). Unless a Participant properly elects a later
Benefit Commencement Date, the Benefit Commencement Date
applicable to a Participant shall be no later than 60 days
after the close of the Plan Year in which occurs the latest
of the following dates:
(a) The date on which the Participant attains age 65;
(b) The date that is the tenth anniversary of the date on
which the Participant commenced participation in the
Plan; or
(c) The date on which the Participant's employment with all
Employers and Affiliated Employers is terminated.
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<PAGE> 72
Notwithstanding the foregoing, if the amount of the payment
required to commence as of the date determined above cannot
be ascertained by such date, or if it is not possible to make
such payment because the Participant cannot be located after
reasonable efforts, a payment retroactive to such date shall
be made no later than 60 days after the earliest date on which
the amount of such payment can be ascertained or the Partici-
pant is located.
8.11 RESTRICTIONS ON BENEFITS FOR CERTAIN EMPLOYEES. Benefits
otherwise payable under the terms of the Plan shall be sub-
ject to the following restrictions:
(a) NONDISCRIMINATORY BENEFITS ON PLAN TERMINATION. In the
event of the termination of the Plan, the benefit of any
current or former "highly compensated employee" shall be
limited to a benefit that is nondiscriminatory under Sec-
tion 401(a)(4) of the Code.
(b) RESTRICTED EMLOYEE BENEFITS PRIOR TO PLAN TERMINATION.
Subject to Paragraph (c) hereof, the benefits payable to
a "restricted employee" in any Plan Year shall not exceed
an amount equal to the payments that would be made to or
on behalf of the restricted employee in that Plan Year
under (i) a Single-Life Annuity that is Actuarially Equi-
valent to the Participant's Accrued Benefit and any other
benefits to which the Participant is entitled under the
Plan (other than a Social Security supplement), and (ii)
the Social Security supplement, if any, that the re-
stricted employee is entitled to receive. For this pur-
pose, the term "any other benefits" includes, among other
benefits, loans in excess of the amounts set forth in Sec-
tion 72(p)(2)(A) of the Code, any periodic income, any
withdrawal values payable to a living employee or former
employee, and any death benefits not provided for by in-
surance on the employee's or former employee's life.
(c) NONAPPLICATION OF RESTRICTED EMPLOYEE PROVISIONS. The
restrictions set forth in Paragraph (b) hereof shall not
apply if any of the following conditions is met:
(i) After taking into account payment to or on behalf
of the restricted employee of all benefits payable
to or on behalf of that restricted employee under
the Plan, the value of Plan assets equals or ex-
ceeds 110% of the value of current liabilities,
as defined in Section 412(l)(7) of the Code;
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<PAGE> 73
(ii) The value of the benefits payable to or on behalf
of the restricted employee is less than 1% of the
value of current liabilities before distribution;
(iii) The value of the benefits payable to or on behalf
of the restricted employee does not exceed the
amount described in Section 411(a)(11) of the Code;
or
(iv) The Internal Revenue Service determines that the
restrictions are not necessary to prevent the pro-
hibited discrimination that may occur in the event
of an early termination of a plan.
In addition to the foregoing, the restrictions set forth
in Paragraph (b) may be modified by the Committee to the
extent that, in its sole discretion, the Committee deter-
mines that a modification is allowed by the Code because
of, for example, a repayment and security arrangement
between the restricted employee and the Plan.
(d) DEFINITION OF HIGHLY COMPENSATED EMPLOYEE. A "highly
compensated employee" is any employee deemed by the Com-
mittee to be highly compensated, using any definition
permitted under Section 414(q) of the Code.
(e) DEFINITION OF RESTICTED EMPLOYEE. A "restricted employee"
is a current or former highly compensated employee who is
one of the twenty-five nonexcludable employees and former
employees of an Employer and its Affiliated Employers with
the largest amount of compensation in the current or any
prior Plan Year. Notwithstanding any other provision of
the Plan, the Company retains the right to define or alter
the group of restricted employees, at any time and for any
reason, including retroactively, and such a definition or
alteration may not be challenged by any Participant as a
prohibited cutback.
8.12 RESTRICTIONS ON BENEFITS DURING LIQUIDITY SHORTFALL. If the
Plan has a "liquidity shortfall," within the meaning of Sec-
tion 412(m)(5) of the Code, benefits payable to a Participant
during the period of the liquidity shortfall shall not exceed
the payments that may be made to or on behalf of the Partici-
pant under a Single Life Annuity plus any applicable Social
Security supplements and other amounts payable pursuant to
Section 401(a)(32) of the Code and Section 206(e) of ERISA.
Additional restrictions shall apply to a period of a liquidity
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<PAGE> 74
shortfall, to the extent required by Section 401(a)(32) of the
Code and Section 206(e) of ERISA.
8.13 INCAPACITY. Every person receiving or claiming a benefit
under the Plan shall be presumed to be mentally competent and
of age until the Committee receives reliable, written notice
that such person is incompetent or a minor. Payments other-
wise due a minor shall be paid to any custodial parent of such
minor. Payments otherwise due any other incompetent person
shall be paid to the guardian, conservator, or other legal
representative of such person. In the event that the Commit-
tee is unable to locate a parent, guardian, conservator, or
other legal representative of an incompetent person who is
otherwise entitled to payment under the Plan, such payment
shall be made to the individual determined by the Committee
to have assumed financial responsibility for the care of such
person. Before the initial payment is made to an individual
designated in this Section, the minor or other legally incom-
petent person shall be notified of the Committee's intent to
make such payment to that other individual. Any payment of
a benefit in accordance with the provisions of this Section
shall be a complete discharge of any further liability to make
such payment.
8.14 IDENTITY OF PAYEE AND AMOUNT OF BENEFITS. The determination
of the Committee as to the identity of the proper payee of any
benefit from the Plan and Trust, and the amount payable, shall
be conclusive, and payment in accordance with such determina-
tion shall constitute a complete discharge of all obligations
on account thereof.
8.15 DIRECT ROLLOVERS. Notwithstanding any provision of the Plan
to the contrary that otherwise would limit a "distributee's"
election, a distributee may elect, at the time and in the man-
ner prescribed by the Committee, to have any portion of an
"eligible rollover distribution" paid directly to an "eligible
retirement plan" specified by the distributee in a "direct
rollover." For purposes of this Section, the following terms
shall have the following meanings:
(a) ELIGIBLE ROLLOVER DISTRIBUTION. An "eligible rollover
distribution" is any single-sum distribution provided
under the Plan, or any other amount to which the direct
rollover rules of the Code may be applicable, and that
is included in the distributee's gross income for income
tax purposes.
(b) ELIGIBLE RETIREMENT PLAN. An "eligible retirement plan"
is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan
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<PAGE> 75
described in Section 403(a) of the Code, or a qualified
trust described in Section 401(a) of the Code, that ac-
cepts a distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution
to a surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity, only.
(c) DISTRIBUTEE. 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 relations order, as de-
fined in Section 414(p) of the Code, are distributees
with regard to the interest of the spouse or former
spouse.
(d) DIRECT ROLLOVER. A "direct rollover" is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
8.16 EFFECT OF QUALIFIED MILITARY SERVICE. Notwithstanding any
provision of this Plan to the contrary, contributions, bene-
fits, and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of
the Code.
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<PAGE> 76
ARTICLE IX
TRANSFER FROM ONE COMPANY PLAN TO ANOTHER
9.01 FROM THIS PLAN TO CONTRACT EMPLOYEE PLAN. If, after July 1,
1976, an Employee who is a Participant in this Plan transfers
to a job classification covered by the Contract Employee Plan,
the following provisions shall apply:
(a) His or her participation in this Plan shall continue, and
he or she shall continue to accrue Years of Vesting Ser-
vice under this Plan during his or her employment by an
Employer or Affiliated Employer.
(b) He or she shall not be eligible to receive any benefits
under this Plan until he or she terminates employment
with all Employers and Affiliated Employers.
(i) If such termination occurs on his or her Normal or
Late Retirement Date, his or her Accrued Benefit
under this Plan shall be computed in accordance
with Article VII, but using the factors described
in Paragraph (c), below.
(ii) If such termination occurs prior to his or her
Normal Retirement Date, his or her Accrued Benefit
under this Plan shall be computed in accordance
with Article VII, but using the factors described
in Paragraph (c), below; provided, however, that
his or her employment as a contract employee fol-
lowing a transfer under this Section 9.01 shall
be excluded in determining his or her Years of
Credited Service projected to his or her Normal
Retirement Date.
(c) His or her Years of Credited Service shall be measured
from his or her Employment Commencement Date to the date
on which the transfer occurred. His or her Average
Monthly Compensation shall be based on the 60 months of
Compensation immediately preceding the date of transfer.
The amount of reduction, if any, made under Paragraph
7.01(c) shall be the amount of pension for any prior Con-
tract Employee Plan Coverage to which the employee was
entitled on the date of transfer, under the Contract Em-
ployee Plan provisions in effect at the date of transfer.
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<PAGE> 77
9.02 FROM CONTRACT EMPLOYEE PLAN TO THIS PLAN. If an employee has
become eligible for this Plan after a period of Contract Em-
ployee Plan Coverage, the following provisions shall apply:
(a) His or her participation in the Contract Employee Plan
shall continue until he or she incurs a Break in Service
under the rules of that Plan.
(b) He or she shall continue to accrue Service for vested
benefits under the Contract Employee Plan, subject to its
rules, during his or her employment with the Company.
(c) His or her benefit from Contract Employee Plan Coverage
used under Paragraph 7.01(c) shall be based on the Con-
tract Employee Plan provisions in effect on the date as
of which the employee's job classification was changed
to one not covered by the Contract Employee Plan.
9.03 EXAMPLES SHOWING BENEFIT CALCULATIONS FOR EMPLOYEES TRANSFER-
RING BETWEEN PLANS.
(a) EXAMPLE ONE.
An employee is hired after July 1, 1976, at age 30 in a
position eligible to participate in this Plan. After 3
years and 6 months, he is transferred to a job classifi-
cation covered by the Contract Employee Plan. Eight
years later, he terminates employment.
(1) (2) (3)
Date of Date of Date of
Hire Transfer Termination
------------------------ ------------------------
Noncontract Plan Contract Plan
------------------------ ------------------------
3 years, 6 months 8 years
------------------------ ------------------------
Benefit Under this Plan:
Salary averaging: Period (1) to (2) = 3 yrs. 6 mos.
Credited Service: Period (1) to (2) = 3 yrs. 6 mos.
Vesting Service: Period (1) to (3) = 11 yrs. 6 mos.
Offset due to Contract Employee Plan = None.
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<PAGE> 78
Benefit Under Contract Employee Plan:
Credited Service: Period (2) to (3). Credit depends
on hours worked in each plan year.
Vesting Service: Period (1) to (3). Credit depends
on hours worked in each plan year.
(b) EXAMPLE TWO. An employee is hired after July 1, 1976,
at age 30 as a contract employee. After 5 years, he is
transferred to a position eligible to participate in this
Plan. He continues in that position until retirement at
age 65.
(1) (2) (3) (4)
Date of Date of Age Date of
Hire Transfer 60 Termination
---------------- ---------------- ----------------
Contract Plan Noncontract Plan Noncontract Plan
---------------- ---------------- ----------------
5 years 25 years 5 year salary
averaging period
---------------- ---------------- ----------------
Benefit Under this Plan:
Salary averaging: Period (3) to (4) = 5 yrs.
Credited Service: Period (1) to (4) = 35 yrs.
Vesting Service: Period (1) to (4) = 35 ys.
Offset due to Contract
Employee Plan: Period (1) to (2) = 5 yrs.
Benefit Under Contract Employee Plan:
Credited Service: Period (1) to (2). Credit depends
on hours worked in each plan year.
Vesting Service: Period (1) to (4). Credit depends
on hours worked in each plan year.
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<PAGE> 79
ARTICLE X
SPECIAL PROVISIONS APPLICABLE TO PRIOR PLAN PARTICIPANTS
10.01 SPECIAL PROVISIONS. In addition to those benefits provided
under other provisions of this Plan, the benefits payable with
respect to a Prior Plan Participant shall be subject to the
following terms and conditions:
(a) DEATH OF ACTIVE PARTICIPANT. In the event a Prior Plan
Participant who is an Employee dies prior to his or her
Benefit Commencement Date, there shall be payable to the
Beneficiary designed by him or her for this benefit an
amount equal to the excess, if any, of (i) the amount of
cash values, exclusive of any dividends, obtained from
surrender of the insurance policies or annuity contracts
in effect with respect to him or her under the Prior Plan,
over (ii) the Present Value of the benefits, if any, pay-
able to any Beneficiary or Contingent Annuitant in accor-
dance with the other provisions of this Plan.
(b) VESTED TERMINATION. If a Prior Plan Participant termi-
nates employment with all Employers and Affiliated Em-
ployers, the actuarial value, as of the date of his or
her termination, of the benefit payable to him or her
shall be the greater of:
(i) the Present Value of the Termination Benefit, if
any, otherwise payable to him or her under Section
4.04; or
(ii) the amount of the cash values, exclusive of any
dividends obtained from surrender of the insur-
ance policies or annuity contracts in effect
with respect to him or her under the Prior Plan,
multiplied by the appropriate vesting percentage
determined under the Prior Plan but based upon
computing his or her number of completed years
of participation in the Prior Plan as being equal
to the sum of (A) the number of his or her com-
pleted years of participation in the Prior Plan,
plus (B) the number of years of employment from
the date his or her participation in the Prior
Plan ended up his or her date of termination.
(The amount under this paragraph (ii) is here-
after referred to as the "Prior Plan Termination
Benefit.")
A Prior Plan Participant may elect to receive a Prior
Plan Termination Benefit in one lump sum, if such elec-
tion is made within 30 days of his or her termination of
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<PAGE> 80
employment. If a Prior Plan Participant has elected to
receive his or her Prior Plan Termination Benefit in one
lump sum and his or her Termination Benefit is greater
than the Prior Plan Termination Benefit, the Termination
Benefit shall be payable as provided in Section 4.04,
but reduced by the amount of the Prior Plan Termination
Benefit.
If the Prior Plan Termination Benefit is greater than
the Termination Benefit and the Prior Plan Participant
has not elected to receive the same in one lump sum, the
Prior Plan Termination Benefit shall be payable in the
same manner as the Termination Benefit would have been
payable had it been greater.
If the Prior Plan Participant has not elected to receive
the Prior Plan Termination Benefit in one lump sum and
dies before the commencement of the payment of the Ter-
mination Benefit, his or her Beneficiaries shall be
entitled to be paid the Prior Plan Termination Benefit,
increased with interest from the date of his or her ter-
mination to the date of his or her death, offset by the
Present Value of the benefits, if any, payable to Eli-
gible Spouse in accordance with Section 5.01. The Prior
Plan Termination Benefit shall be increased with interest
at the rate determined in accordance with Section 1.02 on
the date of termination.
If the Prior Plan Participant has not elected to receive
the Prior Plan Termination Benefit in one lump sum, and
he or she and any Contingent Annuitant die after the Par-
ticipant's Benefit Commencement Date, the excess, if any,
of his or her Prior Plan Termination Benefit, increased
with interest from the date of his or her termination to
the Benefit Commencement Date, over the sum of all pen-
sion payments previously received, shall be payable to
the Participant's Beneficiary.
(c) NORMAL, EARLY AND LATE RETIREMENT. A Prior Plan Partici-
pant who retires pursuant to any of Sections 4.01, 4.02
or 4.03 may elect to receive the amount of his or her
cash values in one lump sum, if such election is made
within 30 days of his or her Retirement. If the Prior
Plan Participant has elected to receive his or her cash
values in one lump sum, his or her Accrued Benefit shall
be reduced by the monthly benefit, payable in the Normal
Form, which is Actuarially Equivalent to the cash values.
If the Prior Plan Participant has not elected to receive
the cash values in one lump sum and he or she and any
Contingent Annuitant die before the sum of the pension
- 38 -
<PAGE> 81
payments the Participant and his or her Contingent Annui-
tant received equal the cash values, the difference be-
tween the cash values and the sum of all such pension
payments previously received shall be payable to the Par-
ticipant's Beneficiary.
10.02 OFFSET FOR INSURANCE OR ANNUITY PAYMENTS. Any retirement
benefit payable under the Plan shall be reduced by the amounts
payable under any insurance or annuity contracts held under
the Plan, such reduction being actuarially adjusted to allow
for any difference in the form of payment under such insurance
or annuity contracts and the standard or optional form under
this Plan.
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<PAGE> 82
ARTICLE XI
REEMPLOYMENT AFTER RETIREMENT
11.01 WHILE RECEIVING ANNUITY PAYMENTS. If a former Participant
is reemployed as an Employee after beginning to receive an
annuity benefit under the provisions of Article VI, he or she
shall resume participation in the Plan in accordance with Sec-
tion 3.02, and the following provisions shall apply:
(a) REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. If such an
Employee is reemployed before his or her Normal Retire-
ment Date, the following provisions shall apply:
(i) ON A FULL-TIME BASIS. If such an Employee is reem-
ployed on a "full-time" basis, his or her benefit
payments shall be suspended during such period of
reemployment; provided, however, that no benefit
shall be suspended pursuant to this provision un-
less the Committee notifies the Employee, by per-
sonal delivery or first-class mail, during the
first calendar month or payroll period in which
the Plan withholds payments, that his or her bene-
fit is being suspended. Such notification shall
contain a description of the specific reasons why
benefit payments are being suspended, a general
description of the Plan provisions relating to the
suspension of benefits, a copy of such provisions,
and a statement to the effect that applicable labor
regulations may be found in Section 2530.203-3 of
Title 29 of the Code of Federal Regulations.
The benefit amount payable upon his or her subse-
quent Retirement shall be recalculated to include
any additional Service and Compensation accrued
during his or her resumed employment, and shall
be reduced by an amount that is Actuarially Equi-
valent to any benefit payments he or she received
prior to his or her reemployment, but in no event
shall the amount of his or her Accrued Benefit on
such subsequent Retirement Date be less than the
corresponding amount on his or her prior Retirement
Date.
(ii) ON A PART-TIME BASIS. If such an Employee is reem-
ployed on a Apart-time" basis, his or her benefit
payments shall not be suspended (unless and until
his or her employment status changes to full-time,
in which event the provisions of subparagraph (a)(i)
shall apply). However, consistent with the provi-
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<PAGE> 83
sions of Code Section 411(b)(1)(H)(iii), the Actu-
arially Equivalent value of any benefits paid to
such an Employee after his or her reemployment
shall be offset, on an annual basis, against any
current or future increases in the Employee's
Accrued Benefit due to either additional Years of
Credited Service or higher Average Monthly Compen-
sation.
(iii) DEFINITIONS. For purposes of this Paragraph (a),
an Employee shall be considered "full-time" if he
or she is scheduled to work at least 173 hours per
month. Any Employee who is not considered full-
time shall be considered "part-time."
(b) REEMLOYMENT AFTER NORMAL RETIREMENT DATE. If such an
Employee is reemployed on or after his or her Normal Re-
tirement Date, his or her benefit payments shall not be
suspended. However, consistent with the provisions of
Code Section 411(b)(1)(H)(iii), the Actuarially Equiva-
lent value of any benefits paid to such an Employee after
his or her reemployment shall be offset, on an annual
basis, against any current or future increases in the Em-
ployee's Accrued Benefit due to either additional Years
of Credited Service or higher Average Monthly Compensa-
tion.
11.02 AFTER RECEIVING LUMP-SUM PAYMENT. If a former Participant is
reemployed as an Employee after receiving a lump-sum payment
of his or her entire vested Accrued Benefit (whether volun-
tarily or involuntarily), he or she shall resume participa-
tion in the Plan in accordance with Section 3.02, and the
following provisions shall apply:
(a) IMMEDIATE LUMP-SUM PAYMENTS. If such an Employee re-
ceived the lump-sum payment by the close of the second
Plan Year following the Plan Year in which he or she
terminated employment, the following provisions shall
apply:
(i) REPAYMENT RIGHT. The Employee may repay to the
Plan the amount of the lump-sum payment, plus in-
terest at the rate determined under Section
411(c)(2)(C) of the Code. Any such repayment must
be made, in full, before the earlier of:
(A) The date that is five years after his or her
reemployment date, or
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<PAGE> 84
(B) The end of a five-year Period of Severance,
measured from his or her prior termination of
employment.
(ii) EFFECT OF REPAYMENT. If such an Employee exer-
cises the repayment right described in subparagraph
(a)(i), his or her prior Years of Credited Services
shall be restored, thereby restoring the entire
Accrued Benefit on which the lump-sum payment was
based.
(iii) EFFECT OF NONREPAYMENT. If such an Employee does
not exercise the repayment right described in
subparagraph (a)(i), his or her prior Years of
Credited Service shall be disregarded in calcula-
ting his or her Accrued Benefit.
(iv) EFFECT OF DEEMED CASH-OUT. Any such Employee who
had no vested interest in his or her Accrued Bene-
fit at the time of his or her prior termination of
employment, and who was therefore deemed to have
received an immediate lump-sum payment of that
vested Accrued Benefit under Paragraph 6.03(b),
shall be deemed to have repaid the full amount of
that payment immediately upon his or her reemploy-
ment.
(b) DEFERRED LUMP-SUM PAYMENTS. If such an Employee received
the lump-sum payment after the close of the second Plan
Year following the Plan Year in which he or she termi-
nated employment, the following provisions shall apply:
(i) NO REPAYMENT RIGHT. The Employee shall have no
right to repay to the Plan any portion of the lump-
sum payment.
(ii) PRIOR SERVICE RETAINED. The Employee shall retain
the prior Years of Credited Service on which the
lump-sum payment was based.
(iii) BENEFIT OFFSET. On the Employee's subsequent
Retirement Date, his or her Accrued Benefit shall
be reduced by the amount of the Accrued Benefit
that was previously distributed in a lump-sum pay-
ment.
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<PAGE> 85
11.03 CONTINUED EMPLOYMENT BEYOND NORMAL RETIREMENT DATE. If a Par-
ticipant remains an employee of an Employer or Affiliated
Employer on his or her Normal Retirement Date, his or her
Benefit Commencement Date shall be deferred until his or her
"retirement." Solely for purposes of this Section, a Partici-
pant's "retirement" shall occur as of the first month in which
he or she completes fewer than 40 Hours of Service. The Com-
mittee shall notify any such Participant, by personal delivery
or first-class mail, during the month in which the Participant
attains his or her Normal Retirement Date, that his or her
Benefit Commencement Date is being deferred pursuant to this
Section. Such notice shall contain the information described
in Paragraph 11.01(a). On the Participant's eventual retire-
ment, he or she shall be entitled to a Late Retirement Bene-
fit, in accordance with Section 4.03. Such a Late Retirement
Benefit shall be increased, however (in accordance with the
requirements of ERISA, the Code, and the regulations issued
thereunder), to reflect any delay in the Committee's provi-
sion of the notice described above.
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<PAGE> 86
ARTICLE XII
TOP-HEAVY RULES
12.01 EXCLUSION OF EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREE-
MENTS. The requirements of this Article shall not apply to
persons who are members of a unit of employees covered under
a collective bargaining agreement under which retirement bene-
fits were the subject of good faith bargaining.
12.02 DETERMINATION OF TOP-HEAVY STATUS. The determination of whe-
ther the Plan is "Top-Heavy" shall be made as follows:
(a) If the Plan is not required to be included in an Aggre-
gation Group with other plans of an Employer and its
Affiliated Employers, then it shall be Top-Heavy with
respect to the Employer only if, when considered by
itself, it is a Top-Heavy Plan. Even then, the plan
shall not be Top-Heavy with respect to the Employer if
it is included in a permissive Aggregation Group that
is not a Top-Heavy Group.
(b) If the Plan is required to be included in an Aggregation
Group with other plans of an Employer and its Affiliated
Employers, it shall be Top-Heavy with respect to the
Employer only if the Aggregation Group, including any
permissively aggregated plans, is Top-Heavy.
(c) If the Plan is not a Top-Heavy Plan and it is not required
to be included in an Aggregation Group with other plans
of an Employer and its Affiliated Employers, then it shall
not be Top-Heavy with respect to the Employer, even if it
is permissively aggregated in an Aggregation Group that
is a Top-Heavy Group.
A plan shall be "Top-Heavy," and an Aggregation Group shall
be a "Top-Heavy Group," with respect to a Plan Year, if, as
of the Determination Date, the sum of the Cumulative Accrued
Benefits and Cumulative Accounts of an Employer's Key Em-
ployees exceeds 60% of a similar sum determined for all Em-
ployees of that Employer. For purposes of this Section, the
Cumulative Accrued Benefits and Cumulative Accounts of an
individual shall be disregarded if the individual has not
performed any services for which he or she received compensa-
tion from the Employer (other than benefits under the Plan)
at any time during the five-year period ending on the Determi-
nation Date.
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<PAGE> 87
12.03 MINIMUM VEWTING REQUIREMENT FOR TOP-HEAVY YEARS. If the Plan
is Top-Heavy with respect to an Employer for any Plan Year,
then a Participant who terminates employment during that Plan
Year shall be entitled to a benefit equal to the percentage
of his or her Accrued Benefit calculated under the following
table, but only if such benefit is larger than the benefit
the Participant would otherwise receive under the Plan. This
special rule shall apply only to Employees of the Employer
with respect to which the Plan is Top-Heavy (or Employees who
were covered under this Plan while Employees of that Employer)
who have an Hour of Service after the Plan became Top-Heavy
with respect to the Employer.
Years of Vested
Vesting Service Percentage
----------------- ----------
Less than 2 0%
2 but less than 3 20%
3 but less then 4 40%
4 but less than 5 60%
5 and over 100%
If the Plan ceases to be Top-Heavy with respect to the Em-
ployer, a Participant who would have been entitled to a
Termination Benefit under this special rule, if his or her
employment had terminated while the Plan was Top-Heavy, shall
continue to be entitled to a Termination Benefit. The amount
of that benefit shall be the amount the Participant would
have received if he or she had terminated employment on the
last day the Plan was Top-Heavy with respect to the Partici-
pant's Employer. Any Participant with three or more Years of
Vesting Service may elect, on a form, to be submitted to the
Committee, to have this special rule continue to apply after
the Plan is no longer Top-Heavy.
12.04 MINIMUM NORMAL RETIREMENT BENEFIT FOR TOP-HEAVY YEARS.
(a) If the Plan is Top-Heavy with respect to an Employer for
any Plan Year, then a Participant who is a Non-Key Em-
ployee of the Employer shall accrue a minimum benefit.
As a result, the Accrued Benefit of the Participant
shall be determined under the preceding provisions of
this Plan, except that the Participant's Accrued Benefit
attributable to Plan Years in which the Plan was Top-
Heavy with respect to his or her Employer shall be in an
amount equal to the minimum benefit under this Section
for those years, if greater than the amount that other-
wise would accrue. The minimum benefit, when expressed
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<PAGE> 88
as an annual retirement benefit payable in the Normal
Form and beginning on the Participant's Normal Retirement
Date, shall not be less than the Participant's average
Compensation in the testing period multiplied by the
lesser of (i) two percent, multiplied by the number of
the Participant's Years of Credited Service, or (ii)
twenty percent.
(b) For purposes of this Section, Years of Credited Service
shall be excluded if the Plan was not a Top-Heavy Plan
for any Plan Year ending during such Year of Credited
Service or if such Year of Credited Service was completed
in a Plan Year beginning before January 1, 1984. A Par-
ticipant's "testing period," for purposes of determining
his or her average Compensation under this Section, is
the five-consecutive-year period during which he or she
had the greatest aggregate Compensation from the Employer
and its Affiliated Employers, excluding years not in-
cluded in a Year of Credited Service, years ending in a
Plan Year beginning before January 1, 1984, and years
beginning after the close of the last year in which the
Plan is Top-Heavy.
(c) No minimum benefit will be required for a Participant
in this Plan if the Participant's Employer maintains
another qualified plan under which a minimum benefit is
being accrued for the year for the Participant, in accor-
dance with Section 416(f) of the Code, and the Employer
elects to have such other plan meet the minimum benefit
requirement. To the extent possible, any minimum benefit
requirement shall be satisfied under this Plan.
12.05 TOP-HEAVY DEFINITIONS. For purposes of the Top-Heavy require-
ments set forth in this Article, the following definitions
shall apply:
(a) The words "Aggregation Group" shall mean, with respect
to the plans of an Employer, the plan or group of plans
that includes all plans maintained by the Employer or
its Affiliated Employers -
(i) In which a Key Employee is a participant,
(ii) That enable any plan maintained by the Employer or
its Affiliated Employers in which a Key Employee
is a participant to meet the requirements of Sec-
tion 401(a)(4) or Section 410(b) of the Code, or
(iii) Which are selected by the Employer for permissive
aggregation, the inclusion of which would not
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<PAGE> 89
prevent the group of plans from continuing to meet
the requirements of Sections 401(a)(4) and 410(b)
of the Code.
(b) The word "Compensation" shall mean compensation that
would be stated on a Participant's Form W-2 (in the box
for "Wages, Tips and Other Compensation") for the calen-
dar year that ends with or within the Plan Year.
(c) The "Cumulative Account" and "Cumulative Accrued Benefit"
of a Participant or former Participant shall be deter-
mined as follows:
(i) A Participant's or former Participant's "Cumula-
tive Account," as of a Determination Date, shall
be the sum of the balances to his or her accounts
under a plan, determined as of the most recent
plan valuation date occurring within the 12-month
period ending on the Determination Date. That
amount shall be increased by any contributions
due after such valuation date and on or before the
Determination Date. If the valuation date falls
within the first plan year of the plan, the Parti-
cipant's or former Participant's Cumulative Account
shall include any contributions made after the
Determination Date, but allocated as of a date in
the first plan year. If the plan is being con-
sidered in an Aggregation Group, the Participant's
or former Participant's Cumulative Account shall
be the sum of the balances to his or her accounts
under all defined contribution plans included in
the Aggregation Group under consideration (as
determined under the rules above).
(ii) A Participant's or former Participant's "Cumulative
Accrued Benefit," as of a Determination Date, shall
be the present value of his or her accrued benefit
under a plan, determined under the actuarial assum-
ptions set forth in such plan, as of the most
recent valuation date occurring within the 12-
month period ending on the Determination Date. For
purposes of computing the Participant's or former
Participant's Cumulative Accrued Benefit, the par-
ticipant shall be treated as if he or she volun-
tarily terminated employment as of such valuation
date (as of the Determination Date, in the case
of the plan's first year). The accrued benefit
of a participant other than a Key Employee shall
be determined as if such benefit accrued not more
rapidly than the slowest accrued rate permitted
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<PAGE> 90
under the fractional rule of Section 411(b)(1)(C)
of the Code. If the plan is being considered in
an Aggregation Group, the Participant's or former
Participant's "Cumulative Accrued Benefit" shall
be the sum of the present values of the Partici-
pant's accrued benefits under all defined benefit
plans included in the Aggregation Group under con-
sideration (as determined under the rules above),
using the same actuarial assumptions for all such
plans.
(iii) The balance to a Participant's or former Partici-
pant's accounts and the value of the Participant's
benefits shall not include amounts attributable to
deductible employee contributions.
(iv) The balance to a Participant's or former Partici-
pant's accounts and the value of the Participant's
benefits shall be increased by the aggregate amount
of any distributions made on his or her account
under the plan or plans during the 5-year period
ending on the Determination Date.
(v) Rollovers and direct plan-to-plan transfers shall
be treated as follows:
(A) If the transfer is initiated by the Partici-
pant or former Participant and made from a
plan maintained by an employer to another
employer, the transferor plan shall continue
to include the amount transferred as an amount
in the Participant's or former Participant's
account under the transferor plan or as an
accrued benefit under the transferor plan.
(B) If the transfer is not initiated by the Parti-
cipant or former Participant, or is made be-
tween plans maintained by the same employer,
the transferor plan shall not include the
amount transferred as an amount under the
plan, and the transferee plan shall consider
the amount transferred as an amount under
the transferee plan.
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<PAGE> 91
(C) For purposes of this Subparagraph (c)(v), all
employers aggregated under the rules of Sec-
tion 414(b), (c) or (m) of the Code shall be
considered a single employer.
(vi) For purposes of determining the Cumulative Accrued
Benefit under this Plan of a Participant or former
Participant, the term "valuation date" shall be
the same date as the Determination Date.
(d) The words "Determination Date" shall mean, for purposes
of determining whether a plan is Top-Heavy for a parti-
cular plan year, the last day of the preceding plan year
(or, in the case of the first plan year of the plan, the
last day of that first year).
(e) The words "Key Employee" shall mean any Participant (in-
cluding the spouse or other beneficiary of such Partici-
pant) who, at the time during the Plan Year or any of
the four preceding Plan Years, is:
(i) An officer of an Employer or an Affiliated Em-
ployer having an aggregate annual Compensation
from the Employer and its Affiliated Employers of
more than 50% of the amount in effect under Sec-
tion 415(b)(1)(A) of the Code for the Plan Year,
but in no event shall more than fifty employees
or, if less, the greater of (A) three employees
or (B) 10% of the aggregate number of employees
of the Employer and its Affiliated Employers, be
taken into account under this Subparagraph (e)(i)
as officers of the Employer or Affiliated Employer;
(ii) One of the ten employees of the Employer having
an aggregate annual Compensation from the Employer
and its Affiliated Employers of more than the limi-
tation in effect under Section 415(c)(1)(A) of the
Code and owning (or considered as owning, within
the meaning of Section 318 of the Code) the largest
interests in the Employer;
(iii) A person owning more than 5% of the Employer (with-
in the meaning of Section 416(i)(1)(B)(i) of the
Code); or
(iv) A person who has an aggregate annual Compensation
from the Employer and its Affiliated Employers
of more than $150,000 and who owns more than 1%
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<PAGE> 92
of the Employer, within the meaning of Section
416(i)(1)(B)(i) of the Code.
For purposes of applying Section 318 of the Code to the
provisions of this Paragraph (e), Subsection (C) of
Section 318(a)(2) shall be applied by substituting "5
percent" for "50 percent." For purposes of subparagraph
(e)(ii), if two employees have the same interest in an
Employer, the employee having the greater aggregate
annual Compensation from the Employer and its Affiliated
Employers shall be treated as having the larger interest.
(f) The words "Non-Key Employee" mean any Employee who is not
a Key Employee.
12.06 CONSTRUCTION. The provisions of this Article are not intended
to expand the benefits and other rights of any individual
under this Plan or any other plan beyond those provided in
other provisions of this Plan or any other plan, except in the
event that this Plan or any other plan is "top-heavy," within
the meaning of Section 416 of the Code, and, in that event,
only to the extent required by such Section 416. Accordingly,
the provisions of this Article shall be interpreted strictly
in accordance with such Section 416 and, in the event of any
inconsistency between such provisions and Section 416, Section
416 shall govern.
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<PAGE> 93
ARTICLE XIII
PLAN ADMINISTRATION
13.01 RETIREMENT COMMITTEE. The Board shall appoint a Retirement
Committee of three to five individuals. The Board may also
remove any members of the Committee and appoint replacements
from time to time. The members of the Committee may, but
need not, be employees, officers or directors of any Employer.
The Committee shall be the "plan administrator," within the
meaning of ERISA, and shall be vested with all the authority
and powers necessary to carry out the administrative provi-
sions of the Plan. The enumeration of specific powers of the
Committee shall in no way restrict or limit the Committee's
general authority in this regard.
13.02 ACTIONS OF THE COMMITTEE. The decision of a majority of the
members of the Committee in office shall control in all cases
over which the Committee has authority. The Committee shall
develop internal rules for the manner in which actions are to
be taken, including, for example, rules regarding actions with
or without a meeting and recordkeeping. Unless otherwise spe-
cified herein, the Committee may designate a subcommittee of
the Committee, or any other entity, individual or group of
individuals (whether or not any such individual is a member
of the Committee), to act on its behalf or as its agent with
respect to matters over which the Committee has authority under
the terms of the Plan and Trust. Any action of such subcommit-
tee, entity, individual or group of individuals with respect
to such matters shall be deemed an action of the Committee.
13.03 PLAN INTERPRETATION. The Committee shall have the sole, abso-
lute and exclusive right, power and discretion to construe and
interpret the provisions of the Plan. For this purpose, the
term "Plan" means this Plan document and any related document
used in the administration or operation of the Plan and Trust,
including, but not limited to, the summary plan description.
The Committee may construe any ambiguity, supply any omission,
or reconcile any inconsistency, in such manner and to such
interest as it deems appropriate, in its sole discretion. The
Committee shall have further authority to determine, in its
sole discretion, all questions with respect to the individual
rights of any Employee or Beneficiary under the Plan, include-
ing, for example, all issues with respect to eligibility for
benefits, Service, Disability and Retirement. The construc-
tion or interpretation placed upon any term or provision of
the Plan by the Committee, and any action by the Committee
taken or not taken pursuant thereto, shall be final, conclu-
sive and binding upon all Employees, Beneficiaries, and any
other interested party.
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<PAGE> 94
13.04 COMPENSATION AND EXPENSES. The members of the Committee shall
serve without compensation, but they shall be reimbursed for
the expenses incurred in performing their responsibilities,
in such amounts and at such times as directed by the Company.
Such expenses may be paid from the Trust Fund or by the Em-
ployers, as determined by the Company.
13.05 RELIANCE ON EXPERTS. Unless otherwise specified herein, the
Committee and any other Plan Fiduciary may employ or appoint
agents, legal or investment counsel (who also may be of coun-
sel to any Employer), accountants, actuaries and such other
experts as may be necessary or convenient in the administra-
tion of the Plan or Trust. The Committee, any other Plan
Fiduciary, the Employers, and their respective employees,
officers and directors shall not be liable for the directions,
actions or omissions of any agent, legal or other counsel,
accountant, actuary or any other expert who has agreed to the
performance of administrative duties in connection with the
Plan or Trust. The Committee, any other Plan Fiduciary, the
Employers, and their respective employees, officers and direc-
tors shall be entitled to rely upon all certificates, reports
and opinions which may be made by such experts and shall be
fully protected in respect of any action taken or suffered by
them in good faith in reliance upon any such certificates,
reports or opinions; all actions so taken or suffered shall
be conclusive upon each of them and upon all persons having
or claiming to have any interest in or under the Plan or
Trust.
13.06 CO-FIDUCIARY RESPONSIBILITY. Plan Fiduciaries may provide
for the allocation of fiduciary responsibilities, other than
trustee responsibilities (as defined in Section 405(c)(3) of
ERISA), among themselves. The Committee, any other Plan
Fiduciary, or any expert employed or appointed by a Plan
Fiduciary to serve in a fiduciary capacity with respect to
the Plan or Trust, shall be solely responsible for the respon-
sibilities, obligations, or duties allocated to it, whether
under the Plan or Trust or under the terms and conditions
of any other agreement. Any person to whom such responsi-
bilities, obligations or duties have not been allocated shall
not be responsible with respect to any action directed, taken
or omitted by the fiduciary to whom such responsibilities,
obligations or duties have been allocated.
13.07 INDEMNIFICATION. The Committee, the individual members of
the Committee, any other Plan Fiduciary, and any employee,
officer or director of the Employers, shall be free from all
liability, joint and several, for their actions and conduct
in the administration of the Plan and Trust, and the Employers
shall indemnify and save them and each of them harmless from
any and all liability for their actions and conduct in the
performance of their duties with respect to the Plan and
Trust, except for liability resulting from their own willful
misconduct.
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<PAGE> 95
13.08 PLAN FIDUCIARY. For purposes of the Plan and Trust, the term
"Plan Fiduciary" means the Committee, the Board, the Trustee,
any Investment Manager, and any other person who may be con-
sidered a "fiduciary" of the Plan and Trust under ERISA; pro-
vided, however, that a person shall be considered a Plan
Fiduciary only with respect to the specific matters and duties
that make such person a fiduciary under the terms of the Plan,
the Trust and ERISA, and that the person's responsibilities
and liabilities shall extend only to such matters and duties.
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<PAGE> 96
ARTICLE XIV
TRUST PROVISIONS
14.01 APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by
the Company and shall be either one or more individuals or a
corporation that is authorized to act as trustee for quali-
fied retirement plans under applicable federal and state law.
(Except as otherwise expressly noted, any reference in this
Article to "the Trustee" shall be interpreted to include a
reference to any individual serving in that capacity.) The
Company may remove the Trustee, or the Trustee may resign,
upon 60 days' written notice to the other party, provided
that either party may waive such notice from the other. Upon
resignation or removal of the Trustee, the Company shall ap-
point a successor Trustee, which shall agree to accept the
Trust and to be bound by all of the provisions of the Plan.
14.02 TITLE OF ASSETS. All contributions to the Trust shall be
made to, and held in trust by, the Trustee. All securities
or other assets whose title is evidenced by a certificate of
title shall be registered in the name of the Trustee or in
such other form as the Trustee shall determine. Any cash
authorized by the Trustee to be held as part of the Trust
Fund shall be held in the name of the Trustee, with such autho-
rized signatures for withdrawals as the Trustee may deem advis-
able. All other assets of the Trust shall be held in the form
determined by the Trustee.
14.05 SCOPE OF TRUSTEE'S RESPONSIBILITY. Notwithstanding any other
provision of this Plan and Trust, the Trustee shall have
exclusive authority and discretion to manage and control the
assets of the Trust Fund, except to the extent that (i) the
Plan and Trust expressly provide that the Trustee is subject
to the directions of another Plan Fiduciary who is not a
Trustee; or (ii) authority to manage, acquire or dispose of
assets is delegated to one or more Investment Managers, in
accordance with Section 14.12. To the extent that the Com-
mittee or another Plan Fiduciary directs the Trustee, the
Trustee shall be subject to the proper directions of such
Committee or other Plan Fiduciary that are made in accordance
with the terms of the Plan and Trust and are not contrary
to ERISA. In carrying out its responsibilities, the Trustee
shall:
(a) Discharge its duties solely in the interest of Partici-
pants and Beneficiaries, for the exclusive purpose of
providing benefits for Participants and Beneficiaries
and defraying reasonable expenses of administering the
Plan and Trust;
(b) Invest the assets of the Trust Fund with the care, skill,
prudence and diligence under the circumstances then pre-
vailing that a prudent person, acting in a like capacity
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<PAGE> 97
and familiar with such matters, would use in the conduct
of an enterprise of a like character and with like aims;
(c) Diversify the investments of the Trust Fund so as to
minimize the risk of large losses, unless under the cir-
cumstances it is clearly prudent not to do so; and
(d) Not maintain the indicia of ownership of any assets of
the Trust Fund outside the jurisdiction of the district
courts of the United States.
14.04 TRUSTEE'S POWERS. The Trustee shall have full power and
authority to administer, manage and otherwise deal with all
of the Trust Fund, to the same extent as an individual owner
thereof. Without limitation or restriction of the foregoing,
but in furtherance thereof, the Trustee is expressly author-
ized and empowered:
(a) To invest and reinvest Trust assets in securities and
stock of any class or kind or any other kind of property,
real or personal, and to hold such investments as the
Trustee deems advisable, all without being confined to
any limitations now or hereafter imposed by law that
are more restrictive than the standard prescribed by
this provision;
(b) To sell, for cash or credit and at public or private
sale, grant options, exercise rights, convert, redeem,
exchange or otherwise dispose of investments in the
Trust Fund;
(c) To hold any part of the Trust Fund uninvested and deposit
the same with any banking institution, including deposits
with a corporate Trustee, without any obligation to pay
interest on funds being held for immediate investment.
(d) To join in, dissent from, or oppose any reorganization,
recapitalization, consolidation, sale or merger affecting
investments in the Trust Fund;
(e) To lease, for any period of time, to repair, improve,
mortgage, divide, alter, exchange, or give options with
respect to real property and generally to exercise all
rights of ownership;
(f) To borrow or raise monies from anyone, including a cor-
porate Trustee, for the purposes of the Trust, in such
amount and upon such terms and conditions as the Trus-
tee may deem advisable, and to pledge all or any part
- 55 -
<PAGE> 98
of the Trust Fund as security therefor; provided that
the Committee is given advance written notice of any
such borrowing; and provided, further, that no annuity
contract, if any, purchased for the account of a speci-
fic Participant shall be pledged except to secure a
loan to pay premiums thereon. No person lending money
to the Trustee need see to the application of the money
lent or inquire into the propriety of any such borrowing;
(g) To vote stock and other votable investments through
proxies or voting trusts, on discretionary as well as
ministerial matters;
(h) To carry investments in the name of a nominee or nomi-
nees or in bearer form;
(i) To apply for, pay premiums under, hold, or transfer
annuity, endowment, life insurance, or other contracts
issued by any insurance company. If annuity contracts
are issued under the Plan, they may consist of, but
not be limited to, individual annuities (both fixed and
variable, immediate and deferred), group annuities, and
deposit administration annuities or variations thereof
(such as immediate participation guaranteed investment
annuities and guaranteed return annuities). Monies also
may be deposited in insurance company "investment only
contracts," such as fixed amount, fixed period, and fixed
interest investments, sometimes referred to as "bullet"
investment contracts and "window" investment arrange-
ments. If any life insurance policies are issued under
the Plan to insure any death benefits provided hereunder,
such life insurance policies shall not provide death
benefits prior to retirement in excess of 100 times the
anticipated monthly pension of the Participant. Such
life insurance policies shall, at the direction of the
Committee, be surrendered to the insurer for their cash
value or transferred to the Participant under the terms
of this Trust. At the retirement of the Participant,
the Trustee shall convert the entire value of life insur-
ance policies into cash or provide for a periodic income,
but in no event shall any portion of such value be used
to continue life insurance protection;
(j) To invest and maintain Trust Fund assets in specific in-
vestments permitted under this Trust as the Committee
or its designee, in writing, may direct the Trustee;
- 56 -
<PAGE> 99
(k) To invest and reinvest all or any part of the Trust
Fund through the medium of any common, collective or
commingled trust fund maintained by the Trustee that is
qualified to accept investments from retirement plans
qualified under the provisions of Section 401(a) of the
Code and exempt from income taxation under the provisions
of Section 501(a) of the Code and, during such period of
time as an investment through such medium shall exist,
such declaration of trust of such fund shall constitute
a part of this Trust; and
(l) To exercise all powers of trustees now or hereafter at
any time conferred by law on trustees and lawfully in
effect, to the extent that such powers are not contrary
to the powers conferred under this Trust.
14.05 ACTION BY TRUSTEE. If more than one individual is appointed
by the Company as Trustee, the Trustee shall take action by
a majority vote of the individual trustees then in office.
The action of such majority of the trustees, expressed either
by a vote at a meeting or in writing without a meeting, shall
constitute the action of the Trustee. It shall have the same
effect for all purposes as if assented to by all of the trus-
tees at the time in office. The Trustee may authorize one or
more of the individual trustees to sign on its behalf any
instructions, instruments, or other documents. No trustee
who is a Participant or Beneficiary shall be entitled to vote
on any matter pertaining solely to himself or herself.
14.06 DISTRIBUTIONS TO PARTICIPANTS. The Trustee, upon written in-
structions from the Committee, shall pay benefits from the
Trust Fund to Participants, Beneficiaries or Contingent Annui-
tants in such amounts, and at such times, as the Committee
directs. The Trustee shall be under no obligation to deter-
mine proper payees or the amount of benefits to which any
payee is entitled.
14.07 RECORDKEEPING. The Trustee shall keep accurate and detailed
accounts of all investments, receipts and disbursements and
other transactions hereunder; and all accounts, books and
records relating thereto shall be open to inspection by the
Company, and by any other entity, individual or group of
individuals designated by the Company, at all reasonable
times. Within 60 days following the close of each Plan Year,
the Trustee shall file with the Company, and with any other
entity, individual or group of individuals designated by the
Company, a written account setting forth all investments,
receipts and disbursements and other transactions effected
by it during such Plan Year, and containing an exact descrip-
tion of all securities purchased and sold, the cost or net
proceeds of sale (excluding accrued interest paid or received)
- 57 -
<PAGE> 100
and showing the securities and investments held at the end of
such Plan Year, and the cost of each item thereof as carried
on the books of the Trustee, together with the current market
value thereof. Upon the expiration of 90 days from the date
of filing any such account, or upon the express approval by
the Company, or by any other entity, individual or group of
individuals designated by the Company, the Trustee shall be
forever released and discharged from any liability or account-
ability to anyone as respects the propriety of the acts or
transactions, except for such acts or transactions as to which
any recipient of the written account shall, within such 90-day
period, file with the Trustee a written statement setting
forth its exceptions or objections, and except for a loss of
diminution of the Trust Fund resulting from the negligence,
willful misconduct, or lack of good faith of the Trustee. The
Trustee shall keep such other records and file with the Inter-
nal Revenue Service and any other applicable federal or state
agency such returns and other information concerning the Trust
as may be required of the Trustee under the Code or other
applicable law or regulation, or as directed by the Committee.
14.08 FINAL ACCOUNTING. In the case of the resignation or removal
of the Trustee, there shall be a settlement of its accounts
as of the effective date of such resignation or removal. Such
settlement may be had either by judicial proceedings in any
court of competent jurisdiction, or by agreement or settlement
between the Trustee and the Company. Upon settlement of such
accounts, the Trustee shall release all of its interest as
Trustee in and to the Trust assets and shall execute all docu-
ments necessary for that purpose; and it shall thereupon be
discharged from further accountability for the Trust Fund.
No person claiming to have any interest in the Plan or Trust,
and no Participant, Beneficiary or representative of either,
shall be a party to the settlement of any such accounts, and
for all the purposes of such accounts, the Company shall be
the representative of all persons claiming to have such
interest. All the parties to the Plan and Trust shall be
bound by the settlement of such accounts between the Trustee
and the Company.
14.09 TRUSTEE'S COMPENSATION. Any corporate Trustee shall be en-
itled to receive for its services hereunder such reasonable
compensation as may be agreed to by the Trustee and the Com-
pany. Such compensation may be paid from the assets of the
Trust Fund or by the Employers, as determined by the Company.
14.10 PLAN AND TRUST EXPENSES. Any income taxes or other taxes of
any kind whatsoever that may be levied or assessed upon or
in respect of the Trust Fund, excluding only excise taxes
imposed under Section 4975 of the Code, may be paid from the
assets of the Trust Fund. Any transfer taxes incurred in
connection with the investment and reinvestment of the assets
of the Trust Fund, and all other fees and administrative ex-
penses incurred by any person in connection with the admini-
- 58 -
<PAGE> 101
stration of the Plan or Trust, may be paid from the assets of
the Trust Fund. The Company, in its sole discretion, shall
determine whether any such amount shall be payable from the
Trust Fund or by the Employers, and, if payable from the
Trust Fund, shall direct the Trustee to that effect; provided,
however, that all such amounts shall constitute a charge upon
the Trust Fund until paid by another party.
14.11 TRUSTEE'S LIABILITY. The Trustee shall not be responsible in
any way for the collection of contributions required under
the Plan, the purposes of propriety of any distributions, or
any similar action taken at the direction of a person who,
pursuant to the provisions of the Plan or Trust, is authorized
to direct the Trustee with respect to such action, provided
the Trustee acts in accordance with the standards prescribed
herein. The Employers shall at all times fully indemnify and
save harmless the Trustee, its successors and assigns from
any liability arising from distributions so made or actions
so taken, from any liability arising out of the investment of
any Trust assets pursuant to a Committee directive or order,
and from any and all other liability whatsoever that may arise
in connection with this Plan and Trust, except the obligation
of the Trustee to perform the things to be done by it under
this Trust, in accordance with the standards prescribed here-
under. The Trustee shall be under no duty to take any action
other than as herein specified with respect to the Trust, nor
shall the Trustee be under a duty to defend or engage in any
suit with respect to the Trust Fund unless properly indemni-
ied by the Employers with regard to the expense of such legal
action. The Trustee may from time to time consult with coun-
sel and shall be fully protected in acting or relying upon
the advice of such counsel. The Trustee shall be protected
in acting or omitting to take any action, upon any written
order, notice, request, consent, certification or other in-
strument or paper believed by it to be genuine and to have
been properly executed, so long as it acts in accordance with
the standards prescribed herein. The Trustee shall not be
liable for any act or failure to act of any predecessor or
successor Trustee. Notwithstanding the foregoing, the Trus-
tee shall be liable for the consequences of any act, or
failure to act, that arise from its own negligence, willful
misconduct, failure to act in good faith, or failure to
comply with ERISA.
14.12 INVESTMENT MANAGER. The Committee may appoint one or more
Investment Managers to manage, acquire and dispose of all or
any part of the assets of the Trust Fund. Upon the effective
date of the appointment of any Investment Manager, the Trustee
shall be relieved of all responsibility and liability with
respect to the management, acquisition and disposition of
those assets under the control of the Investment Manager. To
qualify as an "Investment Manager," a person must (i) qualify
as an investment adviser that is registered under the Invest-
ment Advisors Act of 1940, a bank, as defined in that Act, or
an insurance company qualified to manage, acquire and dispose
- 59 -
<PAGE> 102
of plan assets under the laws of more than one state, and (ii)
acknowledge in writing that it is a Plan Fiduciary.
14.13 CUSTODIAN. The Committee may appoint one or more financial
institutions to serve as custodian of all or any part of the
assets of the Trust Fund. Any such custodian must satisfy
the requirements of Code Section 401(f), and will have no
responsibility for the management, acquisition or disposition
of such assets.
14.14 PROXY AND OTHER VOTING. If an Investment Manager is appointed
to manage all or any part of the assets of the Trust Fund,
such Investment Manager shall, with respect to such portion of
the assets, vote stock and other votable investments through
proxies or voting trusts, both on discretionary as well as
ministerial matters. To the extent of any part of the assets
of the Trust Fund not managed by an Investment Manager, the
Committee or its designee shall exercise such responsibili-
ties. The Committee may also elect to vote proxies with
respect to assets of the Trust Fund managed by an Investment
Manager. No other Plan Fiduciary or other entity or indi-
vidual shall have any responsibility for the voting responsi-
bilities delegated hereunder to Investment Managers and the
Committee or its designee.
14.15 AMENDMENT OF TRUST PROVISIONS. The Board may amend the Trust
provisions set forth herein at any time, and for any reason;
provided, however, that the Board may appoint another entity,
individual or group of individuals to act on its behalf with
respect to one or more amendments and provided, further, that
no amendment that affects the rights, responsibilities or
duties of the Trustee adversely shall become effective with-
out the written consent of the Trustee.
14.16 PLENARY POWER OF THE COMMITTEE. The powers granted to the
Trustee under this Plan and Trust shall be exercised by the
Trustee subject to the written directions of the Committee.
The Trustee shall be under no duty to inquire into the propri-
ety of such directions nor into their effect upon the Trust
Fund or the beneficiaries thereof, nor to apply to a court
for instructions, notwithstanding the fact that the Trustee
has, or with reasonable inquiry should have, actual or con-
structive notice that any action taken or omitted pursuant to,
or as a result of, the exercise of such directive authority
constitutes, or may constitute, a breach of the terms of the
Plan or Trust or a violation of any law applicable to the
investment of the funds hereunder. Any such direction so
given the Trustee shall be deemed to be continuing until re-
voked or modified by a subsequent direction in writing, not-
withstanding the occurrence of any event or other development
of which the Trustee has or should have knowledge. Subject
to the limitations of Section 14.03, the Trustee shall not
be liable or responsible for any loss resulting to the Trust
Fund, or to any present or future beneficiary thereof, by rea-
son of:
- 60 -
<PAGE> 103
(a) Any sale or investment made, or other action taken, pur-
suant to and in accordance with such a direction; or
(b) The retention of any asset, including cash, the acquisi-
tion of retention of which has been directed as provided
in this Section.
In the absence of any direction contemplated in this Section,
all powers and authorities conferred upon the Trustee under
the provisions of this Article shall be exercised in the sole
discretion of the Trustee.
14.17 EXCLUSIVE BENEFIT. The Plan and Trust have been created for
the exclusive benefit of the Employers' employees and their
beneficiaries. It is intended that the Plan satisfy the pro-
visions of the Code that determine the qualification of em-
ployees' pension plans, and that the Trust be exempt from tax
under the Code. Under no circumstances shall any part of the
principal or income under the Plan or Trust be used for, or
diverted to, purposes other than the exclusive benefit of such
employees and their beneficiaries. The Plan shall not be con-
strued, however, as giving any employee or any other person
any right, legal or equitable, against any Employer or any
fiduciary of the Plan or Trust, or against the principal or
income of the Plan or Trust, except as specifically provided
for in this Plan.
- 61 -
<PAGE> 104
ARTICLE XV
CLAIMS AND APPEALS PROCEDURES
15.01 FILING A CLAIM. A person who seeks benefits under the Plan
(a "claimant") shall complete, execute and submit to the Com-
mittee a written claim therefor on a form provided by the
Committee. A claim is filed when such a form is received by
the Committee.
15.02 DECIDING A CLAIM. The Committee shall decide a claim within
a reasonable time after the claim is received, and shall have
the right to require such evidence as reasonably may be neces-
sary to decide the claim. If a claim is wholly or partially
denied, the claimant shall be furnished a written notice set-
ting forth the following:
(a) The specific reason or reasons for the denial;
(b) Specific references to pertinent Plan provisions on which
the denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is neces-
sary; and
(d) Appropriate information on the steps to be taken if the
claimant wishes to appeal the claim decision, including
the period in which the appeal will be decided.
The notice shall be furnished to the claimant within 90 days
after receipt of the claim by the Committee, unless special
circumstances require an extension of time for processing the
claim. No extension shall be for more than 90 days after the
end of the initial 90-day period. If an extension of time
for processing is required, written notice of the extension
shall be furnished to the claimant before the end of the
initial 90-day period. The extension notice shall indicate
the special circumstances requiring an extension of time and
the date by which a final decision will be rendered.
15.03 APPEALING A CLAIM. If a claim is denied, the claimant may
appeal the denial upon written application to the Committee.
No appeal shall be considered unless it is received by the
Committee within 90 days after receipt by the claimant of
written notification of denial of the claim. The claimant
may review documents pertinent to the appeal and may submit
issues and comments in writing to the Committee. In addition,
the claimant shall be granted a hearing before the Committee,
at which hearing the claimant or a designated representative
- 62 -
<PAGE> 105
may present evidence on the claimant's behalf and will be con-
fronted with all contrary evidence. The claimant may also
request that the Company appoint a representative to act on
his or her behalf at the hearing. If the claimant neither
appears at the hearing (in person or through a representative)
nor notifies the Committee of his or her inability to appear,
the Committee may dismiss the appeal for lack of prosecution.
15.04 DECIDING AN APPEAL. The Committee shall decide an appeal
within 60 days after the written application is received.
However, if special circumstances require an extension of
time for processing, a decision shall be rendered as soon
as possible, but not later than 120 days after the appeal
is received. If such an extension of time for deciding the
appeal is required, written notice of the extension shall be
furnished to the claimant prior to the commencement of the
extension. The Committee's decision shall be in writing and
shall include specific reasons for the decision and specific
references to the pertinent Plan provisions upon which the
decision is based.
- 63 -
<PAGE> 106
ARTICLE XVI
AMENDMENT AND TERMINATION
16.01 POWER TO AMEND. Sole power to amend the Plan shall reside
in the Board, unless the Board delegates such power to ano-
ther entity, individual, or group of individuals. The Plan
may be amended at any time, and in any manner, provided that
an amendment does not cause any part of the Trust Fund to be
used for, or diverted to, any purpose other than the exclu-
sive benefit of Participants and their Beneficiaries. The
Plan may be amended retroactively to the extent necessary or
advisable to conform with applicable law, including any quali-
fication requirements under the Code, and, where not necessary
or advisable to conform with applicable law, to the extent not
prohibited by applicable law. Complete and absolute discre-
tion is retained to change, on a retroactive or prospective
basis, any rights that an Employee may have under the Plan,
unless it is determined by the Board (or the entity, indivi-
dual or group of individuals exercising amendment authority)
that such a change would be violative of the Code or ERISA.
16.02 METHOD OF AMENDMENT. Any amendment of the provisions of this
Plan shall be evidenced by a written instrument, signed by the
authorized representative of the Board (or of the entity, in-
dividual or group of individuals exercising amendment authori-
ty). Except as otherwise provided in the written instrument
of amendment, the changes made by any amendment shall apply
only to Employees having at least one Hour of Service after
the effective date or dates specified in the amendment.
16.03 POWER TO TERMINATE. The Board shall have the sole power to
terminate the Plan, and it may terminate the Plan at any time
and for any reason.
16.04 FULL VESTING. In the event of the complete or partial termi-
nation of the Plan, the interest of each Participant affected
by the complete or partial termination shall become 100%
vested. The term "partial termination" is a term used under
the Code, but not under ERISA, and nothing in this Plan or
Trust shall give any Participant or Beneficiary the right to
allege that a partial termination has occurred or that he or
she has the right to become 100% vested as a consequence of
any alleged partial termination or other facts and circum-
stances.
16.05 DISPOSITION OF ASSETS UPON COMPLETE TERMINATION. In the event
of the complete termination of the Plan, the Committee shall
dispose of the assets of the Plan and Trust in accordance with
applicable provisions of the Code and ERISA. Upon the satis-
faction of all liabilities to Participants and Beneficiaries
and payment of administrative expenses, the Company may direct
- 64 -
<PAGE> 107
the Committee to distribute any remaining assets to the Em-
ployers, in such manner and at such times as determined by
the Company.
16.06 TRANSFER OF LIABILITIES TO PBGC. In the event of a complete
termination of the Plan, the Committee, in its sole discre-
tion, may transfer responsibility for the payment of benefits
to missing Participants and Beneficiaries to the Pension Bene-
fit Guaranty Corporation.
16.07 SPIN-OFF OF EMPLOYER. No Employer shall be permitted to dis-
continue its participation in this Plan, or to spin off any
portion of the assets of the Plan, unless such Employer pro-
vides at least 90 days' advance written notice to both the
Company and the Committee, and the Company then consents in
writing. In the event of any such discontinuation or spin-
off, the Committee, in its sole and absolute discretion,
shall determine the procedures to be followed and the amount
of assets in the Trust, if any, to be spun off. No assets
in excess of the amount necessary to satisfy the benefit lia-
bilities of the affected Participants and their Beneficiaries,
as determined by the Committee, in its sole discretion, shall
be spun off unless the Committee, in its sole discretion,
determines otherwise.
- 65 -
<PAGE> 108
ARTICLE XVII
MISCELLANEOUS
17.01 GOVERNING LAW. The Plan and Trust shall be construed, en-
forced and administered in accordance with the laws of the
State of Missouri, to the extent not superseded by ERISA.
17.02 SEVERABILITY. In the event that any provision of the Plan or
Trust shall be held illegal or invalid for any reason, said
illegality or invalidity shall not affect the remaining provi-
sions of the Plan and Trust, and the remaining provisions of
the Plan and Trust shall be construed, enforced and adminis-
tered as if the illegal or invalid provision had never been
included.
17.03 HEADINGS. The headings in the Plan and Trust are included
for the sake of convenience only. They shall be disregarded,
to the extent inconsistent with any provision of the Plan or
Trust.
- 66 -
<PAGE> 109
IN WITNESS WHEREOF, Paul Mueller Company has caused this January
1, 2000, Restatement of the Plan to be executed on its behalf this
27th day of January, 2000, and the individuals signing below agree to
continue serving as Trustee of the Trust incident thereto.
PAUL MUELLER COMPANY
By: /S/ DANIEL C. MANNA
-------------------------
Daniel C. Manna
[Corporate Seal] Title: President
----------------------
ATTEST:
By: /S/ JO ELAINE SMAY
--------------------------
Jo Elaine Smay
Title: Corporate Assistant
-----------------------
TRUSTEES
/S/ DONALD E. GOLIK
-----------------------------
Donald E. Golik
/S/ GERALD S. MILLER
-----------------------------
Gerald S. Miller
/S/ MICHAEL W. YOUNG
-----------------------------
Michael W. Young
- 67 -
</TABLE>
<PAGE> 110
SUBSIDIARIES OF REGISTRANT
Mueller International Sales Corporation, a Foreign Sales Corporation,
was organized December 18, 1984, and incorporated under the laws of
the Virgin Islands of the United States and became active in 1985.
This is a wholly owned subsidiary and its accounts have been included
in the Consolidated Financial Statements filed herein.
Mueller Transportation, Inc., a Missouri Corporation, was incorpo-
rated on October 15, 1996. This is a wholly owned subsidiary that
began operations effective January 1, 1997. Its accounts have been
included in the Consolidated Financial Statements filed herein.
Mueller Field Operations, Inc., a Missouri Corporation, was incorpo-
rated on January 28, 1998. This is a wholly owned subsidiary that
began operations effective January 28, 1998. Its accounts have been
included in the Consolidated Financial Statements filed herein.
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> $ 700
<SECURITIES> 2,296
<RECEIVABLES> 19,330
<ALLOWANCES> 518
<INVENTORY> 11,059
<CURRENT-ASSETS> 33,436
<PP&E> 59,755
<DEPRECIATION> 41,301
<TOTAL-ASSETS> 55,623
<CURRENT-LIABILITIES> 15,213
<BONDS> 162
0
0
<COMMON> 1,348
<OTHER-SE> 37,660
<TOTAL-LIABILITY-AND-EQUITY> 55,623
<SALES> 92,572
<TOTAL-REVENUES> 92,572
<CGS> 71,155
<TOTAL-COSTS> 71,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 2,448
<INCOME-TAX> 577
<INCOME-CONTINUING> 1,871
<DISCONTINUED> 0
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<NET-INCOME> 1,871
<EPS-BASIC> 1.60
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