UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8782
GLEASON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1224655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 University Avenue, Rochester, New York 14692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 473-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( ).
The number of shares outstanding of the registrant's Common
stock, par value $1 per share, at June 30, 1998 was 10,524,815
shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(Dollars in thousands)
JUNE 30 DECEMBER 31
Assets 1998 1997
<S> <C> <C>
Current assets
Cash and equivalents $ 20,488 $ 12,478
Trade accounts receivable 93,049 101,024
Inventories 57,331 55,991
Other current assets 13,538 13,367
Total current assets 184,406 182,860
Property, plant and equipment, at cost 251,528 242,399
Less accumulated depreciation 126,818 118,026
124,710 124,373
Goodwill 17,737 18,036
Other assets 16,918 20,384
Total assets $343,771 $345,653
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 5,475 $ 5,760
Current portion of long-term debt 94 1,613
Trade accounts payable 33,082 30,810
Income taxes 7,907 13,640
Other current liabilities 63,209 70,614
Total current liabilities 109,767 122,437
Long-term debt 35,907 38,244
Pension plans and other retiree benefits 60,587 60,235
Other liabilities 11,670 10,516
Total liabilities 217,931 231,432
Stockholders' equity
Common stock 11,594 11,594
Additional paid-in capital 12,291 12,061
Retained earnings 118,255 107,797
Accumulated other comprehensive income:
Cumulative foreign currency translation
adjustment (3,882) (3,889)
Minimum pension liability adjustment (901) (901)
137,357 126,662
Less treasury stock, at cost 11,517 12,441
Total stockholders' equity 125,840 114,221
Total liabilities and stockholders' equity $343,771 $345,653
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands, except
per share amounts)
THREE MONTHS ENDED
JUNE 30
1998 1997
<S> <C> <C>
Net sales $108,171 $ 62,384
Costs and expenses
Cost of products sold 75,766 42,683
Selling, general and
administrative expenses 17,920 9,759
Research and development expenses 2,692 1,660
Loss on settlement of pension plan 2,031 --
Interest (income) expense -- net 275 (120)
Other (income) -- net (82) (285)
Income before income taxes 9,569 8,687
Provision for income taxes 4,010 3,110
Net income $ 5,559 $ 5,577
Earnings per common share:
Basic $ .53 $ .56
Diluted $ .51 $ .54
Weighted average number of common shares outstanding:
Basic 10,501,250 9,922,136
Diluted 10,922,179 10,306,354
Cash dividends declared per common share $ .0625 $ .0625
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands, except
per share amounts)
SIX MONTHS ENDED
JUNE 30
1998 1997
<S> <C> <C>
Net sales $203,568 $122,719
Costs and expenses
Cost of products sold 141,740 83,699
Selling, general and
administrative expenses 34,530 19,622
Research and development expenses 4,906 3,634
Loss on settlement of pension plan 2,031 --
Interest (income) expense -- net 642 (121)
Other (income) -- net (71) (825)
Income before income taxes 19,790 16,710
Provision for income taxes 8,021 5,939
Net income $ 11,769 $ 10,771
Earnings per common share:
Basic $ 1.12 $ 1.08
Diluted $ 1.08 $ 1.04
Weighted average number of common shares
outstanding:
Basic 10,483,704 9,944,966
Diluted 10,896,833 10,316,908
Cash dividends declared per common share $ .125 $ .125
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
SIX MONTHS ENDED
JUNE 30
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,769 $ 10,771
Adjustments to reconcile net income
to net cash provided by operating activities:
Loss on settlement of pension plan 2,031 --
Depreciation and amortization 10,659 5,535
(Gain) on disposals of property, plant
and equipment (5) (462)
Provision for deferred income taxes 617 278
Changes in operating assets and liabilities:
Decrease in accounts receivable 7,622 6,068
(Increase) in inventories (1,668) (4,201)
(Increase) decrease in other current assets 263 (617)
Increase (decrease) in trade accounts payable (578) 797
Increase (decrease) in income taxes payable (5,265) 1,166
Increase (decrease) in all other current
operating liabilities (3,932) 478
Other, net 1,449 (59)
Net cash provided by operating activities 22,962 19,754
Cash flows from investing activities:
Capital expenditures (10,608) (5,424)
Proceeds from asset disposals 144 1,554
Proceeds from collection of notes receivable 18 36
Net cash (used in) investing activities (10,446) (3,834)
Cash flows from financing activities:
Proceeds from (repayments of) short-term
borrowings (291) 1,820
Net (repayments) under revolving credit agreements (2,021) (1,795)
Net proceeds from (repayment of) long-term debt (1,561) 128
Purchase of treasury stock (5) (1,360)
Net stock issues 701 26
Dividends paid (1,311) (1,242)
Net cash (used in) financing activities (4,488) (2,423)
Effect of exchange rate changes on cash
and equivalents (18) (259)
Increase in cash and equivalents 8,010 13,238
Cash and equivalents, beginning 12,478 7,199
Cash and equivalents, ending $ 20,488 $ 20,437
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly (a) the results of operations
for the three and six-month periods ended June 30, 1998 and
1997, (b) the financial position at June 30, 1998 and
December 31, 1997, and (c) the cash flows for the six-month
periods ended June 30, 1998 and 1997, of Gleason Corporation
and subsidiaries.
2. The results of operations for the six-month period ended
June 30, 1998 are not necessarily indicative of the results
to be expected for the full year.
3. All significant intercompany transactions are eliminated in
consolidation.
4. The components of inventories were as follows:
(In thousands) 6/30/98 12/31/97
Raw materials and
purchased parts $ 11,047 $ 11,215
Work in process 35,423 34,491
Finished goods 10,861 10,285
$ 57,331 $ 55,991
5. Net cash payments for income taxes were $12,882,000 and
$4,158,000 for the six months ended June 30, 1998 and 1997,
respectively. Interest payments were $1,147,000 and $79,000 for
the six months ended June 30, 1998 and 1997, respectively.
6. Effective January 1, 1998, the Company adopted Statement of
Financial Standards No. 130, "Reporting Comprehensive Income"
(FAS No. 130). FAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components.
The adoption of FAS No. 130 does not impact the calculation of
net earnings or earnings per share nor does it impact reported
assets, liabilities or total stockholders' equity. Application
of this Statement will result in the presentation of the
components of comprehensive income within the annual financial
statements, which must be displayed with the same prominence as
other financial statements.
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The components of the Company's total comprehensive income
were:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $5,559 $5,577 $11,769 $10,771
Foreign currency translation
adjustments (82) (116) 7 (1,499)
Total comprehensive income $5,477 $5,461 $11,776 $ 9,272
</TABLE>
7. In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pension and Other Postretirement
Benefits". This Statement revises employers' disclosures of
pensions and other postretirement benefits, requires additional
information on changes in benefit obligations and fair value of
plan assets and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This Statement is
effective for the Company's consolidated financial statements for
the year ending December 31, 1998.
8. In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which provides new
guidelines for accounting for derivative instruments. The
Company is currently analyzing what impact the new guideline will
have on the Company. This statement is effective for fiscal
periods beginning after June 15, 1999.
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GLEASON CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
The following are management's comments relating to significant
changes in the results of operations for the three and six-month
periods ended June 30, 1998 and 1997 and in the Company's
financial condition during the six months ended June 30, 1998.
Results of Operations
All references to earnings per share reflect diluted earnings per
share. Basic and diluted earnings per share for prior periods
have been restated to reflect the Company's two-for-one stock
split which occurred in September 1997.
Net income for the second quarter ended June 30, 1998 was $5.6
million, or $.51 per share, compared to $5.6 million, or $.54 per
share, for the 1997 second quarter. Net income for the quarter
included a $2.0 million ($1.2 million after-tax), or $.11 per
share, non-cash charge, which the Company had previously
disclosed, for the write-off of a prepaid pension asset
associated with the settlement of the Company's U.S. defined
benefit retirement plan. Excluding the pension charge, earnings
per share for the 1998 second quarter would have increased 15%,
compared to the 1997 second quarter, to $.62 per share.
Net income for the six months ended June 30, 1998 was $11.8
million, or $1.08 per share, compared to $10.8 million, or $1.04
per share, for the 1997 first half. Excluding the pension charge,
earnings per share for the first half of 1998 would have
increased 14%, compared to the 1997 first half, to $1.19 per
share. This increase in net income was primarily attributable to
the inclusion of the Company's Pfauter operations, which were acquired
on July 31, 1997.
New orders totaled $85.7 million for the second quarter compared
to $74.6 million in the 1997 second quarter. Order levels for
the 1998 six-month period were $181.5 million compared to $130.0
million in the 1997 first half. Order levels, excluding Pfauter
operations, decreased 42% and 20%, respectively, compared to the
1997 periods due to lower incoming orders for both bevel and
cylindrical gear production machines. This decline was primarily
due to a lack of significant orders from automotive customers in
1998 and lower demand from customers in the Asian region. In
the first half of 1997, the Company received large orders for
both bevel and cylindrical gear production machines tied to major
automotive capital investment programs, including a $14.0 million
order for cylindrical gear production machines from a European
automotive transmission producer.
The Company expects demand for its products in the Americas and
Europe to remain reasonably strong, but due to the economic
crisis in the Asian markets, new orders for the second half of
1998 are expected to be only slightly higher than for the first
half. Approximately 20% of the Company's normal sales volume
comes from customers in Asia, but given the economic conditions
in that region, the Company anticipates this level will account
for only about 5% of total new orders in 1998.
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Consolidated backlog was $155.6 million at June 30,1998 compared
to $177.7 million at December 31, 1997 and $130.1 million at June
30,1997. Backlog at June 30, 1998, excluding Pfauter
operations, totaled $87.0 million, compared to $108.9 million at
December 31, 1997.
Net sales were $108.2 million and $203.6 million for the three
and six-month periods ended June 30, 1998 compared to $62.4
million and $122.7 million in the prior year periods. Sales for
these same periods, excluding Pfauter, increased 6% and 3%
respectively, compared to the prior year. Higher shipments of
cylindrical gear machine products offset lower sales of bevel
gear production machines in both the second quarter and first
half. Sales of tooling and aftermarket products were flat for
the second quarter and down 4% for the first half compared to the
1997 periods. On a regional basis (excluding Pfauter), shipments
in the 1998 first half were higher to customers in the United
States and Europe, but were significantly lower to customers in
Asia. Sales to the Asia-Pacific region declined to represent
only 13% of sales in the 1998 first half, compared to 26% in the
prior year first half. Sales to customers in Europe increased
54% and 22%, respectively, for the second quarter and first half
compared to the 1997 periods.
Cost of products sold as a percentage of sales was 70.0% and
69.6% for the three and six-month periods ended June 30, 1998
compared to 68.4% and 68.2% for the comparable 1997 periods.
Margins are heavily impacted by the mix of products sold. For
example, machines, in general, tend to carry higher cost of sales
percentages than tooling and other products. Consolidated
margins were lower in the 1998 second quarter and first half
primarily due to a higher level of machine sales. Margins on
machine products were lower in 1998 due to higher cylindrical
gear production machine sales, including Pfauter machines.
Selling, general and administrative expenses for the second
quarter were $17.9 million, or 16.6% of sales, compared to $9.8
million, or 15.6% of sales, in the 1997 second quarter. For the
first half of 1998, these expenses totaled $34.5 million, or
17.0% of sales, compared to $19.6 million, or 16.0% of sales, for
the prior year period. These expenses as a percentage of sales
for the first half increased due to the inclusion of the Pfauter
operations in the 1998 results. Excluding Pfauter, spending as a
percentage of sales for the first half equaled the 1997 level of
16.0% of sales.
Research and development expenses were $2.7 million and $4.9
million in the three and six-month periods of 1998, compared to
$1.7 million and $3.6 million in the respective prior year
periods. For the first half of 1998, excluding Pfauter, these
expenses approximated the 1997 level. Research and development
spending in 1998 included new product development programs for
both bevel and cylindrical gear machine products.
<PAGE>
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Other income was $.1 million for both the second quarter and
first half of 1998 compared to $.3 million and $.8 million in the
1997 periods. Other income in the first half of 1997 included a
$.4 million gain on the sale of property associated with one of
the Company's former businesses. The property had been leased to
the purchaser of that operation since its sale in 1992.
Net interest expense totaled $.3 million and $.6 million for the
three and six-month periods ended June 30, 1998 compared to $.1
million of net interest income for the 1997 second quarter and
first half. The increase in interest expense was due to the
higher outstanding debt associated with the acquisition of
Pfauter, partially offset by lower average borrowing rates.
The Company's provision for income taxes as a percentage of
income before taxes was 41.9% for the 1998 second quarter and
40.5% for the first half, compared to 35.8% and 35.5% for the
respective 1997 periods. The level of income generated within
taxing jurisdictions can impact the Company's consolidated
effective tax rate. The second quarter rate was higher due to a
greater percentage of income from the Company's European
operations that have higher effective tax rates. The effective
tax for the 1997 period was lower primarily due the availability
of certain foreign tax credit carryforwards. The Company expects
its effective tax rate to be higher in 1998 than in 1997 due to a
decrease in available tax credit carryforwards.
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Liquidity and Capital Resources
Cash and cash equivalents increased $8.0 million in the first
half of 1998 to $20.5 million. Borrowings under the Company's
term loan and revolving credit facilities decreased to $35.7
million at June 30, 1998 from $38.0 million at December 31, 1997.
Available unused short and long-term credit lines with banks,
including revolving credit facilities, totaled $79.5 million at
June 30, 1998. As of July 1998, the Company reduced the total
amount of the facility from $135 million to $110 million, with
the elimination of the term loan portion of the facility (which
was reduced from $25 million at December 31, 1997). All other
terms and conditions remain the same. Dividend payments to
stockholders totaled $1.3 million in the first half.
Operating activities provided cash of $23.0 million in the first
half of 1998 versus $19.8 million in the comparable 1997 period.
Operating cash flows were higher in the 1998 first half due to
higher operating earnings before non-cash items including
depreciation, amortization and the pension charge. Operating
cash flows were negatively impacted by higher income tax payments
during the first half of 1998 compared to the 1997 period.
Investing activities used $10.5 million of cash in the 1998 first
half versus $3.8 million in the comparable prior year period.
Capital expenditures totaled $10.6 million compared to $5.4
million in the 1997 first half. Capital expenditures for the
1998 full year are expected to exceed depreciation expense with
spending planned for investments in information technology and
equipment to upgrade existing production facilities. Cash flows
from investing activities in the 1997 first half also included
$1.5 million in cash from the sale of the property of a former
business which was sold in 1992.
Financing activities in the 1998 first half included $.7 million
of cash provided from stock issuances compared to $1.3 million of
cash used in stock repurchases in the 1997 first half.
Management believes that the Company's cash balances, borrowing
capacity under its lines of credit, and anticipated funds from
operations will be sufficient to meet its near-term operating and
investing activities and that it will be able to obtain
additional long-term financing if such financing is required.
Forward looking statements related to the level and timing of
incoming orders is subject to a number of risk factors which
could cause actual results to differ materially from those
expected. These risk factors include, but are not limited to,
actions taken by competitors, the stability of customers' capital
spending plans and changes in general economic conditions in the
world markets the Company serves.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
The Company's By-laws provide that in order to properly bring
business before an annual meeting of stockholders, a
stockholder must give timely notice thereof in writing to the
Secretary of the Company. Generally, to be timely, a
stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company not
less than 60 days prior nor more than 90 days prior to
scheduled date of the annual meeting. Such a notice must also
comply with a number of procedural requirements, which are set
forth in Article I, Section 11 of the Company's By-laws.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 (a): Gleason Corporation Supplemental
Retirement Plan, restated as of
July 1, 1998.
Exhibit 10 (b): Form of Executive Agreement between the
Company and its executive officers.
Exhibit 10 (c): Trust Agreement for Gleason Corporation
Executive Compensation Arrangements.
Exhibit 27 (a): Financial Data Schedule - Six Months
Ended June 30, 1998
Exhibit 27 (b): Financial Data Schedule - Six Months
Ended June 30, 1997 Restated
(b) Reports on Form 8-K
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GLEASON CORPORATION
Registrant
DATE: August 12, 1998 John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
GLEASON CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Restated as of July 1, 1998
Gleason Corporation, a Delaware Corporation with its
principal office in Rochester, New York (the "Corporation" which
term, as used herein, includes subsidiaries of Gleason
Corporation), hereby establishes this SUPPLEMENTAL RETIREMENT
PLAN (the "Plan") for the benefit of certain of its key
employees. The purpose of the Plan is to provide a minimum level
of retirement pay for eligible employees who agree to participate
and to pay certain benefits which formerly would have been paid
by the Corporation's Pension Plan as hereinafter described.
1. Eligible Employees. The Executive Compensation
Committee of the Gleason Corporation Board of Directors
("Committee") may, in its sole discretion, select from among the
Corporation's key management and highly compensated employees the
persons who may become entitled to receive benefits under this
Plan. Any person so selected will become a participant in the
Plan (hereinafter termed the "Employee") by executing and
returning to the Committee a letter in the form attached hereto as Exhibit A.
2. Normal Retirement. When an Employee retires at or after
reaching age 60 and completing five years of service with the
Corporation, the Corporation will pay the Employee an annual
supplemental retirement benefit of 3% of the Employee's Final
Average Salary for each of the first 10 years of service, plus
1.5% of the Final Average Salary for each of the next 10 years of
service, plus 1% of the Final Average Salary for each year of
service in excess of 20 to a maximum of 55%, reduced by the
amount of the Employee's Normal Retirement Benefits and any
Section 401(a)(17)/415 Benefit. The benefit payable under this
paragraph shall commence on or before the 30th day following the
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Employee's retirement and shall be payable for the life of the
Employee.
3. Early Retirement. When an Employee retires after
reaching age 55 and completing five years of service, the
Employee is eligible for early retirement benefits. If the
benefit payments commence prior to age 60 the benefit shall be
reduced actuarially for each month by which the commencement of
benefit payments precedes age 60 using such actuarial assumptions
at the time of commencement that the Corporation's actuary deems
reasonable, in his or its sole discretion.
4. Disability Benefit. When an Employee has (a) suffered a
permanent and total disability, (b) has terminated employment
because of such disability, and (c) has ceased receiving benefits
under the Corporation's disability plan, the Corporation will pay
the Employee an annual supplemental retirement benefit commencing
at age 65 of 3 percent of the Employee's Final Average Salary for
each of the first 10 years of service, plus 1% of Final Average
Salary for each of the next 25 years of service to a maximum of
55% of Final Average Salary reduced by the amount of the
Employee's Normal Retirement Benefits. The benefit payable under
this paragraph shall commence on or before the 30th day following
the later of the last disability payment or the Employee's 65th
birthday. For purposes of this paragraph, the term "permanent
and total disability" means a physical or mental condition which
in the judgment of the Committee, based on medical reports and
the opinion of a physician selected by the Corporation and any
other evidence satisfactory to the Committee, will permanently
prevent the Employee from satisfactorily performing his usual
duties for the Corporation.
<PAGE>
<PAGE>
5. Death Benefit. Upon the death of a married Employee
when he was receiving benefits under any of the preceding
paragraphs, or could have been receiving benefits had he
terminated employment on the date of his death, the Corporation
shall pay his surviving spouse a benefit equal to 75 percent of
the reduced benefit that would have been payable to the Employee
had he elected to receive his benefit as a joint and 75 percent
survivor annuity on the earlier of the date payment commenced or
the date of his death. The spouse's benefit shall be paid
commencing on the first day of the second month following the
Employee's death and shall be payable for the life of the spouse.
6. Section 401(a)(17)/415 Benefit. As a separate benefit
under this Plan, the Corporation will pay an affected Employee a
Section 401(a)(17)/415 Benefit which is the amount of monthly
benefit which the benefit formula in the Pension Plan would
provide over and above the maximum amount of benefit payable to
the Employee from the Pension Plan as a result of
Sections 401(a)(17) and 415 of the Internal Revenue Code. The
form of payment (e.g., life annuity, or joint and survivor
annuity) and the necessary calculations shall be the same for
this Plan as used in the Pension Plan.
7. Definitions. For purposes of calculating the benefits
due under any of the preceding paragraphs, the following
definitions shall apply:
(a) the term "Final Average Salary" means the
Employee's average annual compensation (including annual
incentive pay (included in the year earned) and sick pay,
but excluding bonuses (e.g., sign-on bonus), long term
incentive pay (e.g., lump sum bonus bank awards), and
special pay (e.g., moving expenses)), during the highest
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<PAGE>
three completed calendar years out of the last five years
immediately preceding the year during which the Employee
retires or otherwise terminates his employment for whatever
reason;
(b) (USA) the term "Normal Retirement Benefits" means
the total annual benefits (stated in terms of a life annuity
of actuarially equivalent value if payable in another form)
provided to the Employee under any retirement plan, profit
sharing plan or ESOP qualifying under Sections 401(a) or
403(b) of the Internal Revenue Code which is maintained by
the Corporation or by any other prior employer of the
Employee, even if rolled to another plan or an IRA, plus the
Employee's annual primary insurance amount under the Social
Security Act. Normal Retirement Benefits in the case of a
401(k) plan or 403(b) plan means only the actuarial
equivalent benefit that can be provided by the employer's
contributions to the plan and the earnings thereon. In the
case of the Corporation's terminated defined benefit pension
plan, Normal Retirement Benefits means the actuarial
equivalent of the termination benefit paid to the Employee
as of the Plan's termination date. If the termination
benefit was rolled to the Corporation's defined contribution
plan, it shall not again be counted as a Normal Retirement
Benefit under the defined contribution plan.
(c) (U.K.) the term "Normal Retirement Benefits"
means, in the case of an Employee entitled to retirement
benefits under the Gleason Works Limited Superannuation and
Life Assurance Fund ("the Scheme"), the aggregate of all
benefits to which the Employee is entitled under the Scheme
and his basic pension as defined in section 18(1) of the
U.K. Social Security Act 1986 and section 6(1) of the U.K.
Social Security Pensions Act 1975;
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<PAGE>
(d) the term "Pension Plan" means the Retirement Plan
of the Gleason Works or the Gleason Corporation Pension Plan
for General Employees.
8. Forfeiture of Benefits. Except as provided in Section 9
below, if an Employee terminates his employment with the
Corporation at any time prior to his entitlement to benefits
under any of the preceding paragraphs, he shall not be entitled
to receive any benefits under this Plan. If the Corporation
terminates an Employee's employment for Cause at any time, the
Corporation's obligation to make any future payments to such
Employee under this Plan shall cease and terminate.
The term "Cause" means any of the following events, provided
that they are material:
(a) Misappropriating any funds or property of the Corporation;
(b) Engaging in any activity competitive with and adverse
to the Corporation's business, whether alone, with others or
in a representative capacity, unless the Employee shall have
first obtained the written consent of the Corporation's
Board of Directors;
(c) Unreasonable neglect or refusal to perform the
executive duties assigned to him after written notice from
the Board of Directors; or
(d) Being convicted of or pleading nolo contendere to a
felony involving moral turpitude, whether or not appeals
have been exhausted.
9. Change in Control. Notwithstanding anything herein to
the contrary, if an Employee becomes entitled to receive payment
under Section 3.1 or 3.4 of an Executive Agreement with the
Corporation ("Agreement") due to a Change in Control (as defined
in the Agreement), the Employee shall be credited with two
additional years of service in calculating his benefit under this
Plan and the resulting accrued benefit shall be fully vested.
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Furthermore, in such event, the Employee shall be paid an amount
in cash no later than the fifth business day following his Date
of Termination (as defined in the Agreement) equal to the present
value of his accrued benefit under this Plan using an interest
factor of six percent from age 60 in determining present value.
10. Successor Employer. If the Corporation shall at any
time be merged or consolidated into or with any other corporation
or if substantially all the assets of the Corporation are
transferred to another corporation or party, the provisions of
this Plan shall be binding upon and inure to the benefit of the
successor corporation or other party resulting from such merger
or consolidated or to which such assets are transferred, and this
provision shall apply in the event of any subsequent merger,
consolidation, or transfer.
11. Source of Funds. Any provision of this Plan to the
contrary notwithstanding, nothing herein shall be construed as
obligating the Corporation to acquire or set aside any particular
assets for the discharge of its obligations hereunder or as
conferring upon an Employee any property rights in any particular
assets held by the Corporation, whether or not acquired and held
for the purpose of funding the Corporation's obligations
hereunder, or as creating any rights in an Employee beyond the
rights of a general creditor of the Corporation.
12. Nonassignment of Benefits. The benefits of an Employee
under this Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or
liable for the debts, contracts, liabilities, engagements or
torts of the Employee or his spouse.
13. Employment Rights. Nothing in this Plan shall be
construed as a contract of employment between the Corporation and
an Employee or as a limitation on the right of the Corporation to
discharge an Employee, with or without Cause.
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14. Plan Administration. The interpretation of this Plan,
the determination of benefits due and the resolution of any
claim, controversy or dispute is in the sole discretion of the
Committee.
15. Governing Law. This Plan shall be construed in
accordance with the laws of the State of New York.
16. Amendment. This Plan may be amended by the Board of
Directors of Gleason Corporation and may be terminated by the
Board at any time, except that no such amendment or termination
shall relieve the Corporation from paying the amounts agreed to
pursuant to any agreement already made with an Employee.
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EXHIBIT A
GLEASON CORPORATION
SUPPLEMENTAL RETIREMENT PLAN AGREEMENT
Dear ___________________,
We are pleased to inform you that you have been selected by
the Executive Compensation Committee of the Gleason Corporation
Board of Directors to participate in the Corporation's
Supplemental Retirement Plan. A copy of this Plan is attached.
If you wish to participate and agree to abide by the Plan's
terms, please signify your agreement by signing your name at the
bottom of this letter in the place where indicated and return
the letter to the Executive Compensation Committee. Because
benefits under this Plan will be offset by benefits to which you
may be entitled from any other retirement plan, please indicate
below all plans of other employers which may pay you benefits.
The precise amount of the offset will be determined at the time
you become eligible for Plan benefits.
If you sign and return this letter, the Corporation will
pay you deferred compensation benefits in an amount determined
pursuant to the Plan.
Very truly yours,
Executive Compensation Committee
By______________________________
I agree to participate in the Supplemental Retirement Plan
and to abide by its terms. I represent that I am not eligible
for any benefits payable under Internal Revenue Code
Sections 401(a), 403(b) or 401(k) plan except the following (if
none, so state):
Dated:_______________ ________________________
Employee
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EXHIBIT A (U.K.)
GLEASON CORPORATION
SUPPLEMENTAL RETIREMENT PLAN AGREEMENT
Dear__________________,
We are pleased to inform you that you have been selected by
the Executive Compensation Committee of the Gleason Corporation
Board of Directors to participate in the Corporation's
Supplemental Retirement Plan. A copy of this Plan is attached.
If you wish to participate and agree to abide by the Plan's
terms, please signify your agreement by signing your name at the
bottom of this letter in the place where indicated and return
the letter to the Executive Compensation Committee. Because
benefits under this Plan will be offset by benefits to which you
may be entitled from any other retirement plan, please indicate
below all plans of other employers which may pay you benefits.
The precise amount of the offset will be determined at the time
you become eligible for Plan benefits.
If you sign and return this letter, the Corporation will
pay you deferred compensation benefits in an amount determined
pursuant to the Plan.
Very truly yours,
Executive Compensation Committee
By______________________________
I agree to participate in the Supplemental Retirement Plan
and to abide by its terms. I represent that I am eligible for
benefits under the following plans or schemes:
Dated:_________________ ___________________________
Employee
EXECUTIVE AGREEMENT
AGREEMENT dated _________________, 19__ , between Gleason
Corporation, a Delaware corporation ("Corporation") and
_________________ ("Executive").
WHEREAS, the Executive has been employed by the Corporation
and/or one or more of its subsidiaries (collectively the
"Corporation"), and is currently serving in an executive capacity
with respect to the Corporation, a division or subsidiary
thereof; and
WHEREAS, in order to induce the Executive to remain in the
employ of the Corporation following a change in control thereof,
the Corporation is willing to agree to continue to employ the
Executive during the periods specified herein immediately
following the occurrence of such event or events, all on the
terms and subject to the conditions hereinafter set forth; and
WHEREAS, in consideration thereof, the Executive is willing
to agree to continue to serve the Corporation in an executive
capacity during such specified periods on the terms and
conditions hereinafter set forth.
NOW THEREFORE, the parties hereto agree as follows:
1. TERM. This Agreement replaces and supersedes any
employment contract or executive agreement previously entered
into between the Executive and the Corporation, and it shall
commence on the date hereof and continue in effect indefinitely.
2. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A or to
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Item 1 of Form 8-K promulgated under the Securities Exchange Act of
1934, as amended, provided that, without limitation, a Change in Control
shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d)(2) of such Act) is or
becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 30% or more of the
combined voting power of the Corporation's then outstanding
securities; or (ii) during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease
for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
3.1 The Executive shall be entitled to the severance
benefits provided in Article 4 if the Date of Termination of his
employment occurs under any of the following circumstances: (i)
during the 60 day period commencing on the first anniversary of a
Change in Control, the Executive elects to terminate his
employment for any reason, or (ii) if the Corporation terminates
the Executive's employment while there is, to the Corporation's
knowledge, actively pending a proposed transaction, whether
favored or opposed by the Corporation, which results in a Change
in Control within one year of the Executive's Date of
Termination, or (iii) the Executive's employment terminates
within two years following a Change in Control; unless in the
case of either (ii) or (iii) his employment is terminated
(x) because of death or Disability, (y) by the Corporation for
Cause, or (z) by the Executive other than for Good Reason.
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3.2 Disability.
If, as a result of the incapacity of Executive due to
physical or mental illness, including such incapacity due to
drugs or alcohol, he is absent from his duties with the
Corporation on a full-time basis for six (6) consecutive months,
the Corporation may terminate his employment for "Disability."
3.3 Cause. The Corporation may terminate the Executive's
employment for Cause. "Cause" shall mean (i) the willful and
continued refusal by the Executive substantially to perform his
duties with the Corporation (other than any such refusal
resulting from his incapacity due to physical or mental illness),
after a demand for substantial performance is delivered to him by
the Board which specifically identifies the manner in which the
Board believes that he has refused substantially to perform his
duties, or (ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the
Corporation. For purposes of this section, no act or failure to
act on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Corporation. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of
a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board of the
Corporation at a meeting of the Board called and held for the
purpose (after reasonable notice to the Executive and an
opportunity for him, together with his counsel, to be heard from
the Board), finding that in the good faith opinion of the Board
he was guilty of conduct set forth above in clauses (i) or (ii)
of the first sentence of this section and specifying the
particulars thereof in detail.
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3.4 Good Reason. The Executive may voluntarily terminate
his employment for Good Reason. "Good Reason" shall mean:
(a) Without the Executive's express written consent,
the assignment to him during either of the periods specified in
Section 3.1 (ii) or 3.1(iii) of any duties inconsistent with his
positions, duties, responsibilities and status with the
Corporation immediately prior to commencement to the
Corporation's knowledge of active pendency of a proposed
transaction, whether favored or opposed by the Corporation, which
results in the Change in Control, or a change in his reporting
responsibilities, titles or offices as in effect immediately
prior to such commencement, or any removal of him from or any
failure to re-elect him to any of such positions, except in
connection with the termination of his employment for Cause,
Disability or Retirement or as a result of his death or by the
Executive other than for Good Reason. For purpose of this
Agreement, the Executive's removal from a position of inside
director of the Corporation shall not be considered Good Reason;
(b) A reduction during either of the periods specified
in Section 3.1(ii) or 3.1(iii) by the Corporation in the
Executive's base salary as in effect immediately prior to
commencement to the Corporation's knowledge of active pendency of
a proposed transaction, whether favored or opposed by the
Corporation, which results in the Change in Control, or the
failure by the Corporation to increase such base salary each year
after such Change in Control by an amount which at least equals,
on a percentage basis, the average annual percentage increase in
base salary for all officers of the Corporation during the two
(2) full calendar years immediately prior to such commencement;
(c) A failure during either of the periods specified
in Section 3.1(ii) or 3.1(iii) by the Corporation to continue its
Incentive Compensation Plan as it is in effect immediately prior
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to commencement to the Corporation's knowledge of active pendency
of a proposed transaction, whether favored or opposed by the
Corporation, which results in the Change in Control, or to
continue the Executive as a participant in the Plan on at least
as favorable a basis to him as immediately prior to such commencement;
(d) The relocation during either of the periods
specified in Section 3.1(ii) or 3.1(iii) of the principal
executive offices of the Corporation, or of the division or
subsidiary the Executive serves, as the case may be, to a
location outside the Greater Rochester area, or such other area
in which such division or subsidiary executive office is located,
or the Corporation's requiring him to be based anywhere other
than at such principal executive offices except for required
travel on the Corporation's business travel obligations
comparable to that during the three (3) months immediately prior
to commencement to the Corporation's knowledge of active pendency
of a proposed transaction, whether favored or opposed by the
Corporation, which results in the Change in Control;
(e) The failure during either of the periods specified
in Section 3.1(ii) or 3.1(iii) by the Corporation to continue in
effect the same or a comparable fringe benefit or compensation
plan, retirement plan, life insurance plan, health and accident
plan or disability plan in which the Executive is participating
immediately prior to commencement to the Corporation's knowledge
of active pendency of a proposed transaction, whether favored or
opposed by the Corporation, which results in the Change in
Control (or plans providing him with substantially similar
benefits) except as such change is prompted in good faith by a
change in the law, the taking of any action by the Corporation
which would adversely affect his participation in or materially
reduce his benefits under any such plans or deprive him of any
material fringe benefit enjoyed by him immediately prior to such
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commencement, or the failure by the Corporation to provide him
with the number of paid vacation days to which he is then
entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in
effect immediately prior to such commencement;
(f) If the Change in Control occurred within six (6)
months following commencement of a tender or exchange offer by
any person, entity or group other than the Corporation to acquire
stock of the Corporation, following completion of which such
person, entity or group owns, or would if such tender or exchange
offer had succeeded as proposed have owned, 30% or more of the
Corporation's outstanding voting shares, a determination by the
Executive made in good faith that, as a result of the Change in
Control and a change in circumstances thereafter significantly
affecting the Executive's position, he is unable effectively to
carry out the authorities, powers, functions or duties attached
to his position, and the situation is not remedied to his
reasonable satisfaction within thirty (30) days after notice of
such determination and the reasons thereof from him to the
Corporation within six (6) months following the Change in
Control, provided he gives notice of termination within ten (10)
days after the expiration of such thirty (30) days. The burden
shall be on the Corporation to refute the Executive's good faith
determination under this provision, there being a presumption in
favor of the Executive.
3.5 Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated for Disability,
thirty (30) days after notice of termination is given, (ii) if
his employment is terminated pursuant to Section 3.3, the date
specified in the notice of termination, and (iii) if his
employment is terminated for any other reason, the date on which
a notice of termination is given.
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4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
4.1 Provisions of this Article 4 shall apply only if the
Date of Termination of the Executive's employment occurs during
the periods specified in Sections 3.1(ii) or (iii).
4.2 During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or
mental illness, he shall continue to receive his full base salary
at the rate then in effect and any awards under the Executive
Compensation Plan paid during such period until his employment is
terminated pursuant to Section 3.2. Thereafter, his benefits
shall be determined in accordance with the Corporation's
Disability Income Insurance Plan, or a substitute plan then in effect.
4.3 If the Executive's employment is terminated for Cause,
the Corporation shall pay him the unpaid portion of his base
salary through the Date of Termination at the rate then in effect
and shall have no further obligations to him under this Agreement.
Payment shall be made at the time provided in Section 4.4.
4.4 If the Executive's employment is terminated during
either of the periods specified in Section 3.1(ii) or 3.1(iii) by
the Corporation other than pursuant to Section 3.2 or 3.3 or by
the Executive pursuant to Section 3.4, or is terminated by the
Executive during the period specified in Section 3.1(i) (in no
event including termination because of death), the Corporation
shall pay him (i) any unpaid portion of his base salary through
the Date of Termination at the highest annual rate in effect
during the preceding twenty-four (24) months, and (ii) shall, in
addition to any severance benefits payable to the Executive under
the Corporation's normal severance policies, pay to him no later
than the fifth business day following the occurrence of both a
Change in Control and the Executive's Date of Termination an
amount equal to two (2) times the highest annual total
compensation (including base salary and incentive compensation)
paid or payable by the Corporation to him for any one of the
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three (3) calendar years ending with the year prior to the year
in which the Date of Termination occurs. One-half of the amount
under (ii) above shall be severance pay and the other half a
payment contingent on the Executive's not competing with the
Corporation for a period of one year from the occurrence of both
a Change in Control and the Executive's Date of Termination. If
the Corporation determines that the Executive has competed
against the Corporation in violation of this covenant, the
Executive shall repay, within 10 business days, the full amount
paid to the Executive for the covenant not to compete. For
purposes of this Agreement, competing with the Corporation means
to engage in any activity or render any service, directly or
indirectly (whether as principal, director, officer, investor,
employee, consultant or otherwise), for or on behalf of any
person or entity if said activity or service directly or indirectly
consists of any product or service the Corporation offers for sale to its
customers. It is understood that nothing in this Agreement shall prevent
the Executive from discussing any business arrangements to become effective
after the expiration of this covenant not to compete.
4.5 If the Executive's employment is terminated during
either of the periods specified in Section 3.1(ii) or 3.1(iii) by
the Corporation other than pursuant to Section 3.2 or 3.3 or by
the Executive pursuant to Section 3.4, or is terminated by the
Executive during the period specified in Section 3.1(i) (in no
event including termination because of death), the Corporation
shall also pay at the time specified in Section 4.4 an additional
$40,000 which is hereby deemed to be an amount equal to two (2)
times the annual cost to the Executive to continue from the Date
of Termination all employee benefit plans, programs or
arrangements (such as, medical, dental, long-term disability
insurance, life insurance, perquisites, and the like but not
including retirement or stock option plans) in which Executive
was entitled to participate immediately prior to the Date of
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Termination. The Corporation shall, in addition to the
foregoing, continue to provide the Executive with health and
dental benefits until the third anniversary of the date severance
payments are made pursuant to Section 4.4(ii). Such benefits
shall be substantially the same as the benefits offered to the
Company's executives generally, including family coverage, during
this three year period but at no cost to the Executive. In
addition, the Corporation shall provide financial planning
services to the Executive following a termination under Section
3.1 (ii) or (iii) through the third anniversary of the date
severance payments are made pursuant to Section 4.4(ii) at the
reimbursement rates in effect immediately preceding the Change in Control.
4.6 If the Executive's employment is terminated during
either of the periods specified in Section 3.1(ii) or 3.1(iii) by
the Corporation other than pursuant to Section 3.2 or 3.3 or by
the Executive pursuant to Section 3.4, or is terminated by the
Executive during the period specified in Section 3.1(i) (in no
event including termination because of death), then in addition
to the benefits to which he is entitled under the qualified
defined benefit retirement plans or programs in which he
participates or any successor plans or programs in effect on the
Date of Termination, the Corporation shall pay him in one sum in
cash at the date specified in 4.4 the amount equal to the
actuarial equivalent of the retirement pension to which he would
have been entitled under the terms of such retirement plans or
programs without regard to "vesting" thereunder, had he
accumulated two (2) additional years, or the period from the Date
of Termination to his normal retirement date, whichever is less,
of continuous service and age after the Date of Termination at
the compensation level in effect on the Date of Termination under
such retirement plans or programs reduced by the single sum
actuarial equivalent of any amounts to which he is entitled
pursuant to the provisions of said retirement plans and programs.
For purposes of this Section, "actuarial equivalent" shall be
determined using the same methods and assumptions utilized under
the Corporation's retirement plans and programs immediately prior
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to commencement to the Corporation's knowledge of active pendency
of a proposed transaction, whether favored or opposed by the
Corporation, which resulted in the Change in Control. Executive
shall be entitled to an additional amount from the Corporation's
Supplement Retirement Plan which shall not be considered to
duplicate the payment called for in this section.
In the case of any defined contribution plan, in lieu of the
amount determined above, the Corporation shall pay to the
Executive the amount it would have contributed during the two-
year period following the Executive's Date of Termination or to
age 65 if less than two years, assuming the plan provisions
remain in effect as they were on Date of Termination and the
Executive's annual compensation were the highest annual
compensation actually received in the two years preceding his
Date of Termination and the Executive were to continue, where
relevant, to contribute at the highest rate he had contributed in
the two years preceding his Date of Termination.
4.7 The Executive shall not be required to mitigate the
amount of any payment provided for in this Article by seeking
other employment. In the case of a Change in Control, in addition to
the payment pursuant to Section 4.4 on account of a termination pursuant
to Section 3.1 or 3.4, the Executive shall also receive severance payments
pursuant to general Corporation termination policies.
4.8 In the event payments to Executive under this Agreement
and any other plan or agreement would be (except for this
provision) subject to the excise tax imposed by sections 280G and
4999 of the Internal Revenue Code, the amount payable pursuant to
this Agreement shall be reduced to the extent necessary to avoid
the imposition of such tax.
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4.9 The Corporation shall be entitled to withhold from any amounts
payable hereunder such amount or amounts, if any, as are required by law.
4.10 In the event of any delay in payment of the amounts due
Executive, the Corporation shall pay interest on the amounts
delayed at the rate of prime (as reported in the Wall Street
Journal during the relevant period) plus one percent.
4.11 The Corporation may fund some or all of the payments
called for by this Agreement by establishing an irrevocable trust
under the direction and control of an independent trustee. The
amounts potentially due shall be separately stated (and updated
for changes) as shown on Appendix A attached to this Agreement to
enable the Executive, Corporation and trustee to know the amount
due Executive. The agreement with such trustee shall provide
that upon receipt of a statement by the Executive that a
Termination has occurred, such trustee (to the extent possible in
terms of the trust's funding) shall make payment to Executive on
the 5th business day following receipt of such notice pursuant to
the terms of this Agreement. Any funds set aside in such trust
shall at all times remain subject to the claims of the creditors
of the Corporation. The creation of such trust shall not lessen
the contractual obligation of the Corporation under this
Agreement, except that no payments shall be duplicated. Any
funds attributable to Executive remaining in such trust after all
payments have been made to Executive (or the possibility of
payments shall have been extinguished) shall revert to the Corporation.
5. SUCCESSORS: BINDING AGREEMENT.
5.1 This Agreement shall be binding on the successors and
assigns of the Corporation. The Corporation will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation, by agreement to
expressly assume and agree to perform this Agreement in the same
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manner and to the same extent that the Corporation would be
required to perform it if no such succession had taken place, a
copy of which agreement shall be delivered to the Executive prior
to or contemporaneously with such succession. Failure of the
Corporation to obtain such agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Corporation
in the same amount and on the same terms as he would be entitled
hereunder if he terminated his employment for Good Reason, except
that for purposes of implementing the foregoing the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Corporation" shall
include any successor to substantially all of the business and/or
assets of the Corporation.
5.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive dies while any amounts
would still be payable to him hereunder if he had not then died,
all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to his devisee,
legatee, or other designee or, if there be no such designee, to his estate.
6. NOTICE. All notices and other communications provided
for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or when mailed by United
States registered or certified mail, postage prepaid, addressed
to the respective addresses on file, except that all notices to
the Corporation shall be directed to the attention of the Chief
Executive Officer with a copy to the Secretary, or to such other
address as either party may have furnished to the other in
writing in accordance herewith, such notices of change of address
to be effective only upon receipt.
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7. LEGAL EXPENSE. If, with respect to any alleged failure
by the Corporation to comply subsequent to a Change in Control
with any of the terms of this Agreement, Executive hires legal
counsel with respect to this Agreement or institutes any
negotiations or institutes or responds to legal action to assert
or defend the validity of, enforce his rights under, or recover
damages for breach of this Agreement, the Corporation shall pay,
as they are incurred, Executive's actual expenses for attorney's
fees and disbursements, together with such additional payments,
if any, as may be necessary so that the net-after-tax payments to
the Executive equal such fees and disbursements.
8. MISCELLANEOUS.
8.1 No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Chief
Executive Officer or such other officer as is specifically
designated by the Board of Directors of this Corporation. No
waiver by either party hereto at any time of any breach by the
other party of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
8.2 The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of New York.
8.3 The masculine gender, when used herein, shall include
the feminine.
8.4 This Agreement shall not create any right in the
Executive to employment, either before or after a Change in
Control; nor does it create any rights under the Corporation's
1981 Stock Plan, or under any other plan except as specifically
provided herein.
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8.5 The article and section headings in this Agreement are
for convenience only and do not affect the meaning of the
Agreement.
8.6 The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
GLEASON CORPORATION
By: ______________________
Its: ______________________
______________________
Executive
TRUST FOR GLEASON CORPORATION
EXECUTIVE COMPENSATION ARRANGEMENTS
This Agreement made this 28th day of July, 1998 by and
between Gleason Corporation (Company) and M&T Bank (Trustee);
WHEREAS, Company has adopted certain executive agreements
and nonqualified deferred compensation plans listed in Appendix A
(collectively referred to as the "Plan").
WHEREAS, Company has incurred or expects to incur liability
under the terms of such Plan with respect to the individuals
participating in such Plan.
WHEREAS, Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall
be held therein, subject to the claims of Company's creditors in
the event of Company's Insolvency, as herein defined, until paid
to Plan participants and their beneficiaries in such manner and
at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company, in its sole
discretion, to make contributions to the Trust to provide itself
with a source of funds to assist it in the meeting of its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) The Trust shall become irrevocable upon approval by the
Board of Directors.
(b) Company, in its sole discretion, may at any time, or
from time to time, make deposits of cash or other property in
trust with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional deposits.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code
of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of Company and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
<PAGE>
<PAGE>
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets
held by the Trust will be subject to the claims of Company's
general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee
for determining the amounts so payable, the form in which such
amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts.
Except as otherwise provided herein, Trustee shall make payments
to the Plan participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provision for
the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by
Company or such party as it shall designate under the Plan, and
any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of the Plan. Company shall notify Trustee of its decision
to make payment of benefits directly prior to the time amounts
are payable to participants or their beneficiaries. In addition,
if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Company is unable to pay its debts as they
become due, or (ii) Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such
<PAGE>
<PAGE>
determination, Trustee shall discontinue payment of benefits
to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is
Insolvent, Trustee shall have no duty to inquire whether
Company is Insolvent. Trustee may in all events rely on
such evidence concerning Company's solvency as may be
furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that Company
is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or
their beneficiaries under the terms of the Plan for the period of
such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such
period of discontinuance.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, Company shall have no right or power to
direct Trustee to return to Company or to divert to others any of
the Trust assets before all payment of benefits have been made to
Plan participants and their beneficiaries pursuant to the terms
of the Plan.
Section 5. Investment Authority.
(a) Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by Company. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Plan participants, except
that voting rights with respect to Trust assets will be exercised
by Company, and except that dividend rights with respect to Trust
assets will rest with Company.
(b) Company shall have the right anytime, and from time to
time in its sole discretion, to substitute assets of equal fair
market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
<PAGE>
<PAGE>
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within 60
(sixty) days following the close of each calendar year and within
60 (sixty) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a
direction, request or approval given by Company which is
contemplated by, and in conformity with, the terms of the Plan or
this Trust and is given in writing by Company. In the event of a
dispute between Company and a party, Trustee may apply to a court
of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
in connection with this Trust, Company agrees to indemnify
Trustee against Trustee's costs, expenses and liabilities
(including without limitation, attorneys' fees and expenses)
relating thereto and to be primarily liable for such payments.
If Company does not pay such costs, expenses and liabilities in a
reasonably timely manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial, consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, Trustee shall
have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the
<PAGE>
<PAGE>
policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 90 days after receipt of such
notice unless Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or
upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee
may not be removed by Company for 10 years.
(d) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within 90 days after receipt of notice of resignation,
removal or transfer, unless Company extends the time limit.
(e) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraphs (a) or (b) of
this section. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 11. Appointment of Successor.
If Trustee resigns (or is removed) in accordance with
Section 10 (a) or (b) hereof, Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to
evidence the transfer.
<PAGE>
<PAGE>
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the
Plan or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plan. Upon termination
of the Trust any assets remaining in the Trust shall be returned
to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan, Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to Company.
(d) Sections 1(d), 4, 6, 7, 10, 9(c) and 12(b) of this
Trust Agreement may not be amended by Company for 10 years
following a Change in Control, as defined herein.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: a change of control of the Corporation of a nature that
would be required to be reported in response to Item 5 (f) of
Schedule 14A of Regulation 14A or to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as
amended, provided that, without limitation, a Change of Control
shall be deemed to have occurred if (i) any "person" (as such
term is used in Section 13 (d) and 14 (d)(2) of such Act) is or
becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 30% or more of the
combined voting power of the Corporation's then outstanding
securities; or (ii) during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease
for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of period.
Section 14. Effective Date..
The effective date of this Trust Agreement shall be
July 28, 1998.
<PAGE>
<PAGE>
GLEASON CORPORATION
Dated: July 28, 1998
By: John B. Kodweis
John B. Kodweis
Its: Vice President Administration and Human Resources
M&T BANK
Dated: August 7, 1998
By: Francis F. Ostrom
Francis F. Ostrom
Its: Vice-President
<PAGE>
<PAGE>
APPENDIX A
Gleason Corporation Supplemental Retirement Plan
Gleason Corporation Executive Agreements
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 20488
<SECURITIES> 0
<RECEIVABLES> 93049
<ALLOWANCES> 0
<INVENTORY> 57331
<CURRENT-ASSETS> 184406
<PP&E> 251528
<DEPRECIATION> 126818
<TOTAL-ASSETS> 343771
<CURRENT-LIABILITIES> 109767
<BONDS> 0
0
0
<COMMON> 11594
<OTHER-SE> 114246
<TOTAL-LIABILITY-AND-EQUITY> 343771
<SALES> 203568
<TOTAL-REVENUES> 203568
<CGS> 141740
<TOTAL-COSTS> 141740
<OTHER-EXPENSES> 41396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 642
<INCOME-PRETAX> 19790
<INCOME-TAX> 8021
<INCOME-CONTINUING> 11769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11769
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINAINCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EARNINGS PER
SHARE HAVE BEEN RESTATED TO COMPLY WITH FINANCIAL ACCOUNTING STANDARDS NO.
128 "EARNINGS PER SHARE" AND TO REFLECT A TWO-FOR-ONE STOCK SPLIT IN 1997.
</LEGEND>
<RESTATED>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 20437
<SECURITIES> 0
<RECEIVABLES> 57937
<ALLOWANCES> 0
<INVENTORY> 31037
<CURRENT-ASSETS> 120719
<PP&E> 169451
<DEPRECIATION> 110613
<TOTAL-ASSETS> 197368
<CURRENT-LIABILITIES> 59640
<BONDS> 0
0
0
<COMMON> 11594
<OTHER-SE> 79966
<TOTAL-LIABILITY-AND-EQUITY> 197368
<SALES> 122719
<TOTAL-REVENUES> 122719
<CGS> 83699
<TOTAL-COSTS> 83699
<OTHER-EXPENSES> 22431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (121)
<INCOME-PRETAX> 16710
<INCOME-TAX> 5939
<INCOME-CONTINUING> 10771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10771
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.04
</TABLE>
