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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19162
BW/IP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-027054
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 OCEANGATE BOULEVARD
SUITE 900
LONG BEACH, CALIFORNIA 90802
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (310) 435-3700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value
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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
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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 Common Stock held by non-affiliates of the
registrant (based on the last reported sale price per share of the Common Stock
as quoted through the National Association of Securities Dealers Automated
Quotation National Market System on March 7, 1995) was approximately $372
million.
The number of shares outstanding of the registrant's Common Stock as of
March 7, 1995: 24,275,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement (to be filed
with the Securities and Exchange Commission on or before April 30, 1995)
pursuant to Regulation 14A of the Securities and Exchange Act of 1934 in
connection with the annual meeting of stockholders of the registrant to be held
on or about May 16, 1995 are incorporated by reference into Part III of this
Form 10-K. Certain portions of the registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1994, are incorporated by reference into
Parts I, II and IV of this Form 10-K.
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PART I
ITEM 1. BUSINESS
BW/IP, Inc. ("BW/IP") was incorporated in Delaware on March 12, 1987
by Clayton, Dubilier & Rice, Inc. ("Clayton, Dubilier & Rice"), a private
investment firm, to acquire BW/IP International, Inc. ("International"),
International's foreign marketing affiliates and certain related assets in the
Netherlands and other overseas locations (the "Acquisition") from Borg-Warner
Corporation ("Borg-Warner"). All of BW/IP's operations are conducted through
International and International's subsidiaries (BW/IP, International and its
consolidated subsidiaries are together referred to as the "Company"). Prior to
the Acquisition, Borg-Warner had operated certain of the International
businesses for over 30 years. In the course of an initial public offering in
May 1991 and a number of secondary offerings, all of the shares previously held
by Clayton, Dubilier & Rice affiliates, as well as a substantial number of
shares of Common Stock acquired by certain institutional investors in
connection with the Acquisition from Borg-Warner were sold to the public.
The Company is a worldwide supplier of advanced technology fluid
transfer and control equipment, systems and services. Its principal products
are pumps and mechanical seals, primarily for the petroleum and electric power
industries, and increasingly to the chemical industry. The Company
manufactures, sells, distributes and services its products throughout the
world. The Company has manufacturing facilities in eight different countries
and service centers in 18 countries. At December 31, 1994, the Company had
2,967 employees, of whom approximately 50% were located outside the United
States.
The Company had been organized into a Pump/Seal segment and a Fluid
Controls segment. The Pump/Seal segment designs, manufactures, distributes
and services both highly engineered and standard centrifugal pumps primarily
for use in the power and petroleum industries and mechanical seals and seal
support systems primarily for use in the petroleum and chemical industries. In
December 1993 the Company initiated a plan to dispose of the Fluid Controls
segment which designed, manufactured, distributed and serviced control systems,
servovalves, solenoids and other aerospace/defense products. The sale of the
Fluid Controls segment was completed in October 1994. As a result of the
disposition of the Fluid Controls segment, the Company operates in one business
segment: Pump/Seal. The Fluid Controls segment is treated as a discontinued
operation in this Annual Report on Form 10-K ("Form 10-K") and in the
Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations in the 1994 Annual Report to
Stockholders for the fiscal year ended December 31, 1994 (the "1994 Annual
Report to Stockholders"), portions of which are incorporated by reference in
this Form 10-K and, on that basis, information herein and therein for 1994 and
prior periods has been reclassified to reflect the disposition of the Fluid
Controls segment.
For certain financial information by Geographic Location see Note 10
to Consolidated Financial Statements on page 37 of the 1994 Annual Report to
Stockholders which page is incorporated by reference in this Form 10-K.
2
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MARKETS SERVED
Pump products and services accounted for approximately 71%, 77% and
74% of the Company's 1994, 1993 and 1992 net sales, respectively, and seal
products and services accounted for approximately 29%, 23% and 26% of net
sales, respectively, for such periods. Sales of the Company's pumps and seals
are primarily made to the petroleum, power and (to a lesser extent) chemical
markets.
Approximately 77% of the Company's 1994 net sales were to the
petroleum and power markets worldwide. The principal segments of the petroleum
industry that the Company serves are refineries and pipelines. In addition to
the U.S. market, which in 1994 accounted for approximately 57% of the Company's
net sales to the petroleum industry, the Company serves the petroleum industry
in Europe, Africa, Asia, South America, Canada, Mexico and the Middle East.
Another principal market served is the power generation market
worldwide. Sales to this market are principally to both nuclear and fossil
fuel power generating utilities. The majority of the Company's sales in the
nuclear power market are in the United States and Japan, where the Company's
large installed base of equipment provides a continuing market for products and
services to ensure safety and reliability, a major customer concern. A
significant characteristic of the nuclear market worldwide is the stringent
requirements that must be met in order to sell products to nuclear power
plants. For example, the Company maintains a Nuclear Stamp ("N Stamp") from
the American Society of Mechanical Engineers, which is required for
qualification to supply certain kinds of products to the U.S. nuclear industry.
The Company must comply with significant requirements (including triennial
audits) in order to maintain its N Stamp. The Company's next audit will occur
in 1996. Sales to the nuclear power industry comprised approximately 11% of
the Company's 1994 sales. The Company's 1994 sales to the nuclear power
industry related primarily to aftermarket products and services.
The Company could face liability in excess of its own commercial or
government provided insurance if any of its products were found to contribute
to an accident at a nuclear power facility or at other industrial facilities.
The Company does not maintain nuclear liability insurance for the United States
or Canada, but maintains an aggregate of $15 million in nuclear liability
insurance for all other countries. The federal Price-Anderson Act of 1954
provides U.S. nuclear utilities with a system of no-fault insurance coverage up
to $7 billion for third party losses or damages resulting from a nuclear
incident. Canada's Nuclear Liability Act provides for a system of insurance
coverage that generally makes the operator of a nuclear installation absolutely
liable for third party claims arising as a result of a nuclear incident, up to
a maximum liability of Can. $75 million. No assurance can be given that the
Company's insurance coverages will be adequate in the event of a major nuclear
incident.
Most of the non-nuclear power sales are to utilities in the United
States, Mexico, Canada, Europe and the Far East.
The Company also serves agricultural, municipal water, chemical, pulp
and paper, mineral and ore processing and other general industry markets.
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PRODUCTS AND SERVICES
The Company designs, manufactures, distributes and services
centrifugal pumps, valves, submersible electric motors, mechanical seals and
seal support systems. While the Company produces standard products, its
technical focus and expertise is in engineered products for severe service
applications where a specialized product is required for extreme temperatures,
high horsepower, high speed or high pressure. Compared to standard products,
the Company's specialty products are usually capable of higher performance, are
more differentiated from each other and have greater engineering content. Sales
of the Company's specialty products are more dependent on decisions of
operating managers and engineers than purchasing agents. Because the Company's
specialized products have unique designs and high engineering content, the
Company's customers tend to demand more aftermarket services than customers of
the Company's standard products.
Pump Products. Pump products for the power generating industry
include a variety of pumps used in both nuclear and fossil fuel utilities to
generate steam. Products for the nuclear power generating industry include
reactor coolant pumps, horizontal multi-stage pumps for steam generators, and
vertical circulating pumps. A line of gate, globe and check valves is also
produced for the nuclear power market. Products for the fossil fuel power
generation industry are horizontal double case pumps for high pressure boiler
feed, horizontal multi-stage pumps for low pressure boiler feed, vertical
double case pumps and vertical circulating pumps.
Pump products for the petroleum industry which also have application
in other process markets served include horizontal double case pumps used
especially for hot oils under high pressure, horizontal multi-stage pumps used
in pipelines, vertical pumps used for low temperature processes, vertical
circulating pumps used for cooling water, submersible pumps used for water or
brine injection in oil fields, and submersible water pumps used on offshore
platforms to supply water for fire fighting. The Company also supplies pumps
for other industrial uses, including industrial production, utility services
and pollution control, the mining industry and pumps and related aftermarket
parts and services to the U.S. military, primarily the U.S. Navy.
Seal Products. The mechanical seal is critical to the smooth
operation of centrifugal pumps, compressors and mixers because mechanical seals
control leakage between a rotating shaft and a stationary casing and in doing
so, reduce shaft wear on pumps, compressors and mixers used in many industries.
The need to reduce or eliminate the leakage of liquids and gases due to
increasingly stringent environmental regulations and safety concerns has
expanded the market for mechanical seals. The Company's seals are used on
booster and boiler feed pumps, condensate extraction pumps, heater drain pumps
and a wide variety of pumps used principally in the oil refining and chemical
processing industries. The Company also manufactures a dry gas seal used in
gas transmission and oil and gas production markets.
Aftermarket Products. Aftermarket products and services for pumps and
mechanical seals include supplying parts, making repairs, and providing a
variety of technical services for maintenance (both predicted and preventive),
life extension, retrofitting and upgrading of customer equipment. For example,
the Company repairs pumps and seals to acceptable operating condition, provides
field diagnostic analysis and in-place machinery repair and remanufactures
pumps to restore them to their original or upgraded condition.
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WORLDWIDE FACILITIES AND DISTRIBUTION
The Company is engaged in the design, manufacture, distribution and
service of its products throughout the world. Pumps are produced in plant
facilities in the United States (two in California, one in Oklahoma, one in New
Mexico), the Netherlands, Mexico, Argentina and Belgium. The Company is
constructing a new large component facility for pumps in New Mexico, due for
completion in 1995.
When fully operational in late 1995, the new large component facility,
in conjunction with the Company's existing small component facility, will
provide a substantial majority of all pump components previously manufactured
at the Company's three integrated U.S. pump plants. These three U.S. plants
will selectively discontinue the manufacture of certain components and instead
be focused on the engineering, assembly and testing of pumps. The two
specialized component manufacturing facilities will also be utilized to supply
components to other Company plants outside of the U.S. on an economically
selective basis. The construction of the large component facility is an
important element of the Company's restructuring program which is described in
more detail in Management's Discussion & Analysis of Financial Condition and
Results of Operations and in Note 3 to Consolidated Financial Statements
starting respectively on page 14 and 27 of the 1994 Annual Report to
Stockholders.
Seals are produced in facilities in the United States, the
Netherlands, Germany, Switzerland, Mexico, Argentina and Japan. In December
1994 the Company acquired Five Star Seal Corporation ("Five Star"), a
manufacturer in Florence, South Carolina of mechanical seals and related
products for pumps, mixers and valves, particularly for pulp and paper and
chemical markets.
In 1994, nearly 28% of the Company's products manufactured in the
United States, measured by gross sales (which include intercompany sales), were
shipped to international markets. Pump manufacturing facilities in the
Netherlands and seal manufacturing facilities in the Netherlands and Germany
are the primary source of pumps and seals sold in Europe, Africa and the Middle
East. The Argentine facility provides products primarily for Argentine
customers, while the Japanese plant provides products for Japan and parts of
Southeast Asia. The Company is a party to numerous license agreements and
joint ventures for the manufacture and/or service of pump and seal products.
The Company's Mexican operation, which has approximately 275
employees, manufactures pumps and mechanical seals. Its principal customers
are Petroleos Mexicanos (the state-owned oil company) and Comision Federal de
Electricidad (the national electric power company).
The Company's worldwide pump and seal sales forces sell its pump and
seal products directly to end-users and engineering and construction firms.
The Company's worldwide pump sales organization sells to petroleum, power and
general industry customers within regional territories. A portion of the
Company's seal products are sold directly to original equipment ("OE")
manufacturers, for either pumps, compressors, mixers or other rotating
equipment requiring sealing. Distributors, dealers, commissioned
representatives and sales agents are used to a lesser extent in the
distribution and sale of the products except for Five Star products which are
sold primarily through a distributor network.
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The Company has sales offices in most European countries and has
independent representatives to support foreign sales efforts where the Company
does not maintain a presence. Of the Company's 45 service facilities, 24 are
located outside the United States in Argentina, Belgium, Canada, England,
France, Germany, Indonesia, Malaysia, Italy, Japan, Mexico, The Netherlands,
Saudi Arabia, Singapore, Spain, United Arab Emirates and Venezuela. In
addition, an agent of the Company operates one service facility in Saudi
Arabia.
COMPETITION
In general, the markets for the Company's pump and seal products are
highly competitive. In the OE market, the Company competes against a variety
of other companies, some of which are significantly larger, have greater
financial resources, broader product lines or have larger overall market
shares; this is particularly true in the mechanical seal market where the
Company estimates that John Crane Inc. has a substantially larger market share
than the Company or any other competitor. Competition, particularly for OE
sales, has been increasing in a number of the Company's served markets.
Competition occurs on the basis of price, technical expertise,
delivery and reputation for quality. Delivery speed and the proximity of
service centers are particularly important with respect to aftermarket products
and services. The Company's customers are more likely to rely on the Company
for aftermarket products and services relating to more highly engineered and
customized products than for standard products. Price competition tends to be
more significant for original equipment than aftermarket services and has been
increasingly important with ongoing over capacity in the Company's pump and
seal markets.
Due to the high cost of inventory, customers for seal products are
attempting to reduce the number of vendors from which they purchase in order to
reduce the size and diversity of inventory. Although vendor reduction programs
could adversely affect the Company's business, so far the Company has been
successful in entering into several "partnering" arrangements with companies
both in the United States and overseas. Under these arrangements, in exchange
for certain services the customer commits to using the Company as a principal
or sole source. The Company is seeking to enter into similar arrangements with
additional customers.
In the aftermarket portion of its pump and seal business, the Company
competes against both large and well-established national or global competitors
and, in some markets, against smaller regional and local companies, as well as
the in-house maintenance departments of the Company's end-user customers. In
the petroleum industry the competitors for aftermarket services tend to be the
customers themselves because of their sophisticated in-house capabilities,
whereas in other industries, except the nuclear power industry, the competitors
for aftermarket services tend to be low cost replicators of spare parts for the
Company's products. In the sale of aftermarket products and services the
Company enjoys the benefit of a large installed base of pumps and mechanical
seals which require maintenance, repair and replacement parts. The Company has
certain competitive advantages in the nuclear power industry because it has
obtained and maintained the N Stamp that is required to service customers in
that industry, and because the Company has a considerable base of proprietary
knowledge.
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CUSTOMERS
The Company sells to a wide variety of customers. No individual
customer accounted for more than 3% of the Company's 1994 net sales and the
Company's ten largest customers represented less than 13% of the Company's net
sales in 1994.
BACKLOG
The Company's backlog of firm unfilled orders totaled approximately
$159.4 million as of December 31, 1994, compared with approximately $165.1
million as of December 31, 1993. The year-end backlog at December 31, 1994 is
comprised of 35% aftermarket parts and services compared with 28% for the prior
year. The Company estimates approximately 83% of the December 31, 1994 backlog
will be shipped by December 31, 1995.
RISKS OF INTERNATIONAL BUSINESS
The Company's activities are subject to the customary risks of
operating in an international environment, such as unstable political
situations, local laws, the potential imposition of trade restrictions or
tariff increases and currency fluctuations. Historically, U.S. dollar
currency fluctuations have not significantly affected export orders from either
the United States or any foreign Company location. The risk of currency
fluctuations is mitigated by the fact that most of the Company's foreign
business transactions are conducted in the local currency. To minimize the
impact of foreign exchange rate movements on its operating results, the Company
enters into forward exchange contracts to hedge specific foreign currency
denominated transactions. Given the nature of its business, the Company's
financial results are subject to fluctuations in foreign currency rates against
the U.S. dollar within the countries where it operates. See Note 1 to
Consolidated Financial Statements on page 25 of the 1994 Annual Report to
Stockholders, which page is incorporated by reference in this Form 10-K. The
Company conducts substantial business activities in the Middle East and is a
leading supplier of pump and seal products to Saudi Arabia and Iran. The
Middle East region is subject to additional risks such as changes in
governmental policies, political risk, wars, transportation delays, tariffs,
and import, export, exchange and tax controls. The ongoing effect of Mexico's
financial instability is uncertain at this point; in the short term, the impact
should be minimized somewhat in that over 50% of the year-end backlog of the
Mexican subsidiary is denominated in U.S. dollars, providing a natural hedge.
RESEARCH AND DEVELOPMENT
The Company conducts research and development at its own facilities in
various locations. In 1994, 1993, and 1992, the Company spent approximately
$5.3 million, $4.2 million, and $6.2 million, respectively, on
Company-sponsored research and development.
Management believes current expenditures are adequate to sustain
ongoing research and development activities. The Company's research and
development group consists of engineers involved in new product development as
well as development of existing products. Additionally, the Company sponsors
consortium programs conducted by the University of Virginia; Concepts, Eti;
Georgia Institute of Technology; the University of Twente and others.
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Limited development work is also done jointly with certain of the Company's
vendors, licensees and customers.
INTELLECTUAL PROPERTY
Most of the intangible property that the Company uses in its business,
including technology, licenses, patents, copyrights, trademarks and trade
names, was acquired in connection with the Acquisition. The Company considers
its trademarks Byron Jackson(R), United Centrifugal(R), Byron
Jackson/United(TM), BW Seals(R), Gaspac(TM) , Pacific Wietz(TM) and Five Star
Seal(R) to be important to its business. The patents underlying much of the
technology for the Company's products have been in the public domain for many
years. Surviving patents are not considered, either individually or in the
aggregate, material to the Company's business. However, the Company's pool of
proprietary information, consisting of know-how and trade secrets relating to
the design, manufacture and operation of its products and their use, is
considered particularly important and valuable. Accordingly the Company
actively protects such proprietary information.
RAW MATERIALS
The principal raw materials used by the Company in the manufacture of
its industrial products are normally readily available. While all raw
materials are purchased from outside sources, the Company has been able to
obtain an adequate supply of raw materials and no shortage of such materials is
currently anticipated. The Company has elected to obtain certain materials
from a single supplier for certain requirements, but alternate sources could be
developed without creating a critical shortage for the Company. The Company
intends to expand its use of worldwide sourcing to capitalize on low cost
sources of purchased goods.
Suppliers of raw materials for nuclear markets must be qualified by
the American Society of Mechanical Engineers and, accordingly, are limited in
number. However, the Company to date has experienced no significant difficulty
in obtaining such materials.
EMPLOYEES AND LABOR RELATIONS
The Company's worldwide work force at December 31, 1994 consisted of
2,967 employees, of whom 1,470 were located outside of the United States. The
Long Beach headquarters has approximately 35 employees, all of whom perform
managerial or administrative functions. The Company's hourly employees at its
three principal U.S. pump manufacturing plants in Los Angeles, San Jose and
Tulsa are unionized. The Company's U.S. operations have been conducted
without a work stoppage for over 15 years. The Company's operations in Mexico,
The Netherlands and Belgium are unionized. Unions represent approximately 22%
of the Company's worldwide work force. The Company believes employee relations
throughout its operations are satisfactory.
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ENVIRONMENTAL REGULATIONS AND PROCEEDINGS
The Company is subject to pollution and hazardous waste disposal
regulations in all jurisdictions in which it has operating facilities and
periodically makes capital expenditures to meet environmental requirements. The
Company believes that future expenditures will not have a material adverse
effect on its financial position and has established allowances which it
believes to be adequate to cover potential environmental liabilities. In
connection with the Acquisition, Borg-Warner agreed to bring certain
environmental matters into compliance with applicable regulations, including
matters at the Temecula, California facility. In addition, under the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Company has been named a potentially responsible party ("PRP") at the Sand
Springs Petrochemical Complex Superfund Site (Sand Springs, Oklahoma) ("Sand
Springs"), the Operating Industries, Inc. Superfund Site (Monterey Park,
California) ("Operating Industries") and the Stringfellow Acid Pits Superfund
Site (Glen Avon, California) ("Stringfellow") due to waste materials from the
Company's plants having been disposed of at these sites. These sites are being
administered by the U.S. Environmental Protection Agency. Borg-Warner is
contractually obligated by the agreements relating to the Acquisition to
indemnify the Company, in whole, in the event it is held liable as a PRP at the
Operating Industries and Stringfellow sites and for 50% of the costs, in the
event it is held liable at the Sand Springs site. Borg-Warner has undertaken
the active defense or representation of the Company in the legal and
administrative proceedings related to the Operating Industries and Stringfellow
matters, and has paid amounts as they have become due in connection therewith.
The Company and Borg-Warner are jointly coordinating the Company's
participation in the Sand Springs matter, and sharing the costs as they are
incurred. The Company has established an allowance for its share of potential
costs for any PRP liability at the Sand Springs site and any additional costs
are not estimated to be material to the Company's financial position.
As a result of pre-existing contamination found at its property in San
Jose, California, the Company is in the process of identifying the nature and
extent of contamination, and planning for remediation of the site. The Company
has established an allowance for remediation and certain other anticipated
costs. Any additional costs are not currently estimated to be material to the
Company's financial position.
EXPORT LICENSES
Licenses are required from U.S. government agencies for export from
the United States of many of the Company's products. In particular, products
with defense applications are restricted, although limitations are placed on
the export of certain other pump and seal products as well.
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ITEM 2. PROPERTIES
The following tables set forth certain information relating to the
Company's principal facilities. The Company operates other smaller domestic
and foreign manufacturing facilities, service centers and sales offices which
are omitted from these tables.
OWNED FACILITIES
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LOCATION SQUARE FOOTAGE PRINCIPAL OPERATIONS
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Albuquerque, New Mexico (1) 50,000 Manufacture of pump products
Boothwyn, Pennsylvania 17,500 Service of pump products
Elgin, Illinois 24,578 Service of pump products
Etten-Leur, Netherlands 175,100 Manufacture of pump products
Florence, South Carolina 24,873 Service of seal products
Fresno, California (2) 27,400 Manufacture of pump products
Houston, Texas 34,900 Service of pump products
Leduc, Alberta, Canada 30,000 Service of pump and seal products
Los Angeles, California 273,220 Service and manufacture of pump products
Roosendaal, Netherlands 48,400 Manufacture of seal products
Santa Clara, Mexico 154,262 Manufacture of pump and seal products
Santa Fe, New Mexico 30,025 Manufacture of pump products
San Jose, California 99,588 Manufacture of pump products
Temecula, California 64,284 Manufacture of seal products
Tulsa, Oklahoma 319,656 Manufacture of pump products
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LEASED FACILITIES
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LOCATION SQUARE FOOTAGE PRINCIPAL OPERATIONS
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Charleroi, Belgium (3) 119,700 Manufacture of pump products
Guelph, Ontario, Canada (4) 18,080 Service of pump products
Osaka, Japan (5) 25,000 Manufacture of seal products
Mendoza, Argentina (6) 80,900 Manufacture of pump and seal products
Long Beach, California (7) 35,202 Administrative headquarters
Dortmund, Germany (8) 70,000 Manufacture of seal products
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___________________________________
(1) To be completed in 1995.
(2) To be closed in 1995.
(3) Expires 1998.
(4) Expires 1997.
(5) Expires 2004.
(6) Expires 1998.
(7) Expires 2000.
(8) Expires 2012.
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The Company maintains a total of 21 domestic and 24 foreign service
centers and 23 domestic and 26 foreign sales offices.
The Company believes that its manufacturing facilities, including its
machinery and equipment, are in good condition, well maintained and once the
planned restructuring program is completed, and planned additions of
facilities, machinery and equipment are in place, will be adequate for its
needs in the foreseeable future.
The Company is leasing its manufacturing facility in Van Nuys,
California, to the purchaser of the Fluid Controls business segment on a
short-term basis and has offered the property for sale. The Company's
manufacturing facility in Fresno, California will be offered for sale after its
manufacturing operations are transferred or discontinued in 1995.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in ordinary routine litigation incidental to
its business, none of which it believes to be material to its financial
condition. See also "Environmental Regulations and Proceedings" above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of BW/IP, all positions and offices with BW/IP
presently held by each person named, their ages as of March 24, 1995 and their
business experience during the last five years are stated below. Executive
officers serve at the discretion of the Board of Directors.
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Name and Position Age Principal Occupation During Past Five Years
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<S> <C> <C>
Peter C. Valli 68 Chairman and Chief Executive Officer of BW/IP and
Chairman, Chief Executive Officer International since 1987; President of BW/IP from
and President 1987 to 1991 and since 1995; President of
International from 1984 to 1991 and since 1995; Vice
President of Borg-Warner, principally in conjunction
with his affiliation with International from 1972 to
1987.
Eugene P. Cross 59 Executive Vice President, Finance, and Chief
Executive Vice President, Finance, Financial Officer of BW/IP and International since
Chief Financial Officer and Director 1991; Vice President, Finance of BW/IP from 1987 to
1991; Vice President, Finance of International from
1975 to 1991.
John D. Hannesson 43 Vice President, General Counsel and Secretary of
Vice President, General Counsel BW/IP and International since 1987.
and Secretary
Darrach G. Taylor 60 Vice President, Human Resources of BW/IP since 1987
Vice President, and Vice President, Human Resources of International
Human Resources since 1976.
Ronald W. Hoppel 57 Vice President of BW/IP since 1987; Vice President
Vice President and President - Pump of International since 1984; President of the Pump
Division Division since 1995; Vice President - General
Manager of the Pump Division from 1991 to 1995 and
Vice President - General Manager of the Seal
Division from 1982 to 1991.
Richard R. Testwuide 46 Vice President of BW/IP since 1987; Vice President
Vice President and President - Seal of International since 1984; President of the Seal
Division Division since 1995; Vice President - General
Manager of the Seal Division from 1991 to 1995 and
Vice President - General Manager of the Fluid
Controls Division from 1982 to 1991.
Nancy A. Ludlam 41 Corporate Controller of BW/IP and International
Corporate Controller since 1989.
Zohar Ziv 42 Treasurer of BW/IP and International since 1989.
Treasurer
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information on the market prices and dividends regarding the Company's
Common Stock, which appears on page 39 of the 1994 Annual Report to
Stockholders, is incorporated herein by reference.
As of March 7, 1995, BW/IP's Common Stock was held by approximately
5,800 stockholders of record or through nominee or street name accounts with
brokers.
BW/IP's ability to pay dividends on its Common Stock depends on
International's ability to pay dividends to BW/IP. International's senior
credit facilities restrict the payment of dividends by International to BW/IP
(and thereby limit BW/IP's ability to pay dividends on the Common Stock) except
in certain specified circumstances or unless certain financial tests are met.
As of December 31, 1994, after giving effect to the dividends declared to date,
approximately $30 million is available for the payment of dividends by
International to BW/IP pursuant to the most restrictive covenants.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31, 1994,
which appears on page 20 of the 1994 Annual Report to Stockholders, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations appears on pages 14 through 19 of the 1994 Annual Report
to Stockholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price
Waterhouse LLP dated February 14, 1995, appearing on pages 21 through 38 of the
1994 Annual Report to Stockholders are incorporated herein by reference.
10K395 13
<PAGE> 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Information relating to a change in the Company's principal accountant
was previously reported in Item 4 of BW/IP's current report on Form 8-K, dated
March 11, 1993, as filed with the Securities and Exchange Commission. In
accordance with Instruction 1 to Item 304 of Regulation S-K under the
Securities Act of 1933, as amended, no additional disclosure with respect
thereto is provided herein.
10K395 14
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the heading "Proposal No. 1 --
Election of Directors" in the definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on or about May 16, 1995 (the "1995 Proxy
Statement") is incorporated herein by reference. For information concerning
the executive officers of BW/IP, see "Executive Officers of the Registrant" in
Part I of this Form 10-K.
DISCLOSURE PURSUANT TO ITEM 405 OF REGULATION S-K
Information contained under the heading "Beneficial Ownership of
Common Stock - Compliance With Section 16(a) of the Exchange Act" in the 1995
Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the heading "Executive Compensation"
in the 1995 Proxy Statement is incorporated herein by reference (except for the
sections "Report of Compensation and Benefits Committee" and "Performance Graph
for Common Stock" which are not deemed to be filed as part of this Form 10-K).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the heading "Beneficial Ownership of
Common Stock" in the 1995 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
10K395 15
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements, together with the report thereon of Price
Waterhouse LLP dated February 14, 1995, appearing on pages 21 through
38 of the 1994 Annual Report to Stockholders are incorporated herein
by reference. The report of Coopers & Lybrand dated February 16,
1993, listed in the accompanying index on page F-1, is filed as part
of this Form 10-K.
2. Financial Statement Schedules
The required financial statement schedules together with the reports
thereon of Price Waterhouse LLP dated February 14, 1995, and Coopers &
Lybrand dated February 16, 1993, listed in the accompanying index on
page F-1 are filed as part of this Form 10-K.
3. Exhibits
The exhibits listed on the accompanying index to exhibits on pages 17
through 21 are filed as part of this Form 10-K.
(b) Reports on Form 8-K
None.
10K395 16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit DESCRIPTION
No.
<S> <C>
3.a Form of Third Restated Certificate of Incorporation of BW/IP, Inc. (formerly BWIP
Holding, Inc.) ("BW/IP"), as filed with the Secretary of the State of Delaware.
Incorporated by reference to Appendix A of BW/IP's Proxy Statement for the 1994 Annual
Meeting of Stockholders dated April 11, 1994, as filed with the SEC.
3.b Certificate of Designation of Junior Participating Cumulative Preferred Stock of BW/IP
("Certificate of Designation of Junior Participating Cumulative Preferred Stock"), as
filed with the Secretary of State of Delaware. Incorporated by reference to Exhibit 3a
of BW/IP's quarterly report on Form 10-Q for the quarter ended September 30, 1993 as
filed with the SEC (" BW/IP's September 30, 1993 Quarterly Report on Form 10-Q").
3.c* By-laws of BW/IP, as amended on May 10, 1994.
4.a Rights Agreement between BW/IP and Bank One, Indianapolis, N.A., Rights Agent, dated as
of July 26, 1993 which includes as Exhibit B the form of Right Certificate.
Incorporated by reference to Exhibit 4 of BW/IP's Report on Form 8-K dated July 30, 1993
as filed with the SEC.
10.a Assignment Agreement, dated March 14, 1989, among Bank of America NT and SA, The
Mitsubishi Trust and Banking Corporation and Citibank, N.A. Incorporated by reference
to Exhibit 10ggg of BW/IP's 1988 Annual Report on Form 10-K for the fiscal year ended
December 31, 1988 as filed with the SEC ("BW/IP's 1988 Annual Report on Form 10-K").
10.b Irrevocable letter of credit, dated March 14, 1989, regarding the City of San Jose
Floating/Fixed Rate Demand Industrial Revenue Bonds, between Citibank, N.A. and Pacific
Trust Company, as trustee. Incorporated by reference to Exhibit 10ttt of BW/IP's 1988
Annual Report on Form 10-K.
10.c BW/IP International, Inc. Retirement Plan. Incorporated by reference to Exhibit 10vv of
BW/IP's Registration Statement on Form S-1 (Registration No. 33-18701) as filed on
August 4, 1988 with the SEC (the "1988 Form S-1").
10.d Employment Agreement, dated May 20, 1987, between BW/IP International, Inc. and Peter C.
Valli. Incorporated by reference to Exhibit 10aaa of the 1988 Form S-1.
</TABLE>
10K395 17
<PAGE> 18
<TABLE>
<S> <C>
10.e Loan Agreement by and between Industrial Development Authority of the City of San Jose
and United Centrifugal Pumps, dated as of September 1, 1985. (Not filed herewith
pursuant to Item 601(b)(4)(iii) of Regulation S-K. BW/IP hereby agrees to furnish a copy
of such loan agreement to the SEC upon request.)
10.f Amendment to Employment Agreement dated February 1, 1990 between BW/IP International,
Inc. and Peter C. Valli. Incorporated by reference to Exhibit 10ssss of BW/IP's 1989
Annual Report on Form 10-K for the fiscal year ended December 31, 1989 as filed with the
SEC.
10.g Credit Agreement, dated as of September 20, 1991, between BW/IP International, Inc. and
Citicorp USA, Inc. Incorporated by reference to Exhibit 4r of BW/IP's Registration
Statement on Form S-8 (Registration No. 33-44806) as filed on December 27, 1991 with the
SEC (the "Form S-8".)
10.h Credit Agreement, dated as of August 23, 1991 (the "U.S. Credit Agreement"), among BW/IP
International, Inc., the Financial Institutions named therein and Citicorp USA, Inc., as
agent. Incorporated by reference to Exhibit 4s of the Form S-8.
10.i Form of letter agreement for Transitional Income Program. Incorporated by reference to
Exhibit 10oooo of BW/IP's Registration Statement on Form S-1 (Registration No. 33-45165)
as filed on February 18, 1992 with the SEC (the "February 1992 Form S-1").
10.j Supplemental Executive Retirement Plan. Incorporated by reference to Exhibit 10rrrr of
the February 1992 Form S-1.
10.k Credit Agreement, dated as of July 5, 1991, between BW/IP International B.V. and
Algemene Bank Nederland N.V. Incorporated by reference to Exhibit 4t of the Form S-8.
10.l Guaranty, dated October 9, 1991, by BW/IP International, Inc. to Algemene Bank Nederland
N.V. Incorporated by reference to Exhibit 4u of the Form S-8.
10.m Credit Line, dated October 28, 1991, between NCNB Texas National Bank and BWIP
International, Inc. Incorporated by reference to Exhibit 4v of the Form S-8.
10.n BW/IP International, Inc. Capital Accumulation Plan, amended and restated as of January
1, 1992. Incorporated by reference to Exhibit 4w of the Form S-8.
10.o BW/IP International, Inc. 1992 Long-Term Incentive Plan. Incorporated by reference to
Appendix A of BW/IP's Proxy Statement for the 1992 Annual Meeting of Stockholders, dated
April 17, 1992, as filed with the SEC.
</TABLE>
10K395 18
<PAGE> 19
<TABLE>
<S> <C>
10.p First Amendment and Limited Waiver to the U.S. Credit Agreement, dated May 1,1992, among
BW/IP International, Inc., the Lenders named therein, and Citicorp USA, Inc., as agent.
Incorporated by reference to Exhibit 10kk of BW/IP's Registration Statement on Form S-1
(Registration No. 33-53094) as filed on October 29, 1992 with the SEC (the "October 1992
Form S-1").
10.q Second Amendment to the Employment Agreement, dated June 23, 1992, between BW/IP
International, Inc. and Peter C. Valli. Incorporated by reference to Exhibit 10ll of
the October 1992 Form S-1.
10.r Note Agreement, dated as of April 15, 1992, between BW/IP International, Inc. and the
Note Purchasers named therein, with respect to $50,000,000 principal amount of 7.92%
Senior Notes due May 15, 1999. Incorporated by reference to Exhibit 4a of BW/IP's
quarterly report on Form 10-Q for the quarter ended June 30, 1992 as filed with the SEC.
10.s Amendment Number One to the BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10ff of BW/IP's 1992 Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 as filed with the SEC ("BW/IP's 1992 Annual Report on Form 10-K").
10.t Amendment Number Two to the BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10gg of BW/IP's 1992 Annual Report on Form 10-K.
10.u Second Model Amendment to BW/IP International, Inc. Retirement Plan Incorporated, by
reference to Exhibit 10hh of BW/IP's 1992 Annual Report on Form 10-K.
10.v Amendment Number Three to BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10ii of BW/IP's 1992 Annual Report on Form 10-K.
10.w BW/IP International, Inc. 1993 Management Incentive Plan. Incorporated by reference to
Exhibit 10jj of BW/IP's 1992 Annual Report on Form 10-K.
10.x BW/IP Non Employee Directors' Stock Option Plan. Incorporated by reference to Appendix
A of BW/IP's Proxy Statement for the 1993 Annual Meeting of Stockholders dated April 16,
1993.
10.y Non Employee Directors' Charitable Gift Plan. Incorporated by reference to Exhibit kk
of BW/IP's 1992 Annual Report on Form 10-K.
</TABLE>
10K395 19
<PAGE> 20
<TABLE>
<S> <C>
10.z Second Amendment and Limited Waiver, dated as of August 12, 1993, to the Credit
Agreement, dated as of August 23, 1991, as amended by the First Amendment and Limited
Waiver, dated May 1, 1992, among BW/IP International, Inc., the financial institutions
named therein and Citicorp USA, Inc., as agent. Incorporated by reference to Exhibit
10a of BW/IP's September 30, 1993 Quarterly Report on Form 10-Q ("BW/IP's September 30,
1993 Quarterly Report on Form 10-Q").
10.aa Guaranty, dated July 30, 1993, by BW/IP International, Inc. to ABN-AMRO Bank N.V.
Incorporated by reference to BW/IP's September 30, 1993 Quarterly Report on Form 10-Q.
10.bb BW/IP 1994 Management Incentive Plan. Incorporated by reference to Exhibit 10cc of
BW/IP's 1993 Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as
filed with the SEC ("BW/IP's 1993 Annual Report on Form 10-K").
10.cc Credit Agreement, dated as of September 10, 1993 between BW/IP International B.V. and
ABN/AMRO. Incorporated by reference to Exhibit 10dd of BW/IP's 1993 Annual Report on
Form 10-K.
10.dd Amendment Number One to the Supplemental Executive Retirement Plan. Incorporated by
reference to Exhibit 10ee of BW/IP's 1993 Annual Report on Form 10-K.
10.ee Amendment Number One to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10ff of BW/IP's 1993 Annual Report on Form 10-K.
10.ff Amendment Number Two to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10gg of BW/IP's 1993 Annual Report on Form 10-K.
10.gg Amendment Number Three to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10hh of BW/IP's 1993 Annual Report on Form 10-K.
10.hh Form of letter agreement for Transitional Income Program. Incorporated by reference to
Exhibit 10ii of BW/IP's 1993 Annual Report on Form 10-K.
10.ii Amended and Restated BW/IP International, Inc. Retiree Health Care Plan. Incorporated
by reference to Exhibit 10jj of BW/IP's 1993 Annual Report on Form 10-K.
10.jj Bond Purchase Agreement, dated January 27, 1995, among BW/IP-New Mexico, Inc., the City
of Albuquerque, New Mexico and BW/IP International, Inc. (Not filed herewith pursuant
to Item 601(b)(4)(iii) of Regulation S-K. BW/IP hereby agrees to furnish a copy of such
bond purchase agreement to the SEC upon request.)
</TABLE>
10K395 20
<PAGE> 21
<TABLE>
<S> <C>
10.kk* BW/IP International, Inc. 1995 Management Incentive Plan.
10.ll* Amendment Number Four to the BW/IP International, Inc. Capital Accumulation Plan
10.mm* Amendment to the BW/IP International, Inc. Retiree Health Care Plan
10.nn* Amendment to the BW/IP International, Inc. Supplemental Executive Retirement Plan
10.oo* Amendment Number Five to the BW/IP International, Inc. Capital Accumulation Plan
10.pp* Third Amendment, dated as of July 6, 1994, to the Credit Agreement, dated as of August
23, 1991, as amended, among BW/IP International, Inc., the financial institutions named
therein and Citicorp USA, Inc., as agent.
10.qq* Fourth Amendment, dated as of February 17, 1995, to the Credit Agreement, dated as of
August 23, 1991, as amended, among BW/IP International, Inc., the financial institutions
named therein and Citicorp USA, Inc. as agent.
13.a* 1994 Annual Report to Stockholders of BW/IP. (Not deemed to be filed as part of this
report except to the extent incorporated by reference.)
21.a* Subsidiaries of BW/IP
23.a* Consent of Price Waterhouse LLP
23.b* Consent of Coopers & Lybrand L.L.P.
24.a* Powers of Attorney
</TABLE>
____________________________________
* Filed herewith
10K395 21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on this 30th day of
March 1995.
BW/IP, INC.
By: /s/ Eugene P. Cross
Eugene P. Cross
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PETER C. VALLI Chief Executive Officer and Director March 30, 1995
Peter C. Valli (Principal Executive Officer)
/s/ EUGENE P. CROSS Executive Vice President, Finance, March 30, 1995
Eugene P. Cross Chief Financial Officer and Director
(Principal Financial Officer)
/s/ NANCY A. LUDLAM Controller (Principal Accounting Officer) March 30, 1995
Nancy A. Ludlam
/s/ GEORGE D. LEAL* Director March 30, 1995
George D. Leal
/s/ JAMES J. GAVIN, JR.* Director March 30, 1995
James J. Gavin, Jr.
/s/ H. JACK MEANY* Director March 30, 1995
H. Jack Meany
/s/ JAMES S. PIGNATELLI* Director March 30, 1995
James S. Pignatelli
/s/ WILLIAM C. RUSNACK* Director March 30, 1995
William C. Rusnack
*By: /s/ John D. Hannesson
(John D. Hannesson, Attorney-in-fact)
</TABLE>
10K395 22
<PAGE> 23
BW/IP, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(A)(1) AND (2)
<TABLE>
<CAPTION>
ANNUAL REPORT ANNUAL REPORT
TO ON
STOCKHOLDERS FORM 10-K
------------ ---------
<S> <C> <C>
BW/IP, Inc. Consolidated Financial Statements
Report of Independent Accountants 38
Consolidated Balance Sheets at
December 31, 1994 and 1993 21
For the three years ended December 31, 1994:
Consolidated Statements of Income 22
Consolidated Statements of Stockholders' Equity 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25-37
Report of Independent Accountants (Predecessor) F-4
BW/IP, Inc. Financial Statement Schedules at
December 31, 1994 and 1993 or for the three years
ended December 31, 1994.
Reports of Independent Accountants on
Financial Statement Schedules F-2 - F-3
Schedule III - Condensed Financial Information of
Parent Company F-5 - F-7
Schedule VIII - Valuation and Qualifying Accounts F-8
</TABLE>
Financial statement schedules not included in this Annual Report on Form 10-K
have been omitted because they are not applicable or the required information
is shown in the consolidated financial statements or notes thereto.
F-1
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
BW/IP, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 14, 1995 appearing on page 38 of the 1994 Annual Report to
Stockholders of BW/IP, Inc. (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedules at December 31, 1994 and 1993 and
for the years then ended listed in Item 14(a) of this Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements at December 31, 1994 and 1993 and for
the years then ended.
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1995
F-2
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
BW/IP, Inc.
Our report on the consolidated statements of income, stockholders' equity and
cash flows of BW/IP, Inc. (formerly BWIP Holding, Inc.) and its wholly owned
subsidiary for the year ended December 31, 1992 has been included on page F-4
of this Form 10-K. In connection with our audit of such financial statements,
we have audited the related financial statement schedules for the year ended
December 31, 1992, as listed on the index on page F-1 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND
Los Angeles, California
February 16, 1993
F-3
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
BW/IP, Inc.
We have audited the consolidated statements of income, stockholders' equity and
cash flows of BW/IP, Inc. (formerly BWIP Holding, Inc.) and its wholly owned
subsidiary for the year ended December 31, 1992. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and consolidated
cash flows of BW/IP, Inc. and its wholly owned subsidiary for the year ended
December 31, 1992 in conformity with generally accepted accounting principles.
As discussed in Notes 4 and 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes, postretirement
benefits other than pensions and postemployment benefits in 1992.
COOPERS & LYBRAND
Los Angeles, California
February 16, 1993
F-4
<PAGE> 27
BW/IP, INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
The following condensed financial statements of BW/IP, Inc. reflect the parent
company only, using the equity method of accounting for its wholly owned
subsidiary, BW/IP International, Inc. All footnote disclosure has been omitted
since all information has been included in the BW/IP, Inc. consolidated
financial statements included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
BW/IP, INC.
(PARENT COMPANY ONLY)
DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT SHARE AND PER SHARE DATA)
--------------------------------
<S> <C> <C>
Assets 1994 1993
------ ---- ----
Due from subsidiary $ 2,428 $ 1,942
Investment in subsidiary 165,914 146,391
------- -------
Total assets $168,342 $148,333
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Accrued liabilities $ 2,428 $ 1,942
--------- ---------
Total current liabilities 2,428 1,942
Other long-term liabilities - -
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
10,000,000 shares authorized and unissued - -
Common stock, $.01 par value;
40,000,000 shares authorized;
24,450,000 shares issued and outstanding 245 245
Paid-in capital 85,763 85,763
Retained earnings 79,097 63,337
Cumulative translation adjustment 1,422 (2,341)
---------- ----------
166,527 147,004
Less common stock in treasury, at cost (613) (613)
---------- ----------
Total stockholders' equity 165,914 146,391
---------- ----------
Total liabilities and stockholders' equity $168,342 $148,333
======== ========
</TABLE>
F-5
<PAGE> 28
BW/IP, INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
BW/IP, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Administrative expenses(1) $(5,607) $ - $ -
Management fee income(1) 5,607 - -
Interest income - - 229
Interest expense - - (229)
Equity in net income of
wholly owned subsidiary 24,985 4,345 24,024
------- ------ -------
24,985 4,345 24,024
Provision for income taxes (2) - - -
------- ------ -------
Net income(3) $24,985 $4,345 $24,024
======= ====== =======
</TABLE>
(1) Effective January 1, 1994, certain employees and
related costs of the corporate office were
transferred from BW/IP International, Inc. to
BW/IP, Inc. and a management agreement was
executed.
(2) BW/IP, Inc. files a consolidated tax return
with its wholly owned subsidiary.
Accordingly, presentation of a provision for
income taxes on a stand-alone basis is not
considered meaningful.
(3) In 1992, prepayment of BW/IP, Inc. s long-term
debt resulted in an extraordinary loss of $4.2
million ($2.9 million after-tax). Such loss is
included in the "equity in net income of wholly
owned subsidiary" and, accordingly, is not
separately disclosed on this statement.
F-6
<PAGE> 29
BW/IP, INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
BW/IP, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities: $ - $ - $ -
Cash flows from investing activities: - - -
Cash flows from financing activities:
Prepayment of subordinated notes - - (14,201)
Repayment of note receivable from wholly
owned subsidiary - - 14,201
Dividends paid (8,739) (6,797) (4,734)
Dividend from wholly owned subsidiary 8,739 6,797 4,734
-------- ------- --------
Net cash provided by financing activities - - -
-------- ------- --------
Net change in cash and cash equivalents $ - $ - $ -
======== ======= ========
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 24,985 $ 4,345 $ 24,024
Adjustment to reconcile net income to net cash
provided by operating activities:
Equity earnings (24,985) (4,345) (24,024)
-------- ------- --------
Net cash provided by operating activities $ - $ - $ -
======== ======= ========
Supplemental schedule of non-cash financing activities:
Dividends declared but not paid $ 2,428 $ 1,942 $ 1,457
</TABLE>
F-7
<PAGE> 30
BW/IP, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO AMOUNTS LESS: BALANCE
BEGINNING PROFIT AND WRITTEN FLUID CONTROLS AT END
OF PERIOD LOSS OFF OTHER(1) SEGMENT(2) OF PERIOD
--------- --------------- ------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Receivables -
Allowance for doubtful
accounts:
1994 $ 2,805 1,059 (916) 19 -- $ 2,967
======= ===== ======= ======== ======= =======
1993 $3,082 1,138 (1,297) 6 (124) $ 2,805
======= ===== ======= ======== ======= =======
1992 $ 2,813 1,478 (1,098) (111) -- $ 3,082
======= ===== ======= ======== ======= =======
Inventories -
Reserves
1994 $ 7,624 2,192 (740) 3,031 -- $12,107
======= ===== ======= ======== ======= =======
1993 $10,641 606 (939) 166 (2,850) $ 7,624
======= ===== ======= ======== ======= =======
1992 $12,869 (349) (1,466) (413) -- $10,641
======= ===== ======= ======== ======= =======
</TABLE>
(1) Represents foreign currency translation adjustments, acquisitions of
Pacific Wietz Gmbh & Co. KG and Five Star Seal Corporation and
other adjustments.
(2) Amounts reclassified to net assets held for disposition.
F-8
/ANNUAL//10k/N94NL1
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit DESCRIPTION
No.
<S> <C>
3.a Form of Third Restated Certificate of Incorporation of BW/IP, Inc. (formerly BWIP
Holding, Inc.) ("BW/IP"), as filed with the Secretary of the State of Delaware.
Incorporated by reference to Appendix A of BW/IP's Proxy Statement for the 1994 Annual
Meeting of Stockholders dated April 11, 1994, as filed with the SEC.
3.b Certificate of Designation of Junior Participating Cumulative Preferred Stock of BW/IP
("Certificate of Designation of Junior Participating Cumulative Preferred Stock"), as
filed with the Secretary of State of Delaware. Incorporated by reference to Exhibit 3a
of BW/IP's quarterly report on Form 10-Q for the quarter ended September 30, 1993 as
filed with the SEC (" BW/IP's September 30, 1993 Quarterly Report on Form 10-Q").
3.c* By-laws of BW/IP, as amended on May 10, 1994.
4.a Rights Agreement between BW/IP and Bank One, Indianapolis, N.A., Rights Agent, dated as
of July 26, 1993 which includes as Exhibit B the form of Right Certificate.
Incorporated by reference to Exhibit 4 of BW/IP's Report on Form 8-K dated July 30, 1993
as filed with the SEC.
10.a Assignment Agreement, dated March 14, 1989, among Bank of America NT and SA, The
Mitsubishi Trust and Banking Corporation and Citibank, N.A. Incorporated by reference
to Exhibit 10ggg of BW/IP's 1988 Annual Report on Form 10-K for the fiscal year ended
December 31, 1988 as filed with the SEC ("BW/IP's 1988 Annual Report on Form 10-K").
10.b Irrevocable letter of credit, dated March 14, 1989, regarding the City of San Jose
Floating/Fixed Rate Demand Industrial Revenue Bonds, between Citibank, N.A. and Pacific
Trust Company, as trustee. Incorporated by reference to Exhibit 10ttt of BW/IP's 1988
Annual Report on Form 10-K.
10.c BW/IP International, Inc. Retirement Plan. Incorporated by reference to Exhibit 10vv of
BW/IP's Registration Statement on Form S-1 (Registration No. 33-18701) as filed on
August 4, 1988 with the SEC (the "1988 Form S-1").
10.d Employment Agreement, dated May 20, 1987, between BW/IP International, Inc. and Peter C.
Valli. Incorporated by reference to Exhibit 10aaa of the 1988 Form S-1.
</TABLE>
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<TABLE>
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10.e Loan Agreement by and between Industrial Development Authority of the City of San Jose
and United Centrifugal Pumps, dated as of September 1, 1985. (Not filed herewith
pursuant to Item 601(b)(4)(iii) of Regulation S-K. BW/IP hereby agrees to furnish a copy
of such loan agreement to the SEC upon request.)
10.f Amendment to Employment Agreement dated February 1, 1990 between BW/IP International,
Inc. and Peter C. Valli. Incorporated by reference to Exhibit 10ssss of BW/IP's 1989
Annual Report on Form 10-K for the fiscal year ended December 31, 1989 as filed with the
SEC.
10.g Credit Agreement, dated as of September 20, 1991, between BW/IP International, Inc. and
Citicorp USA, Inc. Incorporated by reference to Exhibit 4r of BW/IP's Registration
Statement on Form S-8 (Registration No. 33-44806) as filed on December 27, 1991 with the
SEC (the "Form S-8".)
10.h Credit Agreement, dated as of August 23, 1991 (the "U.S. Credit Agreement"), among BW/IP
International, Inc., the Financial Institutions named therein and Citicorp USA, Inc., as
agent. Incorporated by reference to Exhibit 4s of the Form S-8.
10.i Form of letter agreement for Transitional Income Program. Incorporated by reference to
Exhibit 10oooo of BW/IP's Registration Statement on Form S-1 (Registration No. 33-45165)
as filed on February 18, 1992 with the SEC (the "February 1992 Form S-1").
10.j Supplemental Executive Retirement Plan. Incorporated by reference to Exhibit 10rrrr of
the February 1992 Form S-1.
10.k Credit Agreement, dated as of July 5, 1991, between BW/IP International B.V. and
Algemene Bank Nederland N.V. Incorporated by reference to Exhibit 4t of the Form S-8.
10.l Guaranty, dated October 9, 1991, by BW/IP International, Inc. to Algemene Bank Nederland
N.V. Incorporated by reference to Exhibit 4u of the Form S-8.
10.m Credit Line, dated October 28, 1991, between NCNB Texas National Bank and BWIP
International, Inc. Incorporated by reference to Exhibit 4v of the Form S-8.
10.n BW/IP International, Inc. Capital Accumulation Plan, amended and restated as of January
1, 1992. Incorporated by reference to Exhibit 4w of the Form S-8.
10.o BW/IP International, Inc. 1992 Long-Term Incentive Plan. Incorporated by reference to
Appendix A of BW/IP's Proxy Statement for the 1992 Annual Meeting of Stockholders, dated
April 17, 1992, as filed with the SEC.
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10.p First Amendment and Limited Waiver to the U.S. Credit Agreement, dated May 1,1992, among
BW/IP International, Inc., the Lenders named therein, and Citicorp USA, Inc., as agent.
Incorporated by reference to Exhibit 10kk of BW/IP's Registration Statement on Form S-1
(Registration No. 33-53094) as filed on October 29, 1992 with the SEC (the "October 1992
Form S-1").
10.q Second Amendment to the Employment Agreement, dated June 23, 1992, between BW/IP
International, Inc. and Peter C. Valli. Incorporated by reference to Exhibit 10ll of
the October 1992 Form S-1.
10.r Note Agreement, dated as of April 15, 1992, between BW/IP International, Inc. and the
Note Purchasers named therein, with respect to $50,000,000 principal amount of 7.92%
Senior Notes due May 15, 1999. Incorporated by reference to Exhibit 4a of BW/IP's
quarterly report on Form 10-Q for the quarter ended June 30, 1992 as filed with the SEC.
10.s Amendment Number One to the BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10ff of BW/IP's 1992 Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 as filed with the SEC ("BW/IP's 1992 Annual Report on Form 10-K").
10.t Amendment Number Two to the BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10gg of BW/IP's 1992 Annual Report on Form 10-K.
10.u Second Model Amendment to BW/IP International, Inc. Retirement Plan Incorporated, by
reference to Exhibit 10hh of BW/IP's 1992 Annual Report on Form 10-K.
10.v Amendment Number Three to BW/IP International, Inc. Retirement Plan. Incorporated by
reference to Exhibit 10ii of BW/IP's 1992 Annual Report on Form 10-K.
10.w BW/IP International, Inc. 1993 Management Incentive Plan. Incorporated by reference to
Exhibit 10jj of BW/IP's 1992 Annual Report on Form 10-K.
10.x BW/IP Non Employee Directors' Stock Option Plan. Incorporated by reference to Appendix
A of BW/IP's Proxy Statement for the 1993 Annual Meeting of Stockholders dated April 16,
1993.
10.y Non Employee Directors' Charitable Gift Plan. Incorporated by reference to Exhibit kk
of BW/IP's 1992 Annual Report on Form 10-K.
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10.z Second Amendment and Limited Waiver, dated as of August 12, 1993, to the Credit
Agreement, dated as of August 23, 1991, as amended by the First Amendment and Limited
Waiver, dated May 1, 1992, among BW/IP International, Inc., the financial institutions
named therein and Citicorp USA, Inc., as agent. Incorporated by reference to Exhibit
10a of BW/IP's September 30, 1993 Quarterly Report on Form 10-Q ("BW/IP's September 30,
1993 Quarterly Report on Form 10-Q").
10.aa Guaranty, dated July 30, 1993, by BW/IP International, Inc. to ABN-AMRO Bank N.V.
Incorporated by reference to BW/IP's September 30, 1993 Quarterly Report on Form 10-Q.
10.bb BW/IP 1994 Management Incentive Plan. Incorporated by reference to Exhibit 10cc of
BW/IP's 1993 Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as
filed with the SEC ("BW/IP's 1993 Annual Report on Form 10-K").
10.cc Credit Agreement, dated as of September 10, 1993 between BW/IP International B.V. and
ABN/AMRO. Incorporated by reference to Exhibit 10dd of BW/IP's 1993 Annual Report on
Form 10-K.
10.dd Amendment Number One to the Supplemental Executive Retirement Plan. Incorporated by
reference to Exhibit 10ee of BW/IP's 1993 Annual Report on Form 10-K.
10.ee Amendment Number One to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10ff of BW/IP's 1993 Annual Report on Form 10-K.
10.ff Amendment Number Two to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10gg of BW/IP's 1993 Annual Report on Form 10-K.
10.gg Amendment Number Three to the BW/IP International, Inc. Capital Accumulation Plan.
Incorporated by reference to Exhibit 10hh of BW/IP's 1993 Annual Report on Form 10-K.
10.hh Form of letter agreement for Transitional Income Program. Incorporated by reference to
Exhibit 10ii of BW/IP's 1993 Annual Report on Form 10-K.
10.ii Amended and Restated BW/IP International, Inc. Retiree Health Care Plan. Incorporated
by reference to Exhibit 10jj of BW/IP's 1993 Annual Report on Form 10-K.
10.jj Bond Purchase Agreement, dated January 27, 1995, among BW/IP-New Mexico, Inc., the City
of Albuquerque, New Mexico and BW/IP International, Inc. (Not filed herewith pursuant
to Item 601(b)(4)(iii) of Regulation S-K. BW/IP hereby agrees to furnish a copy of such
bond purchase agreement to the SEC upon request.)
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10.kk* BW/IP International, Inc. 1995 Management Incentive Plan.
10.ll* Amendment Number Four to the BW/IP International, Inc. Capital Accumulation Plan
10.mm* Amendment to the BW/IP International, Inc. Retiree Health Care Plan
10.nn* Amendment to the BW/IP International, Inc. Supplemental Executive Retirement Plan
10.oo* Amendment Number Five to the BW/IP International, Inc. Capital Accumulation Plan
10.pp* Third Amendment, dated as of July 6, 1994, to the Credit Agreement, dated as of August
23, 1991, as amended, among BW/IP International, Inc., the financial institutions named
therein and Citicorp USA, Inc., as agent.
10.qq* Fourth Amendment, dated as of February 17, 1995, to the Credit Agreement, dated as of
August 23, 1991, as amended, among BW/IP International, Inc., the financial institutions
named therein and Citicorp USA, Inc. as agent.
13.a* 1994 Annual Report to Stockholders of BW/IP. (Not deemed to be filed as part of this
report except to the extent incorporated by reference.)
21.a* Subsidiaries of BW/IP
23.a* Consent of Price Waterhouse LLP
23.b* Consent of Coopers & Lybrand L.L.P.
24.a* Powers of Attorney
</TABLE>
____________________________________
* Filed herewith
<PAGE> 1
Exhibit 3.c
BW/IP, INC.
BYLAWS
AS AMENDED AND RESTATED ON MAY 11, 1994
ARTICLE I
STOCKHOLDERS
SECTION 1.01.1. ANNUAL MEETINGS. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before such meeting shall be held at such
place, either within or without the State of Delaware, and at 10:00 a.m. local
time on the last Tuesday in April (or, if such day is a legal holiday, then on
the next succeeding business day), or at such other date and hour, as may be
fixed from time to time by resolution of the board of directors and set forth
in the notice or waiver of notice of the meeting. [Sections 211(a), (b).]*
SECTION 1.01.2. BUSINESS AT ANNUAL MEETINGS. To be properly brought
before an annual meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the board
of directors pursuant to Section 1.03 of these Bylaws, (b) otherwise properly
brought before the meeting by or at the direction of the board of directors, or
(c) otherwise properly brought before the meeting by a stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 1.01.2, who is entitled to vote on such matters at
the meeting and who complies with the notice procedures set forth in this
Section 1.01.2. For business to be properly brought before an annual meeting
by a stockholder, if such business is related to the election of directors of
the Corporation, the procedures in Section 1.01.3 of these Bylaws must be
complied with. If such business relates to any other matter, the stockholder
must have given timely notice thereof in writing to the Secretary. To be
timely, a stockholder's notice must be delivered or mailed to, and received by,
the Secretary at the principal executive offices of the Corporation not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's
____________________
* Citations are to the General Corporation Law of the State of Delaware, are
inserted for reference only, and do not constitute a part of the Bylaws.
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BW/IP, INC.
BYLAWS
annual meeting of stockholders; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the 90th day prior to such annual meeting
and not later than the close of business on the later of the 60th day prior to
such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth in writing (i) as to each matter the stockholder
proposes to bring before the annual meeting, (A) a brief description of the
business desired to be brought before the annual meeting, (B) the reasons for
conducting such business at the annual meeting, and (C) any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (ii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the proposal is made, (A) the
name and address of such stockholder and such beneficial owner as they appear
on the Corporation's books, and (B) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 1.01.2. The presiding
officer of the meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 1.01.2, and if he should so
determine, such presiding officer shall declare to the meeting that any such
business not properly brought before the meeting shall not be transacted.
For the purposes of this Section 1.01.2 and Section 1.01.3 and 1.02 of
these Bylaws, "public announcement" shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition
to the provisions of this Section 1.01.2, a stockholder shall also comply with
all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing in these
Bylaws shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
SECTION 1.01.3. NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the procedures set forth in this Section 1.01.3 shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the board of directors of the Corporation may be made at
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BW/IP, INC.
BYLAWS
any annual meeting of stockholders (a) by or at the direction of the board of
directors or (b) by a stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this Section 1.01.3,
who is entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Section 1.01.3. Any such
nomination by a stockholder shall be made pursuant to timely notice thereof
given in writing to the Secretary. To be timely, a stockholder's notice must
be delivered or mailed to, and received by, the Secretary at the principal
executive offices of the Corporation not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's annual stockholder
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement
of the date of such meeting is first made. Notwithstanding anything in the
foregoing sentence to the contrary, in the event that the number of directors
to be elected to the board of directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased board of directors made by the Corporation
at least 70 days prior to the first anniversary of the preceding year's annual
meeting of stockholders, a stockholder's notice required by this Section
1.101.3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered or mailed
to, and received by, the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation. Such
stockholder's notice shall set forth in writing (i) as to each person whom the
stockholder and the beneficial owner, if any, on whose behalf the nomination is
made, proposes to nominate for election or re-election as a director (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the number of shares of
stock of the Corporation which are beneficially owned by such person, and (D)
any other information relating to such person that is required to be disclosed
in connection with the solicitation of proxies for election of directors, or as
otherwise required, in each case pursuant to Regulation 14A under the Exchange
Act (including, without limitation, such person's written consent to be named
in a proxy statement as a nominee and to serving as a director if elected); and
(ii) as to such stockholder and such beneficial owner, if any, (A) the name and
address of such stockholder and such beneficial owner as they appear on the
Corporation's books, and (B) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
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BYLAWS
Nominations of persons for election to the board of directors of the
Corporation may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (i) by or at
the direction of the board of directors or (ii) provided that the board of
directors has determined that directors shall be elected at such special
meeting, by a stockholder of the Corporation who was a stockholder of record at
the time of giving of the notice provided for in this Section 1.01.3, who is
entitled to vote for the election of directors at the meeting and who complies
with the notice procedures set forth in this Section 1.01.3. In the event the
Corporation calls a special meeting of stockholders for the purpose of election
of one or more directors to the board of directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice shall be delivered or mailed to, and received by, the
Secretary at the principal executive offices of the Corporation not earlier
than the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the board of directors to
be elected at such meeting.
At the request of the board of directors, any person nominated by the
board of directors for election as a director shall furnish to the Secretary
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. Notwithstanding anything in these
Bylaws to the contrary, no persons shall be eligible for election as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 1.01.3. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
properly made in accordance with the provisions of this Section 1.01.3, and if
he should so determine, such presiding officer shall declare to the meeting
that any such nomination not properly made shall be disregarded. In addition
to the provisions of this Section 1.01.3, a stockholder shall also comply with
all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein.
SECTION 1.02. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by law or by the
Certificate of Incorporation, may only be called by (a) the Chairman, (b) the
board of directors pursuant to a resolution adopted by a majority of the total
number of authorized directors, or (c) the President or the Secretary (or, in
the event of their absence or disability, any Vice President). Such special
meetings of the stockholders shall be held at such places, within or without
the State of
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BW/IP, INC.
BYLAWS
Delaware, and at such times, as shall be specified in the respective notices or
waivers of notice thereof. Any previously scheduled special meeting of the
stockholders may be postponed by resolution of the board of directors upon
public announcement made on or prior to the date previously scheduled for such
special meeting of the stockholders.
The purpose or purposes of any special meeting of the stockholders shall
be set forth in the notice of meeting, and, except as otherwise required by law
or by the Certificate of Incorporation, no business shall be transacted at any
special meeting of the stockholders other than the items of business stated in
the notice of meeting. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 1.02, and if he should so determine, such presiding officer shall
declare to the meeting that any such business not properly brought before the
meeting shall not be transacted. [Section 211(d).]
SECTION 1.03. NOTICE OF MEETINGS; WAIVER. The Secretary shall cause
written notice of the place, date and hour of each meeting of the stockholders,
and, in the case of a special meeting, the purpose or purposes for which such
meeting is called, to be given personally or by mail, not less than 10 nor more
than 60 days prior to the meeting, to each stockholder of record entitled to
vote at such meeting. If such notice is mailed, it shall be deemed to have been
given to a stockholder when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the record
of stockholders of the Corporation, or, if he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, then directed to him at such other address. Such further
notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any stockholder
who submits a signed waiver of notice, whether before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders need be specified in a written waiver of
notice. The attendance of any stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
SECTION 1.04. QUORUM. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
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BW/IP, INC.
BYLAWS
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
SECTION 1.05. VOTING. If, pursuant to Section 5.05 of these Bylaws, a
record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his name on the
books of the Corporation at the close of business on the day next preceding the
day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of
Incorporation, the vote of a majority of the shares represented in person or by
proxy at any meeting at which a quorum is present shall be sufficient for the
transaction of any business at such meeting. [Sections 212(a), 216.]
SECTION 1.06.1. VOTING BY BALLOT. No vote of the stockholders need be
taken by written ballot, unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
SECTION 1.06.2. INSPECTORS OF ELECTIONS. Preceding any meeting of the
stockholders, the board of directors shall appoint one or more persons to act
as Inspectors of Elections and make a written report thereof, and may designate
one or more alternate inspectors to replace any inspector who fails to act. In
the event no inspector or alternate is able to act, the presiding officer of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of the duties of an inspector,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall:
(a) ascertain the number of shares outstanding and the voting power
of each;
(b) determine the shares represented at a meeting and the validity
of proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the
inspectors; and
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BW/IP, INC.
BYLAWS
(e) certify their determination of the number of shares represented
at the meeting and their count of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist in the
performance of the duties of the inspectors.
In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, the ballots and the regular books and records of
the Corporation. The inspectors may consider other reliable information for
the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent
more votes than the holder of a proxy is authorized by the record owner to cast
or more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted in this Section
1.06.2, the inspectors, at the time they make their certification pursuant to
clause (e) of this Section 1.06.2, shall specify the precise information
considered by them, the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained, and the basis for the inspectors' belief that such
information is accurate and reliable. [Section 231(a), (b), (d).]
SECTION 1.06.3. OPENING AND CLOSING OF POLLS. The date and time for the
opening and the closing of the polls for each matter upon which stockholders
will vote at a meeting of stockholders shall be announced at the meeting by the
presiding officer of the meeting. The inspectors of the election shall be
prohibited from accepting any ballots, proxies or votes and any revocations
thereof or changes thereto after the closing of the polls, unless the Court of
Chancery upon application by a stockholder shall determine otherwise. [Section
231(c).]
SECTION 1.07. ADJOURNMENT. If a quorum is not present at any meeting of
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the adjournment is
for more than 30 days, or, if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these Bylaws, a notice
of the adjourned meeting, conforming to the requirements of Section 1.03 of
these Bylaws, shall be given to each stockholder of record entitled to vote at
such
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BYLAWS
meeting. At any adjourned meeting at which a quorum is present, any business
may be transacted on the original date of the meeting. [Section 222(c).]
SECTION 1.08. PROXIES. Any stockholder entitled to vote at any meeting of
the stockholders or to express consent to or dissent from corporate action in
writing without a meeting may, by a written instrument signed by such
stockholder or his attorney-in-fact and filed with the Secretary, authorize
another person or persons to vote at any such meeting and express such consent
or dissent for him by proxy. No such proxy shall be voted or acted upon after
the expiration of three years from the date of such proxy, unless such proxy
provides for a longer period. Every proxy shall be revocable at the pleasure
of the stockholder executing it, except in those cases where applicable law
provides that a proxy shall be irrevocable. A stockholder may revoke any proxy
which is not irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or by filing another duly
executed proxy bearing a later date with the Secretary. [Section 212(b), (c).]
SECTION 1.09. ORGANIZATION; PROCEDURE. At every meeting of stockholders
the presiding officer shall be the Chairman or such other officer as is
designated by the board of directors, or in the event of such designated
officer's absence or disability, the President, or in the event of his absence
or disability, any Vice President or, in the event of their absence or
disability, a presiding officer chosen by a majority of the stockholders
present in person or by proxy. The Secretary, or in the event of his absence or
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined
by such presiding officer.
SECTION 1.10. CONSENT SOLICITATIONS. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may
be taken at any such annual or special meeting, may be taken, subject to the
provisions of this Section 1.10, without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize to take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation. Prompt notice of
the taking of any action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
[Section 228(a), (d).]
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Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within 60 days of the earliest
dated consent delivered to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation.
[Section 228(c).]
The record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be fixed by the board of
directors. Any stockholder seeking to have the stockholders authorize or take
corporate action by written consent without a meeting shall, by written notice
to the Chairman or the Secretary, request the board of directors to fix a
record date. Upon receipt of such a request, the Chairman or Secretary shall,
as promptly as practicable, call a special meeting of the board of directors to
be held as promptly as practicable, but in any event not more than 10 days
following the date of receipt of such a request. At such a meeting, the board
of directors shall fix a record date which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the board
of directors, and which record date shall not be more than 10 days after the
date that the resolution fixing the record date is adopted by the board of
directors. Notice of the record date shall be published in accordance with the
rules and policies of any stock exchange on which securities of the Corporation
are then listed or, if the securities of the Corporation are not listed on a
stock exchange, then notice of the record date shall be published in accordance
with the rules and policies of the National Association of Securities Dealers
Automated Quotation National Market System. If no record date has been so
fixed by the board of directors, the record date for determining the
stockholders entitled to consent to the corporate action in writing without a
meeting, where no prior action by the board of directors is required by the
General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation. If no date has been fixed by the board
of directors and prior action by the board of directors is required by the
General Corporation Law of the State of Delaware, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
In the event of the delivery to the Corporation of a written consent or
consents purporting to represent the requisite voting power to authorize or
take corporate action and/or revocations relating thereto, the Secretary shall
provide for the safekeeping of such consents and revocations and shall, as
promptly as practicable, engage inspectors for the purpose of promptly
performing a
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ministerial review of the validity of the consents and revocations. No action
by written consent without a meeting shall be effective until such inspectors
have completed their review, determined that the requisite number of valid and
unrevoked consents has been obtained to authorize or take actions specified in
the consents and certified such determination for entry in the records of the
Corporation for the purpose of recording the proceedings of the meeting of the
stockholders.
For the purposes of this Section 1.10, delivery to the Corporation shall
be effected by delivery to its registered office in the State of Delaware, its
principal place of business, or the Secretary at the principal executive
offices of the Corporation. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. [Section 228(a).]
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. GENERAL POWERS. Except as may otherwise be provided by law,
by the Certificate of Incorporation or by these Bylaws, the property, affairs
and business of the Corporation shall be managed by or under the direction of
the board of directors, and the board of directors may exercise all the powers
of the Corporation. [Section 141(a).]
SECTION 2.02. NUMBER AND TERM OF OFFICE. The number of directors
constituting the entire board of directors shall be nine, which number may be
modified from time to time by resolution of the board of directors, but in no
event shall the number of directors be less than one. Each director (whenever
elected) shall hold office until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal. [Section
141(b).]
SECTION 2.03. ELECTION OF DIRECTORS. Except as otherwise provided in
Sections 2.12 and 2.13 of these Bylaws, the directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
directors is not held on the date designated therefor, the directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of directors, provided a quorum is
present, the directors shall be elected by a plurality of the votes validly
cast in such election. [Sections 211(b), (c), 216.]
SECTION 2.04. ANNUAL AND REGULAR MEETINGS. The annual meeting of the
board of directors for the purpose of electing officers and for the transaction
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of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders.
Notice of such annual meeting of the board of directors need not be given.
The board of directors from time to time may by resolution provide for the
holding of regular meetings and fix the place (which may be within or without
the State of Delaware) and the date and hour of such meetings. Notice of
regular meetings need not be given; provided, however, that if the board of
directors shall fix or change the time or place of any regular meeting, notice
of such action shall be mailed promptly, or sent by telegram, radio or cable,
to each director who shall not have been present at the meeting at which such
action was taken, addressed to him at his usual place of business, or shall be
delivered to him personally. Notice of such action need not be given to any
director who attends the first regular meeting after such action is taken
without protesting the lack of notice to him, prior to or at the commencement
of such meeting, or to any director who submits a signed waiver of notice,
whether before or after such meeting. [Section 141(g).]
SECTION 2.05. SPECIAL MEETINGS; NOTICE. Special meetings of the board of
directors shall be held whenever called by the Chairman or by the Secretary, or
in the event of their absence or disability, by the President or any Vice
President, at such place (within or without the State of Delaware), date and
hour as may be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the board of directors may be called on 24 hours'
notice, if notice is given to each director personally or by telephone,
facsimile transmission or telegram, or on five days' notice, if notice is
mailed to each director, addressed to him at his usual place of business.
Notice of any special meeting need not be given to any director who attends
such meeting without protesting the lack of notice to him, prior to or at the
commencement of such meeting, or to any director who submits a signed waiver of
notice, whether before or after such meeting, and any business may be
transacted thereat. [Sections 141(g), 229.]
SECTION 2.06. QUORUM; VOTING. At all meetings of the board of directors,
the presence of a majority of the total authorized number of directors shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the vote of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the board of directors.
[Section 141(b).]
SECTION 2.07. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting of the board of directors
to
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another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section
2.05 of these Bylaws shall be given to each director.
SECTION 2.08. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the board of directors may be taken without a
meeting if all members of the board of directors consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of the
board of directors. [Section 141(f).]
SECTION 2.09. REGULATIONS; MANNER OF ACTING. To the extent consistent with
applicable law, the Certificate of Incorporation and these Bylaws, the board of
directors may adopt such rules and regulations for the conduct of meetings of
the board of directors and for the management of the property, affairs and
business of the Corporation as the board of directors may deem appropriate.
The directors shall act only as a board, and the individual directors shall
have no power as such.
SECTION 2.10. ACTION BY TELEPHONIC COMMUNICATIONS. Members of the board of
directors may participate in a meeting of the board of directors by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this provision shall constitute presence in person at such
meeting. [Section 141(i).]
SECTION 2.11. RESIGNATIONS. Any director may resign at any time by
delivering a written notice of resignation, signed by such director, to the
Chairman or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery. [Section 141(b).]
SECTION 2.12. REMOVAL OF DIRECTORS. Any director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of
a majority of the outstanding shares of stock of the Corporation entitled to
vote for the election of such director, given at a special meeting of
stockholders called for the purpose or by consent as contemplated by Section
1.10 of these Bylaws. Any vacancy in the board of directors caused by any such
removal may be filled at such meeting or by such consent by the stockholders
entitled to vote for the election of the director so removed. If such
stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 2.13 of these Bylaws. [Section 141(b).]
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SECTION 2.13. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. If any vacancies
shall occur in the board of directors, by reason of death, resignation, removal
or otherwise, or if the authorized number of directors shall be increased, the
directors then in office shall continue to act. Such vacancies and newly
created directorships may only be filled by a majority of the directors then in
office, although less than a quorum. [Section 223.]
SECTION 2.14. COMPENSATION. The amount, if any, which each Director shall
be entitled to receive as compensation for his services as such shall be fixed
from time to time by resolution of the board of directors. [Section 141(h).]
SECTION 2.15. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of a committee designated by the board of directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the records of the Corporation
and upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees or
the board of directors, or by any other person as to matters the directors,
committee member or officer believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 3.01. HOW CONSTITUTED. The board of directors may, by resolution
adopted by a majority of the whole board, designate one or more Committees,
including an Executive Committee, an Audit Committee and a Compensation and
Benefits Committee, each such Committee to consist of such number of directors
as from time to time may be fixed by the board of directors. The board of
directors may designate one or more directors as alternate members of any such
Committee, who may replace any absent or disqualified member or members at any
meeting of such Committee. Thereafter, members (and alternate members, if any)
of each such Committee may be designated at the annual meeting of the board of
directors. Any such Committee may be abolished or re-designated from time to
time by the board of directors. Each member (and each alternate member) of any
such Committee (whether designated at an annual meeting of the board of
directors or to fill a vacancy or otherwise) shall hold office until his
successor shall have been designated or until he shall cease to be a director,
or until his earlier death, resignation or removal. The Executive Committee,
the Audit Committee and the
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Compensation and Benefits Committee shall have, and any such other Committee
may be granted by the board of directors, power to authorize the seal of the
Corporation to be affixed to any or all papers which may require it. [Section
141(c).]
SECTION 3.02. POWERS.
SECTION 3.02.1 EXECUTIVE COMMITTEE. During the intervals between the
meetings of the board of directors, the Executive Committee, except as
otherwise provided in this Section 3.02.1, shall have and may exercise all the
powers and authority of the board of directors in the management of the
property, affairs and business of the Corporation, including the power to
declare dividends, to authorize the issuance of stock and to adopt a
certificate of ownership and merger. Each such other Committee, except as
otherwise provided in this Section 3.02.1, shall have and may exercise such
powers of the board of directors as may be provided in these Bylaws or by
resolution or resolutions of the board of directors. Neither the Executive
Committee nor any such other Committee shall have the power or authority:
(a) to amend the Certificate of Incorporation (except to the extent
permitted by the Delaware General Corporation Law),
(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
(d) to recommend to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or
(e) to amend these Bylaws.
SECTION 3.02.2. AUDIT COMMITTEE. The Audit Committee shall have and may
exercise the power to review and approve the scope and results of the
Corporation's outside audit, and the fees therefor, review, consider and act
upon all matters concerning auditing and accounting matters and the selection
of outside auditors.
SECTION 3.02.3. COMPENSATION AND BENEFITS COMMITTEE. The Compensation and
Benefits Committee shall have and may exercise the power to review, consider
and act upon matters of salary and other compensation and benefits of all
officers and other employees of the Corporation, as well as act
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upon all matters concerning benefits and retirement or pension plans, and
exercise such authority as is delegated to it under the provisions of, any
benefit, retirement or pension plan.
SECTION 3.03. PROCEEDINGS. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall
report such proceedings to the board of directors at the meeting of the board
of directors next following any such proceedings.
SECTION 3.04. QUORUM AND MANNER OF ACTING. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute
a quorum for the transaction of business. The act of the majority of the
members present at any meeting at which a quorum is present shall be the act of
such Committee. Any action required or permitted to be taken at any meeting of
any such Committee may be taken without a meeting, if all members of such
Committee shall consent to such action in writing and such writing or writings
are filed with the minutes of the proceedings of the Committee. The members of
any such Committee shall act only as a Committee, and the individual members of
such Committee shall have no power as such. [ Section 141(c).]
SECTION 3.05. ACTION BY TELEPHONIC COMMUNICATIONS. Members of any
Committee designated by the board of directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
SECTION 3.06. ABSENT OR DISQUALIFIED MEMBERS. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. [Section 141(c).]
SECTION 3.07. RESIGNATIONS. Any member (and any alternate member) of any
Committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery. [Section
141(b).]
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SECTION 3.08. REMOVAL. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by majority of the whole board of directors.
SECTION 3.09. VACANCIES. If any vacancy shall occur in any Committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the board of directors.
ARTICLE IV
OFFICERS
SECTION 4.01. NUMBER. The officers of the Corporation shall be chosen by
the board of directors and shall be a Chairman, a President, one or more Vice
Presidents and a Secretary. The board of directors also may elect a Chief
Financial Officer, a Treasurer and one or more Assistant Secretaries and
Assistant Treasurers in such numbers as the board of directors may determine.
Any number of offices may be held by the same person. No officer need be a
director of the Corporation. [Section 142(a), b).]
SECTION 4.02. ELECTION. Unless otherwise determined by the board of
directors, the officers of the Corporation shall be elected by the board of
directors at the annual meeting of the board of directors, and shall be elected
to hold office until the next succeeding annual meeting of the board of
directors. In the event of the failure to elect officers at such annual
meeting, officers may be elected at any regular or special meeting of the board
of directors. Each officer shall hold office until his successor has been
elected and qualified, or until his earlier death, resignation or removal.
[Section 142(b).]
SECTION 4.03. SALARIES. The salaries of all officers and agents of the
Corporation shall be fixed by the Compensation and Benefits Committee or, in
the absence of such a Committee, by the board of directors.
SECTION 4.04. REMOVAL AND RESIGNATION; VACANCIES. Any officer may be
removed for or without cause at any time by the board of directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the board of directors, the Chairman or the Secretary. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the board of directors. [Section
142(b), (e).]
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SECTION 4.05. AUTHORITY AND DUTIES OF OFFICERS. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these Bylaws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
SECTION 4.06. THE CHAIRMAN. The Chairman may preside at all meetings of
the stockholders and shall preside at all meetings of the directors at which he
is present, shall be the chief executive officer of the Corporation, and shall
have general control and supervision of the policies and operations of the
Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. He shall manage and administer the
Corporation's business and affairs and shall perform all duties and exercise
all powers usually pertaining to the office of a chief executive officer of a
corporation. He shall have the authority to sign, in the name and on behalf of
the Corporation, checks, orders, contracts, leases, notes, drafts and other
documents and instruments in connection with the business of the Corporation,
and together with the Secretary or an Assistant Secretary, conveyances of real
estate and other documents and instruments to which the seal of the Corporation
is affixed. He shall have the authority to cause the employment or appointment
of such employees and agents of the Corporation as the conduct of the business
of the Corporation may require, to fix their compensation and to remove or
suspend any employee or agent elected or appointed by the Chairman.
SECTION 4.07. THE PRESIDENT. The President shall be chief operating
officer of the Corporation, and, subject to the control of the Chairman, shall
have general and active management of the ordinary business of the Corporation
and shall see that all orders and resolutions of the board of directors are
carried into effect. In the absence of the Chairman, the President shall
exercise all the powers of the Chairman, including, without limitation, the
authority to (a) sign, in the name and on behalf of the Corporation, checks,
orders, contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and, together with the
Secretary or an Assistant Secretary, conveyances of real estate and other
documents and instruments to which the seal of the Corporation is affixed; (b)
cause the employment or appointment of such employees and agents of the
Corporation as the conduct of the business of the Corporation may require and
to fix their compensation; and (c) remove or suspend any employee or agent who
shall not have been elected or appointed by the Chairman or the board of
directors. The President shall perform such other duties and have such other
powers as the board of directors or the Chairman may from time to time
prescribe.
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SECTION 4.08. THE VICE PRESIDENTS. The several Vice Presidents shall
perform such duties and exercise such powers as may be assigned to them from
time to time by the Chairman or the President. In the absence of the
President, his duties shall be performed and his powers may be exercised by
such Vice President as shall be designated by the Chairman or the President or
failing such designation, such duties shall be performed and such powers may
be exercised by the Vice Presidents in the order of their earliest election to
that office; subject in any case to review and superseding action by the
Chairman or the President.
SECTION 4.09. THE SECRETARY. The Secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of the board of directors
in books provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with the
provisions of these Bylaws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the board of directors, he shall furnish a copy
of such resolution to the members of such Committee.
(d) He shall be the custodian of the records and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the
Corporation prior to the issuance thereof and to all instruments
the execution of which on behalf of the Corporation under its
seal shall have been duly authorized in accordance with these
Bylaws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records
required by law, the Certificate of Incorporation or these
Bylaws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be
kept in such manner as to show at any time the number of shares
of stock of the Corporation of each class issued and
outstanding, the names (alphabetically arranged) and the
addresses of the holders of record of such shares, the
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number of shares held by each holder and the date as of which
each became such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
an Assistant Secretary shall have signed) certificates
representing shares of the Corporation the issuance of which
shall have been authorized by the board of directors.
(h) He may, in lieu of the Chairman, preside at all meetings of the
stockholders at which he is present.
(i) He shall perform, in general, all duties incident to the office
of Secretary and such other duties as may be given to him by
these Bylaws or as may be assigned to him from time to time by
the board of directors, the Chairman or the President.
SECTION 4.10. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the chief financial officer of the Corporation and, subject to the
control of the Chairman, shall have general management over the finances and
financial records and financial reporting systems of the Corporation. He shall
render to the board of directors, the Chairman or the President, whenever
requested, a statement of the financial condition of the Corporation and render
a full financial report at the annual meeting of the stockholders, if called
upon to do so. He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial transactions
of the Corporation. He shall perform, in general, all duties incident to the
office of chief financial officer and such other duties as may be given to him
by these Bylaws or as may be assigned to him from time to time by the board of
directors or the Chairman.
SECTION 4.11. THE TREASURER. The Treasurer shall have the following
powers and duties:
(a) He shall have charge and supervision over and be responsible
for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and
accurate records of all receipts of the Corporation.
(b) He shall cause the moneys and other valuables of the Corporation
to be deposited in the name and to the credit of the Corporation
in such banks or trust companies or with
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such bankers or other depositories as shall be selected in
accordance with Section 8.05 of these Bylaws.
(c) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in Section 8.06 of these
Bylaws) upon the authorized depositories of the Corporation and
cause to be taken and preserved proper vouchers for all moneys
disbursed.
(d) He may sign (unless an Assistant Treasurer or the Secretary or
an Assistant Secretary shall have signed) certificates
representing stock of the Corporation the issuance of which
shall have been authorized by the board of directors.
(e) He shall perform, in general, all duties incident to the office
of Treasurer and such other duties as may be given to him by
these Bylaws or as may be assigned to him from time to time by
the board of directors, the Chairman or the President.
SECTION 4.12. ADDITIONAL OFFICERS. The board of directors may appoint such
other officers and agents as it may deem appropriate, and such other officers
and agents shall hold their offices for such terms and shall exercise such
powers and perform such duties as may be determined from time to time by the
board of directors. The board of directors from time to time may delegate to
any officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or agent
appointed by him for or without cause. [Section 142(a), (b).]
SECTION 4.13. SECURITY. The board of directors may require any officer,
agent or employee of the Corporation to provide security for the faithful
performance of his duties, in such amount and of such character as may be
determined from time to time by the board of directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
SECTION 5.01. CERTIFICATES OF STOCK. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of, the Corporation by the Chairman, the President or a Vice President or by
the
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Secretary certifying the number of shares owned by him in the Corporation.
Such certificate shall be in such form as the board of directors may determine,
to the extent consistent with applicable law, the Certificate of Incorporation
and these Bylaws. [Section 158.]
SECTION 5.02. SIGNATURES; FACSIMILE. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. [Section 158.]
SECTION 5.03. LOST, STOLEN OR DESTROYED CERTIFICATES. The board of
directors may direct that a new certificate be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the board of directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
board of directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. [Section 167.]
SECTION 5.04. TRANSFER OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Subject to the provisions of the Certificate of Incorporation
and these Bylaws, the board of directors may prescribe such additional rules
and regulations as it may deem appropriate relating to the issue, transfer and
registration of shares of the Corporation.
SECTION 5.05. RECORD DATE. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
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BW/IP, INC.
BYLAWS
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned
meeting. [Section 213 (a), (c).]
SECTION 5.06. REGISTERED STOCKHOLDERS. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer, both the transferor
and transferee request the Corporation to do so. [Section 159.]
SECTION 5.07. TRANSFER AGENT AND REGISTRAR. The board of directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. NATURE OF INDEMNITY. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been
taken or omitted in such capacity, and may indemnify any person who was or is a
party or is threatened to be made a party to such an action, suit or proceeding
by reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with
such action, suit or
22
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BW/IP, INC.
BYLAWS
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case
of an action or suit by or in the right of the Corporation to procure a
judgment in its favor (1) such indemnification shall be limited to expenses
(including attorneys' fees) actually and reasonably incurred by such person in
the defense or settlement of such action or suit, and (2) no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 6.02. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 6.01 of these Bylaws or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
SECTION 6.03. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a director or officer of the Corporation under Section 6.01
of these Bylaws (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 6.01 of these Bylaws. Any
indemnification of an employee or agent of the Corporation under Section 6.01
of these Bylaws (unless ordered by a court) may be made by the Corporation upon
a determination that indemnification of the employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 6.01 of these Bylaws. Any such determination shall be made (1) by
the board of directors by a majority vote of a quorum consisting of directors
who
23
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BW/IP, INC.
BYLAWS
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 6.04. ADVANCE PAYMENT OF EXPENSES. Expenses incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate. The board of directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
SECTION 6.05. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any
indemnification of a director or officer of the Corporation under Sections 6.01
and 6.02 of these Bylaws, or advance of costs, charges and expenses to a
director or officer under Section 6.04 of these Bylaws, shall be made promptly,
and in any event within 30 days, upon the written request of the director or
officer. If a determination by the Corporation that the director or officer is
entitled to indemnification pursuant to this Article is required, and the
Corporation fails to respond within 60 days to a written request for indemnity,
the Corporation shall be deemed to have approved such request. If the
Corporation denies a written request for indemnity or advancement of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within 30 days, the right to indemnification or advances as granted by this
Article shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section 6.04 of
these Bylaws where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of these Bylaws, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its board
of directors, its independent legal counsel, and its stockholders) to have made
a determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 of these Bylaws, nor
the fact that there has
24
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BW/IP, INC.
BYLAWS
been an actual determination by the Corporation (including its board of
directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 6.06. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 6.07. INSURANCE. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article;
provided, that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire board of
directors.
SECTION 6.08. SEVERABILITY. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the
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BW/IP, INC.
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Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent
permitted by applicable law.
SECTION 6.09. DEFINITION. For purposes of this Article, the term
"Corporation" shall include constituent corporations referred to in Subsection
(h) of Section 145 of the General Corporation Law of the State of Delaware (or
any similar provision of applicable law at the time in effect).
ARTICLE VII
OFFICES
SECTION 7.01. REGISTERED OFFICE. The registered office of the Corporation
in the State of Delaware shall be located at 30 The Green in the City of Dover,
County of Kent.
SECTION 7.02. OTHER OFFICES. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the board of directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. DIVIDENDS. Subject to any applicable provisions of law and
the Certificate of Incorporation, dividends upon the shares of the Corporation
may be declared by the board of directors at any regular or special meeting of
the board of directors and any such dividend may be paid in cash, property, or
shares of the Corporation. [Section 173.]
SECTION 8.02. RESERVES. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the board of directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation or for such other purpose as the
board of directors shall think conducive to the interest of the Corporation,
and the board of directors may similarly modify or abolish any such reserve.
[Section 171.]
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BW/IP, INC.
BYLAWS
SECTION 8.03. EXECUTION OF INSTRUMENTS. The Chairman, the President, any
Vice President or the Secretary may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. The board
of directors, the Chairman or the President may authorize any other officer or
agent to enter into any contract or execute and deliver any instrument in the
name and on behalf of the Corporation. Any such authorization may be general or
limited to specific contracts or instruments.
SECTION 8.04. CORPORATE INDEBTEDNESS. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the board of directors, the Chairman, the
President, the Chief Financial Officer or the Treasurer. Such authorization may
be general or confined to specific instances. Loans so authorized may be
effected at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds,
debentures, notes and other obligations or evidences of indebtedness of the
Corporation issued for such loans shall be made, executed and delivered as the
board of directors, the Chairman, the President, the Chief Financial Officer or
the Treasurer shall authorize. When so authorized by the board of directors,
the Chairman, the President, the Chief Financial Officer or the Treasurer, any
part of or all the properties, including contract rights, assets, business or
goodwill of the Corporation, whether then owned or thereafter acquired, may be
mortgaged, pledged, hypothecated or conveyed or assigned in trust as security
for the payment of such bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation, and of the interest thereon, by
instruments executed and delivered in the name of the Corporation.
SECTION 8.05. DEPOSITS. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositories as may
be determined by the board of directors, the Chairman, the President, the
Chief Financial Officer or the Treasurer, or by such officers or agents as
may be authorized by the board of directors or the Chairman to make such
determination.
SECTION 8.06. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the board of directors or the
Chairman from time to time may determine.
SECTION 8.07. SALE, TRANSFER, ETC. OF SECURITIES. To the extent authorized
by the board of directors or the Chairman, the President, any Vice President or
the Secretary or any other officers designated by the board of directors, the
Chairman or the President may sell, transfer, endorse, and assign
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BW/IP, INC.
BYLAWS
any shares of stock, bonds or other securities owned by or held in the name of
the Corporation, and may make, execute and deliver in the name of the
Corporation, under its corporate seal, any instruments that may be appropriate
to effect any such sale, transfer, endorsement or assignment.
SECTION 8.08. VOTING AS STOCKHOLDER. Unless otherwise determined by
resolution of the board of directors, the Chairman, the President, any Vice
President or the Secretary shall have full power and authority on behalf of the
Corporation to attend any meeting of stockholders of any corporation in which
the Corporation may hold stock, and to act, vote (or execute proxies to vote)
and exercise in person or by proxy all other rights, powers and privileges
incident to the ownership of such stock. Such officers acting on behalf of the
Corporation shall have full power and authority to execute any instrument
expressing consent to or dissent from any action of any such corporation
without a meeting. The board of directors may by resolution from time to
time confer such power and authority upon any other person or persons.
SECTION 8.09. FISCAL YEAR. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the
Corporation's first fiscal year which shall commence on the date of
incorporation) and shall terminate in each case on December 31.
SECTION 8.10. SEAL. The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its incorporation
and the words "Corporate Seal" and "Delaware". The form of such seal shall be
subject to alteration by the board of directors. The seal may be used by
causing it or a facsimile thereof to be impressed, affixed or reproduced, or
may be used in any other lawful manner.
SECTION 8.11. BOOKS AND RECORDS; INSPECTION. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the board of directors.
ARTICLE IX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred upon it by
law, the board of directors is expressly authorized to adopt, repeal, alter or
amend the Bylaws of the Corporation by the vote of a majority of the entire
board of directors. Bylaws adopted, repealed, altered or amended by the board
of directors may be altered, amended or repealed, and new Bylaws may be
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BW/IP, INC.
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adopted, by the affirmative vote of a majority of the shares, represented in
person or by proxy and entitled to vote on such matter, at any annual or
special meeting of the stockholders at which a quorum is present. Any proposal
to adopt, repeal, alter or amend any Bylaw at an annual meeting of the
stockholders must be properly brought before such meeting as provided in
Section 1.01.2 of these Bylaws, and any proposal to adopt, repeal, alter or
amend any Bylaw at a special meeting of the stockholders must be set forth in
the notice thereof. [Section 109(a).]
* * *
29
<PAGE> 1
Exhibit 10.kk
BW/IP INTERNATIONAL, INC.
1995
MANAGEMENT INCENTIVE PLAN
PURPOSE
The purpose of the BW/IP Management Incentive Plan is to provide the
opportunitiy for key managerial and professional employees with additional
incentive to improve individual and organization performance. This incentive
compensation is based on the accomplishment of financial and non-financial
goals established to support the Company's business objectives.
PLAN SUMMARY
The BW/IP Management Incentive Plan has several levels of participation, the
selection criteria and guidelines for participation at each level are included
in the following sections of this plan description. Participation and
participation level are generally determined by the position held. To be
considered for inclusion the position must afford real opportunity for the
individual to have a substantial impact on the performance of the organization.
Participation in MIP is at the discretion of the Company. Eligibility, bonus
opportunity, and performance criteria will generally be established by the
participant's level of responsibility, job size and accountability, and
reporting relationship to management and executive level positions but no
guarantee of participation or retention at any level is intended by the
guidelines outlined in this document.
To be considered for inclusion at any level an employee must meet the
eligibility requirements; be recommended by an Officer of the Company; and be
approved by the Chairman of the Board & CEO with further approval by the
Compensation Committee of the Board of Directors, as may be required.
Participation in the Management Incentive Plan does not imply the right to be
retained in the employ of BW/IP, nor does it entitle a participant to any right
or payment under this plan unless the participant meets the appropriate levels
of job performance. The Company reserves the right to modify, suspend or
terminate the Management Incentive Plan in whole or in part at any time.
MANAGEMENT INCENTIVE PLAN
MIP Tiers 1-5 is a cash bonus award plan for Executive and Key Management
personnel. Inclusion in these tiers is generally determined by the position
but can also be influenced by other factors. Recommendation for participation
and assignment of level of participants rests with the Chairman of the Board &
CEO and with approval of the Compensation Committee of the Board as
appropriate.
<PAGE> 2
The general definition of the five MIP tiers are as follows:
TIER 1 CHIEF EXECUTIVE
Limited by the plan to the Chairman of the Board & CEO.
TIER 2 PRESIDENT
Limited by the plan to the President & COO.
TIER 3 EXECUTIVE OR GENERAL MANAGEMENT
This level of participation is for positions that are accountable for
the operating results of free-standing businesses that are not dependent
on other units and have command of their resources. These positions and
the incumbents have a major impact on overall corporate operating
results and are subject only to broad policy and Chief Executive
guidance.
TIER 4 SMALLER DIVISION GENERAL MANAGER/CORPORATE STAFF OFFICERS/SENIOR
DIVISION EXECUTIVES
The positions in this level are accountable for operating results of
several operations or large organization segments, or they have
operational and conceptual integration or coordination of activities
diverse in nature and objectives in an important management area with
corporate-wide impact.
These positions generally have international responsibilities with a
significant impact on overall corporate operating results. They are
subject to functional policies and goals with General Management
direction.
TIER 5 KEY LINE MANAGERS/STAFF PROFESSIONALS
This level of participation is for positions that are accountable for
the operating results of units with manufacturing, sales/marketing or
product development, but generally not all three. Typically these
operations or functions have P&L responsibility but are not considered
free-standing units. Positions in this tier may also have advisory
support roles to executive or general management at a corporate or
division level in key functional areas such as finance or technology.
These positions have responsibility and authority to influence but
not control major decisions impacting overall corporate or division
operating results. An evaluation of these positions using the BW/IP
job evaluation system will usually exceed 1182 Total Points.
2
<PAGE> 3
MIP TIERS 6 - 7 is a cash bonus award plan for Key Line Management and Staff
Professionals for the Operating Units or corporate management. Participation in
this plan is limited to employees who meet the general eligibility requirements
and are not participants in any other BW/IP incentive compensation plan. MIP
Tiers 6 & 7 has two levels of participation. Inclusion in these two tiers is
generally determined by the position but can also be influenced by other
factors. Recommendation for participation and assignment of level of
participants rests with the Chairman of the Board & CEO and with the approval
of the Compensation Commitee of the Board as appropriate.
The general definition of the two MIP tiers is as follows:
TIER 6 OPERATIONS LINE MANAGEMENT/KEY DIVISION STAFF
Participation at this level is for positions where the performance of
the incumbent contributes to the operating results of the Division and
Operation. These positions generally report to Senior Operating or
Operations Management and are responsible for a department or function
in an important operating area. An evaluation of these positions using
the BW/IP job evaluation system will usually exceed 864 Total Points
with at least 230 Accountability points.
TIER 7 MID-MANAGERS-LINE/STAFF/PROFESSIONALS
Participation at this level is for positions that have any impact on
successful operating results of the Division's Operations. These
positions usually report to the General or Operations Management as
manufacturing, technical or administrative department heads. An
evaluation of these positions using the BW/IP job evaluation system will
always exceed 677 Total Points with 175 Accountability points.
BONUS POOL
In addition to the individual bonus limits as established by the Plan, there is
an overall Company MIP bonus pool expressed as a percentage of the Company's
Division Operating Income (DOI).
With the DOI budget generally set at target, the MIP target bonus pool is not
to exceed 5% of the Company's DOI. Seventy five percent (75%) of the Company's
DOI budget constitutes the Minimum performance level producing a bonus pool of
approximately 0.6 times the target pool. One hundred twenty five percent
(125%) of the Company's DOI budget constitutes the Maximum performance level
producing a bonus pool of approximately 1.75 times the target pool.
In 1995, Target is being set at 8% above 1994 Actual for Company and Division's
DOI and the pool set accordingly. 85% and 135% of 1994 Actual DOI constitutes
the Minimum and Maximum performance levels, respectively, with Bonus Pool set
within the limits noted in the paragraph above. Other goals, e.g.: Cash Flow,
Net Earnings or EPS, will have Minimums of Maximums adjusted according to
balance sheet calculations. For 1995, the Bonus Pool for 115% performance
above 1994 Actual is set at approximately 15% above the target level pool.
Non-Financial and Non-DOI related goals may be measured on the traditional
basis.
If the aggregate guideline bonus calculation exceeds the bonus pool limit,
guideline bonuses will be reduced to conform with the limitation.
3
<PAGE> 4
BONUS POOL...(CON'T.)
In the event the Company does not achieve the Minimum performance level, but an
individual division does, a divisional pool will be created. The divisional
pool is based on historical division's DOI percentage at target.
BONUS AWARD GUIDELINES, TARGETS, WEIGHTINGS
For each participant, performance will be measured against financial and non-
financial goals established before the beginning of the plan year. Specific
targets will be established to support the accomplishment of long and short
range goals consistent with the business objectives of the Company.
TABLE ONE (attached) provides the anticipated bonus opportunity at selected
overall performance levels for each level of participation.
The overall performance of the participation will be measured as the weighted
accomplishment of financial and non-financial goals of the individual and the
operating units appropriate for the individual. Weightings will generally
depend on the plan level of the participant following the general guideline
that; financial objectives for line managers will generally not constitute less
than 70% (for staff managers and professionals, not less than 50%) of the
overall weight and individual, non-financial goals will not exceed 30% (50% for
staff managers and professionals) of the total weight.
TABLE TWO (attached) is a matrix of the weighting by organizational units for
each level of participation.
PLAN YEAR, BONUS PAYMENT AND PLAN ADMINISTRATION
The Management Incentive Plan will be administered by the BW/IP International,
Inc. Vice President Human Resources.
The Management Incentive Plan Year is the calendar year, January through
December. Recommendation for participation and determination of goals should
be completed before the start of the plan year.
Participants who as a result of transfer or promotion become eligible for
participation at a different plan level will receive pro-rated awards based on
the amount of time spent at each level, provided that a reasonable period
(usually three months) was spent in each level. The pro-rated award will be
based on the base salary at each level.
Newly hired employees who are otherwise eligible and recommended for
participation will normally be employed prior to July 1st to be included.
For each plan level an individual guideline bonus calculated as a percentage of
year-ending base salary will be determined based on the participant's
performance against established goals.
Bonus payment for the plan year will be made no later than 15 March of the
following year. The bonus award will be considered as oridinary income and
subject to taxes as such. The payment will be included for pension
calculations, but not for insurance or the Capital Accumulation Plan.
4
<PAGE> 5
TERMINATION OF EMPLOYMENT
Termination of employment by resignation or for cause prior to the end of the
plan year will result in the loss of eligibility for payment of the bonus
award.
Termination of employment as a result of retirement, lay-off, or permanent
disability may not forfeit eligibility for a bonus award if the participant was
eligible for an award for six months prior to the termination at plan year-end.
Any exceptions to these requirements will be requested in writing to the Plan
Administrator and if the exception is granted, it will be pro-rata payable no
later than the normal payment date.
5
<PAGE> 6
TABLE ONE - 1995 BONUS AWARD GUIDELINES
TIERS 1 - 5
PAYMENT AS A % OF BASE SALARY
<TABLE>
<CAPTION>
Minimum 1994 Target 115% of Maximum 135%
Plan Level(*) 85% of '94 Actual DOI Actual DOI 108% of '94 DOI '94 Actual DOI of '94 Actual DOI
------------- --------------------- ---------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Tier 1 25% 35% 58% 70% 82%
Tier 2 22% 30% 50% 60% 72%
Tier 3 20% 27% 45% 54% 65%
Tier 4 18% 23% 38% 46% 56%
Tier 5 13% 17% 28% 34% 40%
</TABLE>
(*) For DOI and DOI related calculations.
TABLE TWO - RESULTS WEIGHTING GUIDELINES
TIERS 1 - 5
UNIT RESULTS AS A % OF OVERALL
<TABLE>
<CAPTION>
BW/IP Total Area or (3) Oper. Individual or
Plan Level (1) Div (2) Country(s) Unit (4) Non-Fin'l
---------- ----- ------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Tier 1 70 -- -- -- 30
Tier 2 70 -- -- -- 30
Tier 3 20-70 0-60 -- -- 20-30
Tier 4 20-70 0-60 -- -- 20-30
Tier 5 10 /------ ---60(5)--- -------\ 30
</TABLE>
(1) TOTAL COMPANY includes EPS, net earnings, EBIT, and cash flow. (2) TOTAL
DIVISION is the results of all operations of the unit worldwide.
(2) AREA OR COUNTRY(S) is the results of a geographically or functionally
discreet segment of the unit.
(3) OPERATING UNIT is the results of the individual manufacturing, sales, or
technical operations of the unit, as appropriate.
(4) For TIER 5 the 60% Weight will be allocated to the performance area
appropriate for the participant's position.
6
<PAGE> 7
TABLE ONE - 1995 BONUS AWARD GUIDELINES
TIERS 6 & 7
PAYMENT AS A % OF BASE SALARY
<TABLE>
<CAPTION>
Minimum 1994 Target 115% of Maximum 135%
Plan Level(*) 85% of '94 Actual DOI Actual DOI 108% of '94 DOI '94 Actual DOI of '94 Actual DOI
------------- --------------------- ---------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Tier 6 10% 13% 21% 26% 30%
Tier 7 7% 9% 15% 18% 20%
</TABLE>
(*) For DOI and DOI related calculations.
TABLE TWO - RESULTS WEIGHTING GUIDELINES
UNIT RESULTS AS A % OF OVERALL
<TABLE>
<CAPTION>
Total Area or (2) Oper. Individual or
Plan Level BW/IP (Div(1) Country(s) Unit(3) Non-Fin'l
---------- ----- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
TIER 6 -(1) /---------50-70(4)---------------\ 30-50
TIER 7 -(1) /---------50-70(4)---------------\ 30-50
</TABLE>
NOTES
(1) TOTAL DIVISION is the results of all operations of the unit worldwide.
Substitute BW/IP for Corporate participants.
(2) AREA OR COUNTRY(S) is the results of a geographically or functionally
discreet segment of the unit.
(3) OPERATING UNIT is the results of the individual manufacturing, sales, or
technical operations of the unit, as appropriate.
(4) For TIERS 6 & 7 the 50 - 70% Weight will be allocated to the performance
area appropriate for the participant's position. Most line managers
should have a 70% financial weighting.
7
<PAGE> 1
Exhibit 10.ll
AMENDMENT NUMBER FOUR
TO THE
BW/IP INTERNATIONAL, INC.
CAPITAL ACCUMULATION PLAN
(as amended and restated as of January 1, 1992)
The BW/IP International, Inc. Capital Accumulation Plan, as amended
and restated as of January 1, 1992 (the "Plan"), is hereby amended in the
following respects:
1. Transfers and Distributions from the Executive Life Fund.
The fifth sentence of Subsection 6.5(b)(ii) is hereby deleted and the
following inserted in lieu thereof:
"Notwithstanding anything in this Plan to the contrary, no Participant
shall be permitted to elect, pursuant to Subsections 5.2 or 6.2, to
transfer or withdraw funds out of the Executive Life Fund, except under the
following circumstances:
(A) In the event that the aggregate amount of cash held in
the Executive Life Fund shall at any time exceed five percent (5%) of
the adjusted value of the Executive Life Fund determined as of April
1, 1993 (the "Minimum Executive Life Liquid Amount"), then each
Participant with a portion of his Account then invested in the
Executive Life Fund shall be allocated a pro rata portion of such cash
equal to the percentage which the Participant's interest in the
Executive Life Fund, as of April 11, 1993, bears to the balance of the
Executive Life Fund determined as of such date, and such Participant
shall be provided forms by the Committee permitting such Participant
to transfer, effective as soon as administratively practicable after
the delivery to the Committee of such forms properly completed and
within such time periods established by the Committee, such amount of
cash allocated to his Account to any other Fund hereunder into which
he would otherwise be permitted on a quarterly basis to transfer
investments.
<PAGE> 2
(B) Any Participant who is entitled to make a transfer under
paragraph (A) of this Subsection 6.5(b)(ii) and who has previously
received, or who was entitled to receive, a distribution from the Plan
other than with respect to the portion of his Account invested in the
Executive Life Fund, may, subject to the requirements of Section 8.5
hereof, elect to receive a distribution of the amounts of cash
allocated to his Account under such paragraph (A) by filing such forms
in such manner and at such times as the Committee shall prescribe.
(C) In the event that a Participant entitled to transfer cash
pursuant to paragraph (A) of this Subsection 6.5(b)(ii) fails to do
so, all such amounts of cash allocated to such Participant shall be
invested as soon as administratively practicable in the Income Fund
and allocated to such Participant's Account.
(D) In the event that at any time there shall be cash in the
Executive Life Fund in an amount less than the Minimum Executive Life
Liquid Amount, all amounts of such cash shall be transferred as soon
as administratively practicable to the Income Fund and all such
amounts shall be allocated pro rata in the same manner provided for
under paragraph (A) of this Subsection 6.5(b)(ii) to each
Participant's Account which was immediately prior thereto invested in
the Executive Life Fund."
That portion of the second sentence of Subsection 8.5A preceding the first
semicolon is hereby deleted and the following inserted in lieu thereof:
"A Beneficiary described in the preceding sentence may, by
filing an appropriate election with the Plan Committee, elect to defer
receipt of a lump sum distribution until such date as the Committee
determines, in its sole discretion, that all amounts of such Account
held under the Executive Life Fund are currently distributable or that
all amounts of the Executive Life Fund which were allocable to the
Participant's Account have been transferred out of the Executive Life
Fund;"
2. Effective Date.
This Amendments made hereby shall be effective as the 1st day of
February, 1994.
<PAGE> 3
3. Ratification and Re-Affirmation.
Except as specifically amended hereby, the Plan, as heretofore amended
to date shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly
executed at Long Beach, California, on the 25 day of February, 1994.
BW/IP International, Inc.
By D. G. Taylor
------------------------
Its Vice President
------------------------
<PAGE> 1
Exhibit 10.mm
AMENDMENT
TO THE
BW/IP INTERNATIONAL, INC.
RETIREE HEALTH CARE PLAN
(as restated as of July 1, 1993)
The BW/IP International, Inc. Retiree Health Care PLAN (the
"Plan"), which is maintained by BW/IP International, Inc. (the "Company"), is
hereby amended in the following respects:
1. Amendment or Termination
The Plan is amended by substituting the following for the last
provision thereof under the heading entitled "Amendment":
Subject to any obligation of the Employer under any applicable
collective bargaining then in effect, the Employer retains the right,
through the duly taken action of the Compensation and Benefits
Committee of its Board of Directors, or if the Board of Directors
shall determine by the duly taken action of the Board of Directors, at
any time to amend, change, modify or terminate this Plan and the terms
thereof; provided however, that no amendment of this Plan shall have
an adverse effect upon benefits that may not be reduced under the
Internal Revenue Code, ERISA or any other applicable provision of law.
2. Payment Under an Assignment of Rights
The Plan is amended by adding the following new Section to the
end thereof:
"Payment Under an Assignment of Rights
Notwithstanding any other provision hereof, the Plan shall pay
benefits to an alternate recipient under and otherwise comply with a
Qualified Medical Child Support Order, as defined in Section 609(a)(2)
of ERISA ("QMCSO"). Upon receipt of a medical child support order
which purports to be a QMCSO, the Plan Administrator shall promptly
notify any affected Participant and any alternate
<PAGE> 2
recipients of the Plan's receipt of such order and of the procedures
the Plan Administrator shall undertake to determine whether the order
is a QMCSO. The Plan Administrator shall thereupon undertake to
review such order and determine if it is a QMCSO. The Plan
Administrator shall determine whether the order is a QMCSO within a
reasonable period of time after receipt of the order and notify the
affected Participant and any alternate recipients in writing of its
decision. An alternate recipient under a QMCSO shall be permitted to
designate to the Plan in writing a representative to whom notices
under the Plan should be addressed.
Notwithstanding any other provision hereof, payments hereunder
shall be made in accordance with any assignment of rights as required
by any state Medicaid program and in accordance with any state law
which provides that the state has acquired the rights to payment with
respect to a participant."
3. Enrollment Without Regard to Medicaid
The Plan is amended by adding the following new Section to the
end thereof:
"Enrollment Without Regard to Medicaid
Employees shall be permitted to enroll in the Plan and
benefits shall be paid hereunder without regard to whether the
affected person is covered by Medicaid."
4. Adopted Children
The Plan is amended by adding the following new Section to the
end thereof:
"Adopted Children
The Plan shall not treat any child who is adopted by, or who
was placed for adoption with, a Participant prior to the child's
eighteenth birthday any differently than the natural children of such
Participant."
5. Pediatric Vaccines
The Plan is amended by adding the following new Section to the
end thereof:
"Pediatric Vaccines
<PAGE> 3
To the extent that pediatric vaccines were provided under the
Plan on May 1, 1993, coverage for such vaccines shall not be reduced
after August 10, 1993.
6. Ratification and Reaffirmation
Except as specifically amended hereby and as heretofore
amended by Board of Directors of the Company or the Compensation and Benefits
Committee of the Company, the Plan shall remain in full force and effect in
accordance with its terms.
7. Effective Date
This Amendment to the Plan as restated shall be effective as
of July 1, 1993, except as to paragraph 2, 3, 4 and 5 hereof which shall be
effective as of August 10, 1993.
IN WITNESS WHEREOF, the Company maintaining the Plan has
caused this Amendment to be executed as of the tenth day of August, 1993.
BW/IP International, Inc.
By D. G. Taylor
------------------------
<PAGE> 1
Exhibit 10.nn
AMENDMENT
TO THE
BW/IP INTERNATIONAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of April 1, 1992)
The BW/IP International, Inc. Supplemental Executive
Retirement Plan, as amended and restated as of April 1, 1992, (the "Plan"),
which is maintained by BW/IP International, Inc. (the "Company"), is hereby
amended in the following respects:
1. Amendment or Termination
The Plan is amended by substituting the following for the
first sentence of Section 6.1 thereof:
The Employer retains the right, through the duly taken action of the
Compensation and Benefits Committee of its Board of Directors, or if
the Board of Directors shall determine by the duly taken action of the
Board of Directors, at any time to amend, change, modify or terminate
this Plan and the terms thereof; provided however, that no amendment
of this Plan shall have an adverse effect upon benefits hereunder that
may not be reduced under the Internal Revenue Code, ERISA or any other
applicable provision of law and no amendment shall have the effect of
reducing any benefits theretofore payable to or on behalf of the then
Participants.
2. Ratification and Reaffirmation
Except as specifically amended hereby and as heretofore
amended by Board of Directors of the Company or the Compensation and Benefits
Committee of the Company, the Plan shall remain in full force and effect in
accordance with its terms.
<PAGE> 2
3. Effective Date
This Amendment to the Plan as restated shall be effective as
of January 1, 1994.
IN WITNESS WHEREOF, the Company maintaining the Plan has
caused this Amendment to be executed as of the first day of January 1, 1994.
BW/IP International, Inc.
By D. G. Taylor
----------------------
<PAGE> 1
Exhibit 10.oo
AMENDMENT NUMBER FIVE
TO THE
BW/IP INTERNATIONAL, INC.
CAPITAL ACCUMULATION PLAN
(AS RESTATED AS OF JANUARY 1, 1992)
The BW/IP International, Inc. Capital Accumulation Plan, as
restated as of January 1, 1992, (the "Plan"), which is maintained by BW/IP
International, Inc. (the "Company"), is hereby amended in the following
respects:
1. Direct Rollovers
Article 8 of the Plan is amended by adding to the end thereof
the following new Section 8.13:
8.13. A Distributee may elect, at the time and in the manner
prescribed by the Employer, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover.
a. "Eligible Rollover Distribution": An
Eligible Rollover Distribution is any distribution of all or any
portion of the balance to the credit of a Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's Beneficiary or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the code; and the
portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
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 described in Section
403(a) of the Code, or a qualified trust described in Section 401(a)
of the Code,
<PAGE> 2
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to a
Participant's surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement annuity.
c. "Distributee": A Distributee is a
Participant or former Participant, a Participant's or former
Participant's surviving spouse, and a Participant's or former
Participant's spouse or former spouse who is the alternate payee under
a qualified domestic relations order (as defined by section 414(p) of
the Code).
d. "Direct Rollover": A Direct Rollover is a
payment by the Plan to the Eligible Retirement Plan specified by the
Distributee.
2. Amendment or Termination
Section 11.1 of the Plan is amended by adding the
following phrase immmediately preceding the existing parenthetical
phrase in the first sentence of the last paragraph thereof:
(in such manner as shall be determined in the best interests of the
Company or the Participants of the Plan)
and by adding the word "or" immediately preceding the existing parenthetical
phrase.
3. Compensation Limit
The limit on the maximum amount of Compensation that may be
taken into account under the Plan is changed from $200,000 to $150,000 and
Section 1.2(j) of the Plan shall be amended by substituting the amount of
$150,000 for $200,000 each place that $200,000 currently appears in said
Section 1.2(j).
<PAGE> 3
4. Ratification and Reaffirmation
Except as specifically amended hereby and as heretofore
amended by the Compensation Committee of the Company, the Plan shall remain in
full force and effect in accordance with its terms.
5. Effective Date
This Amendment Number Five to the Plan as restated shall be
effective as of January 1, 1993, except as to Paragraph 3 hereof which shall be
effective as of January 1, 1994.
IN WITNESS WHEREOF, the Company maintaining the Plan has
caused this Amendment Number Five to be executed as of the first day of
January, 1994.
BW/IP International, Inc.
By D. G. TAYLOR
------------------------
<PAGE> 1
Exhibit 10.pp
THIRD AMENDMENT TO CREDIT AGREEMENT
Dated as of July 6, 1994
THIRD AMENDMENT dated as of July 6, 1994 (this "Amendment") to CREDIT
AGREEMENT dated as of August 23, 1991 (as amended to the date hereof, the
"Credit Agreement") among BW/IP INTERNATIONAL, INC., a Delaware corporation
("Borrower"), the Lenders party thereto ("Lenders") and CITICORP USA, INC. as
Agent for the Lenders ("the Agent").
PRELIMINARY STATEMENTS. The parties hereto wish to modify the Credit
Agreement in certain respects as hereinafter set forth. Terms defined in the
Credit Agreement are used in this Amendment as defined in the Credit Agreement
and, except as otherwise indicated, all references to Sections and Articles
refer to the corresponding Sections and Articles of the Credit Agreement.
The parties hereto therefore agree as follows:
SECTION 1. Amendments to Credit Agreement. Effective as of the
Effective Date and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, the Credit Agreement is hereby amended as follows:
(a) The definition of "Consolidated Gross Cash Flow" in Section
1.01 is amended by deleting the final period thereof and adding the following:
, and provided that the foregoing shall not include cash restructuring
charges in the amount of $11,744,000 identified and reported as such
in Borrower's consolidated statement of income for the period ended
December 31, 1993.
(b) The definition of "Loan Documents" in Section 1.01 is amended
by deleting the final period and adding the following:
and any promissory note executed and delivered by Borrower pursuant to
Section 2.16(d) hereof.
(c) Section 2.07(a) is amended by deleting "and on the date such
Base Rate Advance shall be Converted or paid in full or in part (with respect
to the portion paid in part)" and inserting in its place "and on the
Termination Date".
(d) Section 2.16 is amended by inserting a new subsection (d) as
follows:
(d) if, in the opinion of any Lender, a promissory note
or other evidence of debt is required, appropriate or desirable to
reflect or enforce the indebtedness of Borrower resulting from the
Committed Advances or Bid Advances made, or to be made, by such
Lender, then, upon request of such Lender, Borrower shall promptly
execute and deliver to such Lender a promissory note substantially in
the form of Exhibit M-1 in the case of Committed Advances and Exhibit
M-2 in the case of Bid Advances, payable to the order of such Lender
in an amount equal to the maximum amount of
<PAGE> 2
Committed Advances or Bid Advances, as the case may be, payable or to
be payable to such Lender from time to time hereunder.
(e) Section 5.01(a)(i) is deleted and restated in its entirety as
follows:
[intentionally omitted]
(f) Section 5.02(a) is amended by deleting each of subparagraphs
(viii), (xiv) and (xvi) and inserting in place thereof "[intentionally
omitted]", and by deleting subparagraph (xvii) and restating it in its entirety
as follows:
(xvii) Borrower and its Subsidiaries may become and remain
liable for all Debt so long as the aggregate amount of Funded Debt of
Borrower and its Subsidiaries does not exceed 50% of Consolidated
Total Capitalization and the aggregate amount of Funded Debt of
Subsidiaries of Borrower does not exceed 15% of Consolidated Net
Worth.
(g) Section 5.02(f)(iii) is deleted and restated in its entirety
as follows:
(iii) Minimum Fixed Charge Coverage Ratio. The Borrower will
not permit the creation of Consolidated Gross Cash Flow to
Consolidated Fixed Charges for the four consecutive fiscal quarters
ending on the last day of each of the fiscal quarters set forth below,
to be less than the correlative amount indicated below:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- -----
<S> <C>
June 30, 1994 1.75:1.0
September 30, 1994 1.50:1.0
December 31, 1994 1.25:1.0
March 31, 1995 1.50:1.0
June 30, 1995 through December 31, 1995 1.75:1.0
March 31, 1996 and thereafter 2.0:1.0
</TABLE>
(h) Section 8.08 is amended by adding a new Section 8.08(j) as
follows:
(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in
all or any portion of its rights under this Agreement (including,
without limitation the Advances owing to it and any promissory note
or notes executed and delivered by Borrower hereunder and held by such
Lender) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
(i) New Exhibits M-1 and M-2 are added in the form of Exhibits
M-1 and M-2 hereto.
SECTION 2. Conditions to Effectiveness. This Amendment shall be
effective as of the first Business Day (the "Effective Date") on which the
Agent shall have received (a) counterparts of this Amendment executed by the
Borrower and all of the Lenders or, as to any of the Lenders, advice
satisfactory to the Agent that such Lender
<PAGE> 3
has executed a counterpart of this Amendment; and (b) a certificate of the
Secretary or an Assistant Secretary of the Borrower attaching a copy of the
resolutions of the Board of Directors of the Borrower authorizing its
execution, delivery and performance of this Amendment and certifying the name
and true signature of each of its officers executing the same on its behalf.
SECTION 3. Representations and Warranties. Borrower represents
and warrants as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction indicated at the beginning of
this Amendment;
(b) the execution, delivery by Borrower of this Amendment, and the
performance by Borrower of the Credit Agreement as hereby amended, are within
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) Borrower's charter or by-laws, (ii)
any law, regulation or order binding on or affecting Borrower or (iii) the
terms of any indenture, loan or credit agreement or other agreement or
instrument by which Borrower is bound or to which Borrower is a party;
(c) no authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution or delivery by Borrower of this Amendment or the performance
by Borrower of the Credit Agreement as hereby amended;
(d) this Amendment and the Credit Agreement as amended hereby
constitute, the legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms; and
(e) no Event of Default or Potential Event of Default has occurred
and is continuing, or will occur and be continuing after giving effect to this
Amendment.
SECTION 4. Reference to and Effect on the Credit Agreement. On
and after the Effective Date, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference in the other Loan Documents to "the Credit Agreement," "thereunder,"
"thereof," "therein" or words of like import referring to the Credit Agreement
shall mean and be a reference to the Credit Agreement as amended by this
Amendment. Except as specifically amended herein, the Credit Agreement shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
SECTION 5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by any combination of the parties
hereto in separate counterparts, each of which counterparts shall be an
original and all of which taken together shall constitute one and the same
Amendment.
SECTION 6. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BW/IP INTERNATIONAL, INC.
By: Zohar Ziv
----------------------------------
Title: Treasurer
----------------------------------
CITICORP USA, INC., as Agent and Lender
By: Barbara A. Cohen
----------------------------------
Title: Vice President
----------------------------------
NATIONSBANK OF TEXAS, N.A.
By: J. Blake Seaton
----------------------------------
Title: Vice President
----------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
(successor by merger to Security Pacific National Bank)
By: Yvonne C. Dennis
----------------------------------
Title: Vice President
----------------------------------
CONTINENTAL BANK, N.A.
By: Wyatt R. Ritchie
----------------------------------
Title: Vice President
----------------------------------
ABN AMRO BANK
By: Ellen M. Coleman Alexander Pruijs
---------------------------------------------
Title: Asst. Vice President Vice President
---------------------------------------------
<PAGE> 1
Exhibit 10.qq
FOURTH AMENDMENT TO CREDIT AGREEMENT
Dated as of February 17, 1995
FOURTH AMENDMENT dated as of February 17, 1995 (this "Amendment") to
CREDIT AGREEMENT dated as of August 23, 1991 (as amended to the date hereof,
the "Credit Agreement") among BW/IP INTERNATIONAL, INC., a Delaware corporation
("Borrower"), the Lenders party thereto ("Lenders") and CITICORP USA, INC. as
Agent for the Lenders (the "Agent").
PRELIMINARY STATEMENTS. The parties hereto wish to terminate the
Commitment of Bank of America Illinois, formerly known as Continental Bank N.A.
("Continental") and to modify the Credit Agreement in certain respects as
hereinafter set forth. Terms defined in the Credit Agreement are used in this
Amendment as defined in the Credit Agreement and, except as otherwise
indicated, all references to Sections refer to the corresponding Sections of
the Credit Agreement.
The parties hereto therefore agree as follows:
SECTION 1. Termination of Commitment of Continental. Effective as of
the Fourth Amendment Effective Date and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, the Commitment of
Continental shall be reduced to zero and Continental shall relinquish its
rights and be released from its obligations under the Credit Agreement and
shall cease to be a party thereto, provided that (a) Continental shall continue
to be a party hereto with respect to the Fourth Amendment Letters of Credit and
shall continue to have the rights and obligations of an Issuing Lender with
respect thereto until all such Fourth Amendment Letters of Credit have
terminated or expired, all Obligations in connection therewith have been paid
in full, and all participating interests therein pursuant to Section 2.18(l)
have been terminated and paid in full; and (b) Continental shall retain its
rights under Sections 2.02(b), 2.08, 2.12, 2.14, 8.04 and 8.13 with respect to
any period ending on or prior to the Fourth Amendment Effective Date.
SECTION 2. Amendments to Credit Agreement. Effective as of the Fourth
Amendment Effective Date and subject to the satisfaction of the conditions
precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended
as follows:
(a) Section 1.01 is amended by inserting the following new
definitions in the appropriate alphabetical order:
"FOURTH AMENDMENT EFFECTIVE DATE" means the date on which the
Fourth Amendment dated as of February 17, 1995 to this Credit
Agreement became effective in accordance with its terms.
<PAGE> 2
"FOURTH AMENDMENT LETTER OF CREDIT" means any Letter of Credit
available for drawing on the Fourth Amendment Effective Date.
(b) Section 2.01(a) is deleted and restated as follows:
(a) Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make Committed Advances to
the Borrower from time to time on any Business Day during the period
from the date hereof to, but excluding, the Termination Date in an
aggregate amount not to exceed at any time outstanding the amount set
forth opposite such Lender's name on Schedule 2.01(a) hereto or, if
such Lender has entered into any Assignment and Acceptance effective
on or after the Fourth Amendment Effective Date, set forth as such
Lender's Commitment in the Register maintained by the Agent pursuant
to Section 8.08(g), or the equivalent thereof in one or more
Alternative Currencies, as such amount may be reduced pursuant to
Section 2.05(a) (such Lender's "Commitment");provided that the
aggregate amount of the Commitments of the Lenders shall be deemed
used from time to time to the extent of the aggregateamount of the Bid
Advances, the Acceptance Usage, the Letter of Credit Usage and the Bid
Letter of Credit Usage and such deemed use of the aggregate amount of
the Commitments shall be applied to the Lenders ratably according to
their respective Commitments (such deemed use of the aggregate amount
of the Commitments resulting from the Bid Advances and Bid Letters of
Credit being the "Bid Reduction"); provided furtherthat (i) in no
event shall the aggregate principal amount of Committed Advances from
any Lender outstanding at any time exceed its Commitment then in
effect and (ii) the Total Utilization of Commitments shall not exceed
the aggregate Commitments then in effect.
(c) A new Section 2.18(l) is added immediately after Section
2.18(k) as follows:
(1) PARTICIPATIONS IN FOURTH AMENDMENT LETTERS OF
CREDIT. Effective on the Fourth Amendment Effective Date, each Lender
shall be deemed to and hereby agrees to, have irrevocably purchased
from each Issuing Lender (other than itself) which has issued a Fourth
Amendment Letter of Credit a participation in such Fourth Amendment
Letter of Credit and drawings thereunder in an amount equal to such
Lender's pro rata share (with respect to the Commitments) of the
maximum amount that is or at any time may become available to be drawn
thereunder. If the Borrower shall fail to reimburse any Issuing Bank
as provided in Section 2.18(c) in an amount equal to the amount of any
drawing honored by such Issuing Bank under a Fourth Amendment Letter
of Credit issued by it together with accrued interest thereon, such
Issuing Bank shall promptly give notice thereof to the Agent, which
shall promptly notify each Lender of the unreimbursed amount of such
drawing together with accrued interest thereon and of such
<PAGE> 3
Lender's respective participation in the unreimbursed amount therein
based on such Lender's pro rata share of the Commitments. Each Lender
shall make available to the Agent for the account of such Issuing Bank
an amount equal to its respective participation in the unreimbursed
amount, in same day funds, at the office of the Agent specified in
such notice, not later than 12:00 Noon (New York City time) on the
Business Day next following the datenotified by the Agent. The day of
payment by each Lender to the Agent and the day of notice by the Agent
to each Lender shall be both a Business Day and a business day under
the laws of the jurisdiction of each such Lender. If any Lender fails
to make available to the Agent for the account of such Issuing Bank
the amount of such Lender's participation in such Fourth Amendment
Letter of Credit as provided in this Section 2.18(l), such Issuing
Bank shall be entitled to recover such amount on demand from such
Lender, together with interest (to the extent such interest is not
received from the Borrower) until such amount is recovered at the
Federal Funds Rate. Nothing in this Section 2.18(l) shall be deemed
to prejudice the right of any Lender to recover from any Issuing Bank
any amounts made available by such Lender to such Issuing Bank
pursuant to this Section 2.18(l) if it is determined by a final
judgment of a court of competent jurisdiction that the payment with
respect to a Fourth Amendment Letter of Credit by such Issuing Bank in
respect of which payment was made by such Lender constituted gross
negligence or willful misconduct on the part of such Issuing Bank.
Each Issuing Bank shall distribute to each other Lender which has paid
all amounts payable by it under this Section 2.18(l) with respect to
any Fourth Amendment Letter of Credit issued by such Issuing Bank such
other Lender's pro rata share (with respect to the Commitments) of all
payments received by such Issuing Bank from the Borrower or any of its
Subsidiaries in reimbursement of drawings honored by such Issuing Bank
under such Fourth Amendment Letter of Credit when such payments are
received. Borrower shall be liable to the Lenders for all of the
principal and interest made available by the Lenders to any Issuing
Bank pursuant to this Section and interest on all amounts made
available by Lenders to any Issuing Bank shall accrue at the rates set
forth in Section 2.07(d). All such principal and interest amounts
shall be part of the Obligations.
(d) Section 8.08(a) is amended by deleting the period at the end
of the first sentence and inserting the following:
; provided further that if the assigning Lender or any Affiliate
thereof is either an Accepting Lender with respect to any Drafts which
are unmatured at the time of such assignment or an Issuing Lender with
respect to any Letters of Credit which are available for drawing at
the time of such assignment, then (x) the rights and obligations of
the assigning Lender with respect to such Drafts and such Letters of
Credit shall not be assigned, (y) such assigning Lender
<PAGE> 4
shall continue to be a party hereto with respect to such rights and
obligations until all such Drafts have matured and been paid in full
and all such Letters of Credit have been paid in full or have expired
and (z) such assigning Lender shall be deemed to have transferred to
the assignee in accordance with Section 8.08(h) a participation
interest in such rights and obligations equal to the percentage
specified in clause (i) of this sentence.
(e) A new Schedule 2.01(a) is added in the form of Schedule
2.01(a) hereto.
SECTION 3. Conditions to Effectiveness. This Amendment shall be
effective as of March 24, 1995 (the "Fourth Amendment Effective Date"), subject
to the satisfaction on or prior to such date of the following conditions
precedent:
(a) The Agent shall have received the following not less than
three Business Days prior to the Amendment Effective Date (i) counterparts of
this Amendment executed by the Borrower and all of the Lenders or, as to any of
the Lenders, advice satisfactory to the Agent that such Lender has executed a
counterpart of this Amendment; (ii) a certificate of the Secretary or an
Assistant Secretary of the Borrower attaching a copy of the resolutions of the
Board of Directors of the Borrower authorizing its execution, delivery and
performance of this Amendment and certifying the name and true signature of
each of its officers executing the same on its behalf; (iii) a consent and
acknowledgement in substantially the form of Annex A hereto executed by each
Subsidiary which has executed and delivered a Guaranty pursuant to Section
5.01(b) of the Credit Agreement; and (iv) a Notice of Borrowing with respect to
any Borrowing of Eurocurrency Advances to be made on the Amendment Effective
Date.
(b) The Borrower shall have paid or prepaid (i) the principal amount
of all Advances outstanding immediately prior to the Fourth Amendment Effective
Date; (ii) any amounts due under Section 8.04(b) in connection with such
prepayment; and (iii) all unpaid interest on the Advances and unpaid fees under
Sections 2.04(a) and 2.18(e) to the extent accrued through the Fourth Amendment
Effective Date.
(c) There shall be no Drafts outstanding on the Fourth Amendment
Effective Date and there shall be no Bid Loans of Continental outstanding on
the Fourth Amendment Effective Date.
SECTION 4. Representations and Warranties. Borrower represents and
warrants as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction indicated at the beginning of
this Amendment.
<PAGE> 5
(b) The execution, delivery by Borrower of this Amendment, and the
performance by Borrower of the Credit Agreement as hereby amended, are within
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) Borrower's charter or by-laws, (ii)
any law, regulation or order binding on or affecting Borrower or (iii) the
terms of any indenture, loan or credit agreement or other agreement or
instrument by which Borrower is bound or to which Borrower is a party.
(c) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution or delivery by Borrower of this Amendment or the performance
by Borrower of the Credit Agreement as hereby amended.
(d) This Amendment and the Credit Agreement as amended hereby
constitute, the legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
(e) No Event of Default or Potential Event of Default has occurred
and is continuing, or will occur and be continuing after giving effect to this
Amendment.
SECTION 5. Reference to and Effect on the Credit Agreement. On and
after the Fourth Amendment Effective Date, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import, and each reference in the other Loan Documents to "the Credit
Agreement," "thereunder," "thereof," "therein" or words of like import
referring to the Credit Agreement shall mean and be a reference to the Credit
Agreement as amended by this Amendment. Except as specifically amended herein,
the Credit Agreement shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed.
SECTION 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by any combination of the parties hereto in
separate counterparts, each of which counterparts shall be an original and all
of which taken together shall constitute one and the same Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
[balance of this page intentionally left blank]
<PAGE> 6
SCHEDULE 2.01(a)
<TABLE>
<CAPTION>
Commitment
------------
<S> <C>
CITICORP USA, INC. $ 26,000,000
NATIONSBANK OF TEXAS, N.A. $ 26,000,000
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION $ 26,000,000
ABN AMRO BANK $ 22,000,000
------------
Total of the Commitments $100,000,000
============
</TABLE>
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BW/IP INTERNATIONAL, INC.
By: ZOHAR ZIV
---------------------------------------
Title: Treasurer
CITICORP USA, INC., as Agent and Lender
By: BARBARA A. COHEN
---------------------------------------
Vice President
NATIONSBANK OF TEXAS, N.A.
By: J. BLAKE SEATON
---------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By: RUTH EDWARDS
---------------------------------------
Title: Vice President
ABN AMRO BANK
By: JOHN A. MILLER MATTHEW S. THOMSON
-------------------------------------------------
Title: Vice President Group Vice President
BANK OF AMERICA ILLINOIS (formerly known as
CONTINENTAL BANK N.A.)
By: RUTH EDWARDS
---------------------------------------
Title: Vice President
<PAGE> 8
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
Each of the undersigned hereby (a) acknowledges receipt of a copy of
the Fourth Amendment dated as of February 17, 1995 (the "Amendment") to
Revolving Credit Agreement dated as of August 23, 1991 among BW/IP
International, Inc., the Financial Institutions parties thereto, and Citicorp
USA, Inc. as Agent (as amended to the date of the Amendment, the "Credit
Agreement"), (b) consents to the terms of the Amendment and (c) reaffirms its
obligations under each Loan Document (as defined in the Credit Agreement) to
which it is a party.
Dated March 8, 1995
BW/IP INTERNATIONAL, B.V.
By E. P. CROSS
------------------------------
Title Director
BW/IP INTERNATIONAL S.r.l.
By E. P. CROSS
------------------------------
Title Director
BW MECHANICAL SEALS K.K.
By E. P. CROSS
------------------------------
Title Director
<PAGE> 1
Exhibit 13.a
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION BW/IP, INC.
------------------------------------------------------------------------------
RESULTS OF OPERATIONS The Company currently operates in one
business segment: Pump/Seal. The Pump/Seal
segment consists primarily of centrifugal
pumps, mechanical seals, nuclear valves and
related equipment and services. The
information provided in this discussion and
analysis of the Company's financial condition
and results of operations for 1994 and prior
periods has been reclassified to reflect the
disposition of the Fluid Controls segment.
The following discussion should be read
in conjunction with the consolidated
financial statements of the Company included
elsewhere in this document. For additional
financial information about the Company's
operations by geographic location, see Note
10 to Consolidated Financial Statements.
------------------------------------------------------------------------------
1994 COMPARED TO 1993 Net sales of $448.7 million for the year
ended December 31, 1994, were $21.5 million,
or 5.0% higher than the corresponding period
in 1993. The increase in net sales is
attributable to the incremental sales related
to the Company's acquisition of Pacific Wietz
GmbH & Co. KG (Pacific Wietz) and seal market
share growth. The increase in net sales
reflects an increase in both aftermarket and
original equipment (OE) sales of $14.3
million and $7.2 million, respectively. By
geographic region, net sales were down in
1994 as compared to 1993 in the United
States, offset by increases in Europe and the
Pacific Rim.
Net Sales Operating income for the year ended
Millions of dollars December 31, 1994, was $49.2 million, an
increase of $15.9 million or 47.7% from the
comparable period in 1993, however, operating
income for 1993 was impacted by a one-time
charge of $22.7 million for a restructuring
program. Operating income for 1993 before the
restructuring charge was $56.1 million,
reflecting a decrease in comparable results
[GRAPH] between 1994 and 1993 of $6.8 million or
12.2%. Although aftermarket sales increased as
a percentage of sales to 58% in 1994 from 57%
in 1993, a shift in mix within aftermarket
sales, and the continued competitive
environment within the OE sector, resulted in
a decrease in gross profit margin. In
-------------------------------- addition, gross profit for 1993 reflected
1990 1991 1992 1993 1994 favorable experience with respect to warranty
-------------------------------- costs and the reduction of certain other
338.7 392.1 399.3 427.2 448.7 reserves no longer determined to be
necessary.
As a result of continued
overcapacity and increased price sensitivity
of OE purchasers, the Company recognized the
need to undertake substantial actions to
lower the overall cost structure of its
manufacturing operations. The restructuring
is designed to substantially reduce the
Company's costs and permit the Company to
selectively improve its competitive position
and profit margins. Based upon these
objectives, the Company developed a plan to
create centers of manufacturing excellence by
concentrating manufacturing of individual
products and components at specialized
facilities. In that regard, the Company's
plan includes a redistribution of
manufacturing operations whereby each factory
becomes a specialized facility to design
and/or manufacture a specified range of
products or component parts. These plans
include the opening of a new large-component
facility and creation of specialized
engineering, assembly and testing facilities.
The plan requires personnel realignments,
enhancements of manufacturing control systems
and other changes that support the overall
plan objectives. The plan contemplates a
reduction in the Company's work force of
approximately 320 employees.
14
<PAGE> 2
The following table summarizes the Company's
restructuring reserve as of December 31, 1994
and 1993:
<TABLE>
<CAPTION>
Machinery
relocation, Asset disposal
Personnel installation, and and organizational
costs related costs realignment costs Total
==============================================================================================
<S> <C> <C> <C> <C> <C>
Net Sales - by Product Mix 1993 restructuring charge $10,231 $5,310 $7,187 $22,728
By Percent Cash expenditures (636) - - (636)
----------------------------------------------------------------------------------------------
[GRAPH] Balance, December 31, 1993 9,595 5,310 7,187 22,092
Cash expenditures (1,922) (591) (954) (3,467)
-------------------------------- Losses on asset disposals - - (739) (739)
1990 1991 1992 1993 1994 ----------------------------------------------------------------------------------------------
-------------------------------- Balance, December 31, 1994 $ 7,673 $4,719 $5,494 $17,886
Original Equipment ==============================================================================================
33% 37% 34% 43% 42%
--------------------------------
Aftermarket
67% 63% 66% 57% 58%
</TABLE>
Personnel costs include costs for
realigning various employee groups to support
the focused factory concept, including
termination, relocation and training or
retraining of employees. Machinery
relocation, installation and related costs
include costs for moving production equipment
among the various facilities, as well as
costs to install such equipment, bring such
Bookings - by Product Mix equipment into full production, and other
By percent related costs. Asset disposal and
organizational realignment costs include
estimated losses related to the disposal of
property, plant and equipment, and the costs
for realigning certain sales and other
support functions as required by changes in
[GRAPH] manufacturing operations. Based on
information currently available, the Company
estimates that the remaining balance of the
-------------------------------- restructuring reserve is sufficient to allow
1990 1991 1992 1993 1994 it to complete its restructuring plan. In
-------------------------------- addition, changes in the estimates for the
Original Equipment three individual cost components have not
34% 29% 45% 38% 40% been significant. Noncash charges are
-------------------------------- estimated to be approximately $4 million.
Aftermarket Activities to date include cash
66% 71% 55% 62% 60% expenditures related to benefits paid to
terminated employees and the announced
shutdown of the Company's Fresno, California,
plant, and a loss of approximately $0.7
million related to the disposal of property,
plant and equipment. During 1994, the Company
selected Albuquerque, New Mexico, for a new
large-component facility. Construction of the
new facility started in early 1995 and
production is expected to commence in late
1995.
A complex site selection process
relating to the new large-component facility
and other logistical issues slowed the
progress of the restructuring process in
1994. It is currently estimated that the
majority of the remaining cash expenditures
will be incurred and noncash charges will be
realized during 1995 and early 1996.
In addition to the above costs, the
Company is also committed to an integrated
plan of capital expenditures designed to
support the goals of the restructuring. These
expenditures are expected to continue into
early 1996, and are incremental to ongoing
capital expenditures. Such expenditures
totaled $0.5 million in 1994 and will range,
in aggregate, between $13 million and $16
million during 1995 and 1996. Such
expenditures will support the development of
the new large-component manufacturing
facility, and the addition of new, more
efficient state-of-the-art machine tools in
this factory, as well as more modern
manufacturing machinery and support systems
in selected other facilities.
The benefits of the restructuring and
capital expenditures will be realized
incrementally once the contemplated changes
have been implemented. The ultimate savings
generated by the restructuring will depend
upon both current and future market
conditions, many of which cannot be precisely
quantified. Cost benefits relating to staff
reductions are realized almost immediately,
while the benefits from new facilities,
machinery and systems will be realized only
after certain start-up costs are borne and
the inefficiencies of the learning curve
worked through. The Company anticipates that
benefits arising from new facilities,
machinery and systems will begin to be
realized during late 1995 and early 1996.
15
<PAGE> 3
The Company's foreign operations had
net sales of $215.7 million in 1994 and
$173.2 million in 1993. The increase
was due to the acquisition of Pacific
Wietz in the first quarter of 1994
and increased sales in the Pacific Rim,
Canada and Mexico. Offsetting this increase
were lower sales in Europe excluding Pacific
Wietz. Export sales from the United States
represented 30.0% and 34.1% of domestic sales
in 1994 and 1993, respectively. Foreign
sales, by country of destination, accounted
for approximately 62% and 60% of the
Company's net sales in 1994 and 1993,
respectively. Results from foreign operations
and export sales were not significantly
impacted by foreign currency exchange
fluctuations during 1994.
The Company's financial position and
results of operations were not significantly
impacted by the December 1994 Mexican Peso
devaluation. The ongoing effect of Mexico's
financial instability is uncertain at this
point; however, the impact should be
Bookings and Backlog minimized somewhat given that over 50% of the
Millions of dollars year-end backlog of the Mexican subsidiary is
denominated in U.S. dollars, providing a
natural hedge.
Selling, administrative and operating
expenses increased as a percentage of sales
[GRAPH] from 26.2% in 1993 to 26.7% in 1994. The
increase was primarily due to the first
quarter acquisition of Pacific Wietz.
--------------------------------- Interest expense increased by $0.2
1990 1991 1992 1993 1994 million for the year ended December 31, 1994,
--------------------------------- as compared to the corresponding period in
Bookings 1993 because of higher debt levels throughout
401.5 380.9 451.2 399.6 464.5 the year and rising interest rates.
--------------------------------- The Company's effective tax rate
Backlog increased from 32.2% for the year ended
198.6 170.6 199.6 165.1 159.4 December 31, 1993, to 36.5% for the
corresponding period in 1994. The increase in
the consolidated tax rate reflects lower
utilization of foreign tax credits in 1994 as
compared to 1993 as the majority of credits
generated in earlier years were utilized.
On October 31, 1994, the Company
completed the sale of its Fluid Controls
segment. Certain assets and liabilities of
the segment, including real property and
certain accrued employee benefits, were
retained by the Company. During 1994, the
Company recorded an additional loss from the
disposition of $1.9 million, net of tax, or
$.08 per share ($2.0 million and $.09 per
share in the fourth quarter) primarily to
reflect a reduction in the net realizable
value of the real property and certain
personnel termination costs. Revenues for the
discontinued Fluid Controls segment were
$23.4 million for fiscal year 1994 (through
the date of sale) and $37.5 million for
fiscal 1993.
Order input for the year ended December
31, 1994, was $464.5 million compared with
$399.6 million for the corresponding period
in 1993. The increase in input is primarily
due to higher bookings in the United States,
Mexico, and Argentina, and from the
acquisition of Pacific Wietz, offset by lower
bookings in Europe. Backlog at December 31,
1994, was $159.4 million compared to $165.1
million at December 31, 1993, primarily due
to lower bookings in Europe.
--------------------------------------------------------------------------------
1993 COMPARED TO 1992 Net sales of $427.2 million for the year
ended December 31, 1993, were $27.9 million,
or 7.0% higher than the corresponding period
in 1992. This increase was primarily due to
two factors: the Company's decision to retain
its interest in its Argentine affiliate,
which contributed $8.4 million in net sales
in 1993, and the fourth quarter 1992
acquisition of a Belgian pump company, which
contributed $16.3 million in net sales in
1993 compared to $2.6 million in 1992. The
increase in net sales in 1993 reflects an
increase of OE sales of approximately $47
million, offset by a decrease in aftermarket
sales of approximately $19 million.
16
<PAGE> 4
Operating income for the year ended
December 31, 1993, was $33.3 million, a
decrease of $38.0 million, or 53.3% from the
comparable period in 1992. Operating income
was impacted by a one-time charge of $22.7
million taken in the fourth quarter for a
restructuring program, as previously
described. Operating income before the
restructuring charge was $56.1 million, $15.2
million or 21.4% lower than the comparable
period in 1992. Operating income reflects a
decrease in gross profit due to the change in
sales mix, with more-profitable aftermarket
sales declining from 66% in 1992 to 57% in
1993. Gross profit for both years was
impacted by favorable experience with respect
to warranty costs and by the reduction of
certain accruals no longer determined to be
necessary.
In December 1993, the Company initiated
a plan to dispose of its Fluid Controls
segment, which manufactures control systems,
servovalves, solenoids and other
aerospace/defense products and sells related
services. As a result, the Company recorded a
fourth quarter charge of $15.2 million, net
of tax, or $.63 per share, to write down the
segment's assets to their estimated net
realizable values. The loss is primarily
related to the write-off of intangible assets
allocated to the segment at the time BW/IP
was spun off from Borg-Warner Corporation in
1987. The disposition is being accounted for
as a discontinued operation and prior year
income statements have been reclassified to
reflect this treatment. Revenues for the
discontinued Fluid Controls segment were
$37.5 million and $33.8 million for fiscal
years 1993 and 1992, respectively.
The Company's foreign operations had
net sales of $173.2 million in 1993 and
$168.3 million in 1992. The increase was due
to the acquisition in the fourth quarter of
1992 of a Belgian pump company and the
decision to retain the Argentine operation.
Offsetting this increase were lower sales in
Europe excluding the Belgian pump company.
Export sales from the United States
represented 34.1% and 27.0% of domestic sales
in 1993 and 1992, respectively. Foreign
sales, by country of destination, accounted
for approximately 60% and 59% of the
Company's net sales in 1993 and 1992,
respectively. Results from foreign operations
and export sales were not significantly
impacted by foreign currency exchange
fluctuations during 1993.
Selling, administrative and operating
expenses increased as a percentage of net
sales from 25.0% for the year ended December
31, 1992, to 26.2% for the corresponding
period in 1993. The increase was primarily
due to lower-than-anticipated sales volume,
higher dealer commissions and the inclusion
in selling, administrative and operating
expenses of the Company's Argentine affiliate
and the acquired Belgian pump company.
Selling, administrative and operating
expenses for both years reflect the
discontinuance of the Fluid Controls segment,
which does not have significant selling,
administrative and operating expenses in
relation to its sales. On a reclassified
basis and going forward, certain expenses
that had been previously allocated to the
Fluid Controls segment are being absorbed by
continuing operations. Partially offsetting
expenses in 1992 was $4.7 million in
dividends declared by the Company's Argentine
affiliate, which were included in selling,
administrative and operating expenses.
Interest expense was reduced by $2.9
million for the year ended December 31, 1993,
as compared to the corresponding period in
1992 because of lower levels of debt and
interest rates.
17
<PAGE> 5
The Company's effective tax rate
decreased from 33.2% for the year ended
December 31, 1992, to 32.2% for the
corresponding period in 1993. These rates
reflect the discontinuance of the Fluid
Controls segment. Ongoing, the impact on the
Company's tax rate of disposing of Fluid
Controls is expected to be minimal. The
decrease in the consolidated tax rate reflects
higher utilization of foreign tax credits in
1993 as compared to 1992.
In May 1992, the Company redeemed all
its outstanding subordinated debentures,
which had a total principal amount of $87
million. To effect the redemption, the
Company issued $50 million in senior notes
and amended the U.S. credit agreement to
increase its credit line to $100 million, a
portion of which was then applied to pay the
redemption price. As a result of such
redemption, the Company incurred an
extraordinary loss during the second quarter
of 1992 equal to the prepayment premium and
unamortized discount on the redeemed
debentures of approximately $7.7 million
($5.3 million after-tax, or $.21 per share).
In February and November 1992, the
Company completed secondary public offerings
of 6,325,000 shares and 4,695,767 shares,
respectively, of its common stock. All of the
shares were sold by selling stockholders
other than the Company. Pursuant to
agreements with the selling stockholders, the
Company was obligated to pay certain expenses
related thereto. Such expenses totaled
approximately $1.2 million ($0.9 million
after-tax, or $.04 per share). As a result
of the February offering, the Company also
was required to prepay all outstanding junior
subordinated notes, incurring an
extraordinary loss during the first quarter
of 1992 of approximately $4.2 million ($2.9
million after-tax, or $.12 per share).
Clayton, Dubilier & Rice, Inc., which prior
to these offerings owned approximately 41% of
the Company's outstanding common stock, sold
all of its remaining shares in the offerings.
Order input for the year ended December
31, 1993, was $399.6 million compared with
$451.2 million for the corresponding period
in 1992. The decrease in input is primarily
due to lower OE bookings in the United
States. Factors contributing to the decrease
include increased competitive pressures and
deferrals of some projects. Backlog at
December 31, 1993, was $165.1 million
compared to $199.6 million at December 31,
1992, primarily due to lower bookings.
Partially offsetting this decrease is
additional backlog resulting from the
Company's decision to retain its interest in
its Argentine affiliate.
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations, credit available
under its credit agreements and customer
progress payments are the Company's primary
sources of short-term liquidity. During 1994,
the Company generated $32.5 million of net
funds from operating activities, an increase
of $5.6 million over the comparable period in
1993. During the year ended December 31,
1993, the Company generated $27.0 million of
net funds from operating activities, a
decrease of $29.4 million from the comparable
period in 1992. The decrease in operating
cash flow from 1993 to 1992 resulted from an
increase in working capital requirements,
primarily inventories and accounts
receivable, reflecting the shift in product
mix to a higher proportion of OE products.
Cash flow in 1994 was impacted, and
will continue to be impacted in 1995 and
1996, by the restructuring program previously
discussed. In addition to cash requirements
to fund the restructuring activities, a
significant increase in capital expenditures
is expected in 1995. Capital expenditures are
expected to be at the $28-29 million level in
1995, decreasing to the $18-19 million level
in 1996.
18
<PAGE> 6
At December 31, 1994, the Company had
outstanding under its credit facilities
borrowings totaling $19.0 million and letters
of credit totaling $10.5 million, and there
was $79.1 million available for borrowing
thereunder. As of December 31, 1994, the
Company had outstanding $28.6 million of
obligations relating to performance bonds. In
August 1994, the Company extended the terms
of its domestic credit facility to August 31,
1997.
In addition, the Company has other
uncommitted, unsecured revolving credit
facilities totaling $40.3 million, under
which $2.6 million was outstanding as of
December 31, 1994.
Interest on the Company's outstanding
senior notes is fixed at 7.92%. However, all
of the Company's borrowings under its other
senior credit facilities are currently at
floating interest rates. Interest costs are
therefore subject to significant change
depending upon the movement of short-term
interest rates.
During the year ended December 31,
1994, the Company spent $12.1 million on
capital expenditures for service center
expansion, cost reduction machinery and
ongoing renewal and replacements. Capital
expenditures totaled $16.4 million for 1993
and $13.7 million for 1992, primarily for
service center expansion, a new seal
manufacturing facility, renewal and
replacements and cost reduction equipment.
The Company spent approximately $5.3
million on Company-sponsored research and
development during 1994 and approximately
$4.2 million in 1993.
The Company believes that funds
provided by operations together with existing
or replacement credit facilities will be
sufficient for the Company to meet its
liquidity needs and support its dividend
policy over the next three years, the period
covered by the Company's planning cycle.
-------------------------------------------------------------------------------
INFLATION Inflation during the past three years has had
little impact on the Company's financial
performance.
19
<PAGE> 7
FIVE-YEAR SELECTED FINANCIAL DATA BW/IP, INC.
<TABLE>
<CAPTION>
December 31
Amounts in thousands, except per share amounts, ---------------------------------------------------------------------
ratios and number of employees 1994 1993 1992 1991 1990
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $448,719 $427,192 $399,289 $392,101 $338,741
Restructuring charge - 22,728 - - -
Operating income 49,228 33,330 71,289 69,714 64,745
Interest expense, net 6,280 6,091 9,019 16,342 24,169
Income from continuing
operations before income
taxes, extraordinary items
and cumulative effects
of accounting changes 42,262 26,351 61,064 44,438 37,321
Income from continuing
operations before
extraordinary items and
cumulative effects of
accounting changes 26,836 17,854 40,807 28,834 23,747
Discontinued operations, net (1,851) (13,509) 1,683 2,400 2,621
Net income 24,985 4,345 24,024 31,234 26,368
Bookings $464,465 $399,562 $451,236 $380,850 $401,511
Backlog 159,429 165,129 199,605 170,577 198,628
COMMON STOCK
Shares outstanding - end of year 24,275 24,275 24,275 24,275 20,275
Average shares outstanding 24,275 24,275 24,275 22,694 20,315
Earnings per share:
From continuing operations before
extraordinary items and
cumulative effects
of accounting changes $ 1.11 $ .74 $ 1.68 $ 1.27 $ .76
Discontinued operations, net (.08) (.56) .07 .11 .13
Net income per share 1.03 .18 .99 1.38 .89
Pro forma earnings per share(1) - - - - 1.30
Dividends declared per share .38 .30 .2175 .075 -
FINANCIAL DATA
Working capital $108,381 $122,881 $106,292 $109,650 $ 74,427
Capital expenditures 12,143 16,368 13,705 14,469 8,831
Depreciation and amortization 13,050 11,518 10,603 9,787 8,091
Total assets 367,894 341,288 327,822 331,681 314,116
Total debt 65,074 64,082 67,476 101,518 160,426
Stockholders' equity 165,914 146,391 152,793 139,731(1) 32,412
Total debt to total capital 28.2% 30.4% 30.6% 42.1% 83.2%
Return on average equity(2) 17.2% 11.9% 27.9% 33.5% 109.9%
Return on average capital(2) 12.2% 8.3% 17.7% 13.3% 12.1%
Number of employees - end of year 2,967 3,105 3,155 3,084 2,995
================================================================================================================================
</TABLE>
(1) Pro forma earnings per share has been presented to reflect the pro
forma impact of the elimination of the increase in estimated fair
market value ("accretion") related to the redeemable common stock for
the year ended December 31, 1990. Upon completion of the IPO in 1991,
certain outstanding shares of common stock were reclassified from
redeemable common stock to stockholders' equity.
(2) Based on income from continuing operations.
20
<PAGE> 8
CONSOLIDATED BALANCE SHEETS BW/IP, INC.
<TABLE>
<CAPTION>
December 31
-------------------------------
Dollar amounts in thousands, except share and per share data 1994 1993
===========================================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,152 $ 7,671
Accounts and notes receivable, net 111,390 92,614
Inventories 70,927 77,416
Deferred income taxes 13,522 12,840
Other, including net assets held for
disposition (Note 2) 8,552 23,188
---------------------------------------------------------------------------------------------------------------------------
Total current assets 213,543 213,729
Property, plant and equipment, net 94,909 92,273
Goodwill (net of accumulated amortization at
December 31, 1994 and 1993 of $4,952 and $3,742) 45,380 21,392
Other assets 14,062 13,894
---------------------------------------------------------------------------------------------------------------------------
Total assets $367,894 $341,288
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 12,101 $ 9,611
Accounts payable 38,166 34,569
Accrued liabilities 54,445 38,590
Income taxes payable 450 8,078
---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 105,162 90,848
Long-term debt 52,973 54,471
Other long-term liabilities 41,301 49,578
Deferred income taxes 2,544 -
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
10,000,000 shares authorized and unissued - -
Common stock, $.01 par value;
40,000,000 shares authorized;
24,450,000 shares issued and outstanding 245 245
Paid-in capital 85,763 85,763
Retained earnings 79,097 63,337
Cumulative translation adjustment 1,422 (2,341)
---------------------------------------------------------------------------------------------------------------------------
166,527 147,004
Less common stock in treasury; 175,000 shares, at cost (613) (613)
---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 165,914 146,391
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $367,894 $341,288
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 9
CONSOLIDATED STATEMENTS OF INCOME BW/IP, INC.
<TABLE>
<CAPTION>
For the year ended December 31
----------------------------------------
Dollar amounts in thousands, except share and per share data 1994 1993 1992
===========================================================================================================================
<S> <C> <C> <C>
Net sales $448,719 $427,192 $399,289
Cost of sales 279,630 259,157 228,139
---------------------------------------------------------------------------------------------------------------------------
Gross profit 169,089 168,035 171,150
Selling, administrative and
operating expenses 119,861 111,977 99,861
Restructuring charge (Note 3) - 22,728 -
---------------------------------------------------------------------------------------------------------------------------
Operating income 49,228 33,330 71,289
Interest expense, net 6,280 6,091 9,019
Other expenses (Note 6) 686 888 1,206
---------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before
income taxes,
extraordinary items and
cumulative effects of
accounting changes 42,262 26,351 61,064
Provision for income taxes 15,426 8,497 20,257
---------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before
extraordinary items
and cumulative effects
of accounting changes 26,836 17,854 40,807
Discontinued operations (Note 2):
Income from operations, net of tax - 1,665 1,683
Loss on disposition, net of tax (1,851) (15,174) -
---------------------------------------------------------------------------------------------------------------------------
Income before extraordinary
items and cumulative effects of
accounting changes 24,985 4,345 42,490
Extraordinary items, net of
tax (Notes 5 and 6) - - (8,186)
---------------------------------------------------------------------------------------------------------------------------
Income before cumulative effects
of accounting changes 24,985 4,345 34,304
Cumulative effects of accounting
changes, net of tax (Notes 4 and 7) - - (10,280)
---------------------------------------------------------------------------------------------------------------------------
Net income $ 24,985 $ 4,345 $ 24,024
===========================================================================================================================
Earnings per share:
From continuing operations
before extraordinary items and
cumulative effects of
accounting changes $ 1.11 $ .74 $ 1.68
Discontinued operations:
Income from operations, net of tax - .07 .07
Loss on disposition, net of tax (.08) (.63) -
Extraordinary items, net of tax - - (.33)
Cumulative effects of accounting
changes, net of tax - - (.43)
---------------------------------------------------------------------------------------------------------------------------
Net income per share (Note 6) $ 1.03 $ .18 $ .99
===========================================================================================================================
Dividends declared per share (Note 5) $ .38 $ .30 $ .2175
===========================================================================================================================
Weighted average number of shares outstanding 24,275,000 24,275,000 24,275,000
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY BW/IP, INC.
<TABLE>
<CAPTION>
Common Stock Cumulative
------------------------ Paid-In Retained Translation
Dollar and share amounts in thousands Shares Amount Capital Earnings Adjustment
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 24,450 $245 $85,763 $47,531 $ 6,805
Net income 24,024
Dividends declared (5,280)
Currency translation adjustment (5,682)
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 24,450 245 85,763 66,275 1,123
Net income 4,345
Dividends declared (7,283)
Currency translation adjustment (3,464)
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 24,450 245 85,763 63,337 (2,341)
Net income 24,985
Dividends declared (9,225)
Currency translation adjustment 3,763
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 24,450 $245 $85,763 $79,097 $ 1,422
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS BW/IP, INC.
<TABLE>
<CAPTION>
For the year ended December 31
-------------------------------------------
Dollar amounts in thousands 1994 1993 1992
============================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 459,158 $ 452,977 $ 426,754
Cash paid to suppliers and employees (405,702) (403,774) (350,243)
Dividends received from Argentine affiliate - - 3,244
Interest received 910 842 1,486
Interest paid (7,158) (7,311) (7,738)
Income taxes paid (14,660) (15,773) (17,141)
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 32,548 26,961 56,362
----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (12,143) (16,368) (13,705)
Acquisitions and disposition, net (15,012) - (4,216)
Other 4,311 (3,260) 356
----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (22,844) (19,628) (17,565)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (payments) under credit agreements 8,000 (2,000) 13,000
(Payments) borrowings under senior notes (8,333) - 50,000
Payment of subordinated notes and debentures - - (105,661)
Dividends paid (8,739) (6,797) (4,734)
Other (443) (646) (700)
----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (9,515) (9,443) (48,095)
----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,292 (433) (999)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,481 (2,543) (10,297)
Cash and cash equivalents at beginning of year 7,671 10,214 20,511
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 9,152 $ 7,671 $ 10,214
============================================================================================================================
</TABLE>
The reconciliation of net income to net cash provided by operating activities
for the years ended December 31, 1994, 1993 and 1992, is presented below:
<TABLE>
============================================================================================================================
<S> <C> <C> <C>
Net income $ 24,985 $ 4,345 $ 24,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant and equipment 14,207 12,859 12,078
Amortization of goodwill and debt issuance costs 1,534 1,066 1,339
Loss on disposition of segment 3,411 18,065 -
Cumulative effects of accounting changes, net of tax - - 10,280
Extraordinary losses, net of tax - - 8,186
Valuation allowances 3,130 1,744 1,129
Deferred taxes (3,886) 8,765 896
Other changes impacting current assets and liabilities:
Accounts and notes receivable (12,861) (12,649) (5,438)
Inventories 11,696 (18,357) 4,271
Other current assets (5,138) 3 1,041
Accounts payable and accrued liabilities 4,015 16,503 (1,266)
Other (8,545) (5,383) (178)
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 32,548 $ 26,961 $ 56,362
============================================================================================================================
Supplemental schedule of non-cash investing and financing activities:
Dividends declared but not paid $ 2,428 $ 1,942 $ 1,457
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BW/IP, INC
Dollar amounts in thousands, except
share and per share data
------------------------------------------------------------------------------
NOTE 1 Principles of Consolidation - BW/IP,
SUMMARY OF SIGNIFICANT Inc. (formerly known as BWIP Holding,
ACCOUNTING POLICIES Inc.) is the parent company of BW/IP
International, Inc. (BW/IP). Unless the
context otherwise requires, references
herein to "the Company" are to BW/IP,
Inc. and BW/IP International, Inc. and
its consolidated subsidiaries.
The consolidated financial
statements include the accounts of the
Company and majority-owned
subsidiaries. The Company's
investments in 20% to 50% owned
companies are accounted for on the
equity method. All significant
intercompany balances and
transactions have been eliminated in
consolidation.
Cash Equivalents - For purposes of
presenting the consolidated statements
of cash flows, short-term investments,
which have a maturity of 90 days or
less at the time of purchase, are
considered to be cash equivalents. The
carrying amount of cash equivalents
approximates fair value.
Inventories - Inventories are stated at
the lower of cost or market. Cost is
determined using the first-in,
first-out (FIFO) method.
Property, Plant and Equipment -
Property, plant and equipment are
stated at cost, net of accumulated
depreciation and amortization.
Expenditures for maintenance and
repairs are charged to expense as
incurred. Renewals or betterments of
significant items are capitalized.
When assets are sold or otherwise
disposed of, the cost and related
accumulated depreciation or
amortization are removed from the
respective accounts, and any resulting
gain or loss is recognized.
Depreciation and amortization of
property, plant and equipment are
provided for using the straight-line
method over the estimated useful lives
of the assets as follows:
<TABLE>
------------------------------------------------------------------------------
<S> <C>
Buildings and improvements 5 to 35 years
Machinery and equipment 3 to 12 years
Capital lease assets 5 to 25 years
------------------------------------------------------------------------------
</TABLE>
Income Taxes - The Company uses the
liability method of accounting for
income taxes and deferred tax
liabilities and assets are determined
based on the difference between the
financial statement and tax bases of
assets and liabilities. Provision is
made for withholding taxes and income
taxes, if appropriate, on the
unremitted earnings of joint ventures
and foreign subsidiaries which are not
considered to be permanently
reinvested. Tax credits are accounted
for under the flow-through method.
Research and Development - Expenditures
for research and development are
charged to expense in the year
incurred. Such costs were $5.3
million, $4.2 million and $6.2
million, respectively, for the years
ended December 31, 1994, 1993 and
1992.
Foreign Currency Translation - The
assets and liabilities of the
Company's foreign operations, except
those in highly inflationary
economies, are translated at the
end-of-period exchange rates; revenues
and expenses are translated at the
average exchange rates prevailing
during the period. The effects of
unrealized exchange rate fluctuations
on translating foreign currency assets
and liabilities into U.S. dollars are
accumulated in stockholders' equity.
<PAGE> 13
The monetary assets and liabilities of
foreign subsidiaries in highly inflationary
economies are translated into U.S. dollars
at year-end exchange rates and non-monetary
assets and liabilities at historical rates.
Prior to January 1, 1994, the Company's
Mexican subsidiary was accounted for as
operating in a highly inflationary economy.
The impact of the change was not significant.
Forward Contracts - The Company is party to
forward contracts in order to hedge certain
transactions denominated in foreign
currencies. Gains and losses on forward
contracts qualifying as hedges are deferred
and included in the measurement of the
related foreign currency transaction.
Losses are not deferred unless it is
estimated that the related transaction will
not result in a loss. The Company is exposed
to credit-related losses in the event of
nonperformance by counterparties to financial
instruments, but it does not expect any
counterparties to fail to meet their
obligations given their high credit ratings.
As of December 31, 1994, the Company
had outstanding $10.6 million of foreign
currency forward contracts, the majority of
which were in U.S. dollars, and which
mature between two weeks and nine months.
As of December 31, 1993, the Company had
outstanding $0.6 million of foreign currency
forward contracts, all of which were in
Dutch Guilders, and which matured between
two and eleven months. Deferred gains and
losses on hedging transactions as of
December 31, 1994 and 1993 were not
significant.
Long-Term Contracts - Revenue and costs
pertaining to long-term contracts are
recognized as units are shipped. Unbilled
costs on long-term contracts are included
in inventory. Progress billings are shown
as a reduction to inventory unless such
billings are in excess of accumulated costs
on long-term contracts, whereby they are
included in accrued liabilities.
Goodwill - The excess of cost over the fair
value of net assets of purchased
subsidiaries is amortized on the straight-
line basis over not more than 40 years.
Concentrations of Credit Risk - The Company
places its temporary cash investments with
financial institutions and, by policy, limits
the amount of credit exposure to any one
financial institution. Concentrations of
credit risk exist because of the concen-
tration of the business in the power and
petroleum industries. Such risk, however, is
limited due to the large number of customers
comprising the Company's customer base, the
Company's diverse product line and the
dispersion of the Company's customers
across many different geographic regions.
As of December 31, 1994, the Company does
not believe that it had significant concen-
trations of credit risk.
Reclassifications - Certain reclassifi-
cations have been made to the 1993 and 1992
consolidated financial statements to
conform to the 1994 presentation.
-------------------------------------------------------------------------------
NOTE 2
ACQUISITIONS AND DISPOSITION During 1994 and 1992, the Company acquired
the entities described below, which were
accounted for by the purchase method of
accounting. The results of operations
of the acquired companies are included in
the Company's consolidated statements of
income subsequent to the date of
acquisition. The acquisitions did not have a
significant impact on the Company's
consolidated financial position or results
of operations.
In November 1994, the Company acquired
the business and assets of Five Star Seal
Corporation (Five Star). The purchase price
was not significant. Five Star designs,
produces and markets mechanical seals and
related products for pumps and mixers,
selling primarily through a network of
distributors in both North America and
internationally.
26
<PAGE> 14
In January 1994, the Company acquired
Pacific Wietz GmbH & Co. KG, a manufacturer
of mechanical seals for the chemical
market, for $24.0 million.
In October 1992, the Company acquired
all of the outstanding stock of ACEC
Centrifugal Pumps S.A., a manufacturer of
pumps primarily for the petroleum industry.
The purchase price was not significant.
In December 1993, the Company initiated
a plan to dispose of its Fluid Controls
segment, which manufactured control systems,
servovalves, solenoids and other aerospace/
defense products and related services. As a
result, the Company recorded a fourth
quarter charge of $15.2 million, net of tax,
or $.63 per share, to write down the
segment's assets to their estimated net
realizable values. The loss was related
primarily to the write-off of intangible
assets allocated to the segment at the time
BW/IP was spun off from Borg-Warner Corpor-
ation (Borg-Warner) in 1987. The disposi-
tion was accounted for as a discontinued
operation and prior year income statements
were reclassified to reflect this treatment.
On October 31, 1994, the Company
completed the sale of its Fluid Controls
segment. Certain assets and liabilities of
the segment, including real property and
certain accrued employee benefits, were
retained by the Company. During 1994, the
Company recorded an additional loss from the
disposition of $1.9 million, net of tax, or
$.08 per share ($2.0 million and $.09 per
share in the fourth quarter) primarily to
reflect a reduction in the net realizable
value of the real property and certain
personnel termination costs.
Revenues for the discontinued Fluid
Controls segment were $23.4 million, $37.5
million and $33.8 million for fiscal years
1994 (through the date of sale), 1993 and
1992, respectively.
During 1992, the Company decided to
retain its interest in its Argentine
affiliate. In 1992 the Company recorded
$4.7 million in dividend income related to
this affiliate, of which $3.2 million were
earnings accrued by the affiliate in prior
periods, primarily 1991.
------------------------------------------------------------------------------
NOTE 3 As a result of continued overcapacity and
RESTRUCTURING CHARGE increased price sensitivity of original
equipment purchasers in the pump manufac-
turing industry, the Company recognized the
need to undertake substantial actions to
lower the overall cost structure of its
manufacturing operations. The restructuring
is designed to substantially reduce the
Company's costs and permit the Company to
selectively improve its competitive
position and profit margins. Based upon these
objectives, the Company developed a plan to
create centers of manufacturing excellence
by concentrating manufacturing of
individual products and components at
specialized facilities. In that regard, the
Company's plan includes a redistribution of
manufacturing operations whereby each
factory becomes a specialized facility to
design and/or manufacture a specified range
of products or component parts. These plans
include the opening of a new large-component
facility and creation of specialized
engineering, assembly and testing facili-
ties. The plan requires personnel realign-
ments, enhancements of manufacturing
control systems and other changes that
support the overall plan objectives. The
plan contemplates a reduction in the
Company's work force of approximately 320
employees.
27
<PAGE> 15
The following table summarizes the
Company's restructuring reserve as of
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Machinery Asset disposal
relocation, and
Personnel installation, and organizational
costs related costs realignment costs Total
===============================================================================================
<S> <C> <C> <C> <C>
1993 restructuring charge $10,231 $5,310 $7,187 $22,728
Cash expenditures (636) - - (636)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1993 9,595 5,310 7,187 22,092
Cash expenditures (1,922) (591) (954) (3,467)
Losses on asset disposals - - (739) (739)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1994 $ 7,673 $4,719 $5,494 $17,886
===============================================================================================
</TABLE>
Personnel costs include costs for
realigning various employee groups to
support the focused factory concept, includ-
ing termination, relocation and training or
retraining of employees. Machinery reloca-
tion, installation and related costs
include costs for moving production equip-
ment among the various facilities, as well
as costs to install such equipment, bring
such equipment into full production, and
other related costs. Asset disposal and
organizational realignment costs include
estimated losses related to the disposal of
property, plant and equipment, and the
costs for realigning certain sales and other
support functions as required by changes in
manufacturing operations. Based on infor-
mation currently available, the Company
estimates that the remaining balance of the
restructuring reserve is sufficient to allow
it to complete its restructuring plan. In
addition, changes in the estimates for the
three individual cost components have not
been significant. Noncash charges are
estimated to be approximately $4 million.
Activities to date include cash
expenditures related to benefits paid to
terminated employees and the announced shut-
down of the Company's Fresno, California,
plant, and a loss of approximately $0.7
million related to the disposal of property,
plant and equipment. During 1994, the
Company selected Albuquerque, New Mexico,
for a new large-component facility. Con-
struction of the new facility started in
early 1995 and production is expected to
commence in late 1995.
------------------------------------------------------------------------------
NOTE 4
INCOME TAXES
<TABLE>
<CAPTION>
For the year ended December 31
-----------------------------------------
1994 1993 1992
==============================================================================================
<S> <C> <C> <C>
Income from continuing operations before
income taxes, extraordinary items and
cumulative effects of accounting changes:
Domestic $19,348 $ 5,893 $32,897
Foreign 22,914 20,458 28,167
----------------------------------------------------------------------------------------------
$42,262 $26,351 $61,064
==============================================================================================
Income tax provision:
Current
Federal $ 893 $ 6,462 $ 7,328
State 1,494 2,042 3,312
Foreign 8,044 8,813 8,806
----------------------------------------------------------------------------------------------
10,431 17,317 19,446
----------------------------------------------------------------------------------------------
Deferred
Federal 1,889 (6,960) (1,285)
State 651 (614) (103)
Foreign 2,455 (1,246) 2,199
----------------------------------------------------------------------------------------------
4,995 (8,820) 811
----------------------------------------------------------------------------------------------
$15,426 $ 8,497 $20,257
==============================================================================================
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
December 31
-------------------------
Components of deferred tax assets and liabilities 1994 1993
=========================================================================================
<S> <C> <C>
Deferred tax assets:
Restructuring charge $ 7,249 $ 8,677
Postretirement benefits 7,721 8,247
Warranty and other reserves 1,678 1,780
Inventories 1,803 1,044
Accrued liabilities 2,698 2,734
Loss on disposition of segment 3,317 2,891
Pension 1,622 420
Other 963 1,511
Valuation allowance (1,400) -
-----------------------------------------------------------------------------------------
Total deferred tax assets 25,651 27,304
-----------------------------------------------------------------------------------------
Deferred tax liabilities:
Unremitted earnings of foreign affiliates 3,485 2,702
Property, plant and equipment
(excess book basis over tax basis) 8,388 7,692
Goodwill 2,800 2,045
-----------------------------------------------------------------------------------------
Total deferred tax liabilities 14,673 12,439
-----------------------------------------------------------------------------------------
Net deferred tax asset $10,978 $14,865
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31
---------------------------------
Reconciliation of effective income tax rate 1994 1993 1992
=========================================================================================
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 34.0%
Foreign earnings taxed at different rates,
including withholding taxes 5.3 5.3 5.6
State income taxes, net of federal income tax benefit 3.9 2.9 3.0
Utilization of tax credits (7.8) (10.2) (4.0)
Other 0.1 (0.8) (5.4)
-----------------------------------------------------------------------------------------
36.5% 32.2% 33.2%
=========================================================================================
</TABLE>
No taxes have been provided relating
to the possible distribution of
approximately $58 million of undistributed
earnings considered to be permanently
reinvested, primarily in the Netherlands.
The amount of such additional taxes that
would be payable if such earnings were
distributed is estimated to be
approximately $15 million.
Effective January 1, 1992, the Company
adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). The cumulative effect
of adopting SFAS 109 resulted in the
recognition of a $2.0 million gain, or
$.08 per share, during the first quarter
of 1992.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NOTE 5
DEBT AND LEASE OBLIGATIONS December 31
---------------------------
1994 1993
=========================================================================================
<S> <C> <C>
Credit Agreements $ 19,000 $11,000
7.92% Senior Notes; $41,667 principal amount;
payable $8,333 in 1995 through 1999; interest
payable semi-annually 41,667 50,000
Floating rate Industrial Development Revenue Bonds;
payable $700 in 1995; interest payable monthly;
average interest rate 3.1% 700 1,400
Capital lease obligations 1,177 1,628
Other 2,530 54
-----------------------------------------------------------------------------------------
65,074 64,082
Less current maturities (12,101) (9,611)
-----------------------------------------------------------------------------------------
Total long-term debt $ 52,973 $ 54,471
=========================================================================================
</TABLE>
29
<PAGE> 17
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
============================================================================
<S> <C>
1995 $12,101
1996 8,617
1997 27,424
1998 8,381
1999 8,335
Thereafter 216
----------------------------------------------------------------------------
$65,074
============================================================================
</TABLE>
The carrying value of the Company's
long-term debt approximates fair value.
Credit Agreements - The U.S. credit
agreement is an unsecured $100 million,
three-year facility extending through
August 1997. Borrowings under this
agreement are at alternative interest
rates. The U.S. credit agreement also
provides for the issuance of letters of
credit, which are deemed to be borrowings
for purposes of determining available credit
thereunder.
The Dutch credit agreement, available
to the Company's Dutch subsidiary, is a
50 million Dutch Guilder ($28.8 million as
of December 31, 1994) unsecured revolving
credit facility of which 35 million Dutch
Guilders ($20.2 million as of December 31,
1994) are restricted to the issuance of
letters of credit and bank guarantees for
the benefit of the Company's foreign
subsidiaries. The Dutch credit agreement
may be canceled, and all borrowings
thereunder become due, at the option of the
lender upon six-months' notice. Borrowings
under this agreement are at variable interest
rates and are guaranteed by the Company.
At December 31, 1994, the Company had
outstanding under its credit agreements
borrowings totaling $19.0 million and
letters of credit totaling $10.5 million,
and there was $79.1 million available for
borrowing thereunder. As of December 31,
1994, the Company had outstanding
$28.6 million of obligations relating to
performance bonds.
In addition, the Company has other
uncommitted, unsecured revolving credit
facilities totaling $40.3 million, under
which $2.6 million was outstanding as of
December 31, 1994.
The provisions of the credit agreements
require the Company to maintain specified
financial covenants, as defined. They also
include limitations or restrictions on among
other things new indebtedness and liens,
disposition of assets and payment of
dividends or other distributions.
Senior Notes - In May 1992, the Company
issued $50 million principal amount of
senior notes to certain institutional
investors, pursuant to separate but
substantially identical note agreements.
The proceeds from the senior notes,
together with approximately $41.5 million
borrowed under the U.S. credit agreement,
were applied to redeem $87 million
principal amount of the higher-yielding
subordinated debentures resulting in an
extraordinary loss during the second
quarter of 1992 equal to the prepayment
premium and unamortized discount on the
redeemed debentures of approximately
$7.7 million ($5.3 million after-tax, or
$.21 per share).
The senior notes bear interest at 7.92%
per annum, payable each May 15 and
November 15. Overdue payments accrue
interest at the greater of 9.92% or two
percentage points over the prevailing prime
rate.
The senior notes are due on May 15,
1999, and are subject to mandatory payments
of $8.3 million annually, commencing
May 15, 1994. The senior notes are also
subject to optional prepayment by the
Company, in whole or in part, on at least
30 days' notice, upon payment of a
"make-whole" premium designed to compensate
the holders of prepaid senior notes for any
shortfall
30
<PAGE> 18
between the rate of interest borne by the
senior notes and the reinvestment rate
prevailing as of such prepayment
(determined on the basis of securities with
a weighted average life to maturity
corresponding to the senior notes prepaid).
Any such optional prepayment will be applied
against the Company's obligation to make
mandatory payments on the senior notes in
inverse chronological order. Optional
prepayments are required to be applied
ratably among the senior notes, although the
Company has the right to optionally prepay
(with a make-whole premium) those holders of
senior notes that fail to grant their
consent to certain business transactions or
covenant modifications or waivers. An amount
equal to the make-whole premium is also
payable in the event the senior notes are
accelerated upon an event of default under
the note agreements.
Leases - The Company is obligated under
various capital leases for office and
manufacturing space and certain machinery
and equipment. The Company also leases
office and service center space, machinery,
equipment and automobiles under
non-cancelable operating leases. Rental
expense under operating leases for the years
ended December 31, 1994, 1993 and 1992, was
$5.2 million, $6.8 million and $6.6 million,
respectively.
The present value of future minimum
capital lease payments and future minimum
lease payments under non-cancelable
operating leases as of December 31, 1994,
are:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
=================================================================================================
<S> <C> <C>
1995 $ 856 $ 5,493
1996 307 4,770
1997 99 3,952
1998 50 3,243
1999 - 2,783
Later years - 7,963
-------------------------------------------------------------------------------------------------
1,312 $28,204
=================================================================================================
Less amount representing interest at rates varying from 6% to 14% (135)
-------------------------------------------------------------------------------------------------
Present value of minimum capital lease payments 1,177
Less current portion (754)
-------------------------------------------------------------------------------------------------
Capital lease obligations - non-current $ 423
=================================================================================================
</TABLE>
Restriction of Net Assets of Subsidiary
- The Company's U.S. credit facility and
senior note agreements (see above) restrict
the payment of dividends by BW/IP to BW/IP,
Inc. (and thereby limit BW/IP, Inc.'s
ability to pay dividends on its common
stock) except in certain specific
circumstances or unless certain financial
tests are met. As of December 31, 1994,
after giving effect to dividends declared
to date, approximately $30.0 million is
available for the payment of dividends by
BW/IP to BW/IP, Inc. pursuant to its most
restrictive covenants.
--------------------------------------------------------------------------------
NOTE 6 Option Plans - In 1992, the stockholders of
STOCKHOLDERS' EQUITY the Company approved the BW/IP Inter-
national, Inc. 1992 Long-Term Incentive
Plan (the "LTI Plan"). Under the LTI Plan,
the Company may grant incentive and
non-qualified stock options and performance
units to officers and other key employees
with respect to a maximum of 1,000,000
shares of Company common stock.
Stock options are granted at fair
market value of the Company's common stock
at the date of grant, become exercisable
commencing on the third anniversary of the
grant thereof, and expire in 10 years.
Performance units are granted to cover a
period of three or more full fiscal years of
the Company, beginning in the year in which
the units are granted. For each performance
31
<PAGE> 19
period, a contingent value is assigned
to the units, the final realizable
value being dependent upon the degree
to which performance objectives are
met.
Activity under the LTI Plan for the
years ended December 31, 1994,
1993 and 1992, is as follows:
<TABLE>
<CAPTION>
Number Number Unit
of Options Option Price of Units Value
===========================================================================================
<S> <C> <C> <C> <C>
Balance at December 31, 1991 - - - -
Options granted 103,700 $27.31 - -
Units awarded - - 9,320 $100
-------------------------------------------------------------------------------------------
Balance at December 31, 1992 103,700 27.31 9,320 100
Options granted 121,000 26.50 - -
Units awarded - - 10,600 100
-------------------------------------------------------------------------------------------
Balance at December 31, 1993 224,700 26.50-27.31 19,920 100
Options granted 175,300 19.50 - -
Units awarded - - 10,120 100
Options/Units forfeited/expired (27,450) 19.50-27.31 (11,120) 100
-------------------------------------------------------------------------------------------
Balance at December 31, 1994 372,550 $19.50-27.31 18,920 $100
===========================================================================================
</TABLE>
There are no charges to income in
connection with the issuance of
options. The Company recorded a
provision of $0.3 million towards the
performance units awarded in 1994 and
1992. The 1992 provision was reversed
as it became evident that performance
objectives would not be met. No
provision has been made for the 1993
performance units.
For earnings-per-share purposes, the
options are considered common stock
equivalents; however, they are
anti-dilutive and are therefore not
included in the calculation of
earnings per share.
During 1993, the stockholders approved
the Non-Employee Directors' Stock
Option Plan, which provides for the
granting of up to 125,000 stock
options. Options vest after one year
of service on the Board of Directors
and are exercisable for 10 years.
Options granted in 1994 and 1993
totaled 10,000 and 25,000,
respectively, and were at fair market
value.
Purchase Rights Plan - On July 27,
1993, the Company's Board of
Directors adopted a Preferred Stock
Purchase Rights Plan (the "Plan") and
declared a dividend of one Preferred
Stock Purchase Right (a "Right") on
each share of the Company's common
stock. The dividend distribution was
made on August 10, 1993, to the
stockholders of record on July 26,
1993.
The Plan provides that if there is an
announcement or notice to the Company
that a person or group has acquired
15% or more of the Company's common
stock (except pursuant to a tender
offer for all such shares at a price
and on terms determined to be fair
and in the best interests of the
Company and its stockholders by a
majority of the directors who are not
nominees of, or affiliated or
associated with, the 15% holder),
each holder of a Right, other than
Rights beneficially owned by the 15%
holder, will thereafter have the
right to purchase for $85.00 a number
of shares of the Company's common
stock having a market value of
$170.00 or twice the Right's exercise
price. All Rights that were
beneficially owned by the 15% holder
will thereafter be void.
Each Right will entitle the stockholder
to buy one one-hundredth of a share of a
new series of junior participating
cumulative preferred stock at an exercise
price of $85.00. The Rights will become
exercisable after the earlier to occur of
(i) 10 business days following a public
announcement or notice to the Company
that a person or group has acquired
15% or more of the Company's common
stock or (ii) 10 business days, or
such later date as the directors
determine, after a person commences a
tender offer which, if accepted,
would result in the person's owning
15% or more of the Company's common
stock.
32
<PAGE> 20
The preferred stock is designed so that
each one one-hundredth of a share
approximates one share of the Company's
common stock in all respects, except for a
minimum annual preferential dividend of $.10
and a minimum liquidation payment of $.10
for each one one-hundredth of a share of
preferred stock.
Under the Rights agreement, the Company
will not effect a merger or certain other
kinds of business combination transactions
after a public announcement or notice to the
Company that a person or group has acquired
15% or more of the Company's common stock,
unless provision has been made so that
after the transaction a holder of a Right
would be able to buy for $85.00 stock of
the acquiring company having a market value
of $170.00, or twice the exercise price
of the Right.
The Company's directors can redeem the
Rights at $.01 per Right until 10 business
days after a public announcement or notice
to the Company that a person or group has
acquired 15% or more of the Company's common
stock. The redemption period can be extended
by the directors before such an announcement
or notice. If the Board of Directors redeems
the Rights after such an announcement or
notice, the redemption requires concurrence
of a majority of the continuing directors
who are not nominees of, or affiliated or
associated with, the 15% stockholder. In
addition, after a person or group acquires
15% or more (but less than 50%) of the
Company's common stock, the Board of
Directors may, with such a concurrence by the
continuing directors, exchange one share of
common stock for each outstanding Right,
except for Rights held by the 15% holder,
which will become void.
The Rights, which expire in 10 years,
have no voting power.
Stock Offerings - In February and November
of 1992, the Company completed secondary
public offerings of 6,325,000 shares and
4,695,767 shares of its common stock,
respectively. All of the shares sold in both
offerings were by selling stockholders.
Subject to agreements with such selling
stockholders, the Company was obligated to
pay certain expenses related to the
offerings. Such expenses totaled $1.2 million
($0.9 million after-tax, or $.04 per share).
These expenses have been recorded in the
other expenses line within the consolidated
statements of income.
As a result of the February 1992
secondary, the Company was required to
prepay certain subordinated debt, incurring
an extraordinary loss on the transaction of
approximately $4.2 million ($2.9 million
after-tax, or $.12 per share).
--------------------------------------------------------------------------------
NOTE 7 Pension Plans - The Company has certain
BENEFIT PLANS non-contributory, defined benefit pension
plans covering substantially all domestic
employees. The union hourly plans base
benefits upon years of service, while the
salaried/union-free plan uses both years
of service and earnings to determine
benefits. During 1992, the Company adopted a
Supplemental Executive Retirement Plan, the
effects of which are not significant.
It is the Company's policy to fund an
amount necessary to satisfy the minimum
funding requirements of ERISA. The amount
to be funded is subject to annual review by
management and its consulting actuary. The
actuarial method used to determine the plan
liability is the unit credit method. The
plans hold their assets as units in
commingled funds consisting principally of
high quality corporate equities and
corporate and government bonds.
33
<PAGE> 21
Net periodic pension expense for the
Company's domestic and foreign
non-contributory defined benefit pension
plans for the years ended December 31,
1994, 1993 and 1992, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================================
<S> <C> <C> <C>
Service cost of current period $ 3,515 $ 3,415 $ 3,415
Interest cost on projected benefit obligation 8,071 7,436 6,943
Actual loss (return) on assets 3,884 (14,580) (6,795)
Net amortization and deferral (12,424) 6,804 (1,460)
-----------------------------------------------------------------------------------------------
Net periodic pension expense $ 3,046 $ 3,075 $ 2,103
===============================================================================================
</TABLE>
The following sets forth the plans'
funded status reconciled with amounts
reported in the consolidated balance sheets
at:
<TABLE>
<CAPTION>
December 31
----------------------
1994 1993
===============================================================================================
<S> <C> <C>
Present value of benefit obligation:
Vested benefits $ 88,632 $ 88,520
Non-vested benefits 4,082 3,809
-----------------------------------------------------------------------------------------------
Accumulated benefit obligation 92,714 92,329
Value of future pay increases 9,846 15,704
-----------------------------------------------------------------------------------------------
Total projected benefit obligation 102,560 108,033
Plan assets at fair value 91,062 101,880
-----------------------------------------------------------------------------------------------
Excess of projected benefit obligation over
plan assets (11,498) (6,153)
Unrecognized prior service cost 3,135 4,483
Unrecognized net loss (gain) 2,306 (655)
Unrecognized net obligation (asset) 328 (49)
-----------------------------------------------------------------------------------------------
Accrued pension obligation $ (5,729) $ (2,374)
===============================================================================================
Discount rate 8.75% 7.75%
Rate of increase in compensation levels 4.0-8.0% 4.0-8.0%
Long-term rate of return on assets 10.0% 10.0%
===============================================================================================
</TABLE>
The Company's Dutch employees are
covered by a multi-employer defined benefit
plan. Certain of the Company's other
foreign employees are insured under
irrevocable annuity contracts. Pension
expense associated with these arrangements
for the years ended December 31, 1994, 1993
and 1992, was $1.5 million, $1.1 million and
$1.1 million, respectively. The Company also
is required to make benefit payments on
behalf of certain employees in foreign
countries based upon local laws. Amounts
paid are based on a percentage of salary
earned (defined contribution plans) and are
not significant.
Postretirement and Postemployment Benefits -
The Company's postretirement benefit
program is made up of two plans, the Life
Insurance Plan and the Health Care Plan.
Both plans cover U.S. employees only. Any
permanent full-time employee is eligible
upon retirement after age 55 and with 10
years of service with the Company. The Health
Care Plan is a contributory plan.
The following sets forth the post-
retirement program's funded status recon-
ciled with amounts reported in the
consolidated balance sheets at:
34
<PAGE> 22
<TABLE>
<CAPTION>
December 31
---------------------
1994 1993
================================================================================================
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $ 8,589 $ 6,626
Fully eligible active plan participants 2,347 3,428
Other active plan participants 1,773 3,165
------------------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 12,709 13,219
Plan assets at fair value - -
------------------------------------------------------------------------------------------------
Excess of accumulated postretirement benefit obligation
over plan assets (12,709) (13,219)
Unrecognized prior service benefit, arising from
July 1, 1993 plan amendment (7,102) (9,072)
Unrecognized net loss 957 1,734
------------------------------------------------------------------------------------------------
Accrued postretirement benefit obligation $(18,854) $(20,557)
================================================================================================
</TABLE>
Net periodic postretirement benefit
expense for the years ended December 31,
1994, 1993 and 1992, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
================================================================================================
<S> <C> <C> <C>
Service cost of current period $ 288 $ 515 $ 724
Interest cost on accumulated postretirement
benefit obligation 1,000 1,203 1,551
Amortization of prior service benefit (927) (661) -
------------------------------------------------------------------------------------------------
Net periodic postretirement benefit expense $ 361 $1,057 $2,275
================================================================================================
Discount rate 8.75% 7.75% 8.25%
Rate of increase in per capita cost of covered
health care benefits 10.0% 13.0% 14.0%
================================================================================================
</TABLE>
An increase in the assumed health care
cost trend rate of 1% for each year would
increase the accumulated postretirement
benefit obligation by $0.1 million and the
net service and interest cost components of
the net periodic postretirement benefit
expense for the year by less than
$0.1 million.
Effective January 1, 1992, the Company
adopted Statements of Financial Accounting
Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than
Pensions" ("SFAS 106") and No. 112,
"Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). The cumulative
effects of adopting these statements totaled
$19.2 million ($11.2 million after-tax, or
$.46 per share) for SFAS 106 and
$1.8 million ($1.1 million after-tax, or
$.05 per share) for SFAS 112.
Capital Accumulation Plan - The Company
has a Capital Accumulation Plan (the "CAP
Plan" ) qualified under section 401(k) of
the Internal Revenue Code, which allows for
participant contributions and for Company
matching contributions. The Company intends
to make all matching contributions in
shares of its common stock. Employees
immediately vest in all Company matching
contributions. For the years ended
December 31, 1994, 1993 and 1992, the Company
expensed approximately $1.4 million,
$0.8 million and $1.2 million,
respectively, under the CAP Plan.
Fluid Controls Segment - All foregoing
financial disclosures related to the
Company's benefit plans include employees
of the Fluid Controls segment up to the
date of sale and beyond, to the extent
liability for such benefit plans remains
with the Company (see Note 2).
35
<PAGE> 23
--------------------------------------------------------------------------------
NOTE 8 The Company is involved in various
COMMITMENTS AND CONTINGENCIES claims and legal actions arising in
the ordinary course of business. It
is the opinion of management, upon the
advice of legal counsel, that the
ultimate disposition of these matters
will not materially affect the
Company's financial position. As the
predecessor to the Company's business,
Borg-Warner agreed to indemnify the
Company for litigation and potential
claims identified at May 20, 1987, to
the extent such claims were not
provided for at May 20, 1987.
The Company is subject to pollu-
tion and hazardous waste disposal
regulations in all jurisdictions in
which it has operating facilities and
periodically makes capital expendi-
tures to meet environmental require-
ments. The Company believes that future
expenditures will not have a material
adverse effect on its financial
position. In addition, under the
requirements of the Federal
Comprehensive Environmental Response,
Compensation and Liability Act of
1980 ("Superfund"), the Company has
been named a potentially responsible
party ("PRP") at several Superfund
sites being administered by the U.S.
Environmental Protection Agency.
Borg-Warner is obligated to indemnify
the Company, in whole or in part, in
the event it is held liable as a PRP
at these identified sites. Final
resolution of the above matters is
not expected to be material to the
Company's financial position.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 9
DETAILS OF CERTAIN CONSOLIDATED December 31
BALANCE SHEET CAPTIONS ---------------------
1994 1993
====================================================================
<S> <C> <C>
Accounts and notes receivable:
Trade $100,568 $ 82,883
Progress billings 4,186 2,717
Other 9,603 9,819
--------------------------------------------------------------------
114,357 95,419
Less allowance for doubtful accounts (2,967) (2,805)
--------------------------------------------------------------------
$111,390 $ 92,614
====================================================================
Inventories:
Finished parts $ 40,558 $ 38,121
Work in process 22,841 36,723
Raw materials and supplies 13,312 12,951
--------------------------------------------------------------------
76,711 87,795
Less progress billings (5,784) (10,379)
--------------------------------------------------------------------
$ 70,927 $ 77,416
====================================================================
Property, plant and equipment:
Land $ 14,307 $ 13,819
Buildings and improvements 37,444 35,216
Machinery and equipment 98,574 91,810
Capital lease assets 3,976 3,874
Construction in progress 2,645 1,791
--------------------------------------------------------------------
156,946 146,510
Less accumulated depreciation
and amortization (62,037) (54,237)
--------------------------------------------------------------------
$ 94,909 $ 92,273
====================================================================
Accrued liabilities:
Accrued salaries, wages, taxes
and benefits $ 29,011 $ 21,783
Accrued restructuring charge 10,381 6,524
Warranties and claims 2,824 3,315
Accrued interest payable 787 764
Other 11,442 6,204
--------------------------------------------------------------------
$ 54,445 $ 38,590
====================================================================
</TABLE>
36
<PAGE> 24
------------------------------------------------------------------------------
NOTE 10 As a result of the disposition of the
OPERATIONS INFORMATION BY Fluid Controls segment (see Note 2) the
GEOGRAPHIC LOCATION Company currently operates in one
business segment: Pump/Seal. The
Pump/Seal segment consists primarily of
centrifugal pumps, mechanical seals, nuclear
valves and related equipment and services. A
summary of information about the Company's
operations by geographic location for the
years ended December 31, 1994, 1993 and 1992,
is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
=====================================================================================
<S> <C> <C> <C>
Net sales:
United States $232,989 $253,963 $230,986
Western Europe 135,432 109,880 111,887
Other foreign 80,298 63,349 56,416
-------------------------------------------------------------------------------------
$448,719 $427,192 $399,289
=====================================================================================
Intersegment sales (not included above):
United States $ 16,540 $ 13,208 $ 14,582
Western Europe 3,217 1,193 922
Other foreign 2,757 543 228
-------------------------------------------------------------------------------------
$ 22,514 $ 14,944 $ 15,732
=====================================================================================
Operating Income:
United States $ 21,318 $ 11,572 $ 36,209
Western Europe 14,126 11,391 20,306
Other foreign 13,784 10,367 14,774
-------------------------------------------------------------------------------------
$ 49,228 $ 33,330 $ 71,289
=====================================================================================
Identifiable Assets:
United States $195,927 $217,883 $207,802
Western Europe 119,944 100,659 79,589
Other foreign 52,023 22,746 40,431
-------------------------------------------------------------------------------------
$367,894 $341,288 $327,822
=====================================================================================
</TABLE>
Net sales by geographic location
exclude intercompany sales. Included
in U.S. sales are export sales of
$69.9 million, $86.7 million and
$62.4 million for the years ended
December 31, 1994, 1993 and 1992,
respectively.
-------------------------------------------------------------------------------
NOTE 11 The following is a summary of the
QUARTERLY RESULTS OF OPERATIONS quarterly results of operations for the years
(UNAUDITED) ended December 31, 1994 and 1993 (dollar
amounts in millions):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
=========================================================================================
<S> <C> <C> <C> <C>
1994
Net sales $96.7 $105.5 $118.0 $128.5
Operating income 10.0 11.4 13.0 14.8
Income from continuing operations 5.3 6.0 7.1 8.4
Discontinued operations, net of tax (0.1) 0.4 (0.1) (2.0)
Net income 5.2 6.4 7.0 6.4
=========================================================================================
Earnings (loss) per share:
From continuing operations $ .22 $ .25 $ .29 $ .35
Discontinued operations, net of tax (.01) .02 - (.09)
Net income .21 .27 .29 .26
=========================================================================================
1993
Net sales $99.5 $105.0 $110.7 $112.0
Operating income 12.0 14.8 13.3 (6.8)
Income from continuing operations 6.7 8.2 7.9 (5.0)
Discontinued operations, net of tax 0.2 0.3 0.4 (14.4)
Net income (loss) 6.9 8.5 8.3 (19.4)
Earnings (loss) per share:
From continuing operations $ .28 $ .34 $ .32 $ (.20)
Discontinued operations, net of tax - .01 .02 (.59)
Net income (loss) .28 .35 .34 (.79)
=========================================================================================
</TABLE>
37
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS BW/IP, INC.
PRICE WATERHOUSE LLP [LOGO]
To the Board of Directors and
Stockholders of BW/IP, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of BW/IP, Inc.
and its subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above. The
consolidated financial statements of BW/IP, Inc. for the year ended December
31, 1992 were audited by other independent accountants whose report dated
February 16, 1993 included an explanatory paragraph that described changes
during 1992 in the Company's methods of accounting for income taxes and certain
postretirement and other postemployment benefits as described in Notes 4 and 7.
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1995
38
<PAGE> 26
COMMON STOCK PRICES AND DIVIDENDS BW/IP, INC.
The company's common stock is listed
through the NASDAQ National Market
System under the symbol "BWIP." The
following table displays the high and
low reported sale prices for the
periods indicated and the cash
dividend per share of common stock in
each quarter:
<TABLE>
<CAPTION>
Market Price
----------------------- Dividends
Period High Low Declared
================================================================================
<S> <C> <C> <C>
1991
Second Quarter
(from May 24, 1991) $15 $13-3/8 -
Third Quarter 22-3/4 14 $.0375
Fourth Quarter 23-1/4 15-3/4 .0375
1992
First Quarter $28-3/4 $19-3/4 .0375
Second Quarter 28-3/4 23 .06
Third Quarter 26-3/4 22-1/4 .06
Fourth Quarter 30-3/4 23-1/2 .06
1993
First Quarter $30-1/4 $23-3/4 $.06
Second Quarter 26-1/4 23 .08
Third Quarter 27-1/4 22-1/2 .08
Fourth Quarter 25-1/4 22-1/2 .08
1994
First Quarter $25-3/4 $15-3/4 $.08
Second Quarter 19 15 .10
Third Quarter 19-1/2 15-3/4 .10
Fourth Quarter 19-3/4 16-1/4 .10
================================================================================
</TABLE>
At March 7, 1995, the company's common
stock was held by approximately 5,800
stockholders of record or through
nominee or street name accounts with
brokers.
While the company expects to continue
its policy of paying regular
quarterly cash dividends, future
dividends will be dependent on future
earnings, the financial condition of
the company and capital requirements.
39
<PAGE> 1
Exhibit 21.a
BW/IP, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION WHERE PERCENTAGE
NAME OF SUBSIDIARY INCORPORATED OWNED
------------------ ------------ -----
<S> <C> <C>
BW/IP International, Inc. Delaware, U.S.A. 100%
Byron Jackson Argentina Industrial Province of Mendoza, 51%
and Commercial Sociedad Argentine Republic
Anonima (I.C.S.A.)
BW/IP International, Ltd. Canada 100%
BW Mechanical Seals K.K. Japan 100%
BW Mechanical Seals (S.E.A.) Pte. Ltd. Singapore 100%
Byron Jackson K.K. Japan 100%
Byron Jackson Co., S.A. de C.V. Mexico 100%
BW/IP International GmbH Germany 100%
BW/IP International Limited United Kingdom 100%
BW/IP International S. A. Spain 100%
BW/IP International S.A.R.L. France 100%
BW/IP International S.r.l. Italy 100%
BW/IP International B.V. The Netherlands 100%
Ebara-Byron Jackson Co., Ltd. Japan 50%
BW/IP de Venezuela S.A. Venezuela 75%
BW Mechanical Seals (Malaysia) Sdn. Bhd. Malaysia 70%
PT BW Mechanical Seals Indonesia Indonesia 75%
BW/IP International S.A. Belgium 100%
Pacific Dichtungstechnik Gesellschaft m.b.H. Austria 100%
Pacific Dichtungstechnik AG Switzerland 100%
Pacific Wietz GmbH & Co. KG Germany 100%
Pacific Wietz Verwaltungs GmbH Germany 100%
</TABLE>
<PAGE> 2
BW/IP, INC.
LIST OF SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
JURISDICTION WHERE PERCENTAGE
NAME OF SUBSIDIARY INCORPORATED OWNED
------------------ ------------ -----
<S> <C> <C>
BW/IP Services B.V. The Netherlands 100%
BW/Abahsain Seal Company Limited Saudi Arabia 60%
BW/IP - New Mexico, Inc. Delaware, U.S.A. 100%
BW/IP International (Barbados), Ltd. Barbados 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.A
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-44806) of BW/IP, Inc. of our report dated
February 14, 1995 appearing on page 38 of the Annual Report to Stockholders
which is incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules, which appears on page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Los Angeles, California
March 30, 1995
<PAGE> 1
EXHIBIT 23.B
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement of BW/IP, Inc. (formerly BWIP Holding, Inc.) on Form S-8 (no.
33-44806) of our reports dated February 16, 1993 on our audit of the
consolidated statements of income, stockholders' equity, and cash flows, and
the financial statement schedules of BW/IP, Inc. and its wholly owned
subsidiary, for the year ended December 31, 1992, which reports appear on page
F-3 and page F-4 in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 24, 1995
<PAGE> 1
Exhibit 24.a
BW/IP, INC.
POWER OF ATTORNEY
The undersigned does hereby make, constitute and appoint John D.
Hannesson, John M. Nanos and Mary Jane Young, and each of them, with full power
in each to act without the other, his true and lawful attorney, in his name,
place and stead to execute on his behalf, as director of BW/IP, Inc. (the
"Company"), the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and any and all amendments or supplements thereto, to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, together with any other
instruments that such attorneys or any one of them, shall deem necessary or
advisable in connection therewith, giving and granting to each of such
attorneys full power and authority to do and to perform every act necessary or
advisable in furtherance of the purposes hereof as fully as he could do
himself, with full power of substitution and revocation, hereby ratifying and
confirming all that such attorneys or substitutes may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the
date indicated below.
/s/ James J. Gavin, Jr.
----------------------------
James J. Gavin, Jr.
Dated: February 24, 1995
<PAGE> 2
BW/IP, INC.
POWER OF ATTORNEY
The undersigned does hereby make, constitute and appoint John D.
Hannesson, John M. Nanos and Mary Jane Young, and each of them, with full power
in each to act without the other, his true and lawful attorney, in his name,
place and stead to execute on his behalf, as director of BW/IP, Inc. (the
"Company"), the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and any and all amendments or supplements thereto, to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, together with any other
instruments that such attorneys or any one of them, shall deem necessary or
advisable in connection therewith, giving and granting to each of such
attorneys full power and authority to do and to perform every act necessary or
advisable in furtherance of the purposes hereof as fully as he could do
himself, with full power of substitution and revocation, hereby ratifying and
confirming all that such attorneys or substitutes may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the
date indicated below.
/s/ George D. Leal
--------------------------
George D. Leal
Dated: February 23, 1995
<PAGE> 3
BW/IP, INC.
POWER OF ATTORNEY
The undersigned does hereby make, constitute and appoint John D.
Hannesson, John M. Nanos and Mary Jane Young, and each of them, with full power
in each to act without the other, his true and lawful attorney, in his name,
place and stead to execute on his behalf, as director of BW/IP, Inc. (the
"Company"), the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and any and all amendments or supplements thereto, to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, together with any other
instruments that such attorneys or any one of them, shall deem necessary or
advisable in connection therewith, giving and granting to each of such
attorneys full power and authority to do and to perform every act necessary or
advisable in furtherance of the purposes hereof as fully as he could do
himself, with full power of substitution and revocation, hereby ratifying and
confirming all that such attorneys or substitutes may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the
date indicated below.
/s/ H. Jack Meany
--------------------------
H. Jack Meany
Dated: February 24, 1995
<PAGE> 4
BW/IP, INC.
POWER OF ATTORNEY
The undersigned does hereby make, constitute and appoint John D.
Hannesson, John M. Nanos and Mary Jane Young, and each of them, with full power
in each to act without the other, his true and lawful attorney, in his name,
place and stead to execute on his behalf, as director of BW/IP, Inc. (the
"Company"), the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and any and all amendments or supplements thereto, to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, together with any other
instruments that such attorneys or any one of them, shall deem necessary or
advisable in connection therewith, giving and granting to each of such
attorneys full power and authority to do and to perform every act necessary or
advisable in furtherance of the purposes hereof as fully as he could do
himself, with full power of substitution and revocation, hereby ratifying and
confirming all that such attorneys or substitutes may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the
date indicated below.
/s/ James S. Pignatelli
-------------------------------
James S. Pignatelli
Dated: February 23, 1995
<PAGE> 5
BW/IP, INC.
POWER OF ATTORNEY
The undersigned does hereby make, constitute and appoint John D.
Hannesson, John M. Nanos and Mary Jane Young, and each of them, with full power
in each to act without the other, his true and lawful attorney, in his name,
place and stead to execute on his behalf, as director of BW/IP, Inc. (the
"Company"), the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and any and all amendments or supplements thereto, to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, together with any other
instruments that such attorneys or any one of them, shall deem necessary or
advisable in connection therewith, giving and granting to each of such
attorneys full power and authority to do and to perform every act necessary or
advisable in furtherance of the purposes hereof as fully as he could do
himself, with full power of substitution and revocation, hereby ratifying and
confirming all that such attorneys or substitutes may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the
date indicated below.
/s/ William C. Rusnack
----------------------------
William C. Rusnack
Dated: February 23, 1995
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