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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 [FEE REQUIRED]
For the fiscal year ended February 28, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NUMBER 1-10028
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KETEMA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 23-2511128
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
501 S. CHERRY STREET, SUITE 600, 80222
DENVER, COLORADO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(303) 331-0940
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, Par Value $1.00 Per Share American Stock Exchange
8% Convertible Subordinated Debentures American Stock Exchange
Due 2003
7% Cumulative Convertible Voting
Preferred Stock,
Par Value $1.00 Per Share None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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.
X
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
X
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 6, 1994: $42,039,432
The number of shares of common stock outstanding as of May 6, 1994:
3,490,202.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Proxy Statement for
Annual Meeting of Stockholders to be held on June 30, 1994.
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PART I
ITEM 1. BUSINESS.
RECENT DEVELOPMENTS--PROPOSED MERGER TRANSACTION
In an amendment to a Schedule 13D Statement, dated October 19, 1993, filed
with the Securities and Exchange Commission, a group of stockholders of Ketema,
Inc. (the "Company"), consisting of clients of American Securities Partners,
L.P. ("American Securities Partners"), including three directors of the Company
(the "American Securities Group"), stated that they were considering various
options with regard to their investment in the Company including initiating or
responding to proposals regarding a merger or other business combination. The
Amendment also stated that the American Securities Group had discussed
generally and intended to explore with Hugh H. Williamson, III, the President
and Chief Executive Officer of the Company, a possible merger or business
combination transaction. On April 28, 1994, KTM Holdings Corp., a corporation
organized on behalf of the American Securities Group ("KTM"), delivered a
proposal to the Company's Board of Directors proposing the acquisition of all
outstanding shares of Common Stock not already owned by the members of the
American Securities Group at a price of $13.125 per share payable in cash
through a merger of a wholly-owned subsidiary of KTM into the Company which
would be the surviving corporation and become a wholly-owned subsidiary of KTM
(the "Merger Proposal"). The Merger Proposal provides that the proposed merger,
if approved by the Board of Directors based on a favorable recommendation of a
special committee of the Board consisting of two directors who are not members
of the American Securities Group or employees of the Company (the "Special
Committee"), would be subject to a number of conditions, including (i) the
negotiation and execution of a definitive merger agreement, (ii) approval by
the holders of a majority of the outstanding shares of Common Stock, (iii) KTM
reaching satisfactory agreements with (a) the institutional investors holding
the Company's outstanding Senior Notes regarding the early retirement of such
Notes and (b) Mr. Williamson, regarding, among other things, his continuation
as Chief Executive Officer of the Company and his exchange of the convertible
debentures and options held by him for an equity participation in KTM if the
proposed merger is consummated, and (iv) the funding of working capital and
term loans to finance the transaction under a bank commitment letter.
Subsequently, KTM reached an understanding with Mr. Williamson. The American
Securities Group and Mr. Williamson beneficially own in the aggregate
approximately 22.87% of the outstanding shares of Common Stock (after giving
effect to the conversion of all convertible debentures held by them and the
exercise of all presently exercisable stock options held by Mr. Williamson).
"Thereafter, the Special Committee, with the assistance of its financial and
legal advisors, began to consider the Merger Proposal in light of, among other
things, the operating and financial performance of the Company." There can be
no assurances that the merger contemplated by the Merger Proposal, or any other
business combination involving the Company, will be approved by the Special
Committee or the Board of Directors, or if approved, will be consummated.
Subsequent to the Company's public announcement on April 28, 1994 of its
receipt of the Merger Proposal, the Company was served with, or advised of the
filing of, seven class action lawsuits in the Delaware Court of Chancery, New
Castle County, relating to the Merger Proposal. The complaints name as
defendants all or certain directors of the Company and, in some instances, the
Company itself. See Item 3 of this Form 10-K, "Legal Proceedings".
BUSINESS ORGANIZATION, PRODUCTS AND MARKETS
The Company is a diversified multi-product manufacturer which develops,
designs, manufactures and markets a wide group of products for industrial and
commercial markets.
The Company was incorporated in May 1988 in connection with a corporate
restructuring of AMETEK, Inc. ("Ametek"), in which certain businesses and
related assets and liabilities of Ametek were transferred to the Company. On
November 30, 1988, the Company became a separate, publicly held corporation by
means
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of the pro rata distribution (the "Distribution") by Ametek of all the
outstanding shares of the Company's Common Stock, $1.00 par value ("Common
Stock"), to holders of record of Ametek's common stock as of the close of
business on that date. Concurrent with the Distribution, the Company commenced
a rights offering which resulted in the issuance of $17.5 million aggregate
principal amount of the Company's 8% Convertible Subordinated Debentures Due
2003 ("Debentures") for aggregate gross proceeds of $17.5 million. The
Debentures are convertible into either Common Stock or, under certain
circumstances, shares of the Company's 7% Cumulative Voting Preferred Stock,
$1.00 par value ("Preferred Stock"), which in turn are convertible into Common
Stock.
As of February 28, 1994, the Company consisted of eleven operating units.
These operating units and their major products are described in the following
paragraphs and are divided into four business segments: Process Group,
Aerospace Group, Industrial Group and American Innovations, Inc. The Process
Group designs and manufactures highly engineered components and equipment for
the chemical process, petroleum, agriculture, power and related industries. The
Aerospace Group engineers and produces parts and components for aircraft and
rocket engines, missiles, satellites and other aerospace applications. The
units in the Industrial Group generally manufacture products that involve
fairly standard manufacturing processes and industrial applications. American
Innovations, Inc. designs and produces systems for an emerging market, namely
the remotely monitored meter reading segment of the utility industry.
PROCESS GROUP
The Heat Transfer division manufactures Whitlock(R) shell and tube heat
exchangers and Acme(R) chiller barrels designed to maintain temperature or
remove or recover heat in many industrial processes. Standard heat exchangers
are supplied for computer, electronic and other industrial applications, while
custom-engineered heat exchangers are supplied to the refrigeration, power and
process industries. The division utilizes manufacturer's representatives as
well as its own personnel to market its products.
The McCrometer division produces propeller and V-Cone(TM) differential
pressure flow meters, some with electronic batching and remote recording
systems, used primarily for agricultural applications and, to a lesser extent,
for industrial and municipal applications, both in the U.S. and in certain
foreign markets. Flow meters measure and regulate the usage of water or other
fluids. The division's marketing efforts are conducted primarily through
manufacturer's representatives and dealers in the agricultural markets.
The Process Equipment division engineers and manufactures equipment to
separate solids from liquids in numerous applications and provides maintenance,
overhaul and field services for equipment manufactured by the Company and other
manufacturers. It produces Tolhurst(R) and Mark III(R) centrifuges, Filtroba
helical filters and helical filter dryers, Niagara filters and filtration
fabrics for pharmaceutical and other process industries. Also produced are
large metal fabrications made to customer specifications for use as bellows and
expansion joints. Process Equipment's products are sold primarily through
manufacturer's representatives.
The Schutte and Koerting division manufactures flow measurement and control
devices, including the following: variable area meters and turbine meters for
the aerospace, general aviation and automotive industries; steam jet apparatus
and fume scrubbers for the chemical process, petrochemical and pulp and paper
markets; and valves for the power generation industry. Certain high accuracy
flow meters are used principally as instruments for calibration. Schutte and
Koerting's products are sold primarily through manufacturer's representatives.
AEROSPACE GROUP
The Ketema A&E division (formally the Aerospace & Electronics division)
produces titanium, stainless steel and other high-temperature alloy precision
weldments and brazements for a large variety of jet and gas turbine aircraft
engines. It also supplies components and assemblies for the rocket engine of
the Space Shuttle and the fuselage of missiles. In addition, Ketema A&E designs
and manufactures microelectronic fuel control
2
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systems for aerospace and missile projects. Many of Ketema A&E products have
military applications and are built to customer specifications. Jet engine
components produced by Ketema A&E represented approximately 25% in fiscal 1994,
18% in fiscal 1993 and 23% in fiscal 1992, of the Company's net sales. Most of
Ketema A&E's sales are made under subcontracts for the U.S. government and
sales are made primarily by divisional personnel.
Aldan Industrial Machining, Inc. ("Aldan"), a wholly-owned subsidiary which
was acquired in the fourth quarter of fiscal 1993, designs and manufactures
special-use bearings, including slot-loaded, swaged, fractured and lined
bearings, rod ends and fittings. While Aldan focuses primarily on the aerospace
industry, it also develops and manufactures high-precision machined components
for other industries. Sales are made by Aldan personnel.
Programmed Composites, Inc., a wholly-owned subsidiary, fabricates advanced
composite structures primarily for commercial satellite programs. Sales are
made by Programmed Composites' personnel.
INDUSTRIAL GROUP
The Los Angeles Die Casting division produces custom die-cast zinc and
aluminum components for the automotive and recreational vehicle after-market,
computer, commercial and residential lighting products, appliance manufacturers
and industrial applications. These components are produced to customer design
and are sold by divisional personnel and manufacturer's representatives.
The Rodan division manufactures thermistors and thermistor assemblies, which
are solid-state devices that produce precise changes in electrical resistance
as temperature increases or decreases. Rodan's Surge-Gard(TM), a current-
limiting device, is used in computers, power supplies, motors and filament
circuits. Rodan also manufactures positive temperature coefficient thermistors
which function as temperature sensors to protect motors and electric circuits
from over-current conditions. Sales are made by divisional personnel and by
manufacturer's representatives.
The Special Filaments division produces thermoplastic monofilaments extruded
from nylon, polyester and olefin resins and combinations of these materials.
These products are sold primarily as monofilament fibers for industrial textile
applications and bristles for paint, household, industrial, hair and cosmetic
brushes. Sales are made by divisional personnel and a distributor.
AMERICAN INNOVATIONS, INC.
American Innovations, Inc., an 80% owned subsidiary which was acquired in the
third quarter of fiscal 1993, designs and manufactures microprocessor driven
remotely monitored meter reading systems primarily for the utility industry.
Sales are made by American Innovations' personnel and manufacturer's
representatives.
RESEARCH AND DEVELOPMENT
Research activities are geared toward new product development as well as
improvement of existing products or manufacturing processes. The Company spent
$0.7 million in fiscal 1994, $3.6 million in fiscal 1993, and $0.7 million in
fiscal 1992, on research and development programs. Research and development
expenditures in fiscal 1993 included research and development in process in
connection with the acquisition of American Innovations, Inc., a development
stage enterprise acquired in the third quarter of fiscal 1993.
COMPETITION
The Company's products are marketed on a worldwide basis. Generally, most
markets in which the Company operates are highly competitive and, while
generally stable in terms of demand, are subject to general economic
conditions. Many of the Company's businesses have an established customer base
with a
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known product identity. The principal elements of competition for the products
manufactured in each of the Company's business segments are price, product
features, distribution, product quality and service. The Company believes that,
as a whole, it competes effectively with respect to all of the foregoing.
At the Special Filaments division, the Company's competition in certain
extruded filaments is from some of its larger raw material suppliers and
customers who are also end-product manufacturers.
In all other operations the Company faces intense competition from
competitors having either greater or lesser financial and technological
resources. The Company does not believe that it is a major factor in any market
it serves.
CUSTOMERS
The Company, as either a prime contractor or a subcontractor, sells certain
of its products and services to various agencies of the United States
government. Approximately $26.8 million or 21% of the Company's fiscal year
1994 sales were ultimately to the U.S. Government as prime contract and
subcontract sales. Sales to General Electric Co. ("G.E.") in fiscal 1994 were
approximately $35.1 million or 28% of net sales, of which $18.6 million were
included above as subcontracts to the U.S. Government. In November 1993, the
Company received verbal notification from G.E. of its intention to transfer,
over a several year period, certain of its business to other suppliers because
the Company would not honor G.E.'s demand for additional substantial price
concessions. While this continues to be a concern for the Company, no
significant transfers have yet been made and the Company has received new
orders from G.E. since the notification. Substantially all these sales were
made by units in the Aerospace segment. Except for various U.S. Government
agencies treated as a single customer and G.E., the Company as a whole is not
dependent on any single customer or a few customers such that their loss would
have a material adverse effect on its operations.
BACKLOG
The Company's backlog of unfilled orders at February 28, 1994 and 1993 by
business segment was as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Process Group............................................. $13,500 $11,400
Aerospace Group........................................... 42,700 50,700
Industrial Group.......................................... 5,000 4,300
American Innovations, Inc................................. 1,400 600
------- -------
Total................................................. $62,600 $67,000
======= =======
</TABLE>
Backlog is not considered significant to the operations of the Industrial and
Process Groups because substantially all orders are filled on a current order
and shipment basis. Of the total February 28, 1994 backlog, the Company
believes that all but approximately $21.0 million, primarily in the Aerospace
Group, will be filled by February 28, 1995.
RAW MATERIALS
The Company's businesses obtain raw materials and supplies from a variety of
sources, generally from more than one supplier. However, in the Industrial
segment, certain commodities are available only from a limited number of
suppliers. The Company believes that its sources and supply of raw materials
are adequate for its needs.
PATENTS, LICENSES AND TRADEMARKS
The Company owns numerous unexpired U.S. trademarks, U.S. patent and
trademark applications, U.S. design patents, and foreign patents, trademarks
and applications therefor, including counterparts of its more important U.S.
patents and trademarks, in the major free-trade industrial countries of the
world. The
4
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Company is a licensor or licensee under patent agreements of various types and
its products are marketed under various registered U.S. and foreign trademarks
and trade names. However, the Company does not consider any one patent or
trademark or any group thereof essential to its business as a whole, or to any
of its business segments. The annual royalties received or paid under license
agreements are not significant.
PERSONNEL
At February 28, 1994, the Company employed approximately 1,080 employees, 54%
of whom were non-salaried employees. Four of the Company's units rely on union
employees who comprise 32% of all non-salaried employees. Management believes
that the Company's relations with its employees are satisfactory.
SEASONAL VARIATIONS OF BUSINESS
The Company believes that its business as a whole and the business segments
in which it operates are not subject to significant seasonal variations.
ENVIRONMENTAL MATTERS
The Company is subject to an expanding and evolving set of environmental laws
and regulations. Compliance with these laws and regulations may require higher
capital expenditures and expenses in the future. For instance, as reported in
fiscal 1993, the Company had identified certain historic materials handling
practices at its Bensalem, Pennsylvania manufacturing plant which may require
future expenditures. The Company retained an environmental engineering firm to
evaluate these conditions and develop any necessary cleanup plans. No formal
remediation report has been completed at this time.
The Company has notified the appropriate state regulatory agency regarding
this investigation process. No enforcement agency process has been initiated.
The former site owner, Ametek, has also been notified. While it is difficult to
quantify the potential financial impact of this matter, based on engineering
estimates derived from currently available information, the Company reserved
$1.0 million in fiscal 1993 to account for ongoing investigation costs and any
cleanup work that would ultimately be required. During fiscal 1994, the Company
charged investigative and engineering costs of $0.2 million to this reserve and
based on available information, the Company believes that its current reserve
is sufficient to account for any further investigation and cleanup costs that
may become necessary at the site.
Otherwise, while it is difficult to quantify the potential impact of the
evolving set of environmental laws and regulations generally pertinent to the
Company's operations, the Company believes that, other than the incident
discussed above, they will have no material effect on the Company's financial
position or future results of operations.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The business segment information set forth in Note 15 to the Financial
Statements is incorporated herein by reference.
WORKING CAPITAL PRACTICES
The Company does not have extraordinary working capital requirements in any
of its business segments. Customers generally are billed at normal trade terms
with no extended payment provisions. Under certain U.S. government contracts,
shipments may be made before the contracts are finalized and invoicing is
allowed. Inventories are controlled and maintained at levels responsive to
normal delivery requirements of customers. However, under certain long-term
contracts and programs, as to which the Company receives progress payments,
inventories may be carried for longer periods.
5
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ITEM 2. PROPERTIES.
The Company has 11 operations in five states. Nine facilities are owned in
fee and twelve are leased. The properties held in fee consist of approximately
75 acres, of which approximately 932,000 square feet are under roof. Of the
leased properties a total of approximately 170,000 square feet is under roof.
The leases expire over a range from 1995 to 1998 with renewal options for
varying terms contained in most of the leases.
The Company's machinery, plants and offices are in satisfactory operating
condition and are adequate for the uses to which they are put. The principal
operating facilities of the Company by business segment are summarized below:
<TABLE>
<CAPTION>
NUMBER OF SQUARE FEET
PROPERTIES UNDER ROOF
------------ ---------------
OWNED LEASED OWNED LEASED
----- ------ ------- -------
<S> <C> <C> <C> <C>
Process Group................................ 4 4 448,000 65,000
Aerospace Group.............................. 3 2 300,000 40,000
Industrial Group............................. 2 4 184,000 54,000
American Innovations, Inc.................... - 1 -- 3,000
Corporate.................................... - 1 -- 8,000
--- --- ------- -------
Total.................................... 9 12 932,000 170,000
=== === ======= =======
</TABLE>
In addition to the above, the Company has certain non-operating properties as
a result of business dispositions in fiscal 1993 and 1994. One property with
11,000 square feet under roof is owned and two properties with 130,000 square
feet under roof are leased.
ITEM 3. LEGAL PROCEEDINGS.
On August 25, 1993, the Company, Hugh H. Williamson, III--the Company's
President and Chief Executive Officer, and John McCloskey--formerly the
Company's Vice President-Manufacturing, were sued in the District Court, 160th
Judicial District, Dallas, Texas, by Raymond J. Moore, the former General
Manager of the Company's Heat Transfer Division, located in Grand Prairie,
Texas. The case has been removed to the United States District Court for the
Northern District of Texas, Dallas Division. Mr. Moore seeks damages for the
alleged intentional infliction of severe emotional distress suffered by him as
the result of an unsatisfactory performance review, negligent employment and
retention, defamation and violations of the Age Discrimination in Employment
Act, the Family Medical Leave Act and the Americans with Disabilities Act. Mr.
Moore principally seeks, from the defendants, jointly and severally: lost wages
in the amount of $20,000; full pay and benefits through 1997 in the amount of
$150,000 per year as front pay; exemplary and punitive damages in the amount of
$100 million; damages for mental anguish and emotional distress in the amount
of $20 million; and $20 million for the age, disability, family leave and
defamation claims. The Company believes the case is without merit. Discovery is
ongoing. The Company and the individual defendants intend to contest the matter
vigorously and believe they have meritorious defenses. Trial is currently
scheduled for the two week period following November 21, 1994.
Subsequent to the Company's public announcement on April 28, 1994 of its
receipt of the Merger Proposal (as described in Item 1. Business. Recent
Developments--Proposed Merger Transaction), the Company was served with, or
advised of the filing of, seven class action lawsuits in the Delaware Court of
Chancery, New Castle County relating to the Merger Proposal. The complaints
name as defendants, inter alia, all or certain directors of the Company and, in
some instances, the Company itself. These lawsuits are as follows: Phyllis
Freiman v. Hugh H. Williamson, III, et al, CA. No. 13485; Adolph Raab v.
Alexander G. Anagnos, et al, CA. No. 13489; Moshe Greenfield v. Hugh H.
Williamson, III, et al, CA. No. 13491; Robert L. Dunn v. Hugh H. Williamson,
III, et al, CA No. 13494; William Klein II P.C. v. Ketema, Inc., et al, CA. No.
13504; Olga Fried v. Hugh H. Williamson, III, et al, CA. No. 13490; Croyden
Associates v. Ketema, Inc., et al, CA. No. 13487.
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All of the complaints allege that the proposal by certain of the defendant
directors who are members of the American Securities Group to acquire the
remaining interest of the Company at the offer price of $13.125 in cash, if
accepted, would be inadequate and unfair to the minority shareholders of the
Company and would constitute a breach of fiduciary duties by the defendant
directors. Certain of the complaints include further allegations, among them,
that the offer "effectively put(s) a cap on the market price for Ketema stock"
and therefore is manipulative, and that there is allegedly non-public
information in the possession of the defendants with respect to the Company's
prospects which should be disclosed to shareholders to enable them to determine
whether to exercise appraisal rights in any proposed merger. The principal
relief sought by the complaints is a declaration that, if the acquisition were
consummated at the offered price, it would constitute a breach of fiduciary
duty and the granting of a preliminary injunction to bar an acquisition at the
offered price. The complaints further seek to rescind the merger if implemented
prior to entry of an injunction, to recover damages in an unspecified amount,
reimbursement of costs, including attorneys' and experts' fees, and other
equitable relief.
In addition, the Company is party to routine litigation incidental to its
business, none of which, in the opinion of management, will have a material
impact on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
its fiscal year ended February 28, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The following table sets forth the high and low quoted sales prices for the
Company's Common Stock on the American Stock Exchange for the periods
indicated.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
-------------------- ------- -------
<S> <C> <C>
February 28, 1994......................................... $14 1/2 $12 1/2
November 30, 1993......................................... $15 3/4 $10 3/4
August 31, 1993........................................... $11 7/8 $ 9 7/8
May 31, 1993.............................................. $12 1/2 $ 11
February 28, 1993......................................... $12 1/2 $10 5/8
November 30, 1992......................................... $11 5/8 $ 11
August 31, 1992........................................... $11 7/8 $10 7/8
May 31, 1992.............................................. $11 7/8 $ 9 1/2
</TABLE>
At May 6, 1994, there were approximately 3,600 holders of record of the
Company's Common Stock.
The Company has not paid cash dividends to date. As of February 28, 1994,
payments of dividends were restricted until the Company earns additional net
income of $6.0 million. In the future, the Company's Board of Directors will
consider the advisability of paying cash dividends, when permitted, based on
the Company's earnings, financial condition, anticipated cash needs and such
other factors as are deemed relevant at the time.
Under the terms of the Note Purchase Agreement with respect to the Company's
Senior Notes due October 31, 2003 ("Senior Debt"), the Company is restricted in
its ability to pay any dividend or make any distribution on its capital stock
or to its stockholders (other than dividends or distributions payable in its
Common Stock or rights, warrants, options or similar securities with respect to
the purchase of its Common Stock). Such payments or distributions are
prohibited (i) if a Default or an Event of Default, as defined in the Note
Purchase Agreement, has occurred and is continuing, or (ii) if, in the
aggregate, proposed dividends, repurchases of shares of Common Stock, or
certain investments are in excess of $5.0 million plus 75% of
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cumulative net income (or minus 100% of net losses) subsequent to December 1,
1988, plus any proceeds from the issuance of Common Stock or resulting from the
conversion of indebtedness or Preferred Stock into Common Stock. During fiscal
1991, the Company received a waiver from its lenders excluding $3.0 million of
certain costs reimbursed to Ametek from the above calculation. During fiscal
1992, the Note Purchase Agreement was amended to permit additional repurchases
of up to $15.0 million of the Company's Debentures and Common Stock provided
that the Company is entitled to incur additional unsecured Funded Debt, as
defined in the Note Purchase Agreement. In conjunction with such amendment, the
interest rate on the Senior Debt was increased. Additional restrictions on the
Company's ability to pay dividends will be imposed if at any time the
Debentures are in default or any dividends are not declared and paid on the
Preferred Stock. See Note 5 to the consolidated financial statements.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which follows this section, and the Consolidated Financial
Statements and related Notes included herein. Historical amounts for dividends
per share have not been presented because the Company has paid no dividends.
KETEMA, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR THE FISCAL YEARS ENDED
FEBRUARY 28 OR 29 (A),
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.................... $127,109 $122,159 $133,132 $142,665 $136,848
Restructuring charge (b)..... -- -- (7,385) -- --
Operating income (loss)...... 5,550 (2,373) (4,149) 2,510 (2,139)
Settlement charge (c)........ -- -- -- (5,841) --
Income (loss) before income
taxes, minority interest,
discontinued operations and
cumulative effect of changes
in accounting principles.... 2,095 (4,915) (4,343) (2,930) (1,553)
Income (loss) from continuing
operations.................. 1,541 (3,447) (3,194) (2,884) 1,015
Income (loss) from
discontinued operations (d). (305) (342) (21) 2,016 3,851
Cumulative effect of changes
in accounting principles.... -- -- 208 -- --
Net income (loss)............ 1,236 (3,789) (3,007) (868) 4,866
Income (loss) per share (e):
Continuing operations...... $ 0.42 $ (0.93) $ (0.81) $ (0.70) $ 0.23
Net income (loss).......... $ 0.34 $ (1.02) $ (0.77) $ (0.21) $ 1.10
Average common shares
outstanding............... 3,630 3,718 3,927 4,111 4,417
Total assets................. $148,973 $158,409 $156,952 $160,622 $165,997
Net working capital.......... $ 67,208 $ 75,543 $ 91,309 $ 90,016 $ 90,754
Long-term debt............... $ 55,692 $ 60,198 $ 62,044 $ 62,858 $ 62,924
Equity....................... $ 56,981 $ 57,826 $ 64,269 $ 67,382 $ 72,214
</TABLE>
- - --------
(a) Prior years restated to reflect the Aluminum Extrusion Division as a
discontinued operation. The division was sold effective August 31, 1993.
(b) Restructuring charge consisted primarily of the write-down of intangible
and other assets related to the woven fabric composite material business,
expenses related to the consolidation of various facilities and relocation
costs.
(c) Costs associated with settling claims assumed when spun off by Ametek.
(d)Income (loss) associated with discontinued operations of Aluminum Extrusion
Division.
(e) Fully diluted earnings per share, which assumes the conversion of the
Debentures into additional shares of common stock, is not presented since
it is antidilutive.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
DISCONTINUED OPERATIONS
On September 1, 1993 the Company completed the sale of the business and
substantially all the assets of its Aluminum Extrusion Division, effective as
of the close of business August 31, 1993. The Company's consolidated financial
statements present the results of the Aluminum Extrusion Division as a
discontinued operation and reported amounts for the previous years have been
restated consistent with this presentation. The Division was previously
included in the Industrial Group for business segment reporting. See the Notes
to the Consolidated Financial Statements for further information on the
Aluminum Extrusion Division. The comments in the Results of Operations and
Review of Financial Condition sections, which follow, pertain to the Company's
continuing operations.
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Sales for 1994 were $127.1 million compared to $122.2 million in 1993, an
increase of $4.9 million or 4.0%. Operating income for 1994 was $5.5 million
compared to a $2.4 million loss in 1993. The changes in sales and operating
income by business group are shown in the following table:
COMPARATIVE SALES AND OPERATING INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------------ -------------------------
FISCAL FISCAL INCREASE FISCAL FISCAL INCREASE
GROUP 1994 1993 (DECREASE) 1994 1993 (DECREASE)
----- ------ ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Process................... $ 55.5 $ 50.9 $4.6 $4.6 $ 3.8 $0.8
Aerospace................. 46.1 46.1 0.0 5.8 1.3 4.5
Industrial................ 25.0 25.2 (0.2) 2.8 2.5 0.3
American Innovations,
Inc...................... 0.5 -- 0.5 (1.6) (2.4) 0.8
Corporate Expenses........ NA NA NA (6.1) (7.6) 1.5
------ ------ ---- ---- ----- ----
Totals................ $127.1 $122.2 $4.9 $5.5 $(2.4) $7.9
====== ====== ==== ==== ===== ====
</TABLE>
Sales of the Process Group increased $4.6 million or 9.0% to $55.5 million
compared to the prior year. Increases in shipments of flow measurement devices
of $3.5 million and miscellaneous process equipment of $3.0 million were
partially offset by a decrease in shipments of heat exchangers of $1.9 million.
The increase in shipments of flow measurement devices was due primarily to the
acquisition of XO Technologies in the fourth quarter of last year. Most of the
increase in sales of miscellaneous process equipment resulted from increased
shipments of centrifuges, including several exported to China. The decline in
shipments of heat exchangers was primarily due to poor economic conditions.
Operating profit for the Process Group was $4.6 million, which was $0.8 million
greater than 1993. The reduced shipments and lower margins of heat exchangers
negatively impacted operating profits by $1.4 million; this negative impact was
more than offset by increased operating profits of $0.8 million and $1.4
million resulting from the higher level of sales of flow measurement devices
and miscellaneous process equipment, respectively.
The Aerospace Group recorded sales of $46.1 million in both 1994 and 1993.
Sales of the group were reduced by $1.6 million as a result of the sale of
several composite materials businesses in 1993, and by $2.3 million, due mostly
to lower shipments of electro-mechanical devices. However, these decreases were
offset by an increase of $3.2 million in sales by Aldan Industrial Machining,
Inc., purchased in the fourth quarter of 1993 and by a $0.7 million increase in
sales of fabricated composite structures for commercial space satellites.
Delays and extensions of aerospace customer requirements related to defense
industry cutbacks and
9
<PAGE>
softness in the commercial airline business, which have had an adverse effect
on sales and profits of aerospace components in the past, are expected to
continue for some time in the future. Also, see the discussion under Item 1 of
this Form 10-K, "Customers", concerning the possible loss of business from a
major customer of the Aerospace Group. Operating profit of this group was $5.8
million, an improvement of $4.5 million compared to the prior year. The
liquidation of LIFO inventory layers, carried at lower costs prevailing in
prior years compared with the current cost of inventory, contributed $0.8
million to this improvement. The balance is principally attributable to
improved productivity and cost control measures related to the manufacture of
aerospace components at the Ketema A&E Division and increased sales of
composite structures by Programmed Composites, Inc.
The Industrial Group recorded sales of $25.0 million in 1994, a decrease of
$0.2 million or less than 1.0%. Shipments of extruded monofilaments and
thermistors increased $1.0 million and $0.1 million, respectively; however,
these increases were more than offset by reduced sales of die castings. The
increase in extruded monofilament sales resulted from new products introduced
for the household and industrial brush market, and increased demand for paint
brush bristle. (The loss in the fourth quarter of fiscal 1994 of a large
specialty monofilament customer, with annual sales of approximately $2.8
million, is expected to have a substantial adverse impact on sales and profits
of this group in 1995.) Despite the reduction in sales, the operating profit of
the Industrial Group increased by $0.3 million over the prior year. Increased
shipments of extruded monofilaments resulted in an increase in operating profit
of $0.3 million; and increased volume, cost control measures and new production
techniques used in the manufacture of thermistors increased operating profit by
$0.5 million. On the other hand, reduced sales of die castings caused a
reduction in operating profit of $0.6 million.
American Innovations, Inc., which was acquired late in the third quarter of
1993 and had no sales last year, reported sales of $0.5 million in 1994.
Operating losses, consisting primarily of marketing and engineering costs, were
$1.6 million in 1994 compared to $2.4 million in 1993 which included a charge
to research and development expense of $1.8 million for the value of research
and development projects in process at the time of acquisition.
Corporate expenses were $6.1 million or $1.5 million less than 1993.
Compensation and benefits were reduced $1.0 million due principally to
reductions in staff, the discontinuance of the Supplemental Senior Executive
Death Benefit Program and decreased pension costs. The balance of the decrease
resulted principally from reduced workers' compensation insurance costs.
Other expense, net of other income, increased $0.9 million compared to 1993
primarily as a result of reduced investment income due chiefly to lower
interest rates and, to a lesser extent, a smaller investment pool.
The effective tax rate for 1994 was 26%. This reduced rate reflects a refund
of federal income taxes related to the settlement of claims assumed during the
spin off from Ametek as described in Notes 8 and 11.
Income from continuing operations was $1.5 million or 42 cents per share,
compared to a net loss of $3.4 million or 93 cents per share in the prior year.
Net income for the Company was $1.2 million or 34 cents per share this year,
an improvement of $5.0 million over the prior year loss of $3.8 million or a
loss of $1.02 per share.
10
<PAGE>
FISCAL 1993 COMPARED TO FISCAL 1992
Sales for 1993 were $122.2 million compared to $133.1 million in 1992, a
decrease of $10.9 million or 8.2%. The operating loss for 1993 was $2.4 million
or $1.8 million less than the prior year which included a restructuring charge
of $7.4 million. The changes in sales and operating income by business group
are shown in the following table:
COMPARATIVE SALES AND OPERATING INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------------ --------------------------
FISCAL FISCAL INCREASE FISCAL FISCAL INCREASE
GROUP 1993 1992 (DECREASE) 1993 1992 (DECREASE)
----- ------ ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Process................... $ 50.9 $ 54.2 $ (3.3) $ 3.8 $ 6.4 $(2.6)
Aerospace................. 46.1 54.1 (8.0) 1.3 (4.2) 5.5
Industrial................ 25.2 24.8 0.4 2.5 1.3 1.2
American Innovations,
Inc...................... -- -- -- (2.4) -- (2.4)
Corporate Expenses........ NA NA NA (7.6) (7.7) 0.1
------ ------ ------ ----- ----- -----
Totals................ $122.2 $133.1 $(10.9) $(2.4) $(4.2) $ 1.8
====== ====== ====== ===== ===== =====
</TABLE>
The Process Group's sales were $50.9 million in 1993, a decrease of $3.3
million or 6.1% compared to 1992. Decreases in shipments of heat exchangers and
process equipment of $2.7 million and $0.9 million, respectively, were
partially offset by increased sales of flow measurement devices of $0.3
million. The major reason for the decline in shipments of heat exchangers was
reduced demand for mainframe computers. Operating profit for the Process Group
was $3.8 million in 1993 versus $6.4 million in 1992, a decrease of $2.6
million. The reduced shipments of heat exchangers resulted in a reduction of
operating profits of $0.7 million. Reduced shipments of process equipment as
well as increased environmental costs decreased operating profits by $1.4
million.
The Aerospace Group reported sales of $46.1 million for 1993, a decrease of
$8.0 million or 14.8% compared to 1992. The sale of the Textile Products and
Composite Material divisions in the third quarter of 1993 contributed $2.6
million to this decrease. Reduced shipments of aerospace components of $7.1
million and electro-mechanical devices of $1.6 million also had a negative
impact on sales. These reductions were partially offset by a $2.8 million
increase in space shuttle component shipments and a $0.5 million increase in
sales of fabricated composite structures. Delays and extensions of aerospace
customer requirements related to defense industry cutbacks and the soft
commercial airline business, which had an adverse effect on sales and profits
of aerospace components, are expected to continue for some time in the future.
The operating profit of this group was $1.3 million, a decrease of $0.8 million
compared to 1992, before the restructuring charge of $6.3 million. This
decrease is primarily attributable to the changes in sales previously discussed
and increased research and development expenditures in connection with a new
composite structure fabrication program, partially offset by reduced losses of
$0.7 million related to the composite materials businesses sold in 1993.
The Industrial Group recorded sales of $25.2 million in 1993, compared to
$24.8 million for 1992. This increase of $0.4 million or 1.6% was due to
increased shipments of extruded monofilaments as a result of new products
introduced for the household and industrial brush market and increased demand
for paint brush bristle and specialty monofilaments. The operating profit of
the Industrial Group was $2.5 million in 1993, an increase of $1.2 million over
the prior year. Increased shipments of extruded monofilaments used in cosmetic
brushes resulted in an increase in operating profit of $0.4 million. Reduced
cost of sales of die castings and thermisters as result of cost control
measures and new production techniques increased operating profit by $0.3
million and $0.5 million, respectively.
11
<PAGE>
American Innovations, Inc., acquired in the third quarter of 1993, had no
sales in that year. Operating losses of $2.4 million in 1993 consisted of a
$1.8 million charge to research and development expense for the value of
research and development projects in process at the time of acquisition plus
continuing marketing and engineering costs.
Corporate expenses of $7.6 million in 1993 were $0.9 million greater than
1992 after excluding a $1.0 million restructuring charge included in that year.
This increase was due to increases in corporate general and administrative
expenses.
Other expense, net of other income, increased $2.3 million compared to 1992
primarily due to reduced investment income resulting principally from lower
interest rates.
The 1993 tax provision includes a valuation allowance of $0.8 million for
certain deferred tax assets related to current year losses that were not
expected to be recoverable.
Loss from continuing operations was $3.4 million or 93 cents per share in
1993, compared to a loss of $3.2 million or 81 cents per share in the prior
year.
Net loss for the Company was $3.8 million or $1.02 per share in 1993,
compared to the net loss for 1992 of $3.0 million or 77 cents per share.
REVIEW OF FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 28, 1994 amounted to $67.2 million compared to
$75.5 million at February 28, 1993. This decrease of $8.3 million was caused
largely by the reclassification of $4.5 million of long-term debt to current,
the repayment of $1.4 million of loans on officers life insurance and the
decrease in assets of discontinued operations of $6.8 million due to the sale
of the Aluminum Division. Included in current assets are cash and cash
equivalents and marketable securities of $60.7 million at February 28, 1994 and
$64.7 million at February 28, 1993. Also included in current assets are net
deferred income tax assets of $2.8 million. The recognition of this amount and
$0.2 million of long term deferred income tax assets is justified by the
Company's ability to generate future taxable income through tax-planning
strategies for inventories which are presently valued on a LIFO costing basis.
The ratio of current assets to current liabilities at February 28, 1994 was
3.01 to 1.
Cash used in operating activities by the Company's continuing operations for
1994 was $5.3 million in 1994 compared to cash provided by operating activities
of $6.6 million in the prior year. Of the $11.9 million net change between
years, $10.2 million related to the fiscal 1993 acquisition of Aldan Industrial
Machining, Inc. for which $5.1 million was recorded as payable to an escrow
account in fiscal 1993 but was not funded until early fiscal 1994. Cash
provided by investing activities was $2.2 million for 1994, including $8.9
million of proceeds from the sale of the Aluminum Extrusion division and
expenditures for plant and equipment from continuing operations of $4.5
million. The only significant financing activity in 1994 was $1.4 million used
to repay loans against the cash surrender value of officers' life insurance
policies.
The covenants of the $45.0 million of Senior Debt, with a current interest
rate of 11.17%, prohibit prepayment until October 31, 1996, though scheduled
annual repayments of $4.5 million will commence October 31, 1994. An amendment
to the Senior Debt Agreement, however, will allow Ketema to purchase an
aggregate amount of $7.5 million of Debentures and/or Common Stock subsequent
to February 28, 1994 if the Company can maintain a debt to capitalization ratio
of less than 50%. The ratio as of February 28, 1994 was 51.2%.
The Company's ability to pay dividends is also restricted by the terms of its
financing arrangements and the Company currently is not permitted to pay cash
dividends to stockholders. In the future, the Company's
12
<PAGE>
Board of Directors will consider the advisability of paying cash or other
dividends, when permitted, based on the Company's earnings, financial
condition, anticipated cash needs and such other factors as are deemed relevant
at the time.
The Company's overall financial condition remained strong at February 28,
1994, and its liquidity and capital resources were adequate for its operating
needs.
CAPITAL EXPENDITURES
In 1994, 1993 and 1992, the Company invested a total of $15.0 million in
capital improvements. Such expenditures were directed primarily toward improved
production efficiency and expanded capacity. Capital expenditures in 1994
totaled $4.9 million, reflecting investment in automated and other
manufacturing equipment. Capital expenditures and other cash requirements are
being funded by internally generated and existing funds, and no significant
additional borrowings have been incurred. Capital expenditures in 1995 are
expected to be financed by existing cash balances and cash generated by
operating activities.
OTHER MATTERS
Inflation has had no significant effect on the Company's overall operations
or financial condition in the last few years due to the relatively low rate of
inflation in the United States. In addition, the LIFO method of accounting for
inventories (where the cost of the products sold approximates current cost) is
used and, therefore, the effect of inflation is substantially reflected in
operating costs. In general, the Company believes that programs are in place to
monitor the effect of inflation and take the necessary steps to minimize its
effect on operations.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statement of management responsibility for financial reporting.......... 15
Report of independent auditors.......................................... 16
Consolidated statements of operations for the years ended February 28,
1994, February 28, 1993 and February 29, 1992.......................... 17
Consolidated balance sheets as of February 28, 1994 and February 28,
1993................................................................... 18
Consolidated statements of cash flows for the years ended February 28,
1994, February 28, 1993 and February 29, 1992.......................... 19
Consolidated statements of stockholders' equity for the years ended
February 28, 1994, February 28, 1993 and February 29, 1992............. 20
Notes to consolidated financial statements.............................. 21-36
</TABLE>
14
<PAGE>
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Ketema, Inc. is responsible for the accuracy and internal
consistency of all information contained in this annual report, including the
consolidated financial statements. Management has consistently followed those
generally accepted accounting principles which it believes to be most
appropriate to the circumstances of the Company, and has made what it believes
to be reasonable and prudent judgments and estimates where necessary. The
financial statements have been audited by Ernst & Young, independent auditors,
whose report appears on the next page.
Management maintains an internal control structure which is designed to
provide appropriate division of responsibility and reasonable assurance, at
appropriate cost, that assets are safeguarded and records are adequate for the
preparation of reliable financial data. The internal control structure is
characterized by a control-oriented environment within the Company which
includes written policies and procedures, careful selection and training of
personnel, and audits by professional internal auditors.
The Audit Committee of the Board of Directors, composed of three non-
management directors, meets periodically with Ernst & Young, the Company's
internal auditors, and management representatives to review internal accounting
control, auditing and financial reporting matters. Ernst & Young and the
internal auditors have full and free access to the Audit Committee.
[LOGO of William E. Leisey]
Robert L. Tomz William E. Leisey
Vice President--Finance and Controller
Chief Financial Officer
(Chief Financial Officer after February 28, 1993)
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Ketema, Inc.
We have audited the accompanying consolidated balance sheets of Ketema, Inc.
as of February 28, 1994 and February 28, 1993, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended February 28, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Ketema, Inc. at February 28, 1994 and February 28, 1993 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended February 28, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes and individual deferred
compensation contracts during the year ended February 29, 1992.
[LOGO of Ernst & Young]
Denver, Colorado
April 15, 1994,
except for Note 14, as to which the date is
May 11, 1994
16
<PAGE>
KETEMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1993* 1992*
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................... $127,109 $122,159 $133,132
-------- -------- --------
Expenses:
Cost of sales, excluding depreciation. 95,716 100,294 106,359
Selling, general and administrative... 21,080 19,996 19,303
Depreciation.......................... 4,763 4,242 4,234
Restructuring charge.................. -- -- 7,385
-------- -------- --------
121,559 124,532 137,281
-------- -------- --------
Operating income (loss)................. 5,550 (2,373) (4,149)
Other income (expense):
Interest income....................... 2,651 3,969 6,405
Interest expense...................... (6,515) (6,402) (6,424)
Other, net............................ 409 (109) (175)
-------- -------- --------
(3,455) (2,542) (194)
-------- -------- --------
Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
changes in accounting principles....... 2,095 (4,915) (4,343)
Benefit from (provision for) income
taxes.................................. (554) 1,018 1,149
Minority interest in loss of subsidiary. -- 450 --
-------- -------- --------
Income (loss) from continuing
operations............................. 1,541 (3,447) (3,194)
Discontinued operations, net of income
taxes.................................. (305) (342) (21)
-------- -------- --------
Income (loss) before cumulative effect
of changes in accounting principles.... 1,236 (3,789) (3,215)
Cumulative effect of changes in
accounting principles.................. -- -- 208
-------- -------- --------
Net income (loss)....................... $ 1,236 $ (3,789) $ (3,007)
======== ======== ========
Income (loss) per share:
Continuing operations................. $ 0.42 $ (0.93) $ (0.81)
Discontinued operations............... (0.08) (0.09) (0.01)
Cumulative effect of changes in
accounting principles................ -- -- 0.05
-------- -------- --------
Net income (loss)..................... $ 0.34 $ (1.02) $ (0.77)
======== ======== ========
Average common shares outstanding....... 3,630 3,718 3,927
======== ======== ========
</TABLE>
- - --------
*Restated to reflect disposition of Aluminum Extrusion Division (Note 2).
See accompanying notes.
17
<PAGE>
KETEMA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
ASSETS 1994 1993*
- - ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 961 $ 6,303
Marketable securities.............................. 59,719 58,405
Receivables........................................ 20,445 19,089
Notes receivable from employees.................... -- 408
Inventories........................................ 11,322 10,952
Deferred income taxes.............................. 2,835 3,949
Net assets of discontinued operations.............. 992 7,822
Prepaid expenses and other current assets.......... 4,311 4,271
-------- --------
Total current assets ............................ 100,585 111,199
-------- --------
Property, plant and equipment, at cost:
Land............................................... 2,573 2,573
Buildings.......................................... 15,536 14,858
Machinery and equipment............................ 54,988 53,116
-------- --------
73,097 70,547
Less accumulated depreciation...................... (47,789) (44,812)
-------- --------
Net property, plant and equipment................ 25,308 25,735
Intangibles, net of amortization..................... 13,396 14,490
Deferred income taxes................................ 173 --
Other assets......................................... 9,511 6,985
-------- --------
$148,973 $158,409
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable................................... $ 7,200 $ 8,268
Escrow funds payable............................... -- 5,120
Accrued employee compensation and benefits......... 5,671 5,710
Other accrued liabilities.......................... 15,692 16,468
Income taxes payable............................... 309 --
Current maturities of long-term debt............... 4,505 90
-------- --------
Total current liabilities........................ 33,377 35,656
-------- --------
Long-term debt....................................... 55,692 60,198
Deferred income taxes................................ -- 664
Other long-term liabilities.......................... 2,923 4,065
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 1,500
shares; none issued
Common stock, $1.00 par value, authorized 13,500
shares; issued 4,532 for 1994 and 1993............ 4,532 4,532
Capital in excess of par value..................... 74,096 74,096
Deficit............................................ (8,858) (10,094)
Net unrealized losses.............................. (523) (468)
Cost of shares held in treasury:
1994--1,042 shares; 1993--851 shares.............. (12,221) (10,121)
Unearned compensation.............................. (45) (119)
-------- --------
Total stockholders' equity....................... 56,981 57,826
-------- --------
$148,973 $158,409
======== ========
</TABLE>
- - --------
*Restated to reflect disposition of Aluminum Extrusion Division (Note 2).
See accompanying notes.
18
<PAGE>
KETEMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1993* 1992*
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Income (loss) from continuing
operations........................... $ 1,541 $ (3,447) $(3,194)
Adjustments to reconcile income (loss)
from continuing operations to net
cash provided by (used in) operating
activities:
Depreciation and amortization....... 6,227 4,873 5,274
Write-off of intangibles............ -- -- 5,204
Research and development projects in
process............................ -- 1,766 --
Deferred income taxes and credits... 305 134 (2,138)
Minority interest in loss of
subsidiary......................... -- (450) --
Changes in working capital
Receivables....................... (949) (686) 3,251
Inventories....................... (370) 2,200 (1,098)
Prepaid expenses and other current
assets........................... (40) (1,648) (270)
Escrow fund, payable.............. (5,120) 5,120 --
Payables and accruals............. (4,938) 106 (700)
Investing activities included in
income (loss) from continuing
operations......................... 399 284 (138)
Prepaid interest to escrow account.. -- (1,120) --
Termination of deferred compensation
arrangements....................... (1,744) -- --
Other............................... (634) (488) 360
------- -------- -------
Net cash provided by (used in)
continuing operations.......... (5,323) 6,644 6,551
Loss from discontinued operations..... (305) (342) (21)
Change in net operating assets of
discontinued operations and other
adjustments.......................... (479) (901) 2,293
------- -------- -------
Net cash provided by (used in)
operating activities........... (6,107) 5,401 8,823
------- -------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures--continued
operations........................... (4,546) (3,617) (4,272)
Capital expenditures--discontinued
operations........................... (349) (431) (1,745)
Purchased companies................... -- (12,057) --
Sale (purchase) of marketable
securities........................... (1,902) 17,676 (2,396)
Proceeds from sale of Aluminum
Extrusion Division................... 8,878 -- --
Proceeds from sale of other assets.... 243 928 208
Proceeds from note receivable......... -- -- 1,819
Other................................. (97) (269) (732)
------- -------- -------
Net cash provided by (used in)
investing activities........... 2,227 2,230 (7,118)
------- -------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of long term
debt................................. -- 500 --
Purchase of treasury stock............ -- (2,291) (747)
Principal repayments of long-term
debt................................. (91) (2,312) (812)
Principal repayment of loans on
officers life insurance.............. (1,371) -- --
------- -------- -------
Net cash used in financing
activities..................... (1,462) (4,103) (1,559)
------- -------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (5,342) 3,528 146
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR................................... 6,303 2,775 2,629
------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR.. $ 961 $ 6,303 $ 2,775
======= ======== =======
</TABLE>
- - --------
Supplemental cash flow disclosures--excluded from the consolidated statement of
cash flows for the year ended February 28, 1994 was the effect of certain non-
cash investing activities related to the sale of the Aluminum Division as
disclosed in Note 2.
*Restated to reflect disposition of Aluminum Extrusion Division (Note 2).
See accompanying notes.
19
<PAGE>
KETEMA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL NET
COMMON IN EXCESS UNREALIZED
STOCK $1 OF GAINS TREASURY UNEARNED
PAR VALUE PAR VALUE (DEFICIT) (LOSSES) STOCK COMPENSATION TOTAL
--------- --------- --------- ---------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 28,
1991................... $4,535 $74,140 $(3,298) $(431) $ (7,083) $(481) $67,382
Net loss................ -- -- (3,007) -- -- -- (3,007)
Employee stock
incentives............. -- -- -- -- -- 353 353
Purchase of treasury
stock.................. -- -- -- -- (747) -- (747)
Change in pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... -- -- -- 288 -- -- 288
------ ------- ------- ----- -------- ----- -------
BALANCE, FEBRUARY 29,
1992................... 4,535 74,140 (6,305) (143) (7,830) (128) 64,269
Net loss................ -- -- (3,789) -- -- -- (3,789)
Employee stock
incentives............. (3) (44) -- -- 111 9 73
Purchase of treasury
stock.................. -- -- -- -- (2,402) -- (2,402)
Change in pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... -- -- -- (325) -- -- (325)
------ ------- ------- ----- -------- ----- -------
BALANCE, FEBRUARY 28,
1993................... 4,532 74,096 (10,094) (468) (10,121) (119) 57,826
Net income.............. -- -- 1,236 -- -- -- 1,236
Employee stock
incentives............. -- -- -- -- -- 74 74
Treasury stock received
in connection with sale
of the Aluminum
Extrusion Division..... -- -- -- -- (2,100) -- (2,100)
Change in pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... -- -- -- (55) -- -- (55)
------ ------- ------- ----- -------- ----- -------
BALANCE, FEBRUARY 28,
1994................... $4,532 $74,096 $(8,858) $(523) $(12,221) $ (45) $56,981
====== ======= ======= ===== ======== ===== =======
</TABLE>
See accompanying notes.
20
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
subsidiaries, after elimination of all significant intercompany transactions in
consolidation.
RESTATEMENT AND RECLASSIFICATION OF PRIOR YEARS
The results for fiscal years 1993 and 1992 have been restated to reflect the
Aluminum Extrusion Division, which was sold effective August 31, 1993, as a
discontinued operation. In addition, certain reclassifications have been
reflected in the accompanying fiscal 1993 and 1992 consolidated financial
statements to conform to the fiscal 1994 presentation.
SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents.
All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. The recorded value of cash and
cash equivalents approximates market.
Marketable Securities.
Marketable securities, primarily U.S. Government securities, are carried at
amortized cost plus accrued interest, which approximates market. During May
1993, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). FAS 115 is effective for fiscal years
beginning after December 15, 1993 and will be implemented by the Company
effective in fiscal 1995. Management does not believe the implementation of
FAS 115 will have a significant effect on the Company.
Inventory Valuation.
Inventories are stated at the lower of cost or market, cost being
determined principally by the last-in, first-out (LIFO) method, and market on
the basis of the lower of replacement cost or estimated net proceeds from
sales.
Property, Plant and Equipment.
Expenditures for additions to plant facilities, or which extend the useful
life of the properties, are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of plant and equipment is determined
principally on a straight-line basis over the estimated useful lives of the
assets.
Intangible Assets.
Intangible assets are amortized on a straight-line basis over 3 to 40
years.
Research and Development.
Research and development costs are charged to operations as incurred. Such
costs during the past three years were approximately: 1994--$700; 1993--
$3,600 and 1992--$700. The costs in 1993 included a significant amount of
research and development costs in process which related to the acquisition of
American Innovations, Inc. during the third quarter of fiscal year 1993.
21
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Income Taxes.
Deferred income taxes have been determined by applying current tax rates to
temporary differences between the amount of assets and liabilities determined
for income tax and financial reporting purposes and to applicable income tax
credit carryforwards.
Earnings Per Share.
Primary earnings per share is determined by dividing income (loss) by the
weighted average number of common shares outstanding during the year, after
adjusting for common stock equivalents arising from stock incentives, if
dilutive.
Earnings per share assuming full dilution is not presented since there is
no dilutive effect on earnings per share amounts assuming the conversion of
the Company's outstanding debentures into additional shares of common stock
and the exercise of outstanding stock incentives.
Cumulative Effect of Accounting Changes in Fiscal 1992.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in the fourth quarter of the fiscal year ended
February 29, 1992. The Statement provides for the recognition of deferred tax
assets given the likelihood of certain future events. The Company had
previously used Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes," which contained much more restrictive criteria
for the recognition of deferred tax assets. In accordance with generally
accepted accounting principles, the cumulative effect of the change on prior
years was recorded in the first quarter of fiscal 1992. The cumulative effect
of this accounting change was to record a benefit of $1,115 or $0.28 per
share as of March 1, 1991.
The Company also changed the method of accounting for existing individual
deferred compensation contracts in accordance with an amendment to APB
Opinion No. 12, Omnibus Opinion in the fourth quarter of the fiscal year
ended February 29, 1992. In prior years, expense was recognized over a period
through the date the Company commenced payment of its obligation under the
deferred compensation contract. The amendment reduces the recognition period
to the period over which the employee becomes entitled to the deferred
compensation. In accordance with generally accepted accounting principles,
the cumulative effect of the change on prior years was recorded in the first
quarter of fiscal 1992. The total cumulative effect of this accounting change
was to record a charge of $907 or $0.23 per share, net of a tax benefit of
$605.
NOTE 2--ACQUISITIONS AND DISPOSALS
Effective August 31, 1993, the Company sold its Aluminum Extrusion Division
for $10,978 which consisted of cash and short term notes of $8,878 (all notes
were fully collected by December 30, 1993) and a non-cash item of 190,900
shares of Ketema, Inc. common stock which had a market value of $2,100. In
addition, the Company is entitled to a contractually defined percentage of the
profits, if any, for the period from September 1, 1993 through December 31,
1996, from the combined aluminum extrusion operations consisting of the
divested operation and two of the purchaser's operations. No gain or loss on
the sale was recognized since the sales price, net of estimated divestiture
expenditures, approximated the division's book value. The remaining assets of
the Aluminum Extrusion Division at February 28, 1994 of $992 consist primarily
of accounts receivable and some fixed assets to be disposed of separately. The
net assets of the Aluminum Extrusion Division at February 28, 1993 were $7,822
consisting primarily of receivables, inventory
22
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
and property, plant and equipment of $11,112 less payables and accruals of
$3,290. The net assets and operating results of the Aluminum Extrusion Division
have been classified as discontinued operations for all periods presented in
the consolidated financial statements. Operating results for the three years
ended February 28, 1994, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net sales..................................... $17,412 $33,091 $34,554
Operating loss, before tax.................... (508) (570) (35)
Operating loss, after tax..................... $ (305) $ (342) $ (21)
======= ======= =======
</TABLE>
On January 29, 1993, the Company purchased certain assets and assumed certain
liabilities of XO Technologies, Inc., a producer of turbine meter products, for
approximately $3,500. On December 17, 1992 a wholly-owned subsidiary of the
Company purchased certain assets and assumed certain liabilities of Aldan
Industrial Machining, Inc., a producer of high-precision machined components,
at a cost of approximately $4,600 in cash and $4,000 (plus an additional $1,120
in interest thereon) funded into an escrow account subsequent to February 28,
1993 (the "Escrow Account"). These acquisitions were accounted for as
purchases, and accordingly, the assets and liabilities acquired have been
recorded at their estimated fair value (assets acquired of approximately
$14,000, including intangible assets of approximately $8,500 being amortized
over periods ranging from 3 to 20 years, and liabilities assumed of
appoximately $1,900) and the results of operations were included from the date
of acquisition.
During the third quarter of fiscal 1993, the Company entered into an
arrangement whereby it contributed cash of approximately $1,800 to a newly
established entity, American Innovations, Inc., in exchange for 80% of the
common stock of the entity. A development stage enterprise (the "Predecessor
Company") contributed tangible assets of approximately $100, liabilities of
approximately $1,400, and intangible assets (comprised of research and
development projects in process) of approximately $1,750 in exchange for 20% of
the common stock of the newly established entity. The Company has consolidated
the results of the newly formed entity since the formation date. The value of
research and development projects in process was included in research and
development expense for the period. The minority shareholders are entitled to a
dividend preference for fiscal years 1994, 1995 and 1996 equal to 80% of
earnings before interest and taxes of American Innovations, Inc. which will be
paid 90 days following the close of the fiscal year. In the case of a loss
before interest and taxes, a dividend will be paid only to the extent of
cumulative earnings. Should such dividend be distributed, they will be
accounted for as a purchase price adjustment. No dividend was earned for fiscal
1994 since American Innovations had a contractually defined operating loss.
On September 18, 1992, the Company sold the Composite Materials division, a
composite materials engineering and design business, to former division
management. On September 30, 1992, the Company completed the sale of the
Textile Products division, a woven fabric composite material business. Sales
and operating results of these businesses through the date of sale, which are
included in the fiscal 1993 results, were not significant. No gain or loss was
recorded in fiscal 1993 as a result of these disposals due to the restructuring
charge booked in fiscal 1992 (see Note 3).
NOTE 3--RESTRUCTURING CHARGE
The fourth quarter of fiscal 1992 financial results included a special pretax
charge of approximately $7,400 for the write-down of various intangible and
other assets related to the woven fabric composite material business, expenses
related to the consolidation of facilities and relocation costs.
23
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--INVENTORIES
Inventories are principally accounted for using the last-in, first-out (LIFO)
cost method. If the first-in, first-out (FIFO) method of accounting for
inventories had been used by the Company, inventories would have been higher
than that reported at February 28, 1994 and 1993, by $9,714 and $10,968
respectively. During fiscal years 1994, 1993 and 1992, certain inventories were
reduced resulting in the liquidation of LIFO inventory layers carried at lower
costs prevailing in prior years as compared with the cost of 1994, 1993 and
1992 purchases, the effect of which decreased costs of goods sold by
approximately $1,564, $890 and $588 in fiscal years 1994, 1993 and 1992,
respectively.
Revenues are recorded and costs are relieved from inventory relating to long-
term fixed price contracts and programs primarily on a unit-of-delivery basis.
Revenues and costs related to cost reimbursement contracts are recognized and
relieved as the work progresses. Progress payments (principally related to
long-term contracts and programs) of $661 at February 28, 1994 ($694 at
February 28, 1993) have been netted against inventories.
The components of inventory at February 28, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Raw Materials............................................. $ 1,831 $ 1,424
Work in process........................................... 4,335 5,170
Finished goods............................................ 5,156 4,358
------- -------
$11,322 $10,952
======= =======
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt at February 28, 1994 and 1993 consisted of:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Notes payable due October 31, 1994 to 2003............. $45,000 $45,000
8% convertible subordinated debentures due 2003........ 14,692 14,692
8% private placement convertible subordinated
debentures due 2003................................... 500 500
Other.................................................. 5 96
------- -------
60,197 60,288
Less current maturities................................ (4,505) (90)
------- -------
Net long-term debt..................................... $55,692 $60,198
======= =======
</TABLE>
In February 1989, the Company issued $17,500 of convertible subordinated
debentures (the "Debentures") bearing an interest rate of 8% and maturing on
November 15, 2003, with mandatory annual prepayments equal to 20% of principal
beginning in fiscal year 2000 reduced by any repurchases or conversions to
date. The Debentures are convertible at a conversion price of $15.58 per share
into common stock at any time or into preferred stock under certain conditions,
and are subordinated in right of payment to all existing and future senior
indebtedness of the Company.
During fiscal 1993, the Company issued, through a private placement to Hugh
H. Williamson, III, President and Chief Executive Officer of the Company, a
$500 convertible subordinated debenture due 2003, with mandatory annual
prepayments equal to 20% of principal beginning in fiscal year 2000 reduced by
any
24
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
repurchases or conversions to date, bearing an interest rate of 8% and maturing
on November 15, 2003. This debenture issued to Mr. Williamson is convertible at
a conversion price of $10.375 per share into common stock at any time and
participates pari passu with the Debentures described above.
Through a private placement in December 1988, the Company issued $45,000 in
notes bearing interest at an annual rate of 10.97%. Scheduled annual repayments
of $4,500 commence on October 31, 1994. The convenants of the notes prohibit
prepayment until October 31, 1996. The prepayment penalty declines from 4.701%
on October 31, 1996 to zero on October 31, 2002. In addition, the agreement
contains restrictions relating to working capital, dividends and capital stock
purchases. Under the Company's debt agreements at February 28, 1994,
consolidated current assets were $50,519 in excess of the required minimum and
payments of dividends were restricted until the Company earns additional net
income of $6,015.
During the third quarter of fiscal 1992, the Company's note agreement was
amended to permit, under certain circumstances, repurchases of up to $15,000 of
the Company's common stock and 8% convertible subordinated debentures due 2003,
not subject to certain otherwise applicable restrictions. In conjunction with
the amendment, the interest rate on the notes payable increased to 11.07% and
will increase to a maximum of 11.22% based on the level of permitted
repurchases (11.17% and 11.12% at February 28, 1994 and 1993, respectively). In
fiscal years 1992 and 1993, the Company repurchased $2,798 of the 8%
convertible subordinated debentures. As of February 28, 1994, the Company is
allowed to purchase an aggregate of $7,497 of Debentures and/or common stock if
the Company can maintain a debt to capitalization ratio of less than 50%. (The
debt to capitalization ratio as of February 28, 1994 is 51.2%.)
Cash payments of interest were approximately $6,300, $6,400, and $6,500 in
1994, 1993 and 1992, respectively.
The fair value of long-term debt approximated the recorded value at February
28, 1994. The fair values have been determined through information obtained
from market sources and management estimates.
NOTE 6--STOCKHOLDERS' EQUITY
During fiscal 1993, the Company exercised an option, acquired in April 1991
at a price of $2.75 per share, to purchase 198 shares of common stock at an
exercise price of $10.00 per share and purchased 37 shares of its common stock
in a privately negotiated transaction at a cost of $426.
In October 1991, the Company adopted a Shareholder Rights Plan. Under the
Shareholder Rights Plan's Rights Agreement, the Board of Directors declared a
dividend of one Right for each share of Company common stock owned. The
Shareholder Rights Plan provides, under certain conditions involving
acquisition of the Company's common stock, that holders of Rights, except for
the acquiring entity, would be entitled: (a) to purchase shares of preferred
stock at a specified exercise price, or (b) to purchase shares of common stock
of the Company, or the acquiring company, having a value of twice the Rights
exercise price. The rights under the Shareholder Rights Plan expire in 2001.
The Company has a stock incentive plan (the "Plan") whereby key employees and
directors may be granted stock options, stock appreciation rights and
restricted stock awards. These stock incentives entitle them to purchase common
stock and in certain cases receive cash under the Plan. The outstanding options
are exercisable at a price not less than market value on the date of grant,
with the exception of 104 stock options granted to Hugh H. Williamson, III in
fiscal 1993 at 85% of market value on the date of grant.
25
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Information on stock options for fiscal 1994 is as follows:
<TABLE>
<CAPTION>
PRICE RANGE SHARES
------------ ------
<S> <C> <C>
Outstanding at beginning of year..................... $ 8.82-14.94 321
Granted.............................................. $11.13-11.13 19
Exercised............................................ $ -- --
Cancelled............................................ $11.13-13.56 27
Outstanding at end of year (expire from 1996 through
2002)............................................... $ 8.82-14.94 313
Exercisable at end of year........................... $10.38-14.94 108
</TABLE>
Outstanding options are exercisable in installments over five to nine years
and expire seven to ten years from the date of grant.
Under the Plan, the Company also has 142 outstanding conjunctive stock
appreciation rights exercisable for cash and/or shares of common stock when the
related option is exercised. Subject to certain limitations, each right relates
to the excess of market value of the Company's stock over the exercise price of
the related option, for which a charge to income is made, which is not
significant in amount.
Also under the Plan, there are 7 outstanding shares of restricted stock which
become nonforfeitable over fiscal 1995 and 1996. The shares were purchased for
$1.00 per share and are subject to forfeiture under certain circumstances.
Unearned compensation, representing the excess of the fair market value of the
shares at the date of issuance over the purchase price of the award, is
amortized to expense over the period of restriction.
At February 28, 1994 and 1993, 461 shares of the Company's common stock were
reserved for issuance pursuant to the exercise of stock options and restricted
stock awards, or stock appreciation rights granted or to be granted
independently of any stock options. A maximum of 229 shares of the Company's
common stock at February 28, 1994 and 1993, respectively were reserved for
issuance pursuant to the exercise of conjunctive stock appreciation rights
granted or to be granted in connection with stock options.
NOTE 7--LEASES
During fiscal years 1994, 1993 and 1992 rental expense under operating leases
was charged to operations in the amount of $1,450, $1,555 and $1,722,
respectively.
Minimum aggregate rental commitments under noncancellable operating leases
(including those of discontinued operations retained by the Company) in effect
at February 28, 1994 are as follows (principally comprised of real property and
office space):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1995............................................................... $1,256
1996............................................................... 1,015
1997............................................................... 877
1998............................................................... 619
1999............................................................... 530
Thereafter......................................................... 3,183
------
$7,480
======
</TABLE>
26
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8--INCOME TAXES
At February 28, 1994, the Company has net operating loss carryforwards of
approximately $4,700 for federal income tax purposes which expire in the year
2008. The Company also has AMT credit carryforwards of approximately $400 which
may be utilized to reduce federal income taxes due in the future.
Components of the Company's deferred tax liabilities and assets as of
February 28, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Total deferred tax assets............................... $ 7,899 $ 7,643
Valuation allowance for deferred tax assets --.......... (2,189) (805)
------- -------
5,710 6,838
Total deferred tax liabilities.......................... (2,702) (3,553)
------- -------
Net deferred tax assets................................. $ 3,008 $ 3,285
======= =======
</TABLE>
The increase in the valuation allowance during fiscal 1994 of $1,384 was
primarily attributable to: (a) $646 arising from the deductibility of a $1,900
claim paid in 1991 as to which no benefit was taken by the Company in 1994 (see
Note 11); and (b) $813 which applied to deferred tax assets at February 28,
1993 which were grossed up against the related valuation allowance provided
through that date.
Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amount used for income tax purposes and the tax effect of income tax
credit carryforwards. Principal items comprising net deferred income tax assets
as of February 28, 1994 and 1993 are:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Tax over book depreciation............................. $(1,951) $(3,231)
Reserves and accruals.................................. 5,021 4,580
Restructuring charge................................... 81 297
AMT credit carryforward................................ 422 --
Net operating loss carryforward........................ 1,610 2,405
Other--net............................................. 14 39
------- -------
5,197 4,090
Valuation allowance.................................... (2,189) (805)
------- -------
Net deferred tax assets............................ $ 3,008 $ 3,285
======= =======
</TABLE>
The income tax provision (benefit) consists of:
<TABLE>
<CAPTION>
1994 1993 1992
---- ------- -------
<S> <C> <C> <C>
Current:
Federal......................................... $ 12 $(1,380) $ 813
State........................................... 34 -- 162
Amortization of prior years investment tax
credits.......................................... -- (267) (131)
Deferred.......................................... 305 401 (2,007)
---- ------- -------
351 (1,246) (1,163)
Add back: benefit from discontinued operations.... 203 228 14
---- ------- -------
Provision for (benefit from) income taxes,
continuing operations.......................... 554 (1,018) (1,149)
Deferred (benefit) from cumulative effect of
changes in accounting principles................. -- -- (1,720)
---- ------- -------
$554 $(1,018) $(2,869)
==== ======= =======
</TABLE>
27
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The differences between the federal income tax rate of 34% and the Company's
effective tax rate were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ------- -------
<S> <C> <C> <C>
Statutory federal tax provision (benefit)
continuing operations............................ $713 $(1,671) $(1,477)
State income taxes, net of federal income tax
benefit.......................................... 124 87 185
Investment tax credits............................ -- (267) (131)
Tax deduction related to fiscal 1991 settlement
cost
(Note 11)........................................ (646) -- --
Valuation allowance............................... 571 805 --
Non-deductible items.............................. 153 57 218
AMT refund........................................ (314) -- --
Other............................................. (47) (29) 56
---- ------- -------
Provision for (benefit from) income taxes,
continuing operations........................ $554 $(1,018) $(1,149)
==== ======= =======
</TABLE>
During 1994 and 1993 net income tax refunds of $106 and $522, respectively,
were received. Income taxes of $1,442 were paid during 1992. Refundable income
taxes in the amounts of $1,694 and $1,462 for fiscal 1994 and 1993,
respectively, are included within prepaids and other current assets in the
accompanying balance sheet.
NOTE 9--RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit retirement and pension
plans for eligible salaried and hourly rated employees. The defined benefit
plans provide benefits based primarily on the participant's years of service
and/or compensation. These benefits are being funded through a trust
established in conjunction with these plans. A defined benefit retirement plan
for the Company's directors is unfunded.
The Company's funding policy with respect to its qualified plans is to
contribute amounts determined annually on an actuarial basis that provides for
current and future benefits in accordance with funding requirements of federal
law and regulations. Assets of funded benefit plans are invested in a variety
of equity and debt instruments and in commingled funds.
Net pension expense for the Company's defined benefit retirement and pension
plans includes the following components:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost benefits earned during the period... $1,017 $1,421 $1,384
Interest cost on projected benefit obligation.... 1,271 1,190 1,031
Actual return on plan assets..................... (3,193) (369) (1,840)
Net amortization and deferrals................... 2,087 (636) 1,215
------ ------ ------
Net pension expense.............................. 1,182 1,606 1,790
Pension expense of discontinued operations....... 52 107 149
------ ------ ------
Net pension expense of continuing operations..... $1,130 $1,499 $1,641
====== ====== ======
</TABLE>
28
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company also incurred an additional $267 in 1994 for costs associated
with the curtailment and settlement of plans associated with discontinued
operations. Such costs have been reflected as a charge to the reserve for
discontinued operations (see Note 10).
Net pension expense reflects an expected long-term rate of return on plan
assets of 9% for 1994, 1993 and 1992. The actual return has been adjusted to
defer gains or losses which differ from the expected return. The present value
of projected benefit obligations was determined using an assumed discount rate
of 7.25% for 1994, 8.5% for 1993 and 9.0% for 1992. The assumed rate of
compensation increase, where applicable, used in determining the present value
of projected benefit obligations was 5.25% for 1994 and 6% for 1993 and 1992.
The following table sets forth the funded status of the plans:
<TABLE>
<CAPTION>
FEBRUARY 28, 1994 FEBRUARY 28, 1993
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation. $ 8,613 $ 6,690 $6,277 $ 6,378
======= ======= ====== =======
Accumulated benefit
obligation............... $ 9,212 $ 7,000 $6,785 $ 6,505
======= ======= ====== =======
Projected benefit
obligation............... $11,382 $ 7,000 $8,995 $ 6,650
======= ======= ====== =======
Plan assets at fair value... $11,545 $ 5,135 $8,763 $ 5,009
======= ======= ====== =======
Plan assets in excess of
(less than) projected
benefit obligation......... $ 163 $(1,865) $ (232) $(1,641)
Unrecognized prior service
cost....................... 608 709 745 600
Unrecognized net loss
(gain)..................... (24) 781 178 863
Unrecognized net transition
(asset) obligation, net of
amortization............... (712) 310 (763) 301
------- ------- ------ -------
Prepaid (accrued) pension
expense.................... $ 35 $ (65) $ (72) $ 123
======= ======= ====== =======
</TABLE>
For pension plans with accumulated benefits in excess of assets, a minimum
liability was recognized for the sum of the excess of the accumulated benefit
obligation over the fair value of the plan assets plus the amount of prepaid
pension expense or minus the amount of accrued pension expense (such reduction
limited to the underfunding position of individual plans). The minimum
liability was $1,812 and $1,660 at February 28, 1994 and 1993, respectively. In
1994, the minimum liability was offset by a charge to stockholders' equity of
$523, net of deferred tax benefits of $269, and an intangible asset of $1,020.
In 1993, the minimum liability was offset by a charge to stockholders' equity
of $468, net of deferred tax benefits of $241, and an intangible asset of $951.
The Company sponsors a defined contribution plan for eligible employees. The
cost recognized in fiscal years 1994, 1993 and 1992 for the defined
contribution plan, based on compensation of covered employees, was $246, $278
and $255, respectively.
The Company provides limited health care benefits for certain early retirees
of one of its divisions. Prior to fiscal year 1994, the Company accounted for
the costs of these benefits on an accrual basis over the working lives of
employees expected to receive benefits. Effective March 1, 1994, the Company
adopted the provisions
29
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
of Statement of Financial Accounting Standards No. 106 ("FAS 106") "Employers'
Accounting for Postretirement Benefits Other than Pensions". At February 28,
1994 and 1993, respectively, the Company had accruals of $507 and $619 for
these postretirement medical benefits which are included in other long-term
liabilities in the accompanying balance sheet. The impact on the Company's
operations of adopting FAS 106 in 1994 was not significant.
Prior to fiscal 1994, the Company had deferred compensation arrangements with
certain officers, directors, and key employees pursuant to a Supplemental
Executive Benefit Plan and a Directors' Benefit Plan. As of February 28, 1993,
the Company had accrued $2,287 with respect to these agreements of which $350
was charged to expense in fiscal 1993. During fiscal 1994, the Board of
Directors authorized the settlement of the obligation associated with these
plans for participants with a "vested" benefit (currently retired or eligible
for early retirement under the Ketema, Inc. Employees' Retirement Plan). These
participants were offered a discounted lump sum cash settlement in lieu of
future benefits from the Plan. Payments were made under this arrangement in the
amount of $1,744. Non-vested agreements were terminated at no cost to the
Company. At February 28, 1994, the Company has an accrual of $531 with respect
to those participants who did not elect to accept the lump sum cash settlement.
During fiscal 1994, $49 was charged to expense with respect to these Plans.
As part of the compensation package for Mr. Williamson which was recommended
by the Compensation Committee and approved by the Board of Directors, a
retirement benefit was approved which permits Mr. Williamson to retire at age
60 and receive an annual amount equal to 50% of the three-year average of his
then-current salary and bonus. The difference between such amount and the
amount received by Mr. Williamson under the retirement plan would be paid by
the Company. Automatic vesting would occur upon a change in control of the
Company prior to Mr. Williamson's reaching age 60. At February 28, 1994, $201
was accrued with respect to this agreement.
30
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10--INTANGIBLES, OTHER ASSETS AND OTHER ACCRUED LIABILITIES
Intangibles, other assets and other accrued liabilities consist of the
following at February 28, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Intangible Assets
-----------------
Patents.............................................. $ 2,312 $ 2,312
Other acquired intangibles........................... 8,832 8,584
Excess of cost over net assets acquired.............. 3,016 2,965
Financing and organization costs..................... 3,492 3,492
Pension.............................................. 1,020 951
Less accumulated amortization........................ (5,276) (3,814)
------- -------
$13,396 $14,490
======= =======
Other Assets
------------
Investment in limited partnership (approximates
market value)....................................... $ 5,228 $ 4,586
Cash surrender value of officers life insurance, net
of related loans in 1993............................ 2,172 643
Prepaid pension expense.............................. 862 862
Unbilled receivable, long term portion............... 693 --
Prepaid interest, long term portion.................. 556 784
Other................................................ -- 110
------- -------
$ 9,511 $ 6,985
======= =======
Other Accrued Liabilities
-------------------------
Accrued insurance.................................... $ 4,871 $ 5,210
Accrued interest..................................... 2,032 2,074
Contract loss reserve................................ 3,390 3,393
Restructuring/relocation reserves.................... 643 2,036
Environmental reserve................................ 832 1,000
Reserve for discontinued operations.................. 1,644 --
Other................................................ 2,280 2,755
------- -------
$15,692 $16,468
======= =======
</TABLE>
NOTE 11--CONTINGENT ASSETS AND LIABILITIES
The Company was incorporated in May 1988 in connection with a corporate
restructuring of AMETEK, Inc. ("Ametek"), in which certain businesses and
related assets and liabilities of Ametek were transferred to the Company. On
November 30, 1988, the Company became a separate, publicly held corporation by
means of the pro rata distribution (the "Distribution") by Ametek of all the
outstanding shares of the Company's Common Stock, $1.00 par value ("Common
Stock"), to holders of record of Ametek's common stock as of the close of
business on that date.
In connection with the Distribution, the Company and Ametek agreed that
contingent liabilities which arise out of the transferred assets or the conduct
of the Company's operations, or which are not incurred in
31
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
the ordinary course of business, shall be obligations of the Company only to
the extent of the first $5,000 and one-half of the next $10,000. The Company
and Ametek agreed to indemnify each other against claims or damages arising
from liabilities for which each has agreed to be responsible. However, to the
extent liabilities are covered by insurance of Ametek, only one-half of the
first $200 in any individual case shall be the responsibility of the Company.
In accordance with the above agreement, the Company reimbursed Ametek $5,210 in
1991 for a settlement with the U.S. Government, for an event which occurred
prior to the distribution. The income tax benefit of the settlement was to be
recognized for financial statement purposes upon final determination by the
Internal Revenue Service as to the deductibility of such costs.
During fiscal 1994, the Company and Ametek reached an agreement with the
Internal Revenue Service which allowed the Company and Ametek to each deduct
for federal income tax purposes $1,900 in relation to the reimbursement to
Ametek mentioned above.
The Company has reflected its $1,900 additional deduction in the 1994 income
tax balances. AMT refunds which resulted from amended prior year returns have
been included in earnings in the fourth quarter of 1994. A valuation allowance
has been provided to offset the deferred tax asset which results from the
availability of an additional operating loss carryforward (see Note 8).
When Ametek files its amended federal and state income tax returns for
calendar year 1991 for its $1,900 deduction, the proceeds plus interest, net of
certain contractual costs and legal fees, will be due to the Company. Due to
the uncertainty of the amount and the timing of payment, such amount will not
be reflected in the Company's books until the net payment becomes certain.
NOTE 12--LETTERS OF CREDIT
The Company has entered into irrevocable standby letter of credit agreements
with financial institutions primarily to back the Company's self-insurance
program. At February 28, 1994, the Company was contingently liable on
outstanding letters of credit aggregating $9,709. The Company paid fees in the
amount of $83 on the outstanding letters of credit during fiscal 1994.
NOTE 13--LEGAL PROCEEDINGS
On August 25, 1993, the Company, Hugh H. Williamson, III--the Company's
President and Chief Executive Officer, and John McCloskey--formerly the
Company's Vice President--Manufacturing, were sued in the District Court, 160th
Judicial District, Dallas, Texas, by Raymond J. Moore, the former General
Manager of the Company's Heat Transfer Division, located in Grand Prairie,
Texas. The case has been removed to the United States District Court for the
Northern District of Texas, Dallas Division. Mr. Moore seeks damages for the
alleged intentional infliction of severe emotional distress suffered by him as
the result of an unsatisfactory performance review, negligent employment and
retention, defamation and violations of the Age Discrimination in Employment
Act, the Family Medical Leave Act and the Americans with Disabilities Act. Mr.
Moore principally seeks, from the defendants, jointly and severally: lost wages
in the amount of $20; full pay and benefits through 1997 in the amount of $150
per year as front pay; exemplary and punitive damages in the amount of
$100,000; damages for mental anguish and emotional distress in the amount of
$20,000; and $20,000 for the age, disability, family leave and defamation
claims. The Company believes the case is without merit. Discovery is ongoing.
The Company and the individual defendants intend to contest the matter
vigorously and believe they have meritorious defenses. Trial is currently
scheduled for the two week period following November 21, 1994.
See Note 14 for additional litigation matters.
32
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14--SUBSEQUENT EVENTS
In an amendment to a Schedule 13D Statement, dated October 19, 1993, filed
with the Securities and Exchange Commission, a group of stockholders of the
Company, consisting of clients of American Securities Partners, L.P. ("American
Securities Partners"), including three directors of the Company (the "American
Securities Group"), stated that they were considering various options with
regard to their investment in the Company including initiating or responding to
proposals regarding a merger or other business combination. The Amendment also
stated that the American Securities Group had discussed generally and intended
to explore with Hugh H. Williamson, III, the President and Chief Executive
Officer of the Company, a possible merger or business combination transaction.
On April 28, 1994, KTM Holdings Corp., a corporation organized on behalf of the
American Securities Group ("KTM"), delivered a proposal to the Company's Board
of Directors proposing the acquisition of all outstanding shares of Common
Stock not already owned by the members of the American Securities Group at a
price of $13.125 per share payable in cash through a merger of a wholly-owned
subsidiary of KTM into the Company which would be the surviving corporation and
become a wholly-owned subsidiary of KTM (the "Merger Proposal"). The Merger
Proposal provides that the proposed merger, if approved by the Board of
Directors based on a favorable recommendation of a special committee of the
Board consisting of two directors who are not members of the American
Securities Group or employees of the Company (the "Special Committee"), would
be subject to a number of conditions, including (i) the negotiation and
execution of a definitive merger agreement, (ii) approval by the holders of a
majority of the outstanding shares of Common Stock, (iii) KTM reaching
satisfactory agreements with (a) the institutional investors holding the
Company's outstanding Senior Notes regarding the early retirement of such Notes
and (b) Mr. Williamson, regarding, among other things, his continuation as
Chief Executive Officer of the Company and his exchange of the convertible
debentures and options held by him for an equity participation in KTM if the
proposed merger is consummated, and (iv) the funding of working capital and
term loans to finance the transaction under a bank commitment letter.
Subsequently, KTM reached an understanding with Mr. Williamson. The American
Securities Group and Mr. Williamson beneficially own in the aggregate
approximately 22.87% of the outstanding shares of Common Stock (after giving
effect to the conversion of all convertible debentures held by them and the
exercise of all presently exercisable stock options held by Mr. Williamson).
"Thereafter, the Special Committee, with the assistance of its financial and
legal advisors, began to consider the Merger Proposal in light of, among other
things, the operating and financial performance of the Company." There can be
no assurances that the merger contemplated by the Merger Proposal, or any other
business combination involving the Company, will be approved by the Special
Committee or the Board of Directors, or if approved, will be consummated.
The Company is obligated to pay the fees and expenses of the Special
Committee's financial and legal advisors. The financial advisor was retained at
a fee of $350 plus expenses, of which $100 was incurred in fiscal 1994. The
amount of legal expenses is not currently determinable.
Subsequent to the Company's public announcement on April 28, 1994, of its
receipt of the Merger Proposal the Company was served with, or advised of the
filing of, seven class action lawsuits in the Delaware Court of Chancery, New
Castle County relating to the Merger Proposal. The complaints name as
defendants, inter alia, all or certain directors of the Company and, in some
instances, the Company itself. All of the complaints allege that the proposal
by certain of the defendant directors who are members of the American
Securities Group to acquire the remaining interest of the Company at the offer
price of $13.125 in cash, if accepted, would be inadequate and unfair to the
minority stockholders of the Company and would constitute a breach of fiduciary
duties by the defendant directors. Certain of the complaints include further
allegations, among them, that the offer "effectively put(s) a cap on the market
price for Ketema stock" and therefore is
33
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
manipulative, and that there is allegedly non-public information in the
possession of the defendants with respect to the Company's prospects which
should be disclosed to stockholders to enable them to determine whether to
exercise appraisal rights in any proposed merger. The principal relief sought
by the complaints is a declaration that, if the acquisition were consummated at
the offered price, it would constitute a breach of fiduciary duty and the
granting of a preliminary injunction to bar an acquisition at the offered
price. The complaints further seek to rescind the merger if implemented prior
to entry of an injunction, to recover damages in an unspecified amount,
reimbursement of costs, including attorneys' and experts' fees, and other
equitable relief.
NOTE 15--BUSINESS SEGMENT INFORMATION
The Company classifies its operations into four business segments: Process
Group, Aerospace Group, Industrial Group and American Innovations, Inc. The
principal products and services offered by each segment are as follows:
Process Group
Heat transfer equipment, propeller and differential pressure flow meters,
centrifuges and separation equipment and flow measurement and control devices.
Aerospace Group
Jet engine and airplane parts and composite material structures.
Industrial Group
Synthetic monofilaments, custom die-cast components and thermistors.
American Innovations, Inc.
Remotely monitored meter reading systems, primarily for the utility industry.
34
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company's operations by industry segments are as follows:
<TABLE>
<CAPTION>
1994 1993* 1992*
-------- -------- --------
<S> <C> <C> <C>
Net sales (1&2)
Process Group............................... $ 55,503 $ 50,896 $ 54,237
Aerospace Group............................. 46,081 46,048 54,068
Industrial Group............................ 25,023 25,215 24,827
American Innovations, Inc................... 502 -- --
-------- -------- --------
Total..................................... $127,109 $122,159 $133,132
======== ======== ========
Operating profit (3)
Process Group............................... $ 4,595 $ 3,769 $ 6,399
Aerospace Group............................. 5,793 1,357 (4,192)
Industrial Group............................ 2,787 2,537 1,309
American Innovations, Inc................... (1,633) (2,438) --
-------- -------- --------
Segment operating profit (4).............. 11,542 5,225 3,516
Corporate and other expenses................ (5,583) (7,707) (7,840)
Interest income (expense), net.............. (3,864) (2,433) (19)
-------- -------- --------
Income (loss) before income taxes,
minority interest, discontinued
operations and cumulative effect of
changes in accounting principles......... $ 2,095 $ (4,915) $ (4,343)
======== ======== ========
Identifiable assets
Process Group............................... $ 26,019 $ 24,531 $ 20,357
Aerospace Group............................. 32,184 33,173 26,129
Industrial Group............................ 9,663 9,142 11,003
American Innovations, Inc................... 925 265 --
-------- -------- --------
Total segments............................ 68,791 67,111 57,489
Discontinued operations..................... 992 7,822 6,490
Corporate assets............................ 79,190 83,476 92,973
-------- -------- --------
Total..................................... $148,973 $158,409 $156,952
======== ======== ========
Additions to property, plant and equipment
Process Group............................... $ 1,355 $ 833 $ 1,379
Aerospace Group............................. 2,005 2,075 2,179
Industrial Group............................ 1,101 497 704
American Innovations, Inc................... 14 34 --
-------- -------- --------
Total segment............................. 4,475 3,439 4,262
Discontinued operations..................... 349 431 1,745
Corporate................................... 71 178 10
-------- -------- --------
Total..................................... $ 4,895 $ 4,048 $ 6,017
======== ======== ========
Depreciation and amortization
Process Group............................... $ 1,813 $ 1,253 $ 1,315
Aerospace Group............................. 3,222 2,445 2,757
Industrial Group............................ 819 827 867
American Innovations, Inc................... 19 6 --
-------- -------- --------
Total segments............................ 5,873 4,531 4,939
Corporate................................... 354 342 335
-------- -------- --------
Total..................................... $ 6,227 $ 4,873 $ 5,274
======== ======== ========
</TABLE>
- - ----------------
*Restated to reflect disposition of Aluminum Extrusion Division (Note 2),
formerly a component of the Industrial Group.
35
<PAGE>
KETEMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) After elimination of inter-segment sales, not significant in amount.
(2) Sales to the U.S. Government (principally by the Aerospace Group) were 21%
in 1994, 23% in 1993 and 29% in 1992 of the Company's net sales. Sales to
General Electric Company (principally by the Aerospace Group) were 28% in
1994, 21% in 1993 and 22% in 1992 of the Company's total net sales and are
partially included in sales to the U.S. Government.
(3) The 1992 results reflect a one-time, pretax charge of $7,385 for
restructuring costs and the write-down of certain assets. Of the total
charge $6,300 was allocated to the Aerospace Group, $85 was allocated to
the Industrial Group and $1,000 was allocated to corporate and other
expenses.
(4) Represents sales less all direct costs and expenses and certain
administrative expenses applicable to each segment.
NOTE 16--QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly sales and earnings for fiscal years 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
1994 QUARTER QUARTER QUARTER QUARTER YEAR
---- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $33,477 $31,913 $31,902 $29,817 $127,109
Operating income.............. $ 1,020 $ 1,327 $ 1,107 $ 2,096 $ 5,550
Income (loss) from continuing
operations................... $ (93) $ 37 $ 519 $ 1,078 $ 1,541
Net income (loss)............. $ (343) $ (18) $ 519 $ 1,078 $ 1,236
Primary earnings (loss) per
share:
Continuing operations....... $ (0.03) $ 0.01 $ 0.15 $ 0.30 $ 0.42
Net income (loss)........... $ (0.09) $ 0.00 $ 0.15 $ 0.30 $ 0.34
Fully diluted earnings (loss)
per share:
Continuing operations....... $ (0.03) $ 0.01 $ 0.15 $ 0.28 $ 0.42
Net income (loss)........... $ (0.09) $ 0.00 $ 0.15 $ 0.28 $ 0.34
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
1993* QUARTER QUARTER QUARTER QUARTER YEAR
----- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $31,798 $33,228 $27,457 $29,676 $122,159
Operating income (loss)....... $ 647 $ 1,429 $(1,457) $(2,992) $ (2,373)
Income (loss) from continuing
operations................... $ 237 $ 554 $(1,762) $(2,476) $ (3,447)
Net income (loss)............. $ 265 $ 501 $(1,853) $(2,702) $ (3,789)
Primary earnings (loss) per
share:
Continuing operations....... $ 0.06 $ 0.15 $ (0.47) $ (0.67) $ (.93)
Net income (loss)........... $ 0.07 $ 0.14 $ (0.50) $ (0.73) $ (1.02)
Fully diluted earnings (loss)
per share:
Continuing operations....... $ 0.06 $ 0.15 $ (0.47) $ (0.67) $ (.93)
Net income (loss)........... $ 0.07 $ 0.14 $ (0.50) $ (0.73) $ (1.02)
</TABLE>
- - ----------------
*Restated to reflect disposition of Aluminum Extrusion Division (Note 2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
36
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to Directors of the Company, and information with
respect to compliance with Section 16(a) of the Securities Exchange Act of
1934, is incorporated herein by reference to the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission (the
"Commission") not later than 120 days after the close of the fiscal year ended
February 28, 1994, under the captions "Election of Directors--Information as to
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934".
EXECUTIVE OFFICERS
Set forth below are the names, ages, titles and current and prior positions
of executive officers of the Company.
<TABLE>
<CAPTION>
NAME AND AGE PRESENT POSITION WITH THE COMPANY
------------ --------------------------------------------------
<S> <C>
Hugh H. Williamson, III
(52)................... President, Chief Executive Officer and Director
Tom A. Sims (49)........ Vice President-Human Resources
Robert L. Tomz (50)..... Vice President-Finance and Chief Financial Officer
William E. Leisey (55).. Controller
Robert L. Welty (61).... Secretary
</TABLE>
Mr. Williamson has been President and Chief Executive Officer of the Company
since April 1992. He was President, Chief Executive Officer and Chief Operating
Officer of Williamson & Associates from May 1987 to April 1992.
Mr. Sims has been Vice President-Human Resources of the Company since August
1992. He was Director of Human Resources of Energy Service, Inc., from June
1990 to July 1992 and he was Vice President of Administration of the Reading
and Bates Corporation for more than two years prior thereto.
Mr. Tomz has been Vice President-Finance and Chief Financial Officer of the
Company since March 1993. From December 1992 until March 1993 he served as Vice
President of the Company. He was a business consultant from July 1991 to
November 1992, an Executive Vice President of James Barko and Associates from
March 1990 to December 1992 and President and Chief Executive Officer of
RemodelAmerica Corporation from December 1988 to February 1990.
Mr. Leisey has been Controller of the Company since September 1990. He was
Director of Accounting of the Company from December 1988 to September 1990.
Mr. Welty has been legal counsel of the Company since August 1990. He was in
private practice for two years prior to joining the Company.
Messrs. Williamson and Leisey were each elected to office by the Board of
Directors on June 25, 1992. Mr. Sims was elected to office, effective August 1,
1992, by the Board of Directors on September 29, 1992. Mr. Tomz was elected to
office, effective March 1, 1993, by the Board of Directors on January 20, 1993.
ITEMS 11, 12 AND 13.
The information required by Item 11, Executive Compensation, by Item 12,
Security Ownership of Certain Beneficial Owners and Management, and by Item 13,
Certain Relationships and Related Transactions, is incorporated herein by
reference to the Company's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the close of the fiscal year ended
February 28, 1994, under the headings "Executive Compensation" and "Election of
Directors--Stock Ownership".
37
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statement Schedules and Exhibits filed.
1. and 2. Financial statement schedules shown by index on page 40.
3. Exhibits shown by index on pages 45, 46 and 47.
(b) No reports on Form 8-K were filed during the three-month period ended
February 28, 1994.
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Ketema, Inc.
/s/ Robert L. Tomz
By___________________________________
ROBERT L. TOMZ
VICE PRESIDENT--FINANCE AND CHIEF
FINANCIAL OFFICER
Dated: May 23, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Hugh H. Williamson, III
- - ------------------------------------
HUGH H. WILLIAMSON, III President, Chief Executive
Officer and Director
(Principal Executive
Officer) May 23, 1994
/s/ Robert L. Tomz
- - ------------------------------------
ROBERT L. TOMZ Vice President--Finance and
Chief Financial Officer
(Principal Financial
Officer) May 23, 1994
/s/ William E. Leisey
- - ------------------------------------
WILLIAM E. LEISEY Controller (Principal
Accounting Officer) May 23, 1994
/s/ Alexander G. Anagnos
- - ------------------------------------
ALEXANDER G. ANAGNOS Director May 23, 1994
/s/ William J. Catacosinos
- - ------------------------------------
WILLIAM J. CATACOSINOS Director May 23, 1994
/s/ Alan R. Gruber
- - ------------------------------------
ALAN R. GRUBER Director May 23, 1994
/s/ Charles D. Klein
- - ------------------------------------
CHARLES D. KLEIN Director May 23, 1994
/s/ Elizabeth R. Varet
- - ------------------------------------
ELIZABETH R. VARET Director May 23, 1994
</TABLE>
39
<PAGE>
KETEMA, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
(ITEM 14(A)1 AND 2)
FINANCIAL STATEMENT SCHEDULES PAGE
----
Schedules for the three years ended February 28, 1994 (except where otherwise
indicated):
<TABLE>
<CAPTION>
<C> <S> <C>
I Marketable securities -- other investments at February 28, 1994 .... 41
II Amounts receivable from related parties and underwriters, promoters,
and employees other than related parties ........................... 42
VIII Valuation and qualifying accounts .................................. 43
X Supplementary income statement information ......................... 44
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedules.
40
<PAGE>
KETEMA, INC.
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS
FEBRUARY 28, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR UNITS
PRINCIPAL AMOUNT AT WHICH
AMOUNT OF BONDS COST OF CARRIED IN
AND NOTES EACH ISSUE BALANCE SHEET
--------------- --------------- ------------------
<S> <C> <C> <C>
MARKETABLE SECURITIES:
United States Government Obligations......................... $55,240 $56,325 $55,458
Subordinated Debentures
Time Warner, 8.75%, due 1/10/15............................ 2,500 2,668 2,699
Unisys, 8.88%, due 7/15/97................................. 500 511 514
Unisys, 9.50%, due 7/15/98................................. 1,000 1,041 1,048
------- ------- --------
4,000 4,220 4,261
------- ------- --------
TOTAL........................................................ $59,240 $60,545 $59,719(A)
======= ======= =======
OTHER INVESTMENTS:
Pine Street Partners, L.P.................................... $ 3,000 $ 5,224(B)
Certificate of Deposit, 3.25% due 3/31/95.................... 4 4
------- -------
TOTAL........................................................ $ 3,004 $ 5,228
======= =======
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Stated at amortized cost plus accrued interest, which approximates market.
(B) Stated at cost plus allocated partnership net earnings or accrued income,
which approximates market.
41
<PAGE>
KETEMA, INC.
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED FEBRUARY 28, 1994, FEBRUARY 28, 1993 AND FEBRUARY 29, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance
Deductions End of Year
Balance ----------------------- ---------------------
Beginning of Amounts Amounts
Name of Debtor Year Additions Collected Written Off Current Non-Current
- - -------------- ------------ --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended
February 28, 1994:
- - -----------------
* F. Dale Fort (1) $105 $ - $105 $ - $ - $ -
* Howard F. Turner (1) 115 - 115 - - -
* Robert L. Welty (1) 110 - 110 - - -
** Robert L. Tomz (3) - 420 420 - - -
* Predecessor Company of
American Innovations, Inc. (4) 110 - - - 110 -
---- ------ ---- ---- ---- ----
$440 $ 420 $750 $ - $110 $ -
==== ====== ==== ==== ==== ====
Year ended
February 28, 1993:
- - -----------------
* F. Dale Fort (1) $ - $ 105 $ - $ - $105 $ -
* William H. Gregg (1) - 206 206 - - -
** William E. Leisey (1) - 155 155 - - -
* Howard F. Turner (1) - 115 - - 115 -
* Robert L. Welty (1) - 110 - - 110 -
** Hugh H. Williamson, III (2) - 335 335 - - -
Predecessor Company of
American Innovations, Inc. (4) - 110 - - - 110
---- ------ ---- ---- ---- ----
$ - $1,136 $696 $ - $330 $110
==== ====== ==== ==== ==== ====
Year ended
February 28, 1992: - - - - - -
- - ----------------- ==== ====== ==== ==== ==== ====
</TABLE>
___________________________________
* Employee
** Officer
1) In July 1992, pursuant to its relocation policy, the Company made non-
interest bearing loans to Messrs. Fort (Corporate Accounting Manager), Gregg
(Cost Accounting Manager), Leisey (Controller), Turner (Assistant Treasurer)
and Welty (Attorney) in the amounts of $105, $206, $155, $115 and $110,
respectively. Such loans were evidenced by a promissory note and were repaid
in full upon the sale of their former residences.
(2) In May 1992, pursuant to its relocation policy, the Company made a non-
interest bearing loan to Mr. Williamson (President and Chief Executive
Officer). Such loan was evidenced by a promissory note and was repaid in
full upon the sale of his former residence.
(3) In May 1993, pursuant to its relocation policy, the Company made a non-
interest-bearing loan of $420 to Mr. Tomz (Vice President, Finance and Chief
Financial Officer). Such loan was evidenced by a promissory note and was
paid in full upon the sale of his former residence.
(4) In connection with the acquisition of American Innovations, Inc., the
Company advanced the predecessor company $110 for certain costs and
expenses. One employee of American Innovations, Inc. is a major shareholder
in the predecessor company.
42
<PAGE>
KETEMA, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED FEBRUARY 28, 1994, FEBRUARY 28, 1993 AND FEBRUARY 29, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED WRITE-OFFS, BALANCE
BEGINNING TO COSTS NET OF END OF
DESCRIPTION OF YEAR AND EXPENSES RECOVERIES YEAR
- - ------------------------------------ --------- ------------- ----------- -------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:**
- - --------------------------------
Year ended February 28, 1994 $150 $(58) $ (15) $ 77
==== ==== ===== ====
Year ended February 28, 1993* $253 $108 $(211) $150
==== ==== ===== ====
Year ended February 29, 1992* $451 $(56) $(142) $253
==== ==== ===== ====
</TABLE>
* Restated to reflect disposition of Aluminum Extrusion Division
** Allowance deducted from asset to which it applies
43
<PAGE>
KETEMA, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED FEBRUARY 28, 1994, FEBRUARY 28, 1993 AND FEBRUARY 29, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES (A)
---------------------------------
ITEM 1994 1993 1992
- - ---------- -------- -------- --------
<S> <C> <C> <C>
Maintenance and repairs (B)................ $3,143 $3,704 $4,033
Amortization of intangible assets.......... 1,464 631 1,040
====== ====== ======
</TABLE>
______________________
(A) Advertising, royalties and taxes other than payroll and income taxes do not
exceed one percent of combined net sales and, accordingly, are not included
herein.
(B) Prior years restated to reflect disposition of Aluminum Extrusion Division
(Note 2).
44
<PAGE>
KETEMA, INC.
INDEX TO EXHIBITS
(ITEM 14(A)3)
(a) Exhibits
(3)a Restated Certificate of Incorporation of the Company. Incorporated
by reference to Annex B of the Company's Prospectus/Information
Statement dated November 30, 1988 (the "Prospectus/Information
Statement") filed as part of Amendment No. 4 to the Company's
Registration Statement on Form S-1 (Registration No. 33-23959) (the
"Registration Statement").
(3)b Amendment to Restated Certificate of Incorporation of the Company.
Incorporated herein by reference to Exhibit (3)b to the Company's
Report on Form 10-K, SEC File No. 1-10028 for the fiscal year ended
February 29, 1992 (the "1992 10-K").
(3)c By-Laws of the Company, as amended. Incorporated by reference to
Annex C of the Prospectus/Information Statement.
(3)d Certificate of Designation, Voting Powers, Preferences and Rights of
the Company's 7% Cumulative Voting Preferred Stock. Incorporated
herein by reference to Exhibit (3)c to the Company's Report on Form
10-K, SEC File No. 1-10028, for the fiscal year ended February 28,
1989 (the "1989 10-K").
(4)a Indenture relating to the Company's 8% Convertible Subordinated
Debentures Due 2003. Incorporated herein by reference to Exhibit
(4)a to the 1989 10-K.
(4)b Note Purchase Agreement relating to the Company's Senior Notes due
October 31, 2003. Incorporated herein by reference to Exhibit (4)b
to the 1989 Form 10-K.
(4)c Amendment No. 1 to Note Purchase Agreement relating to the Company's
Senior Notes due October 31, 2003. Incorporated herein by reference
to Exhibit (4)c to the 1992 10-K.
(4)d Amendment No. 2 to Note Purchase Agreement relating to the Company's
Senior Notes due October 31, 2003. Incorporated herein by reference
to Exhibit (4)d to the 1992 10-K.
(4)e Rights Agreement, dated October 15, 1991, between the Company and
American Stock Transfer & Trust Company. Incorporated herein by
reference to Exhibit 4 to the Company's Report on Form 8-K, SEC File
No. 1-10028, dated October 25, 1991.
(4)f Debenture Purchase Agreement relating to the Company's 8%
Convertible Subordinated Debenture Due 2003 issued to Mr. Hugh H.
Williamson, III. Incorporated herein by reference to Exhibit (4)f to
the 1993 10-K.
(10)a Reorganization and Distribution Agreement by and between Ametek and
the Company. Incorporated herein by reference to Exhibit (10)a to
the 1989 10-K.
(10)b Tax Agreement by and between Ametek and the Company. Incorporated
herein by reference to Exhibit (10)b to the 1989 10-K.
45
<PAGE>
KETEMA, INC.
INDEX TO EXHIBITS - (CONTINUED)
(10)c Benefits Agreement by and between Ametek and the Company.
Incorporated herein by reference to Exhibit (10)c to the 1989 10-K.
(10)d Support Services Agreement by and between Ametek and the Company.
Incorporated herein by reference to Exhibit (10)d to the 1989 10-K.
(10)e Agreements between the Company and Ametek amending certain
provisions of the Reorganization and Distribution Agreement.
Incorporated herein by reference to Exhibit (10)e to the 1992 10-K.
(10)f* Employees' Retirement Plan of Ketema, Inc. Incorporated herein by
reference to Exhibit (10)e to the 1989 10-K.
(10)g* Amendment No. 1 to the Employees' Retirement Plan of Ketema, Inc.
Incorporated herein by reference to Exhibit (10)f to the Company's
Report on Form 10-K, SEC File No. 1-10028, for the fiscal year ended
February 28, 1990 (the "1990 10-K").
(10)h* Amendment No. 2 to the Employees' Retirement Plan of Ketema, Inc.
Incorporated herein by reference to Exhibit (10)g to the 1990 10-K.
(10)i* Amendment No. 3 to the Employees' Retirement Plan of Ketema, Inc.
Incorporated herein by reference to Exhibit (10)h to the 1990 10-K.
(10)j* Amendment No. 4 to the Employees' Retirement Plan of Ketema, Inc.
Incorporated herein by reference to Exhibit (10)i to the Company's
Report on Form 10-K, SEC File No. 1-10028, for the fiscal year ended
February 28, 1991.
(10)k* The Ketema Savings and Investment Plan. Incorporated by reference
to Annex D of the Prospectus/Information Statement.
(10)l* Amendment No. 1 to The Ketema Savings and Investment Plan.
Incorporated herein by reference to Exhibit (10)j to the 1990 10-K.
(10)m* Amendment No. 2 to The Ketema Savings and Investment Plan.
Incorporated herein by reference to Exhibit (10)m to the 1992 10-K.
(10)n* Ketema, Inc. Retirement Plan for Directors. Incorporated herein by
reference to Exhibit (10)g to the 1989 10-K.
(10)o* Forms of Agreements under the Ametek Supplemental Senior Executive
Death Benefit Program, assumed by the Company, covering certain
executives. Incorporated by reference to Exhibit (10)h of Amendment
No. 1 to the Registration Statement ("Amendment No. 1").
(10)p* Ketema, Inc. Supplemental Executive Benefit Plan. Incorporated
herein by reference to Exhibit (10)p to the 1992 10-K. Plan
terminated February 28, 1994, unanimous consent of Board on February
7, 1994.
46
<PAGE>
KETEMA, INC.
INDEX TO EXHIBITS - (CONTINUED)
(10)q* Form of Agreement under the Ketema Death Benefit Program for
Directors, entered into by the Company and certain of its directors.
Incorporated by reference to Exhibit (10)i to Amendment No. 1
(10)r* Ketema, Inc. Directors' Benefit Plan. Incorporated herein by
reference to Exhibit (10)r to the 1992 10-K. Plan terminated
February 28, 1994 by unanimous consent of Board.
(10)s* The Ketema, Inc. 1988 Stock Incentive Plan. Incorporated by
reference to Annex E of the Prospectus/Information Statement.
(10)t* Amendment No. 1 to The Ketema, Inc. 1988 Stock Incentive Plan.
Incorporated herein by reference to Exhibit (10)p to the 1990 10-K.
(10)u* Amendment No. 2 to The Ketema, Inc. 1988 Stock Incentive Plan.
Incorporated herein by reference to Exhibit (10)q to the 1990 10-K.
(10)v* Amendment No. 3 to The Ketema, Inc. 1988 Stock Incentive Plan.
Incorporated herein by reference to Annex A to the Company's
definitive proxy statement, SEC File No. 1-10028, in connection with
the June 25, 1992 annual meeting of stockholders.
(10)w* Form of Restricted Stock Agreements for recipients of restricted
stock awards under The Ketema, Inc. 1988 Stock Incentive Plan.
Incorporated herein by reference to Exhibit (10)o to the 1990 10-K.
(10)x* Form of Indemnity Agreement between the Company and each of its
officers and directors. Incorporated herein by reference to Exhibit
(10)k of Amendment No. 1.
(10)y* The Ketema Savings and Investment Plan as Restated, July 1, 1993.
(10)z* The Ketema, Inc. Key Employee Severance Plan.
(11) Computation of earnings per share.
(23) Consent of Independent Auditors.
(99) Letter to the holders of the Company's Common Stock, dated October
25, 1991 (including Summary of Rights). Incorporated herein by
reference to Exhibit 4 to the Company's Report on Form 8-K, SEC File
No. 1-10028, dated October 25, 1991.
___________________
Note: Index numbers not listed are not applicable.
* Indicates a management contract or compensatory plan.
47
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- - ----------- -----------
(10)y The Ketema Savings and Investment Plan as Restated, July 1, 1993.
(10)z The Ketema, Inc. Key Employee Severance Plan.
(11) Computation of earnings per share.
(23) Consent of Independent Auditors.
<PAGE>
EXHIBIT (10)y
THE KETEMA SAVINGS AND INVESTMENT PLAN
AS RESTATED
JULY 1, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- - ------- ----
<S> <C> <C>
I DEFINITIONS AND CONSTRUCTION.................................. 1
1.1 Definitions............................................ 1
1.2 Word Usage............................................. 10
1.3 Calculation of Time.................................... 11
1.4 Construction........................................... 11
1.5 Headings............................................... 11
II PARTICIPATION................................................. 11
2.1 Eligibility............................................ 11
2.2 Employees Not Eligible................................. 11
2.3 Participant Information................................ 11
2.4 Employee Acceptance.................................... 11
2.5 Leased Employees....................................... 12
III SERVICE....................................................... 13
3.1 Year of Service........................................ 13
3.2 Hours of Service....................................... 13
3.3 Severance From Service Date............................ 13
3.4 Absence of Less Than 12 Months......................... 14
3.5 Severance from Service................................. 14
(a) One Year Period of Severance...................... 14
(b) One Year Period of Severance--Participation....... 14
(c) Participation After a One Year Period of Severance 14
3.6 Service with Ametek.................................... 15
IV CONTRIBUTIONS................................................. 15
4.1 Deferral Election...................................... 15
(a) Election.......................................... 15
(b) Amount of Deferral................................ 15
(c) Committee's Approval.............................. 15
4.2 Employer Contributions................................. 16
(a) Deferral Amounts.................................. 16
(b) Employer Contributions............................ 17
(c) Limitation on Contributions....................... 17
4.3 Distribution of Excess Salary Reduction Deferrals...... 17
4.4 Percentage Limitation on Deferral Amounts.............. 18
4.5 Distribution of Excess Contributions................... 20
4.6 Percentage Limitation on Matching Contributions under
Code (S) 401(m)........................................ 21
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE Page
- - ------- ----
<S> <C> <C>
4.7 Distribution of Excess Aggregate Contributions......... 24
4.8 Deferral Election--Discontinuance, Variation and
Resumption............................................. 25
4.9 Rollovers and Transfers................................ 25
(a) Rollover Contribution--General.................... 25
(b) Rollover Contribution--Defined.................... 26
V INDIVIDUAL ACCOUNTS........................................... 26
5.1 Participant Accounts................................... 26
5.2 Valuation of Accounts.................................. 26
5.3 Allocation of Employer Contributions--General.......... 27
5.4 Method of Allocating and Crediting Employer
Contributions.......................................... 27
5.5 Employer Contributions Considered Made on Last Day of
Plan Year.............................................. 28
5.6 Participants to Whom Matching Contributions Will Be
Allocated.............................................. 28
5.7 Valuation.............................................. 28
5.8 Limitation on Annual Additions......................... 28
(a) General........................................... 28
(b) Coordination with Defined Benefit Plan............ 28
(c) Defined Benefit Plan Fraction--Defined............ 29
(d) Defined Contribution Plan Fraction--Defined....... 29
(e) Annual Additions--Defined......................... 30
(f) Compensation--Defined............................. 30
(g) Other Plans....................................... 31
(h) Related Employer--Defined......................... 31
5.9 Allocations Do Not Create Rights....................... 31
VI PAYMENT OF BENEFITS........................................... 31
6.1 Vesting and Payment Upon Retirement, Death, Disability
or Termination of Employment........................... 31
(a) Retirement, Death or Disability................... 31
(b) Vesting Upon Termination of Employment............ 31
(c) Restoration of Benefits........................... 32
6.2 Attainment of Age 59-1/2............................... 32
6.3 Beneficiary Designation................................ 33
6.4 Form of Payment........................................ 34
(a) Retired or Disabled Participants.................. 34
(b) Death Benefits.................................... 35
(c) Other Benefits.................................... 35
(d) Amount and Form of Payment........................ 35
6.5 Direct Rollovers....................................... 35
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE Page
- - ------- ----
<S> <C> <C>
(a) General........................................... 35
(b) Definitions....................................... 36
6.6 Limitations on Commencement or Duration of Benefit
Payments............................................... 37
(a) Commencement of Benefits.......................... 37
(b) Maximum Duration of Death Benefits................ 37
(c) Life Expectancies................................. 38
(d) Additional Limitations............................ 38
6.7 Cash-Out of Benefits................................... 38
6.8 Qualified Domestic Relations Orders.................... 39
VII LOANS TO PARTICIPANTS AND WITHDRAWALS......................... 39
7.1 Loans.................................................. 39
(a) General........................................... 39
(b) Allocation of Loans............................... 41
(c) Aggregation of Loans.............................. 42
(d) Number of Outstanding Loans....................... 42
(e) Maximum Term of Loans............................. 42
(f) Allocation of Payments............................ 42
(g) Ametek Plan Loans................................. 42
7.2 Hardship Distribution.................................. 42
(a) General........................................... 42
(b) Immediate and Heavy Financial Need................ 43
(c) Distribution Deemed Necessary..................... 43
(d) Suspension and Limitation of Deferral Elections... 44
VIII COMMITTEE AND PLAN ADMINISTRATOR.............................. 44
8.1 Committee-Authority.................................... 44
8.2 Appointment............................................ 44
8.3 Death, Resignation or Removal of Committee Member...... 45
8.4 Written Notice of Appointment, Resignation or Removal.. 45
8.5 Action by Committee.................................... 45
8.6 Employment of Agents................................... 45
8.7 No Committee Member Compensation....................... 45
8.8 Committee Powers....................................... 45
8.9 Claims for Benefits.................................... 46
8.10 Appeal Procedure for Denial of Benefits................ 46
8.11 Liability for Contributions............................ 48
8.12 Plan Administrator..................................... 48
8.13 Compensation of Plan Administrator..................... 48
8.14 Allocation of Duties................................... 48
8.15 Dispute as to Duties................................... 49
8.16 Participation of Committee Members and Plan
Administrator.......................................... 49
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE Page
- - ------- ----
<S> <C> <C>
8.17 Books and Records...................................... 49
8.18 Fiduciary Standard..................................... 49
8.19 Indemnification........................................ 49
IX INVESTMENT OF PLAN ASSETS..................................... 50
9.1 Contributions Held in Trust............................ 50
9.2 Investment of Contributions............................ 50
(a) Fixed Income Fund................................. 50
(b) Balanced Fund..................................... 51
(c) Equity Fund....................................... 51
(d) Ketema Common Stock Fund.......................... 51
9.3 Appointment of Investment Manager...................... 52
X AMENDMENT, TERMINATION OR TRANSFER OF ASSETS.................. 52
10.1 Amendment or Termination............................... 52
10.2 Termination of Plan.................................... 53
10.3 Distribution of Assets................................. 53
10.4 Affiliates............................................. 54
(a) Adoption by Affiliates............................ 54
(b) Withdrawal by Affiliate........................... 54
10.5 Amendment to Vesting Schedule.......................... 54
10.6 Merger of Plan......................................... 55
XI TOP HEAVY PLANS............................................... 55
11.1 Definitions............................................ 55
11.2 Minimum Contributions.................................. 58
11.3 Coordination with Defined Benefit Plan................. 58
11.4 Maximum Benefits....................................... 59
XII MISCELLANEOUS................................................. 60
12.1 No Rights Implied...................................... 60
12.2 Assignment and Alienation.............................. 60
12.3 Exclusive Benefit Rule................................. 60
(a) No Diversion of Trust Assets...................... 60
(b) Exceptions........................................ 60
12.4 Exclusive Benefit...................................... 61
12.5 No Employment Contract................................. 61
12.6 Section 16(b) Compliance............................... 61
12.7 Fiduciaries............................................ 61
12.8 Incapacity............................................. 61
12.9 Governing Law.......................................... 61
12.10 Initial Qualification.................................. 62
12.11 Effective Date of Restatement.......................... 62
</TABLE>
-iv-
<PAGE>
THE KETEMA SAVINGS AND INVESTMENT PLAN
AS RESTATED
Restatement of THE KETEMA SAVINGS AND INVESTMENT PLAN (the "Plan"), by
KETEMA, INC., a Delaware corporation ("Ketema") effective July 1, 1993.
W I T N E S S E T H
WHEREAS, effective as of the close of business on November 30, 1988,
Ketema established and adopted, for the benefit of certain eligible employees of
Ketema and its subsidiaries, the Plan;
WHEREAS, Ketema reserved the right to amend such Plan in Section 10.1;
NOW, THEREFORE, Ketema amends and restates the Plan in its entirety as
follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. The following words and phrases shall have the
meanings set forth below, unless the context clearly indicates otherwise:
(a) "Accounts" shall mean the Deferral Election Account, the
Employer Contribution Account and the Rollover Contribution Account, or as many
as are applicable, maintained on behalf of a Participant in accordance with this
Plan.
(b) "Actual Deferral Percentage" or "ADP" shall mean, for a
specified group of Eligible Participants for a Plan Year, the average of the
ratios (calculated separately for each Eligible Participant in such group) of
(a) the amount of Employer contributions actually paid on behalf of such
Participant pursuant to such Participant's Deferral Election for the Plan Year
to (b) the Participant's ADP Compensation for the portion of the Plan Year
during which the Participant was an Eligible Participant. Employer contributions
on behalf of any Participant will include Deferral Amounts, including Excess
Deferrals, but excluding Deferral Amounts that are taken into account in the ACP
test (provided the ADP test is satisfied both with and without exclusion of
these Deferral Amounts). For purposes of computing Actual Deferral Percentages,
an Employee who would be a Participant but for the failure to make a Deferral
Election will
<PAGE>
be treated as a Participant on whose behalf no Employer contributions under
Section 4.2(a) are made.
(c) "ADP Compensation" shall have such meaning as the
Committee may determine from time to time, provided that such meaning shall at
all times comply with Code (S) 414(s) and the regulations thereunder.
(d) "Adjustment Factor" shall mean the cost-of-living
adjustment factor prescribed by the Secretary of the Treasury under Section
415(d) of the Code for Plan Years beginning after December 31, 1987 as applied
to such items and in such manner as the Secretary shall provide.
(e) "Affiliate" shall mean any corporation that is, along with
the Company, a member of a controlled group of corporations (within the meaning
of Section 414(b) of the Code) or any other trade or business (whether or not
incorporated) which is under common control with the Company (as defined in
Section 414(c) of the Code) or any member of an "affiliated service group" (as
such term is defined under Section 414(m) of the Code or in regulations under
Section 414(o) of the Code) of which the Company is also a member.
(f) "Aggregate Limit" shall mean the sum of (a) 125% of the
greater of the ADP of the Non-Highly Compensated Employees for the Plan Year or
the ACP of the Non-Highly Compensated Employees for the Plan Year and (b) the
lesser of 200% or two plus the lesser of such ADP or ACP.
(g) "Ametek" shall mean AMETEK, Inc., a Delaware corporation,
and any subsidiary or affiliate thereof as of the Effective Date.
(h) "Ametek Plan" shall mean The AMETEK Savings and Investment Plan.
(i) "Annual Valuation Date" shall mean the 31st day of December in
each year.
(j) "Average Contribution Percentage" or "ACP" shall mean the
average of the ratios (calculated separately for each Eligible Participant in
the group) of the Contribution Percentages of the Eligible Participants in a
group.
(k) "Balanced Fund" shall have the meaning set forth in Section
9.2(b).
(l) "Beneficiary" shall mean the person or persons designated by a
Participant or Former Participant, in accordance with Section 6.3, as the person
or persons entitled to
-2-
<PAGE>
receive upon the death of such Participant or Former Participant any benefit
under the provisions of this Plan.
(m) "Board of Directors" shall mean the Board of Directors of the
Company.
(n) "Code" shall mean the Internal Revenue Code of 1986, as it may
from time to time be amended.
(o) "Committee" shall mean the Administrative Committee appointed and
serving pursuant to Article VIII.
(p) "Company" shall mean Ketema, Inc., a Delaware corporation.
(q) "Compensation" shall mean an Employee's wages, salary, fees for
professional services, and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer to the extent that
the amounts are includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and
bonuses). The term "Compensation" does not include such items as: (i)
contributions made by the Employer to a plan of deferred compensation to
the extent that, before the application of Code (S) 415 limitations to
that plan, the contributions are not includable in the gross income of the
Employee for the taxable year in which contributed; (ii) Employer
contributions made on behalf of an Employee to a simplified employee
pension described in Code (S) 408(k); (iii) any distributions from a plan
of deferred compensation, regardless of whether such amounts are
includable in the gross income of the Employee when distributed; (iv)
amounts realized from the exercise of a nonqualified stock option, or when
restricted stock (or property) held by an Employee becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(v) amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; (vi) other amounts which receive
special tax benefits; and (vii) reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred
compensation, and welfare benefits. An Employee's "Compensation" shall
include elective contributions that are made by the Employer on behalf of
the Employee but are not includable in gross income under Code (S)(S) 125,
402(a)(8) and 402(h). Notwithstanding the preceding, "Compensation" shall
not include any amounts in excess of $200,000, as adjusted by the
Adjustment Factor.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost-of-
living in accordance with section 401(a)(17(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
Compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall
mean the OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is $150,000.
(r) "Contribution Percentage" shall mean the ratio (expressed
as a percentage) of the Participant's Contribution Percentage Amounts to the
Participant's ADP
-A-
<PAGE>
Compensation for the Plan Year (whether or not the Employee was a Participant
for the entire Plan Year).
(s) "Contribution Percentage Amounts" shall mean the Matching
Contributions under the Plan on behalf of an Eligible Participant for the Plan
Year. Such Contribution Percentage Amounts will include forfeitures of Excess
Aggregate Contributions or Matching Contributions allocated to the Participant's
Account as of the year in which such forfeiture is allocated. The Employer may
use Employer contributions under Section 4.2(a) in the Contribution Percentage
Amounts as long as the ADP test is met before such contributions are used in the
ACP test and continues to be met following the exclusion of such contributions
that are used to meet the ACP test.
(t) "Deferral Amount" shall mean the amount by which a Participant
has reduced his Compensation pursuant to a Deferral Election.
(u) "Deferral Election" shall mean an election which a Participant
has made to contribute to the Plan pursuant to Section 4.1.
(v) "Deferral Election Account" shall mean a separate Account
maintained for each Participant who has elected to make a Deferral Election,
consisting of the Deferral Amount contributed pursuant to the Participant's
Deferral Election (and amounts, if any, that were salary deferrals which were
transferred directly from the Ametek Plan to this Plan) plus any earnings and
realized and unrealized gains and losses of the Trust allocable to such Account,
but less any amounts previously distributed to the Participant, Former
Participant or Beneficiary for whom the Account is maintained.
(w) "Disabled" or "Disability." A Participant shall be considered to
be "Disabled" and to have a "Disability" if he is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The
permanence and degree of such impairment shall be supported by medical evidence.
(x) "Early Retirement" means a Participant's retirement after
attainment of age 55 and completion of 10 Years of Service.
(y) "Effective Date" shall mean the close of business on
November 30, 1988.
(z) "Eligible Participant" shall mean any Employee who is eligible to
make a Deferral Election. Any
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Employee who would be a Participant in the Plan but who makes no such Deferral
Election will be treated as an Eligible Participant for whom no Employer
Contributions are made.
(aa) "Employee" shall mean any person on the payroll of the
Employer whose wages from the Employer are subject to withholding for Federal
income tax purposes.
(bb) "Employer" shall mean the Company and any Affiliate of the
Company which adopts this Plan pursuant to Section 10.4 hereof.
(cc) "Employer Contribution Account" shall mean a separate Account
maintained for each Participant, consisting of the Participant's share of
Employer contributions (and amounts, if any, that were employer matching or
discretionary contributions which were transferred directly from the Ametek Plan
to this Plan) plus any earnings and any realized or unrealized gains and losses
of the Trust allocable to such Account, but less any amounts previously
distributed to the Participant, Former Participant or Beneficiary for whom the
Account is maintained.
(dd) "Employment Commencement Date" shall mean the date on which the
Employee first performs an Hour of Service as an Employee, except as otherwise
provided in Section 3.5 with respect to a One Year Period of Severance.
(ee) "Entry Date" shall mean the first day of each Plan Quarter.
(ff) "Equity Fund" shall have the meaning set forth in Section
9.2(c).
(gg) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(hh) "Excess Aggregate Contributions" shall mean with respect to
any Plan year, the excess of:
(i) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated
Employees for such Plan Year, over
(ii) The maximum Contribution Percentage Amounts permitted by
the Average Contribution Percentage test (determined by
reducing
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contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination will be made after first determining Excess Deferrals and
then determining Excess Contributions.
(ii) "Excess Contributions" shall mean with respect to any Plan Year,
the excess of:
(i) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(ii) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on
behalf of Highly Compensated Employees in order of the
ADPs, beginning with the highest of such percentages).
(jj) "Excess Deferrals" shall mean those Deferral Amounts that are
includable in a Participant's gross income under Code (S) 402(g) to the extent
such Participant's Deferral Amount for a taxable year exceeds the dollar
limitation under such Code (S) 402(g). Excess Deferrals will be treated as
Annual Additions under the Plan unless such amounts are distributed no later
than the first April 15 following the close of the Participant's taxable year.
(kk) "Five Percent Owner" shall mean:
(iii) if the Company or an Affiliate is a corporation, any
person who owns, or is considered as owning, within the
meaning of Section 318 of the Code, as modified by
Section 416 thereof, more than 5% of the outstanding
stock of the Company or an Affiliate or more than 5% of
the total combined voting power of all of the stock of
the Company or an Affiliate; or
(iv) if an Affiliate is not a corporation, any person who
owns, or is considered as owning, within the meaning of
Section 416 of the Code,
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more than 5% of the capital or profits interest in the
Affiliate.
(ll) "Fixed Income Fund" shall have the meaning set forth in
Section 9.2(a).
(mm) "Highly Compensated Employee" shall mean an Employee or former
Employee of the Company or an Affiliate who, during the Plan Year or the
preceding Plan Year:
(i) was at any time a Five Percent Owner;
(ii) received compensation during such Plan Year in excess of
$75,000, multiplied by the Adjustment Factor;
(iii) received compensation during such Plan Year in excess of
$50,000, multiplied by the Adjustment Factor, and his
compensation exceeded the compensation received by at
least 80% of the remaining Employees of the Company or an
Affiliate during such Plan Year; or
(iv) was an Officer and his compensation during such Plan Year
either exceeded the compensation of all other Officers of
the Company and its Affiliates or exceeded 150% of the
dollar limitations set forth in Sections 5.8(a)(i).
For purposes of this Subsection (mm), if an Employee is a Five Percent Owner or
one of the ten Employees of the Company and its Affiliates with the highest
compensation, and the Employee's spouse, his lineal ascendants or descendants or
any spouse of his lineal ascendants or descendants is an Employee of the Company
or an Affiliate, then such spouse or ascendant or descendant shall not be
treated as an Employee of the Company or the Affiliate, and any compensation
paid to such person shall be treated as if paid to the Employee. In determining
which Employee is a Highly Compensated Employee for purposes of this Subsection
(mm), any Employee who is a Highly Compensated Employee during the current Plan
Year pursuant to clauses (ii), (iii) or (iv) above, but was not a Highly
Compensated Employee during the immediately preceding Plan Year (without regard
to this sentence) shall not be treated as a Highly Compensated Employee unless
he is one of the 100 employees of the Company and its Affiliates with the
highest compensation for the current Plan Year. Notwithstanding the preceding,
an Employee shall not be taken into account for
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purposes of this Subsection (mm) if he has completed a Period of Service of less
than six months; is normally credited with less than 17-1/2 Hours of Service per
week; normally works less than six months during the year; has not attained age
21; or is not eligible to participate in the Plan pursuant to Section 2.3 or
would not be eligible to participate in the Plan pursuant to Section 2.3 if he
was employed by an Employer. A former Employee of the Company or an Affiliate
who was a Highly Compensated Employee when he separated from service or at any
time after he attained age 55 shall continue to be treated as a Highly
Compensated Employee for purposes of the Plan. For purposes of this Subsection
(mm), the term "compensation" shall mean an Employee's ADP Compensation.
(nn) "Hour of Service" shall have the meaning set forth in
Section 3.2.
(oo) "Investment Funds" shall mean the investment vehicles designated
by the Committee from time to time as being available to Participants for
investment of their Accounts. Such investment vehicles may include an Equity
Fund, a Fixed Income Fund, a Balanced Fund and a Ketema Common Stock Fund.
(pp) "Ketema Common Stock Fund" shall have the meaning set forth
in Section 9.2(d).
(qq) "Limitation Year" shall mean the Plan year.
(rr) "Matching Contribution" shall mean an Employer contribution
made under Section 4.2(b).
(ss) "Monthly Valuation Date" shall mean the last day of each
calendar month.
(tt) "Non-Highly Compensated Employee" shall mean an Employee of the
Employer who is neither a Highly Compensated Employee nor an individual
described in Code (S) 414(q)(6)(B).
(uu) "Normal Retirement Date" shall mean the later of (i) a
Participant's or Former Participant's 65th birthday or (ii) the fifth
anniversary of such Participant's participation in the Plan.
(vv) "Officer" shall mean an individual who is an executive in the
regular and continued service of the Company or an Affiliate. Notwithstanding
the preceding, the number of Officers shall not exceed:
(A) three, if the number of Employees of the Company and the
Affiliates does not exceed 30;
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(B) 10% of the number of Employees of the Company and the
Affiliates, if the number of Employees is more than 30 but
less than 500; and
(C) 50, if the number of Employees of the Company and the
Affiliates is 500 or more.
If the number of Officers exceeds the limits set forth in this Subsection (vv),
then the Officers having the highest annual compensation (as defined in
Subsection (mm)) among all Officers during the applicable period shall be
considered Officers for purposes of this Plan. For purposes of this Subsection
(vv), the "applicable period" shall mean, with respect to Subsection (mm), the
Plan Year and the immediately preceding Plan Year and with respect to Article
XI, the five year period ending with the Determination Date (as such term is
defined in Section 11.1(a) hereof).
(ww) "One Year Period of Severance" shall have the meaning set
forth in Section 3.5.
(xx) "Participant" shall mean an Employee who has met the
requirements for participation in, and has signified his acceptance of, this
Plan, pursuant to the provisions of Article II; "Former Participant" shall mean
a person who has ceased to be a Participant but who is entitled to immediate or
deferred benefits under this Plan.
(yy) "Period of Service" shall mean a period of service performed for
an Employer by an Employee commencing on the Employee's Employment Commencement
Date and ending on his Severance From Service Date.
(zz) "Period of Severance" shall mean the period commencing on an
Employee's Severance From Service Date and ending on the date he again performs
an Hour of Service for the Employer as an Employee.
(aaa) "Plan" shall mean The Ketema Savings and Investment Plan,
as embodied herein and as amended from time to time.
(bbb) "Plan Administrator" shall mean the person, group of persons,
firm or corporation serving as plan administrator pursuant to Section 8.12.
(ccc) "Plan Quarter" shall mean each three month period ending
on March 31st, June 30th, September 30th or December 31st, as the case may be.
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(ddd) "Plan Year" shall mean the 12 month period commencing
January 1st and ending the following December 31st.
(eee) "Qualified Domestic Relations Order" shall mean a domestic
relations order which the Plan Administrator has determined meets the
requirements of Section 414(p) of the Code.
(fff) "Rollover Contribution" shall mean a contribution which meets
the requirements of Section 4.9(b).
(ggg) "Rollover Contribution Account" shall mean a separate
Account maintained for each Participant who has elected to make a Rollover
Contribution pursuant to Section 4.9, consisting of the Rollover Contribution
plus any earnings and realized and unrealized gains and losses of the Trust
allocable to such Account, but less any amounts previously distributed to the
Participant, Former Participant or Beneficiary for whom the Account is
maintained.
(hhh) "Severance From Service Date" shall have the meaning set forth
in Section 3.3.
(iii) "Trust" shall mean The Ketema Savings and Investment Trust, as
amended from time to time.
(jjj) "Trust Fund" shall mean the assets held by the Trustee for
the benefit of the Participants, Former Participants and their Beneficiaries,
but not including any Plan assets theretofore set aside for distribution of
benefits to or with regard to Participants, Former Participants or
Beneficiaries.
(kkk) "Trustee" shall mean the trustee or trustees appointed by
the Company to hold the assets of the Plan, as provided by Section 9.1 and the
Trust, and such successor trustee or trustees as the Company, from time to time,
may designate.
(lll) "Year of Service" shall have the meaning set forth in Section
3.1.
1.2 Word Usage. Except when otherwise indicated by the context, any
masculine terminology used herein also includes the feminine and neuter, and
vice versa, and the definition of any term herein in the singular shall also
include the plural, and vice versa. The words "hereof," "herein," "hereunder,"
and other similar compounds of the word "here" shall mean and refer to the
entire Plan and not to any particular provision or section. All references to
Sections and Articles shall mean and refer to Sections and Articles contained in
this Plan, unless otherwise indicated.
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1.3 Calculation of Time. In determining time periods within which an event
or action is to take place for purposes of the Plan, no fraction of a day shall
be considered and any act, the performance of which would fall on a Saturday,
Sunday, holiday or other non-business day, may be performed on the next
following business day.
1.4 Construction. It is the intention of the Employer that the Plan be
qualified under the provisions of Sections 401(a), 401(k) and 501(a) of the Code
and under ERISA, and all provisions of this Plan shall be construed and
interpreted in light of that intention.
1.5 Headings. The titles and headings of Articles and Sections are
intended for convenience of reference only and are not to be considered in
construction of the provisions hereof.
ARTICLE II
PARTICIPATION
2.1 Eligibility. An Employee shall become a Participant in the Plan as of
the Entry Date which is on or after the date on which he attains age 21 and
follows his date of hire by at least 30 days, provided he signifies his
acceptance of the Plan in accordance with Section 2.4 and he continues to be an
Employee as of such Entry Date. A person shall cease to be a Participant upon
his death, Disability or retirement or if he incurs a One Year Period of
Severance.
2.2 Employees Not Eligible. Notwithstanding Section 2.1, an Employee shall
not be eligible to participate in this Plan if he is included in a unit of
Employees which the National Labor Relations Board finds to be a collective
bargaining unit, unless the collective bargaining agreement provides for the
inclusion of such unit of Employees in the Plan. If an Employee is included in a
collective bargaining unit, and the collective bargaining agreement provides for
the inclusion of such Employee in the Plan, the Employee will be eligible to
participate in the Plan, pursuant to Section 2.1, on the later of the date
specified in the collective bargaining agreement or the first Entry Date which
is on or after the date he completes the eligibility requirements set forth in
Section 2.1.
2.3 Participant Information. The Employer shall from time to time furnish
the Committee, the Trustee and the Plan Administrator with relevant information
with respect to Employees who are or become eligible for participation in the
Plan, Participants, Former Participants and Beneficiaries, including
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without limitation, information as to their names, Compensation, date of birth,
Employment Commencement Date, Hours of Service, Periods of Service, retirement
and death or other cause for termination of employment. The Committee, the
Trustee and the Plan Administrator may rely upon such information and shall be
under no obligation to make inquiry with regard to the accuracy thereof.
2.4 Employee Acceptance.
(a) In General. Each Employee who meets the requirements for
participation in this Plan shall be so notified in writing or otherwise by the
Plan Administrator. An Employee shall become a Participant if he signifies his
acceptance of the Plan and the benefits hereof by filing with the Committee his
written application for participation in the Plan on a form supplied by the
Committee and by agreeing to make a Deferral Election pursuant to Section 4.1.
Each Employee shall file his application within 60 days after he receives notice
of his eligibility. If an Employee does not file his application within the time
period specified above, such Employee shall become a Participant as of the Entry
Date following or coinciding with the receipt by the Committee of such
application, provided he continues to meet the eligibility requirements on such
Entry Date.
(b) Special Employee Acceptance Rule. An Employee who was a
participant in the Ametek Plan shall be deemed to have signified his acceptance
of the Plan and the benefits hereof and authorized the continuation of his
salary deferral percentage under the Ametek Plan as his Deferral Election,
unless he notifies the Plan Administrator, in writing, not later than five days
after the Effective Date that he desires to make a new Deferral Election.
2.5 Leased Employees.
(a) In General. Notwithstanding any other provision of the Plan, for
purposes of the pension requirements of Section 414(n)(3) of the Code and for
identifying Highly Compensated Employees, employees of the Company shall include
Employees as defined in Subsection (b). A leased employee within the meaning of
Section 414(n)(2) of the Code shall become a Participant in, or accrue benefits
under, the Plan based on Periods of Service as a leased employee only as
provided in the provisions of the Plan other than this Section 2.5, and only if
the participation of such leased employee in the Plan is required so that the
Plan meets the pension requirements of Section 414(n)(3) of the Code.
(b) Definition and Special Rule. For purposes of this Section,
"Employee" shall mean employees of the Company
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and shall include leased employees of the Company within the meaning of Section
414(n)(2) of the Code. Notwithstanding the foregoing, if such leased employees
constitute less than 20% of the Company's non-highly compensated work force
within the meaning of Section 414(n)(5)(C)(ii) of the Code, the term "Employee"
shall not include those leased employees covered by a plan described in Section
414(n)(5) of the Code unless otherwise provided by the Plan.
ARTICLE III
SERVICE
3.1 Year of Service. A Participant shall be credited with a Year of
Service for each 12 consecutive month Period of Service beginning with his
Employment Commencement Date, and anniversaries thereof. For purposes of this
Plan, any service performed by an Employee for the Company or any Affiliate
shall be considered to be service performed by an Employee for an Employer.
3.2 Hours of Service. An Hour of Service shall mean an hour for which an
Employee is directly or indirectly paid, or entitled to payment, by the
Employer, for the performance of duties. Hours of Service shall include each
hour for which back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by the Employer, and such hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made. Hours of Service shall also include each hour for which the
Employee is directly or indirectly paid, or entitled to payment, by the Employer
for reasons (such as vacation, sickness or temporary disability) other than for
the performance of duties during the applicable computation period.
3.3 Severance From Service Date. An Employee's Severance from Service
Date shall mean the earlier of:
(i) the date the Employee quits, retires, is discharged or
dies; or
(ii) the later of:
(A) the first anniversary of the first date of a period
during which the Employee remains continuously absent
from service with the Employer, either with or
without pay, for any reason other than those set
forth in clause (i); or
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(B) the second anniversary of the first date of a period
of continuous absence from service with the Employer,
for reasons of (1) the pregnancy of the Employee, (2)
the birth of the Employee's child, (3) the placement
of a child with the Employee in connection with the
adoption of such child by the Employee or (4) caring
for such child for a period beginning immediately
following such birth or placement.
(iii) Notwithstanding anything contained in clause (ii) to the
contrary, if an Employee is continuously absent from
service with the Employer for more than one year for a
reason described in clause (ii), the period between the
first and second anniversaries of the Employee's first
date of absence shall not be treated as a Year of Service
for any purpose under this Plan.
3.4 Absence of Less Than 12 Months. If a Participant's service as an
Employee is severed because he quits, retires or is discharged but he resumes
service as an Employee of the Employer within 12 months of his Severance from
Service Date the intervening Period of Severance shall be deemed to be a Period
of Service.
3.5 Severance from Service.
(a) One Year Period of Severance. A One Year Period of Severance
shall occur when an Employee or former Employee does not perform an Hour of
Service as an Employee within the 12 month period beginning on his Severance
from Service Date.
(b) One Year Period of Severance--Participation. An individual shall
cease to be a Participant as of the first day of the Plan Year in which he
incurs a One Year Period of Severance, and he shall be entitled to such
benefits, if any, under this Plan, as are provided pursuant to Section 6.1.
(c) Participation After a One Year Period of Severance. A
Participant who incurs a One Year Period of Severance shall again become a
Participant on his new Employment Commencement Date. For this purpose, the new
Employment Commencement Date shall be the date following the Participant's re-
employment on which he first performs an Hour of Service for
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the Employer. If the Employee again becomes a Participant in the Plan, his Years
of Service completed prior to his One Year Period of Severance will be taken
into account to determine the vested percentage of his Employer Contribution
Account, unless:
(i) at the time he incurs a One Year Period of Severance
he does not have a nonforfeitable interest in his
Employer Contribution Account, if any; and
(ii) Employee has at least five consecutive One Year
Periods of Severance.
3.6 Service with Ametek. Notwithstanding any other provision of the Plan
to the contrary, with respect to any Employee who was an employee of Ametek
immediately prior to the Effective Date and who directly transferred his
employment from Ametek to the Company or any Affiliate, the Period of Service of
each such Employee shall be the sum of the Period of Service of each such
Employee measured from the Effective Date and the credited service of each such
Employee under the Ametek Plan determined as of the day immediately prior to the
Effective Date under the terms of the Ametek Plan as then in effect.
ARTICLE IV
CONTRIBUTIONS
4.1 Deferral Election.
(a) Election. For each Plan Year, each Participant may make a
Deferral Election pursuant to which the Participant shall direct the Employer to
reduce the Participant's Compensation and to contribute to the Plan, on the
Participant's behalf, the amount by which the Participant's Compensation has
been so reduced.
(b) Amount of Deferral. A Participant may make a Deferral Election
in an amount equal to not less than 1% nor more than 14% of his Compensation (in
multiples of 1%) for the Plan Year. Such contribution shall be made by payroll
deduction at the regular payroll period applicable to the Participant, or
deducted from any special, non-recurring payment of Compensation made to the
Participant.
(c) Committee's Approval. A Participant's Deferral Election shall be
subject to the approval (or partial approval) of the Committee. The Committee's
approval shall not be given:
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(i) to the extent that the Participant's Deferral
Amount for a Plan Year would exceed $7,000,
multiplied by the Adjustment Factor;
(ii) the extent that the Deferral Election results in
prohibited discrimination in favor of an Employee
who is a Highly Compensated Employee as determined
pursuant to Sections 4.4 and 4.6;
(iii) the extent that the Deferral Amount, taken together
with the Employer contributions made on behalf of
the Participant for the Limitation Year under this
Plan and any other defined benefit or defined
contribution plan, exceeds 25% of the Participant's
"compensation" (as defined in Section 5.8(f)
hereof) for the Limitation Year; or
(iv) the extent that the Committee otherwise determines
that the election is, or is likely to be, in excess
of the amounts permitted by the Code.
In making its determination, the Committee shall apply the provisions of this
Subsection (c) and the applicable provisions of the Code and the regulations and
rulings promulgated thereunder. If, as a result of subsequent events, a
Deferral Election which has been previously approved by the Committee would
later result in contributions in excess of the amount permitted under this
Subsection (c), the Committee may revoke, in whole or in part, its prior
approval and may require the Participant to reduce his Deferral Election in
order to prevent such excess.
4.2 Employer Contributions.
(a) Deferral Amounts. The Employer shall contribute to the Plan, on
behalf of each Participant, the amount by which the Participant has elected to
reduce his Compensation pursuant to his Deferral Election in accordance with
Section 4.1. Notwithstanding any other provision of the Plan to the contrary,
the maximum amount which the Employer shall contribute on behalf of any
Participant pursuant to such Participant's Deferral Election for any Plan Year
beginning on or after the Effective
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Date shall not exceed $7,000, multiplied by the Adjustment Factor.
(b) Employer Contributions. The Employer shall contribute, on behalf
of each Participant who has a Deferral Election in effect during the Plan Year,
and is employed by the Employer on the last day of the Plan Year, an amount
equal to 20% of the amount contributed on behalf of such Participant pursuant to
such Participant's Deferral Election which does not exceed 5% of his
Compensation, but the amount contributed by the Employer shall not exceed $700
(the "Contribution Cap") for any Plan Year unless the Employer elects to
increase the Contribution Cap as provided below. For each Plan Year, the
Employer may contribute an additional amount which the Employer determines in
its discretion, and the Employer may increase the Contribution Cap for any Plan
Year. Such additional contributions shall be allocated to the accounts of
Participants who have Deferral Elections in effect during the Plan Year and are
employed by the Employer on the last day of the Plan Year in proportion to the
Participant's Deferral Amount which does not exceed 5% of his Compensation.
Notwithstanding the foregoing, if a Participant is not employed by the Employer
on the last day of the Plan Year by reason of such Participant's death,
Disability, or such Participant's normal or Early Retirement during such Plan
Year, such Participant shall be considered to have been employed by the Employer
on the last day of such Plan Year for purposes of making and allocating Employer
contributions. The Employer may, in the sole discretion of its Board of
Directors, make the Employer contribution hereunder at any time during the Plan
Year or, following the end of the Plan Year, within the time prescribed by law
for filing the Employer's Federal income tax return (including extensions
thereof) for its taxable year which coincides with, or ends within, such Plan
Year. The amount of the Employer's contribution for a Plan Year shall be reduced
by the amount of any forfeitures that may have arisen under Section 6.1(b)
during such Plan Year.
(c) Limitation on Contributions. Notwithstanding any other provision
of the Plan to the contrary, the Employer shall not make any contributions to
the Plan pursuant to this Section 4.2 on behalf of a Participant if such
contributions would exceed the limitations of Section 5.8.
4.3 Distribution of Excess Salary Reduction Deferrals--
(a) Notice--A Participant may allocate to the Plan any excess salary
reduction deferrals made during a calendar year by notifying the Committee by
March 15 of the amount of the excess salary reduction deferrals to be assigned
to the Plan.
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(b) Distribution -- Notwithstanding any other provision of the
Plan, if an Employee gives notice under (a) immediately above, excess salary
reduction deferrals, plus any income and minus any loss allocable thereto, will
be distributed no later than April 15 to any Participant to whose Account excess
salary reduction deferrals were allocated for the preceding year and who claims
excess salary reduction deferrals for such calendar year.
(c) Determination of Income or Loss -- Excess salary reduction
deferrals will be adjusted for any income or loss up to the date of
distribution. The income or loss allocable to such excess deferrals is the sum
of (i) income or loss allocable to the Participant's Deferral Election Account
for the taxable year multiplied by a fraction, the numerator of which is such
Participant's excess deferrals for the year and the denominator is the
Participant's Deferral Election Account balance without regard to any income or
loss occurring during such taxable year, and (ii) 10% of the amount determined
under (i) multiplied by the number of whole calendar months between the end of
the Participant's taxable year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th of such month.
(d) Claim -- If a Participant claims excess salary reduction
deferrals for the preceding calendar year, such Participant must submit claims
in writing to the Committee by March 15.
4.4 Percentage Limitation on Deferral Amounts --
(a) The Actual Deferral Percentage Test -- The Actual Deferral
Percentage (ADP) for Eligible Participants who are Highly Compensated Employees
for each Plan Year and the ADP for Eligible Participants who are Non-Highly
Compensated Employees for the same Plan Year will satisfy one of the following
tests:
(i) The ADP for Eligible Participants who are Highly
Compensated Employees for the Plan Year will not exceed
the ADP for Eligible Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by
1.25; or
(ii) The ADP for Eligible Participants who are Highly
Compensated Employees for the Plan Year will not exceed the
ADP for Eligible Participants who are Non-Highly
Compensated Employees for the same Plan Year
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multiplied by two, provided that the ADP for Eligible
Participants who are Highly Compensated Employees does
not exceed the ADP for Eligible Participants who are Non-
Highly Compensated Employees by more than two percentage
points or such lesser amount as the Secretary of the
Treasury prescribes to prevent the multiple use of this
alternative limitation with respect to any Highly
Compensated Employee.
(b) Special Rules --
-------------
(i) The ADP for any Eligible Participant who is a Highly
Compensated Employee for the Plan Year and who makes
salary reduction deferrals under two or more arrangements
described in Code (S) 401(k) and maintained by the
Employer will be determined as if such salary reduction
deferrals were made under a single arrangement. Such
salary reduction deferrals will include qualified
nonelective contributions or qualified matching
contributions, or both, if treated as Employer
contributions for purposes of the ADP test. If a Highly
Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the
same calendar year will be treated as a single
arrangement.
(ii) In the event that this Plan satisfies the requirements of
Code (S) 401(k), 401(a)(4) or 410(b) only if aggregated
with one or more other plans, or if one or more other
plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this section
shall be applied by determining the ADP of Employees as
if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be
aggregated in order to satisfy
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Code (S) 401(k) only if they have the same Plan Year.
(iii) For purposes of determining the ADP of an Eligible
Participant who is a 5 percent owner or one of the ten
most highly paid Highly Compensated Employees, the
Deferral Amounts and ADP Compensation of such Participant
will include the Deferral Amounts and ADP Compensation
for the Plan Year of family members of such Highly
Compensated Employees. Family members of such Highly
Compensated Employees will be disregarded as separate
Employees in determining the ADP both for such
Participants who are Non-Highly Compensated Employees and
for Participants who are Highly Compensated Employees.
(iv) For purposes of determining the ADP test, Deferral
Amounts must be made before the last day of the twelve-
month period immediately following the Plan Year to which
contributions relate.
(v) The Employer must maintain records sufficient to
demonstrate satisfaction of the ADP test.
(vi) The determination and treatment of the ADP amounts of any
Eligible Participant will satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
4.5 Distribution of Excess Contributions --
-------------------------------------
(a) Distribution -- Notwithstanding any other provision of this Plan,
Excess Contributions, plus any income and minus any loss allocable thereto, will
be distributed no later than the last day of each Plan Year to Participants to
whose accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than 2-1/2 months after the
last day of the Plan Year in which such excess amounts arose, a 10% excise tax
will be imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions will be made to Highly Compensated Employees on the
basis of the respective portions of the Excess
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Contributions attributable to each of such Employees. Excess Contributions will
be allocated to Participants who are subject to the family member aggregation
rules of Code (S) 414(q)(6) in the manner prescribed by the regulations. Excess
Contributions will be treated as Annual Additions under the Plan.
(b) Determination of Income or Loss -- Excess Contributions
will be adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (i) income or
loss allocable to the Participant's Deferral Election Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Contributions for the year and the denominator is the Participant's account
balance attributable to Deferral Amounts without regard to any income or loss
occurring during such Plan Year; and (ii) 10% of the amount determined under (i)
multiplied by the number of whole calendar months between the end of the Plan
Year, counting the month of distribution if distribution occurs after the 15th
of such month.
(c) Accounting for Excess Contributions -- Excess Contributions will
be distributed from the Participant's Deferral Election Account.
4.6 Percentage Limitation on Matching Contributions under Code (S) 401(m).
(a) The Average Contribution Percentage Test -- The Average
Contribution Percentage (ACP) for Eligible Participants who are Highly
Compensated Employees for each Plan Year and the ACP for Eligible Participants
who are Non-Highly Compensated Employees for the same Plan Year will satisfy one
of the following tests:
(i) The ACP for Eligible Participants who are Highly
Compensated Employees for the Plan Year will not exceed the
ACP for Eligible Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by
1.25; or
(ii) The ACP for Eligible Participants who are Highly
Compensated Employees for the Plan Year will not exceed the
ACP for Eligible Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by
two, provided that the ACP for Eligible Participants who
are Highly Compensated Employees do not exceed the ACP for
Eligible Participants who are Non-Highly
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Compensated Employees by more than two percentage points or
such lesser amount as the Secretary of the Treasury will
prescribe to prevent the multiple use of this alternative
limitation with respect to any Highly Compensated Employee.
(b) Special Rules --
(i) If the sum of the ADP and ACP of Highly Compensated
Employees exceeds the Aggregate Limit, then the ADP, the
ACP or both of the Highly Compensated Employees will be
reduced (beginning with such Highly Compensated Employee
whose ADP or ACP, as the case may be, is the highest) so
that the limit is not exceeded. The Deferral Amount of a
Highly Compensated Employee shall not be reduced to the
extent that such reduction would result in the Highly
Compensated Employee's ratio of Matching Contributions to
Deferral Amounts for the Plan Year exceeding the same ratio
for any other Participant who is entitled to Matching
Contributions for that Plan Year. The amount by which each
Highly Compensated Employee's Contribution Percentage
Amounts or Deferral Amounts are reduced will be treated as
an Excess Aggregate Contribution. The ADP and ACP of the
Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests.
Multiple use does not occur if both the ADP and ACP of the
Highly Compensated Employees do not exceed 1.25 multiplied
by the ADP and ACP of the Non-Highly Compensated Employees.
(ii) The Contribution Percentage for any Eligible Participant
who is a Highly Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his or
her account under two or more plans described in Code (S)
401(a), or
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arrangements described in Code (S) 401(k), that are
maintained by the Employer will be determined as if the
total of such Contribution Percentage Amounts were made
under each plan. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements
that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year
shall be treated as a single arrangement.
(iii) In the event that this Plan satisfies the requirements of
Code (S) 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the
requirements of Code (S) 410(b) only if aggregated with
this Plan, then this Section will be applied by determining
the Contribution Percentage of Employees as if all such
plans were a single plan. For plan years beginning after
December 31, 1989, plans may be aggregated in order to
satisfy Code (S) 401(m) only if they have the same plan
year.
(iv) For purposes of determining the Contribution Percentage of
an Eligible Participant who is a 5 percent owner or one of
the ten most highly paid Highly Compensated Employees, the
Contribution Percentage Amounts and ADP Compensation of
such Participant will include the Contribution Percentage
Amounts and ADP Compensation for the Plan Year of family
members. Family members of Highly Compensated Employees
will be disregarded as separate Employees in determining
the Contribution Percentage both for Employees who are Non-
Highly Compensated Employees and for Employees who are
Highly Compensated Employees.
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(v) For purposes of determining the Contribution Percentage
test, Matching Contributions will be considered made for a
Plan Year if made by the date specified in the applicable
regulations, and allocated to a Participant's account for
the Plan Year if made no later than the end of the twelve-
month period beginning on the day after the close of the
Plan Year.
(vi) The Employer must maintain records sufficient to
demonstrate satisfaction of the ACP test.
(vii) The determination and treatment of the Contribution
Percentage of any Employee will satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
4.7 Distribution of Excess Aggregate Contributions.
(a) Distribution -- Notwithstanding any other provision of this Plan,
Excess Aggregate Contributions, plus any income and minus any loss allocable
thereto, will be forfeited, if forfeitable, or, if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose accounts
such Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions will be allocated to Participants who are subject
to the family member aggregation rules of Code (S) 414(q)(6) in the manner
prescribed by the regulations. If such Excess Aggregate Contributions are
distributed more than 2-1/2 months after the last day of the Plan Year in which
such excess amounts arose, a 10% excise tax will be imposed on the Employer
maintaining the Plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as Annual Additions under the Plan.
(b) Determination of Income or Loss -- The Excess Aggregate
Contributions will be adjusted for income or loss. The income or loss allocable
to Excess Aggregate Contributions is the sum of: (i) income or loss allocable
to the Participant's Employer Contribution Account for the Plan Year multiplied
by a fraction, the numerator of which is such Participant's Excess Aggregate
Contributions for the year and the denominator is the Participant's Employer
Contribution Account balance without regard to any income or loss occurring
during such Plan Year; and (ii) 10% of the amount determined under (i)
multiplied by the number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the
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month of distribution if distribution occurs after the 15th of such month.
(c) Forfeitures of Excess Aggregate Contributions -- Forfeitures of
Excess Aggregate Contributions shall be reallocated to the accounts of Non-
Highly Compensated Employees as additional Employer Contributions. Such
Forfeitures will not be allocated to the account of any Highly Compensated
Employee. Amounts forfeited by Highly Compensated Employees under this Section
will be treated as Annual Additions under the Plan.
(d) Accounting for Excess Aggregate Contributions -- Excess Aggregate
Contributions will be forfeited, if forfeitable, or distributed on a pro rata
basis from the applicable Participant's Employer Contribution Account.
4.8 Deferral Election--Discontinuance, Variation and Resumption. A
Deferral Election, if approved by the Committee, shall continue in effect until
changed or revoked by the Participant. A Participant may make, discontinue or
change a Deferral Election, effective as of the beginning of each calendar
quarter, by filing a form with the Committee indicating his instructions with
respect thereto; provided, however, that a Participant may completely
discontinue a Deferral Election, effective as of the first day of any pay
period, by filing a form with the Committee. The Committee may establish
reasonable administrative deadlines for filing the forms described in this
section. The Committee shall have authority to waive any such deadlines under
appropriate circumstances. In no event, however, may a Participant be permitted
to file any such forms after the effective date of the election, discontinuance
or change to which the form relates. All changes in a Deferral Election are
subject to approval by the Committee in accordance with Section 4.1(c).
4.9 Rollovers and Transfers.
(a) Rollover Contribution--General. In the sole discretion of the
Committee, and subject to such terms and conditions as the Committee may
establish from time to time, a Participant (or an Employee who is not eligible
to participate in the Plan solely because he has failed to satisfy the age and
service requirements of Section 2.1, and who, for purposes of his Rollover
Contribution only, shall be considered a Participant in the Plan) may at any
time make a Rollover Contribution to this Plan, which shall be allocated to the
Participant's Rollover Contribution Account when received by the Trustee. Such
Participant shall submit a written certification from the trustees, plan
administrator or party maintaining the plan from which the Rollover Contribution
was distributed, in a form satisfactory to the Committee, that the contribution
qualifies as
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a Rollover Contribution. The Committee and the Trustee shall be
entitled to rely upon any such certification.
(b) Rollover Contribution--Defined. A contribution shall qualify as
a Rollover Contribution if:
(i) it represents an eligible rollover distribution, as defined
in Section 6.5(b), from an employees' trust described in
Section 401(a) of the Code which is exempt from tax under
Section 501(a) of the Code; or
(ii) it represents the balance to the credit of the Participant
in an individual retirement account or annuity (as
described in Section 408 of the Code) created solely to
receive amounts described in clause (i) above, and to which
no other contributions were made by the Employee.
ARTICLE V
INDIVIDUAL ACCOUNTS
5.1 Participant Accounts. The Committee shall maintain a Deferral
Election Account, an Employer Contribution Account and a Rollover Contribution
Account, if applicable, in the name of each Participant.
5.2 Valuation of Accounts. As of each Monthly Valuation Date, the
Committee shall:
(i) First, add to each of the Participant's Accounts the
contributions made during the monthly ending on such
Monthly Valuation Date which are then allocable to each
such Account and subtract all distributions made to
Participants since the last preceding Monthly Valuation
Date.
(ii) Next, allocate to the Accounts of each Participant who has
elected to invest in each Investment Fund, each item of
income, expense, gain and loss accruing to such Fund among
the Accounts of Participants electing to invest, or having
an investment, in such Fund in the same proportion to the
value, as of the last
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preceding Monthly Valuation Date, that the portion of each
such Account so invested bears to the value of the portion
of all such Accounts which are invested in such Fund.
Notwithstanding any provision to the contrary, the Committee may value
Participant's Accounts, in accordance with the provisions of this Section 5.2,
as of the last day of valuation periods more frequent than the applicable
Monthly Valuation Date.
5.3 Allocation of Employer Contributions--General. As of the Annual
Valuation Date for the Plan Year, the Committee shall:
(i) First, determine the aggregate limitation prescribed by Section
5.8 for all Participants; and
(ii) Next, allocate the Employer contribution made to the Plan
pursuant to Section 4.2(b) in accordance with Section 5.4, to
the Employer Contribution Account of each Participant entitled
to an allocation under Section 5.6. The allocation for any
Participant shall not exceed the amount determined pursuant to
Section 5.8. If, after the first such allocation, any Employer
contributions remain, the remainder shall be allocated to the
Employer Contribution Accounts of Participants not yet
restricted by the limitations of Section 5.8, until exhausted.
5.4 Method of Allocating and Crediting Employer Contributions. Subject
to the conditions and limitations of Section 5.8, as of the Annual Valuation
Date for any Plan Year, the Matching Contribution for such Plan Year shall be
allocated among, and credited to, the Employer Contribution Accounts of
Participants entitled to share in the Matching Contribution for that Plan Year,
pursuant to Section 5.6, in proportion to such Participants' Deferral Amounts
that do not exceed 5% of each such Participant's respective Compensation;
provided, however, that no Participant shall receive an allocation in excess of
the Contribution Cap, as that term is defined in Section 4.2. To the extent that
a Participant's Deferral Amount would result in the Participant receiving a
Matching Contribution in excess of the Contribution Cap, the Participant's
Deferral Amount shall be disregarded in allocating Matching Contributions.
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5.5 Employer Contributions Considered Made on Last Day of Plan Year.
For purposes of this Article V, the Matching Contribution made for any Plan
Year will be considered to have been made on the last day of that Plan Year,
regardless of when paid to the Trustee.
5.6 Participants to Whom Matching Contributions Will Be Allocated.
The Matching Contribution for each Plan Year will be allocated among, and
credited to, the Employer Contribution Accounts of those Participants who have a
Deferral Election in effect during such Plan Year and (i) are employed by the
Employer as of the last day of such Plan Year, or (ii) terminated their
employment with the Employer by reason of death, a Disability or normal or Early
Retirement.
5.7 Valuation. Within a reasonable time after the close of each
Plan Quarter, the Trustee shall prepare or cause to be prepared a statement of
the condition of the Trust Fund, setting forth all investments, receipts,
disbursements, and other transactions effected during such Plan Quarter, and
showing all the assets of the Trust Fund and the cost and fair market value
thereof. The items of information in the statement shall be shown separately
for each Investment Fund. This statement shall be delivered to the Committee
and the Plan Administrator. The Plan Administrator shall then cause to be
prepared, and shall deliver to each Participant or Former Participant, a
quarterly report disclosing the status of his Accounts in the Trust Fund.
5.8 Limitation on Annual Additions.
(a) General. Notwithstanding any other provision of the
Plan, the Annual Addition to a Participant's Accounts for any Limitation Year
may not exceed an amount equal to the lesser of:
(i) the greater of (A) $30,000 or (B) 1/4th of the
defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for
the Limitation Year;
or
(ii) 25% of the Participant's compensation for the
Limitation Year.
(b) Coordination with Defined Benefit Plan. In the event that an
Employee is a participant in both a defined benefit plan (whether or not
terminated) and a defined contribution plan maintained by the Employer (or a
Related
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Employer), the sum of the Defined Benefit Plan Fraction plus the Defined
Contribution Plan Fraction may not exceed 1.0.
(c) Defined Benefit Plan Fraction--Defined. For purposes of
this Section 5.8, the term "Defined Benefit Plan Fraction" with respect to a
defined benefit pension plan shall mean, for any Limitation Year, a fraction:
(i) the numerator of which is the Participant's projected
annual benefit under such defined benefit pension plan
(determined as of the close of such year); and
(ii) the denominator of which is the lesser of (A) the product
of 1.25 times $90,000 multiplied by the Adjustment Factor;
provided, however, that such adjusted dollar limit shall
not become effective for purposes of this Plan for
Limitation Years ending prior to the January 1st of the
calendar year for which such adjustment is announced, or
(B) the product of 1.4 times 100% of the Participant's
average compensation for the three consecutive years of
participation in such defined benefit pension plan during
which he received the greatest aggregate compensation from
the Employer or any Related Employer.
(d) Defined Contribution Plan Fraction--Defined. For purposes of this
Section 5.8, the term "Defined Contribution Plan Fraction" shall mean, for any
Limitation Year, a fraction:
(i) the numerator of which is the sum of the Annual Additions
credited to the Participant's Accounts under this Plan and
all other defined contribution plans maintained by the
Employer or any Related Employer in such Limitation Year
and for all prior Limitation Years; and
(ii) the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year
and for each prior
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Limitation Year: (A) the product of 1.25 times the dollar
limitation under Subsection (a)(i), as in effect for such
Limitation Year, or (B) the product of 1.4 times 25% of
the Participant's compensation for such year.
(e) Annual Additions--Defined. For purposes of this Section 5.8, the
term "Annual Addition" means, for each Limitation Year, the sum of:
(i) the portion of the contribution (other than a contribution
made pursuant to a Participant's Deferral Election) made
by the Employer (or a Related Employer) for such
Limitation Year under this Plan and any defined
contribution plan; plus
(ii) the amount, if any, contributed on behalf of the
Participant pursuant to the Participant's Deferral
Election for such Limitation Year under this Plan or any
other defined contribution plan maintained by the Employer
or a Related Employer; plus
(iii) the amount of forfeitures, if any, allocated to the
Participant's account for such Limitation Year under this
Plan or any other defined contribution plan maintained by
the Employer or a Related Employer; plus
(iv) the amount, if any, of the Participant's voluntary
contributions made under any defined contribution plan
maintained by the Employer or a Related Employer for such
Limitation Year.
The term "Annual Addition" shall not include any Rollover Contribution or any
earnings allocable to any Account.
(f) Compensation--Defined. Solely for purposes of this
Section 5.8, the term "compensation" shall be defined as wages within the
meaning of Code (S) 3401(a) (for purposes of income tax withholding at the
source) but determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment or the
services
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performed (such as the exception for agricultural labor in Code (S) 3401(a)(2)).
(g) Other Plans. For purposes of applying the limitations of this
Section 5.8, all defined benefit plans maintained by the Employer or a Related
Employer (whether or not terminated) are to be treated as one defined benefit
plan, and all defined contribution plans maintained by the Employer or a Related
Employer (whether or not terminated) are to be treated as one defined
contribution plan. Any contributions to the Employer's defined benefit plan made
by an Employee shall be deemed to be made under a separate defined contribution
plan.
(h) Related Employer--Defined. For purposes of this Section 5.8, the
term "Related Employer" shall mean any other corporation that is, along with an
Employer, a member of a controlled group of corporations (as defined in Section
414(b) of the Code, as modified by Section 415(h) thereof) or any other trade or
business (whether or not incorporated) which, along with an Employer, are under
common control (as defined in Section 414(c) of the Code, as modified by Section
415(h) thereof) or any other employer that forms, along with an Employer, an
"affiliated service group" (as such term is defined in Section 414(m) of the
Code or in regulations under Section 414(o) of the Code).
5.9 Allocations Do Not Create Rights. No Participant shall acquire
any right to or interest in any specific asset of the Trust Fund merely as a
result of the allocations provided for in the Plan.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Vesting and Payment Upon Retirement, Death, Disability or Termination
of Employment.
(a) Retirement, Death or Disability. A Participant shall be 100%
vested in his Accounts upon reaching his Normal Retirement Date or upon his
death, Disability or Early Retirement. Should any Participant retire (within the
meaning of the preceding sentence), die, or become Disabled, an amount equal to
the value of his Accounts (determined in accordance with the provisions of
Section 5.2 and 5.3) shall be payable to the Participant, Former Participant or
his Beneficiary, as the case may be, in accordance with the provisions of
Section 6.4.
(b) Vesting Upon Termination of Employment. A Participant's Deferral
Election Account and Rollover Contribution Account, if any, shall be 100%
nonforfeitable at all times. A
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Participant's Employer Contribution Account shall become 100% nonforfeitable
only upon the Participant's completion of three Years of Service. Upon a
Participant's termination of employment with the Employer, either voluntarily or
involuntarily, prior to his Normal Retirement Date (other than by reason of
death, Disability or Early Retirement) he shall be entitled to a distribution of
the value of his Deferral Election Account and his Rollover Contribution
Account, if any. Such Participant shall also be entitled to a distribution of
the value of his Employer Contribution Account, if, as of the date of his
termination, he completed three Years of Service. If such Participant has not
completed three Years of Service, he shall forfeit the entire amount outstanding
to his credit in his Employer Contribution Account, as of the last day of the
Plan Year in which he terminates employment. The value of all Accounts shall be
determined and payable in accordance with the provisions of Sections 5.2, 5.3
and 6.4. Amounts forfeited in any Plan Year pursuant to this Subsection (b)
shall be applied to reduce Employer contributions made pursuant to Section
4.2(b) for such Plan Year.
(c) Restoration of Benefits. If a Former Participant again
begins to participate in the Plan before he incurs five consecutive One Year
Periods of Severance, then, on or before the last day of the Plan Year which
follows the Plan Year in which the Former Participant again begins to
participate in the Plan, the Employer shall make an additional contribution to
the Plan, on his behalf, which is equal to the dollar amount which was
forfeited. Such additional contribution shall be allocated to the Former
Participant's Employer Contribution Account and his vested right to the amount
so contributed shall be determined in accordance with Subsection (b) based upon
his Years of Service completed both prior to and subsequent to his Period of
Severance.
6.2 Attainment of Age 59-1/2. If a Participant attains age 59-1/2 and
remains in the service of the Employer, he may elect to have all or a portion of
the value of his Accounts (determined in accordance with Sections 5.2 and 5.3
and valued as of the Monthly Valuation Date coincident with or next succeeding
the date of his election), to the extent of his nonforfeitable right to such
Accounts, paid to him in a lump sum as soon as practicable following the date as
of which his Accounts are valued. A Participant shall be entitled to make only
one withdrawal under this Section 6.2 in any single Plan Year, and such
withdrawal shall be for no less than $1,000. The Participant may make such an
election by filing a written notice with the Committee, on a form acceptable to
the Committee. Notwithstanding such withdrawal, the Participant may also elect
to continue to participate in the Plan if he otherwise remains eligible.
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6.3 Beneficiary Designation. If a Participant or Former Participant has a
spouse, his spouse shall be his beneficiary, unless the Participant or Former
Participant designates someone other than his spouse as his Beneficiary (other
than as a contingent Beneficiary) and his spouse consents to such designation
pursuant to this Section 6.3. If the Participant or Former Participant does not
have a spouse, or if the spouse consents, the Participant or Former Participant
shall have the right to designate someone other than his spouse as his
Beneficiary. In all events, the Participant or Former Participant shall have the
right to designate a contingent Beneficiary. Each such designation shall be in
writing, filed with the Committee, and shall be in such form as may be required
by the Committee. If a Participant or Former Participant designates someone
other than his spouse as his Beneficiary (other than as a contingent
Beneficiary), such Beneficiary designation shall not be effective unless:
(i) the spouse consents to such Beneficiary designation, in
writing, and her consent is witnessed by a Plan
representative or notary public; or
(ii) the Participant or Former Participant demonstrates, to the
satisfaction of the Committee, that he is not married or
his spouse cannot be located.
The Committee shall determine which Beneficiary, if any, shall have been validly
designated. If no Beneficiary has been validly designated, or if the designated
Beneficiaries predecease the Participant or Former Participant, then the amount,
if any, payable upon the Participant's or Former Participant's death shall be
paid:
(i) to the Participant's or Former Participant's surviving
spouse; or, if there is none,
(ii) to the Participant's or Former Participant's children and
issue of deceased children, in equal shares, per stirpes;
or if there are none,
(iii) to the Participant's or Former Participant's parents, in
equal shares, or to the survivor thereof; or if there are
none,
(iv) to the legal representative(s) of the Participant's or
Former Participant's estate.
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6.4 Form of Payment.
(a) Retired or Disabled Participants. A Participant or Former
Participant who has terminated his employment on or after his Normal Retirement
Date, because of Early Retirement or because he was Disabled may elect, in
writing, in a form satisfactory to the Committee, to receive his benefit under
the Plan in one of the following methods:
(i) by a lump sum payment;
(ii) by payment in equal monthly, quarterly, semi-annual or
annual installments over a period of more than one year but not longer than the
greater of the life expectancy of the Participant or Former Participant or the
joint and survivor life expectancy of the Participant or Former Participant and
his or her Beneficiary. The life expectancy of the Participant or Former
Participant and the joint and survivor life expectancy of the Participant or
Former Participant and his or her Beneficiary may not be recalculated after the
installment distributions have commenced. Payment shall be made not less often
than annually to such Participant or Former Participant of the installments as
they fall due, plus such earnings as may have been credited on the amount so
deposited or invested. In the event of the death of the Participant or Former
Participant prior to completion of the designated number of payments, such
payments shall be paid to his Beneficiary until the designated number of
payments has been completed. Notwithstanding anything in this subsection 6.4(a)
to the contrary, the Participant, the Former Participant or, after the death of
the Participant or Former Participant, the Beneficiary may elect at any time to
receive the remaining balance of the Participant's or Former Participant's
Account in a lump sum; or
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(iii) by any combination of a lump sum or installment payments.
(b) Death Benefits. If a Participant or Former Participant dies prior
to the date payment of his benefit begins, the value of his Accounts shall be
paid to his Beneficiary as soon as practicable following his death; provided,
however, benefit payments to a Participant's or Former Participant's surviving
spouse must commence within 90 days of the date of death. The deceased
Participant's or Former Participant's Accounts shall be valued in accordance
with Section 5.2.
(c) Other Benefits. Upon a Participant's termination of employment
with the Employer, either voluntarily or involuntarily, prior to his Normal
Retirement Date (other than by reason of his death, Disability or Early
Retirement), he shall be entitled to receive a distribution of the vested value
of his Accounts. The Participant may elect to receive such distribution as soon
as practicable following his termination of employment or any time thereafter.
Payment of such Accounts to the Participant shall be made no later than his
Normal Retirement Date unless he elects to defer the commencement of the payment
of his Accounts pursuant to Section 6.6(c). Any benefit payable to a
Participant, Former Participant or Beneficiary, as the case may be, pursuant to
this Subsection (c) shall be paid in a lump sum.
(d) Amount and Form of Payment. The present value of the payments to
the Participant pursuant to this Section 6.4 must be greater than 50% of the
present value of the total payments to be made to the Participant and his
Beneficiary. Any distribution made pursuant to this Plan shall be made in cash
except that if, as of the date the Participant's or Former Participant's benefit
is to be paid in the form of a lump sum pursuant to this Section 6.4, part of
his Accounts is invested in the Ketema Common Stock Fund or in shares of any
publicly traded mutual fund held in any Investment Fund, then the Participant,
Former Participant or Beneficiary to whom such payment is made may elect to have
that portion of the Accounts which is so invested paid in shares of common stock
held in each such Fund; provided, however, that cash will be paid in lieu of any
fractional shares allocated to the Participant's or Former Participant's
Accounts.
6.5 Direct Rollovers.
(a) General. This section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this section, a distributee
may elect, at the time and in the manner prescribed by the Committee, to have
any portion of an eligible rollover
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distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution. An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the
Code; and the portion of any distribution that is not
includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect
to employer securities).
(ii) 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, that
accepts that distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(iii) Distributee. A distributee includes a Participant or
Former Participant. In addition, the Participant's or
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Former Participant's surviving spouse, the
Participant's or Former Participant's spouse or
former spouse who is the alternate payee under a
qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former
spouse.
(iv) Direct rollover. A direct rollover is a payment by
the Plan to the eligible retirement plan specified
by the distributee.
6.6 Limitations on Commencement or Duration of Benefit Payments.
(a) Commencement of Benefits. Notwithstanding any provision of the
Plan to the contrary, the interest of each Participant or Former Participant
will be distributed to him no later than the April 1st following the taxable
year in which the Participant or Former Participant terminates his service with
the Employer or attains age 70-1/2, whichever is later. Such payment shall be
made:
(i) on or before such date; or
(ii) beginning by such date, over a period not extending
beyond the life expectancy of such Participant or
Former Participant or the joint life expectancy of
the Participant or Former Participant and his
Beneficiary.
(b) Maximum Duration of Death Benefits. With respect to a
Participant or Former Participant who dies before his entire interest is
distributed to him or a distribution has commenced to his surviving spouse and
such surviving spouse dies before the entire remaining interest is distributed
to such surviving spouse, then the entire interest (or the remaining part of
such interest, if distribution thereof had commenced) shall be distributed to
his Beneficiary:
(i) within five years after the death of the Participant
or Former Participant (or the death of his surviving
spouse, as the case may be); or
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(ii) over the life of such Beneficiary or over a period
no longer than the life expectancy of such
Beneficiary (determined as of the date payment to
the Beneficiary begins), provided, that if the
Beneficiary is the surviving spouse of the deceased
Participant or Former Participant, such payments
begin on or before the date on which the Participant
or Former Participant would have attained 70-1/2 if
he had lived and, if the Beneficiary is not the
surviving spouse, such payments begin within one
year of the Participant's or Former Participant's
death, or the death of the surviving spouse, if the
surviving spouse dies before benefit payments begin,
as the case may be.
(c) Life Expectancies. For purposes of this Section 6.6, life
expectancies shall be determined without regard to the permissive recalculation
rule under Code (S) 401(a)(9)(D).
(d) Additional Limitations. The payment of benefits hereunder to a
Participant or Former Participant shall commence no later than the 60th day
after the close of the Plan Year in which the later of the following events
occurs:
(i) the attainment by him of age 65;
(ii) the 10th anniversary of the year in which the
Participant began to participate in the Plan; or
(iii) the termination of the Participant's service with
the Employer;
provided, however, that the Participant or Former Participant may elect to defer
the commencement of the payment of benefits hereunder until any time prior to
the April 1st following the calendar year in which he attains age 70-1/2.
6.7 Cash-Out of Benefits. Notwithstanding anything contained in this
Plan to the contrary, if the value of a Participant's or Former Participant's
Accounts is $3,500 or less, the Committee shall pay such benefit in a single
lump sum as soon as practicable after the retirement, termination, Disability or
death of the Participant or Former Participant, and any such distribution to the
Participant, Former Participant or his
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Beneficiary, as the case may be, shall be in complete discharge of the Plan's
obligation with respect to such benefit.
6.8 Qualified Domestic Relations Orders. If the Plan Administrator has
determined that a domestic relations order which pertains to the benefits under
this Plan of a Participant or Former Participant is a Qualified Domestic
Relations Order, then the amount of benefits otherwise payable under this Plan
to such Participant or Former Participant, or his Beneficiary, as the case may
be, shall be reduced by the value of any amounts paid or payable pursuant to
such Order. For a reasonable period of time after the Employer receives written
notice that it will or may be receiving a domestic relations order with respect
to the Plan, the Employer may, but shall not be obligated to, restrict
distributions to the Participant or Former Participant to whom such domestic
relations order relates. In no event, however, shall the Employer restrict such
distributions in a manner that would cause the Plan to fail to be qualified
under Section 401(a) of the Code. Notwithstanding any restrictions that may
apply to distributions to the Participant, if the amount payable to the spouse
of the Participant under a Qualified Domestic Relations Order is $3,500 or less,
such amount shall be distributed to such spouse in a lump sum as soon as
administratively practicable, and if such amount is in excess of $3,500, such
amount may, with the consent of such spouse, be distributed to such spouse in a
lump sum as soon as administratively practicable.
ARTICLE VII
LOANS TO PARTICIPANTS AND WITHDRAWALS
7.1 Loans.
(a) General. The Committee shall be authorized to administer a loan
program under the Plan, pursuant to this Section 7.1. As of the first day of any
month, a Participant may borrow a portion of his Accounts, in accordance with
the following procedures, terms and conditions:
(i) In order to borrow any portion of his Accounts, the
Participant shall complete such forms and comply with
such administrative procedures as may be established
by the Committee from time to time, including, but
not limited to, authorization of payroll deductions
for repayment of the loan. In determining a schedule
of repayment of any loan under this Plan, the
Committee shall provide
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for substantially level amortization of such loan (with
payments not less frequently than quarterly), over the
term of the loan. The Committee, in its discretion, may
determine the times at which a Participant may repay the
outstanding principal and accrued interest due under the
loan without being charged with any prepayment penalty.
(ii) Any loan to a Participant under this Plan shall be in an
amount specified by the Participant, which amount shall
not be less than $1,000 nor more than 50% of the
nonforfeitable value of such Participant's Accounts;
provided, however, that in no event may a Participant
borrow more than $50,000, reduced by the excess, if any,
of (A) the highest outstanding balance of loans during the
one-year period ending on the day before the date on which
such loan is made, over (B) the outstanding balance of
loans on the date on which such loan is made.
(iii) Any loan to a Participant under this Plan shall be made at
an interest rate fixed by the Committee. The Committee
shall ascertain a reasonable rate of interest each month,
with respect to loans granted on the first day of the
following month, which shall provide the Plan with a
return commensurate with, and be determined on the basis
of, the interest rates charged by commercial lending
institutions for loans which would be made under similar
circumstances.
(iv) Any loan to a Participant under this Plan shall be
adequately secured by up to 50% of the non-forfeitable
value of the Participant's Accounts. In addition to said
value of the Participant's Accounts, the Committee may
require the Participant to post additional security if it
believes such
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security is necessary or desirable in order to adequately
secure the loan. If, because of a decrease in the value
of the Participant's Accounts or for any other reason,
the Committee believes the loan to be inadequately
secured, it shall either require the Participant to post
security in addition to the value of such Accounts or
demand accelerated repayment of the loan. The types of
security that may be required to be posted shall include,
but not be limited to, certificates of deposit, stocks,
short-term bonds and other short-term securities and
their cash equivalents.
(v) Any loan to a Participant under this Plan shall contain
such default provisions as may be determined appropriate
by the Committee, including the provision that if an
event of default occurs and is not cured within 30 days,
the unpaid principal and accrued interest due under the
loan shall be declared immediately payable in full and
may be charged back against the Participant's Accounts as
a distribution at the earliest time that the Participant
is entitled to receive a distribution under this Plan. A
failure to make a scheduled payment, or the filing of an
application for a benefit distribution (other than a
hardship withdrawal pursuant to Section 7.2) under this
Plan, shall constitute events of default.
(vi) A Participant's Account may be charged with any direct
administrative cost to the Plan of processing the loan
application.
(b) Allocation of Loans. The written instrument evidencing any loan
made pursuant to this Section 7.1 shall be held by the Trustee for the benefit
of the Participant to whom the loan was made and not for the Trust Fund as a
whole, and the Participant's interest in each Investment Fund will be reduced by
the portion of the loan amount (together with any
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administrative charge) that bears the same proportion to the total loan amount
as the proportion of his interest in each such Investment Fund bears to his
interest in all of the Investment Funds.
(c) Aggregation of Loans. For purposes of determining whether the
dollar limitations of Subsection 7.1(a) have been met, the Committee shall take
into account the unpaid principal amount of any loans made to the Participant
under the provisions of any employee benefit plan to which contributions have
been made on his behalf by the Employer or an Affiliate.
(d) Number of Outstanding Loans. A Participant may not borrow any
amounts from his Accounts more than once during any Plan Year. A Participant may
not have more than two outstanding loans at any time. A Participant may not
borrow any amount from his Accounts and use the proceeds to repay a prior
outstanding loan from the Trust.
(e) Maximum Term of Loans. The Committee may not permit a
Participant to borrow any part of the value of the Participant's accounts
pursuant to this Section 7.1 unless the Participant is required, by the terms of
the loan, to repay the amount borrowed within five years of the date of the
loan. Notwithstanding the foregoing, if the Participant borrows from his
Accounts under the provisions of this Section 7.1 and the proceeds of such loan
will be used by the Participant to acquire any dwelling unit which, within a
reasonable period of time, is to be used as a principal residence of the
Participant, then the maximum term of the loan need not be restricted to five
years and the loan shall be repaid within a reasonable period of time, as fixed
by the Committee in the loan papers at the time the loan is made. At the time
the loan is made, the Committee shall determine whether a dwelling unit will be
used as a principal residence within a reasonable period of time.
(f) Allocation of Payments. Each payment by the Participant to the
Trustee in repayment of an outstanding loan shall be allocated to the portion of
the Participant's Accounts invested in each Investment Fund in the same
proportion as any Employer contributions on behalf of the Participant would be
allocated to such Investment Fund.
(g) Ametek Plan Loans. Participants' loans from the Ametek Plan
that have not been satisfied or discharged by the Effective Date and that have
been transferred or otherwise assigned to the Trust shall continue in full force
and effect.
7.2 Hardship Distribution.
(a) General. As of the last day of any month, a Participant shall
be entitled to receive a hardship
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distribution from his Deferral Election Account if he establishes, to the
satisfaction of the Committee or as provided in Subsection (b) or Subsection
(c), that (i) he has a heavy and immediate financial need and (ii) the
distribution is necessary to satisfy such financial need. In no event, however,
shall the amount which is distributed to a Participant exceed the lesser of the
amount required to meet such financial need, as determined by the Committee, or
the aggregate amount of contributions made pursuant to the Participant's
Deferral Elections and allocated to his Deferral Election Account (reduced by
any prior distributions of such amounts). In order to make a withdrawal pursuant
to this Section 7.2, the Participant shall complete such forms and comply with
such administrative procedures as the Committee may establish from time to time.
In administering the provisions of this Section 7.2, the Committee shall act in
a uniform, non-discriminatory manner, and all Participants shall be treated
similarly under similar circumstances.
(b) Immediate and Heavy Financial Need. For the purposes of this
Section 7.2, a need will be deemed to be an immediate and heavy financial need
within the meaning of Subsection (a)(i) if it is for:
(i) The payment of medical expenses (within the meaning of
Section 213(d) of the Code) previously incurred by the
Participant, the Participant's spouse or the
Participant's dependents or necessary for these persons
to obtain medical care (within the meaning of Section
213(d) of the Code;
(ii) The purchase (excluding mortgage payments) of the
Participant's principal residence;
(iii) The payment of tuition and related educational fees for
the next twelve (12) months of post-secondary education
for the Participant, the Participant's spouse or the
Participant's dependents; or
(iv) A payment to prevent eviction from, or foreclosure of a
mortgage on, the Participant's principal residence.
(c) Distribution Deemed Necessary. For purposes of Subsection
(a)(ii), a distribution shall be treated as necessary to satisfy an immediate
and heavy financial need of
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a Participant, if, and only if, the Participant has obtained all distributions
(other than hardship distributions) and all nontaxable loans available to him
under this Plan and any other plan maintained by the Company or any Affiliate.
The amount of an immediate and heavy financial need may include any amounts
necessary to pay any federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution. Notwithstanding the
preceding sentence, if the obtaining of such loan would impair the Participant's
ability to obtain additional funds from other sources which are necessary to
satisfy the same financial need, the Participant may satisfy Subsection (a)(ii)
by demonstrating to the Committee that he lacks other resources that are
reasonably available to satisfy his heavy and immediate financial need.
(d) Suspension and Limitation of Deferral Elections. A Participant
who receives a hardship distribution pursuant to this Section 7.2 shall have his
Deferral Elections suspended for a one year period commencing on the date of
receipt of the hardship distribution, and the Participant's Deferral Election
for the Plan Year following the Plan Year of the hardship distribution shall be
limited to the amount described in Section 4.1(c)(i), as in effect for such
following year, reduced by the amount of the Participant's Deferral Elections
made for the Plan Year of the hardship distribution prior to the beginning of
the one year suspension.
ARTICLE VIII
COMMITTEE AND PLAN ADMINISTRATOR
8.1 Committee-Authority. The Administrative Committee (the "Committee")
shall have the authority to control and manage the operation and administration
of this Plan (other than the authority to manage and control the assets of the
Plan), except to the extent such powers have been allocated to the Trustee or a
Plan Administrator, or delegated to any other person pursuant to the Plan or the
Trust. The Committee and the Plan Administrator shall be "named fiduciaries"
within the meaning of Section 402 of ERISA.
8.2 Appointment. The Committee shall consist of at least three persons,
all of whom shall be appointed by the Board of Directors, to serve at its
pleasure. The members may, but need not be, officers or directors of the
Company. If, at any time, there shall be fewer than three members, the Board of
Directors shall appoint one or more new members so that there are at least three
members. The appointment of a Committee member shall become effective upon
delivery of his acceptance in writing of such appointment to the Company and to
each other Committee member, if any, then acting under this Plan.
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8.3 Death, Resignation or Removal of Committee Member. A Committee
member shall cease to be such upon his death, resignation, removal by the Board
of Directors or being declared legally incompetent. Any Committee member may
resign by notice in writing mailed or delivered to the Company and to the
remaining member or members. Any one or all of the Committee members may be
removed by the Board of Directors by delivery to the affected member or members,
with copies to the other members then acting, of an instrument executed by the
Company evidencing the action taken by the Board of Directors to remove such
member or members.
8.4 Written Notice of Appointment, Resignation or Removal. A copy of
any instrument evidencing the acceptance of appointment, resignation or removal
of a Committee member shall be filed with the records of this Plan and shall be
deemed a part of this Plan.
8.5 Action by Committee. Any and all acts may be taken and decisions
may be made hereunder by a majority of the Committee members then acting, but if
at any time only one Committee member shall be acting, actions may be taken and
decisions made by the sole member. The Committee may make any decision or take
any action at a meeting duly called and held, or by written documents signed by
the minimum number of Committee members empowered to take action or make
decisions at that time, as hereinabove provided. The members may delegate to
each or any of their number authority to perform ministerial acts or to sign
documents on behalf of the Committee, and a document so signed shall be
conclusively presumed to be the action of the Committee.
8.6 Employment of Agents. The Committee may enlist the services of
such agents, representatives and advisers as they may deem advisable to assist
them in the performance of their duties under this Plan, including, but not by
way of limitation, custodial agents for the Trust Fund and attorneys and
accountants.
8.7 No Committee Member Compensation. The Committee Members shall
serve without compensation, as such, but the reasonable expenses incurred by the
Committee, including reasonable fees and expenses of custodial agents,
attorneys, accountants and other advisers, shall be paid from the Trust Fund and
shall be allocated between principal and income as the Committee may determine;
provided, however, that the Company may, in its own discretion, pay all or part
of such expenses.
8.8 Committee Powers. The Committee shall have the specific powers
elsewhere herein granted to it and shall have such other powers as may be
necessary in order to enable it to
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discharge its responsibilities with respect to this Plan, including, but not by
way of limitation, the following:
(i) To interpret and construe this Plan and to
determine all questions arising under this Plan,
other than those specifically reserved elsewhere
herein for determination by the Company or the Plan
Administrator, and to correct any defect or supply
any omission or reconcile any inconsistency in this
Plan in such manner and to such extent as they
shall deem expedient to effectuate the purposes and
intent of this plan;
(ii) To determine all questions of eligibility, status
and rights of Participants and others hereunder;
(iii) To authorize and make, or cause to be made, payment
of all benefits and expenses which become payable
under this Plan; and
(iv) To adopt and to amend from time to time such
by-laws and rules and regulations as they shall
deem necessary for the administration of this Plan,
which are not inconsistent with the terms and
provisions of this Plan.
8.9 Claims for Benefits. A Participant, Former Participant or
Beneficiary shall file a claim for benefits with the Committee at the time and
in the manner prescribed thereby; provided, however, that the Committee may, in
its sole discretion, commence payment of a Participant's, Former Participant's
or Beneficiary's benefits hereunder without requiring the filing of a claim
therefor if the Committee has knowledge of such Participant's, Former
Participant's or Beneficiary's whereabouts.
8.10 Appeal Procedure for Denial of Benefits. The Committee shall
provide adequate notice in writing to any Participant, Former Participant or to
any Beneficiary ("Claimant") whose claim for benefits under the Plan has been
denied. Such notice must be sent within 90 days of the date the claim is
received by the Committee unless special circumstances require an extension of
time for processing the claim. Such extension shall not exceed 90 days and no
extension shall be allowed unless, within the initial 90 day period, the
Claimant is sent a notice of extension indicating the special circumstances
requiring the extension and specifying a date by which the
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Committee expects to render its final decision. The Committee's notice of denial
to the Claimant shall set forth:
(i) the specific reason or reasons for the denial;
(ii) specific references to pertinent Plan provisions on which
the Committee based its denial;
(iii) a description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed;
(iv) a statement that the Claimant may:
(A) request a review upon written application to the
Committee;
(B) review pertinent Plan documents; and
(C) submit issues and comments in writing; and
(v) the names of the Committee's delegate to whom the
Claimant may forward his appeal.
Any appeal that the Claimant wishes to make of the adverse
determination must be made, in writing, to the Committee, within 60 days after
receipt of the Committee's notice of denial of benefits. The Committee's notice
must further advise the Claimant that his failure to appeal the action to the
Committee in writing within the 60 day period will render the Committee's
determination final, binding and conclusive. If the Claimant should appeal to
the Committee, he, or his duly authorized representative, may submit, in
writing, whatever issues and comments he, or his duly authorized representative,
feel are pertinent. The Committee shall re-examine all facts related to
the appeal and make a final determination as to whether the denial of
benefits is justified under the circumstances. The Committee shall advise the
Claimant in writing of its decision on his appeal, the specific reasons for the
decision, and the specific Plan provisions on which the decision is based. The
notice of the decision shall be given within 60 days of the Claimant's written
request for review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the 60 day period unfeasible, but in no event
shall the Committee render a decision on an appeal from the denial of a claim
for benefits later than 120 days after receipt of a request for review. If an
extension of time for review is required because of special circumstances,
written notice of the
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extension shall be furnished to the Claimant prior to the date the extension
period commences.
8.11 Liability for Contributions. The Committee shall not be responsible
for the determination or collection of any contributions which may be or become
payable under this Plan.
8.12 Plan Administrator. The Board of Directors may designate in writing
the Committee, or a person, who may but need not be a Committee member, or a
corporation which may but need not be the Company, to act as the Plan
Administrator hereunder. The appointment of a Plan Administrator shall be
effective upon delivery of written acceptance of such appointment to the Company
and the Committee. The Board of Directors may from time to time revoke such
designation by notice in writing mailed or delivered to the Plan Administrator,
and the Plan Administrator may resign by notice in writing mailed or delivered
to the Company. Any designation, acceptance, resignation or removal of the Plan
Administrator shall be deemed a part of this Plan. The Company shall be the Plan
Administrator unless a Plan Administrator has been appointed pursuant to this
Section 8.12. The Plan Administrator shall establish reasonable procedures to
determine whether a domestic relations order is a Qualified Domestic Relations
Order and for payments to be made pursuant to such Orders, and shall have those
responsibilities assigned to the "plan administrator" by ERISA, the Code, any
other applicable law, any regulations issued pursuant to any of the foregoing,
and the provisions of this Plan.
8.13 Compensation of Plan Administrator. Unless the Plan Administrator is
a firm or corporation, the Plan Administrator shall serve without compensation;
provided, however, that the reasonable expenses incurred by the Plan
Administrator hereunder shall be paid from the Trust Fund except to the extent
that the Company, in its own discretion, pays all or part of such expenses. If
the Plan Administrator is a firm or corporation, its compensation shall be
determined by written agreement between it and the Company and shall be paid
from the Trust Fund unless the Company, in its own discretion, pays all or part
of such compensation. If the Company is the Plan Administrator, it shall serve
without compensation and shall bear its own expenses.
8.14 Allocation of Duties. The Committee and the Plan Administrator may
further allocate their fiduciary responsibilities with respect to this Plan
among themselves, and may designate one or more other persons, firms or
corporations to carry out such fiduciary responsibilities under this Plan. Any
allocation or designation pursuant to this Section 8.14 shall be in writing and
shall constitute a part of this Plan.
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8.15 Dispute as to Duties. In the event that any dispute shall arise as
to any act to be performed by the Committee or the Plan Administrator, the
Committee or the Plan Administrator, as the case may be, may postpone the
performance of such act until final adjudication of such dispute shall have been
made in a court of competent jurisdiction.
8.16 Participation of Committee Members and Plan Administrator. No
Committee member or Plan Administrator shall be precluded from becoming a
Participant in this Plan, if he be otherwise eligible, but he shall not be
entitled to vote or to act upon or to sign any document relating to his own
participation in this Plan.
8.17 Books and Records. The Committee shall maintain appropriate records
of all actions taken. The Committee and the Plan Administrator shall submit,
make available or deliver on request to governmental agencies or
instrumentalities, the Company and other Employers, Participants, Former
Participants, Beneficiaries and other persons entitled thereto such reports,
documents or records as may be required by law, or as they may otherwise deem
appropriate. The Company may, at any time, inspect the records of the Committee
and the Plan Administrator.
8.18 Fiduciary Standard. The Committee and the Plan Administrator shall
exercise their powers in accordance with rules applicable alike to all similar
cases, and they shall discharge all their powers and duties hereunder in
accordance with the terms of this Plan, solely in the interests of Participants,
Former Participants and Beneficiaries, and for the exclusive purpose of
providing benefits to such persons, with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims.
8.19 Indemnification. To the extent permitted by law, the Company shall
indemnify and save each Committee Member, each former Committee Member, the Plan
Administrator and each former Plan Administrator if, while serving as such, he
is or was an Employee (each such person being herein called an "Indemnitee"),
and their respective heirs and legal representatives, harmless from and against
any loss, cost or expense including reasonable attorneys' fees (collectively,
"liability") which any such person may incur individually, jointly, or jointly
and severally, arising out of or in connection with the administration of this
Plan, including, without limitation of the foregoing, any liability which may
arise out of or in connection with the management and control of the Trust Fund,
unless such liability is determined to be due to willful breach of the
Indemnitee's responsibilities under this Plan, under ERISA, or other applicable
law.
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ARTICLE IX
INVESTMENT OF PLAN ASSETS
9.1 Contributions Held in Trust. All contributions under this Plan shall
be paid to the Trustee. The Trustee shall have the exclusive authority and
discretion to accept such sums of money and such other property (including
common stock of the Company) as shall from time to time be paid or delivered to
it pursuant to this Plan and, except to the extent provided in Sections 9.2 and
9.3, to hold, invest, reinvest, and distribute the Trust Fund in accordance with
the provisions of this Plan and the Trust.
9.2 Investment of Contributions. The Committee shall cause to be
maintained Investment Funds in which a Participant can elect to invest the
amounts allocated to his Accounts. Such Investment Funds may, but need not,
include a Fixed Income Fund, a Balanced Fund, an Equity Fund and a Ketema Common
Stock Fund. A Participant may elect to have 100% of each of his Accounts
invested in any of the Investment Funds, or he can elect to have portions of his
Accounts (in increments of 5%) invested in two or more Investment Funds. At the
time the Participant elects to make contributions to the Plan, he shall file an
election with the Committee specifying the Investment Fund or Funds in which his
Accounts will be invested. A Participant may change the Investment Fund or Funds
in which his Deferral Amounts and Matching Contributions are invested or
transfer funds from one Investment Fund to another at the beginning of each
calendar quarter. The Participant can change his election by filing a written
notice with the Committee at such time as the Committee may establish. Whenever
amounts are to be transferred because of a change in the Participant's election,
the Trustee or the Investment Manager, as the case may be, shall make such
transfer as soon as is practicable after the effective date of such election,
after taking into account the time reasonably necessary to establish the new
value of the Participant's Accounts as of such date and without causing the
Investment Fund from which such amounts are transferred to incur any
extraordinary loss or penalty on account of the liquidation of its investments.
The investment vehicles established by the Committee may include the following
as well as such other investment vehicles as the Committee may designate from
time to time.
(a) Fixed Income Fund: The Trustee (or the Investment Manager, if
applicable) shall invest and reinvest the assets of the Fixed Income Fund in
guaranteed investment contracts, United States Treasury Bills or other
obligations of the United States Treasury, obligations of Federal agencies,
bankers' acceptances, certificates of deposit, savings bank deposits, commercial
paper and other short-term, medium-term (up to five years to maturity) or demand
obligations (secured or
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unsecured), whether issued by a governmental or quasi-governmental agency or
corporation or by any firm or corporation (including banks, savings and loan
associations and insurance companies), or in a collective short-term investment
fund or money market fund maintained by the Trustee for the benefit of qualified
retirement plans, or in part interests in each of the foregoing, the nature of
which, in the opinion of the Trustee (or the Investment Manager, if applicable)
will in a reasonable measure provide for the conservation of the assets invested
and a current fixed rate of return;
(b) Balanced Fund: The Trustee (or the Investment Manager, if
applicable) shall invest and reinvest the assets of the Balanced Fund in equity
securities, mutual funds, bonds, mortgages, notes, other fixed income
securities, interests in pooled trust funds maintained by the Trustee and other
investments in such proportions as the Trustee (or the Investment Manager, if
applicable) shall deem appropriate to provide a balance of equity growth and
income;
(c) Equity Fund: The Trustee (or the Investment Manager, if
applicable) shall invest and reinvest the assets of the Equity Fund in equity
securities of any kind, including, but not limited to, common or preferred
stock, with or without par value, warrants, debentures, options to purchase or
sell stock, puts, calls, options on the increase or decrease in an index of
prices of common stock, or in any mutual funds, partnerships, joint ventures,
trusts or corporations, the principal business of which is to invest in equity
securities or in part interests in the foregoing as the Trustee (or the
Investment Manager, if applicable) shall deem appropriate;
(d) Ketema Common Stock Fund: The Trustee shall maintain the assets
of the Ketema Common Stock Fund in the common stock of the Company, par value
$1.00 ("Ketema Common Stock"). Any dividends paid with respect to the Ketema
Common Stock shall be reinvested in additional shares. Shares of Ketema Common
Stock may be acquired from the Company, from other stockholders or on the open
market; provided, however, that in no event shall the Trustee pay more than fair
market value for Ketema Common Stock. To the extent that the Trustee purchases
Ketema Common Stock other than on the open market, "fair market value" for a
share of Ketema Common Stock for any day shall mean the closing sales price of a
share of Ketema Common Stock on the American Stock Exchange on the trading day
immediately preceding such date or such other amount as may be determined by the
Committee by any fair and reasonable means. Notwithstanding any provision of the
Plan or the Trust to the contrary, on all corporate matters requiring
stockholder approval, each Participant who has part of his Accounts invested in
the Ketema Common Stock Fund shall have the right to direct the Trustee how to
vote any Ketema Common Stock allocated to his Accounts. Prior
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to the holding of any special or annual meeting of the Company's stockholders,
the Committee shall distribute to each Participant all proxy materials and a
proxy form of ballot on which the Participant can direct the Trustee as to the
voting of shares of Ketema Common Stock allocated to his Accounts. Any and all
fractional shares of Ketema Common Stock allocated to the Participant's Accounts
shall be combined with other fractional shares of other Participants and shall
be voted, to the extent possible, to reflect the direction of Participants
holding such fractional shares. Shares of Ketema Common Stock for which no
instructions are received shall be voted, for or against, by the Trustee in the
same proportion as the shares for which the Trustee has received instructions
from the Participants.
9.3 Appointment of Investment Manager. The Board of Directors may, from
time to time, appoint one or more Investment Managers to manage, invest and
reinvest the Trust Fund, or such part or parts of the Trust Fund as is specified
in such appointment. Any appointment made pursuant to this Section 9.4 may be
revoked or modified by the Board of Directors at any time and a new appointment
made hereunder.
ARTICLE X
AMENDMENT, TERMINATION OR TRANSFER OF ASSETS
10.1 Amendment or Termination. The Company may amend, terminate or
suspend this Plan at any time or from time to time by an instrument in writing
duly executed in the name of the Company and delivered to the Committee;
provided, however, that:
(i) No amendment shall provide for the use of the
assets of this Plan or any part thereof other then
for the exclusive benefit of Participants, Former
Participants and Beneficiaries;
(ii) No amendment shall deprive any Participant, Former
Participant or Beneficiary of any of the benefits
which are vested in him or to which he is entitled
under this Plan by reason of the prior Years of
Service, death, disability or termination of
employment of such Participant or Former
Participant; and
(iii) Without limiting the generality of the foregoing
and notwithstanding anything to the contrary in
this Plan contained, this Plan may be amended at
any time and from time to time in any respect so
as to
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qualify this Plan as exempt pursuant to Sections
401(a) and 501(a) of the Code and like provisions
of subsequent Revenue Acts, and to comply with the
provisions of ERISA, regardless of whether any such
amendment may change, alter or amend the relative
benefits under this Plan of any Participant, Former
Participant or Beneficiary.
10.2 Termination of Plan. This Plan shall terminate, although the Trust
Fund shall continue to be held by the Trustee for distribution in accordance
with Section 10.3 or Section 12.9, as the case may be, if and when:
(i) it is declared terminated by a written instrument
duly executed in the name of the Company and
delivered to the Committee and Trustee; or
(ii) the Company is dissolved or liquidated or disposes
of substantially all of its assets without
provision for continuation of this Plan by any
successor person, firm or corporation.
10.3 Distribution of Assets. Upon termination of this Plan, other than
under the circumstances set forth in Section 12.9, or complete discontinuance
of contributions to this Plan, the proportionate interest of each Participant
in the Trust Fund shall become nonforfeitable. Upon partial termination of
this Plan, the nonforfeitable rights shall be applicable only to the portion
of this Plan that is terminated. Except as otherwise provided by ERISA, there
shall first be set aside amounts due to Former Participants which were not
previously paid pursuant to the provisions of Article VI, and the amount to
which any such Former Participant is entitled as hereinabove provided shall
be paid to him or his duly designated Beneficiary, as the case may be. The
proportionate interest of each Participant in the remaining assets of the
Trust Fund shall then be determined in accordance with Sections 5.2 and 5.3
except that the value of such proportionate interest shall be determined as
of the date of termination of this Plan. There shall be paid to each
Participant or his duly designated Beneficiary, as the case may be, the
benefit thus determined pursuant to this Section 10.3, plus his proportionate
share of any earnings thereon, or less his proportionate share of any losses
thereon, if applicable. Provision for the payment of benefits pursuant to this
Section 10.3 may be made at the direction of the Company, by continuing the
Trust Fund in existence and making provision therefrom for benefit distributions
in accordance with the terms
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of this Plan, by immediate and full distribution from the Trust Fund of
Participants' Accounts, or by any combination thereof.
10.4 Affiliates.
(a) Adoption by Affiliates. Any Affiliate may, subject to the
approval of the Company, adopt and become a party to this Plan by resolution
of its Board of Directors, certified copies of which shall be delivered to the
Company, the Committee, the Trustee and the Plan Administrator. The effective
date of any such adoption shall be the first day of a calendar month as is
fixed in the resolution of adoption.
(b) Withdrawal by Affiliate. Any one or more of the Employers
shall be entitled to withdraw from this Plan without the consent or approval
of any one or more of the remaining Employers. Any Employer shall be deemed
to have withdrawn from this Plan in the event it loses its corporate or other
legal existence by dissolution or merger. In the event of such withdrawal
from this Plan of an Employer while this Plan continues for any one or more
of the other Employers, if the obligations hereunder of the withdrawing
Employer are not assumed by any one or more of the remaining Employers, it
shall be deemed that this Plan has been terminated with respect to such
withdrawing Employer and in such event the Committee or the Trustee, as the
case may be, shall perform the acts set forth in Section 10.3 with respect to
the part of the Trust Fund representing the Accounts of the Participants or
Former Participants employed by the withdrawing Employer; provided, however,
that if any Participant of a withdrawing Employer is immediately employed by
any other Employer then he shall continue as a Participant under this Plan.
10.5 Amendment to Vesting Schedule. If any amendment changes the method
for determining the nonforfeitable percentage of the value of a Participant's
Accounts, the Committee shall give written notice thereof, within 60 days of
the later of the date on which such amendment was adopted or became effective,
to each Participant who has completed five or more Years of Service prior to
the 60th day following the later of:
(i) the date he receives notice of such amendment,
(ii) the date the amendment is adopted, or
(iii) the date the amendment becomes effective.
Such Participant may elect to have his nonforfeitable percentage determined
without regard to the amendment by filing a written request with the Committee
within 60 days of the later of the
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dates specified in clauses (i), (ii) and (iii) of this Section 10.5. Such
election shall be irrevocable.
10.6 Merger of Plan. This Plan shall not be merged or consolidated with,
nor shall any assets or liabilities be transferred to, any other plan, unless
the benefits payable to each Participant, Former Participant and Beneficiary,
if the transferee plan were terminated immediately after such action, would be
equal to or greater than the benefits to which he would have been entitled if
this Plan had been terminated immediately before such action.
ARTICLE XI
TOP HEAVY PLANS
11.1 Definitions. For purposes of this Article XI, the following
definitions shall apply unless the context clearly indicates otherwise:
(a) "Determination Date" shall mean the last day of the
preceding Plan Year, and, in the case of the first Plan Year, the last day
of such Plan Year.
(b) "Five Percent Owner" shall have the same meaning as set forth
in Section 1.1(z), except that for purposes of this Subsection (b), Affiliates
shall not be treated as a single employer, and a person's ownership interest
in the Company or any Affiliate shall not be aggregated.
(c) "Key Employee" shall mean an individual who is, or was, at
any time during the five year period ending with the Determination Date:
(i) an Officer, but only if the Employee's Total
Compensation exceeds 1.5 times the dollar limit
set forth in Section 415(c)(1)(A) of the Code,
as adjusted for increases in the cost-of-living;
(ii) a Top Ten Owner, but only if the Employee has at
least a 0.5% ownership interest in the Employer and
his Total Compensation exceeds the dollar limit set
forth in Section 415(c)(1)(A) of the Code, as
adjusted for increases in the cost-of-living;
(iii) a Five Percent Owner;
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(iv) A One Percent Owner whose Total Compensation from the
Employer exceeds $150,000; or
(v) the Beneficiary of any individual specified in clauses
(i) through (iv), above.
(d) "Non-Key Employee" shall mean each Employee who is not a Key
Employee.
(e) "Officer" shall have the same meaning as set forth in Section
1.1(gg).
(f) "One Percent Owner" shall have the same meaning as Five Percent
Owner, except that 1% shall be substituted for 5%, wherever the latter term
appears in Section 1.1(z).
(g) "Aggregation Group" shall mean a group of plans consisting of
all plans of the Company or any Affiliate in which one or more Key Employees are
participants, whether or not such plans are terminated and whether or not such
plans are sponsored by a corporation, and all other plans maintained by the
Company or any Affiliate that enable any plan in which a Key Employee is a
participant to comply with the coverage and nondiscrimination requirements of
Sections 401(a)(4) and 410 of the Code, and all plans of the Company or any
Affiliate which the Employer designates as part of the Aggregation Group,
provided the resulting Aggregation Group meets the coverage and
nondiscrimination requirements of Sections 401(a)(4) and 410 of the Code.
(h) "Super Top-Heavy Plan" shall have the same meaning as "Top-Heavy
Plan" except that, "90%" shall be substituted for "60%" wherever the latter
phrase appears in Subsection (k).
(i) "Top-Heavy Plan." This Plan shall be considered a Top-Heavy Plan
for any Plan Year if, as of the Determination Date,
(i) the Plan is not part of an Aggregation Group and the
value of the Accounts of the Key Employees participating
in the Plan exceeds 60% of the aggregate value of the
Accounts of all Participants in the Plan, or
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(ii) the Plan is part of an Aggregation Group and the value of
the accounts and the present value of the accrued
benefits of the Key Employees participating in the
Aggregation Group exceeds 60% of the value of the
accounts and the present value of the accrued benefits of
all Participants in the Aggregation Group,
as computed in each case in accordance with Section 416 of the Code. The
account balances or accrued benefits of any Participant or Former Participant
shall not include any tax-free rollover (as described in Section 402(a)(5)(A) or
Section 408(d)(3) of the Code) or plan-to-plan transfer which
(x) is made from the Plan (or, if applicable, from any plan
which is part of the Aggregation Group) if the plan to
which the tax-free rollover or plan-to-plan transfer is
made is an employee benefit plan which is maintained by
the Company or any Affiliate and the tax-free rollover or
plan-to-plan transfer is not initiated by the Employee or
(y) is made to the Plan (or, if applicable, to any plan which
is part of the Aggregation Group) if the plan from which
the tax-free rollover or plan-to-plan transfer is made is
an employee benefit plan not maintained by the Company or
any Affiliate and the tax-free rollover or plan-to-plan
transfer is initiated by the Employee.
The account balance or accrued benefit of any Participant or Former Participant
shall include any distribution from the Plan (or, if applicable, from any plan
which is part of the Aggregation Group) made to the Participant or Former
Participant or his Beneficiary during the Plan Year ending with the
Determination Date and any of the next four (4) preceding Plan Years. Solely
for purposes of determining if the Plan, or any other plan included in a
required Aggregation Group of which this Plan is a part, is Top-Heavy, the
accrued benefit of a Non-Key Employee shall be determined under the method, if
any, that uniformly applies for accrual purposes under all plans maintained by
the Company or any Affiliate, or if there is no such method, as if such benefit
accrued not more rapidly than the shortest
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accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C)
of the Code. For purposes of this Subsection (i), the accrued benefit of an
individual who has not performed any service for the Employer maintaining the
plan at any time during the five year period ending on the Determination Date
will be excluded from the calculation to determine whether a plan is Top-Heavy.
(j) "Top Ten Owner" shall mean one of the ten Employees owning, or
considered as owning, within the meaning of Section 318 of the Code, the largest
interest in the Employer. For purposes of this Subsection (j), if two Employees
have the same ownership interest in the Employer, the Employee with the greater
Total Compensation shall be considered as owning the larger interest in the
Employer.
(k) "Total Compensation" shall mean the Employee's "compensation" as
defined in Section 5.8(f) of the Plan.
11.2 Minimum Contributions. For each Plan Year during which the Plan is a
Top-Heavy Plan, the amount of Employer contributions allocated to the Employer
Contribution Account of each Non-Key Employee who has satisfied the eligibility
requirements of Article II hereof, and who is still in the service of the
Employer as of the last day of the Plan Year, shall be an amount at least equal
to the lesser of:
(i) 3% of the Non-Key Employee's Total Compensation for the Plan
Year; or
(ii) a percentage which is equal to the highest percentage of Total
Compensation contributed by the Employer on behalf of any Key
Employee.
The amount the Employer is required to contribute on behalf of each Non-Key
Employee pursuant to this Section 11.2 shall be reduced by the amount of any
Employer contribution made on behalf of such Non-Key Employee with respect to
such Plan Year pursuant to the provisions of this Plan or any other defined
contribution plan maintained by the Employer, provided that such Employer
contribution is not a matching contribution as defined in Section 401(m)(4) of
the Code.
11.3 Coordination with Defined Benefit Plan . In the event that a
Non-Key Employee who is entitled to receive a contribution under Section 11.2 is
also entitled to receive a minimum benefit pursuant to Section 416 of the Code
under a defined benefit pension plan maintained by the Employer, and the Non-Key
Employee does not accrue a benefit under such defined benefit pension plan
which, together with the Non-Key Employee's minimum contribution provided under
Section 11.2 hereof, satisfies the requirements of Section 416 of the Code, the
amount
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of Employer Contributions allocated to the Employer Contribution Account of such
Non-Key Employee shall equal the lesser of:
(i) 5% of the Non-Key Employee's Total Compensation for the
Plan Year; or
(ii) the percentage necessary in order that the Non-Key
Employee receive the minimum combined benefits under this
Plan and such defined benefit pension plan to which he is
entitled under Section 416 of the Code.
Notwithstanding the foregoing, the amount allocated to the Employer Contribution
Account of each Non-Key Employee shall be reduced by the amount of any Employer
contribution made on behalf of such Non-Key Employee with respect to such Plan
Year pursuant to Section 11.2 or any other provision of this Plan or any other
defined contribution plan maintained by the Employer.
11.4 Maximum Benefits. If, in any Limitation Year in which the Plan
is a Top-Heavy Plan, a Participant also participates in one or more defined
benefit plans maintained by the Employer or a Related Employer (as defined in
Section 5.8(h)), then for purposes of Sections 5.8(c) and (d) respectively, the
phrase "1.00" shall be substituted for the phrase "1.25" wherever the latter
phrase appears. Notwithstanding the preceding, the provisions of this Section
11.4 shall not apply if the Plan is not a Super Top-Heavy Plan and the Employer
contributes, on behalf of each Non-Key Employee who is entitled to receive a
benefit under Section 11.2, an amount at least equal to 1% of the Participant's
Total Compensation for the Plan Year. The amount contributed on behalf of each
Non-Key Employee under this Section 11.4 shall be in addition to any
contribution made on his behalf pursuant to Sections 11.2 or 11.3 hereof,
whichever is applicable, but shall be reduced by the amount by which:
(i) any Employer contributions made on behalf of such Non-Key
Employee with respect to such Plan Year under the
provisions of this Plan or any other defined contribution
plan maintained by the Employer, exceed
(ii) the contributions made on his behalf under Sections 11.2
and 11.3 hereof.
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ARTICLE XII
MISCELLANEOUS
12.1 No Rights Implied. Nothing herein contained shall be deemed to
give any Participant, Former Participant or Beneficiary an interest in any
specific property of this Plan or of the Trust Fund or any interest other than
his right to receive payment in accordance with the provisions of this Plan.
12.2 Assignment and Alienation. The interest in this Plan of a
Participant, Former Participant or Beneficiary shall not be subject to
assignment or transfer or otherwise be alienable either by voluntary or
involuntary act of such person, or by operation of law, nor shall it be subject
to attachment, execution, garnishment, sequestration or other seizure under any
legal, equitable or other process. If any Participant, Former Participant or
Beneficiary shall attempt to or shall alienate, sell, transfer, pledge or
otherwise encumber any amount to which he is or might become entitled, or if by
reason of the bankruptcy or insolvency of any such person or the issuance of any
garnishment, writ of execution or other court process, or other event happening
at any time, any amount otherwise payable hereunder to such person should
devolve upon anyone else or would not be enjoyed by him, the Committee, in its
absolute discretion, may terminate such interest and may hold or apply it to or
for the benefit of such Participant, Former Participant or Beneficiary, or as
the case may be, the spouse, children or other dependents of such person, in
such manner as the Committee may deem proper.
12.3 Exclusive Benefit Rule.
(a) No Diversion of Trust Assets. Anything contained in this
Plan to the contrary notwithstanding, it shall be impossible at any time for any
part of the corpus or income of the Trust Fund or of any segregated share of the
assets of this Plan to be used for or diverted to purposes other than for the
exclusive benefit of Participants, Former Participants or Beneficiaries, and no
part thereof shall ever revert to the Company or any of the Employers except as
specifically provided in Section 12.3(b).
(b) Exceptions. Notwithstanding Subsection (a), a contribution made
by an Employer may be returned to the Employer if:
(i) the contribution is made by reason of a mistake of fact;
(ii) the contribution is conditioned on its deductibility for
Federal income
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tax purposes and such deduction is disallowed (but only to the extent the
deduction for such contribution is disallowed);
provided, however, that such contribution may be returned only within one year
of the discovery of the mistake of fact or the disallowance of the deduction for
Federal income tax purposes, as the case may be.
12.4 Exclusive Benefit. This Plan and Trust are created for the
exclusive benefit of Participants, Former Participants and Beneficiaries and
shall be interpreted in a manner consistent with its being qualified under
Section 401(a) of the Code and exempt under Section 501(a) of the Code.
12.5 No Employment Contract. This Plan shall not be construed as
creating any contract of employment between the Employer and any Employee; and
the Employer shall have the same control over its employees as though this Plan
had never been executed.
12.6 Section 16(b) Compliance. With respect to persons subject to
Section 16 ("Section 16 Insiders") of the Securities Exchange Act of 1934 (the
"1934 Act"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To
the extent any provision of the Plan or action by the Plan Administrator fails
to so comply, it shall be deemed void to the extent permitted by law and deemed
advisable by the Plan Administrator. The Plan Administrator is authorized to
make such rules and regulations as it deems appropriate to assure that Section
16 Insiders comply with Section 16 of the 1934 Act.
12.7 Fiduciaries. Any person or group of persons may serve in more
than one fiduciary capacity with respect to this Plan.
12.8 Incapacity. In the event that the Committee finds that any
Participant, Former Participant or Beneficiary is unable to care for his affairs
due to illness or accident, any payments due to such Participant, Former
Participant or Beneficiary under this Plan may be made to his duly appointed
legal representative. The Committee may, in its discretion, make such payments
to a child, parent or spouse of such Participant, Former Participant or
Beneficiary, or to any other person with whom he resides or who is charged with
his care. Any payments or payments so made shall be in complete discharge of
the liability under this Plan thereof.
12.9 Governing Law. This Plan shall be construed according to the laws of
the State of Colorado, where it is made
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and where it shall be enforced, except to the extent such laws have been
superseded by ERISA.
12.10 Initial Qualification . Notwithstanding anything to the contrary in
this Plan contained, the contributions made by the Company and the other
Employers to the Trust Fund prior to the Plan's having been granted an Internal
Revenue Service ruling that it initially constitutes a qualified employees'
profit sharing plan as defined in Section 401(a) of the Code and that the Trust
Fund is exempt from Federal income tax pursuant to Section 501(a) of the Code,
shall upon written demand made by the Company upon the Trustee be refunded by
the Trustee to the Company and the other Employers if the within Plan is denied
such Internal Revenue Service ruling and such amounts shall be paid to the
Participants after the Employer has deducted all applicable taxes. Upon issuance
of such ruling, this Section 12.9 shall become ineffective and be considered
deleted from this Plan.
12.11 Effective Date of Restatement . Except as provided below, this
restatement of the Plan is effective as of July 1, 1993. Participants shall be
permitted to retain in their Accounts any investments in the Ametek Common Stock
Fund and the Insurance Contracts (as those terms were defined in the Plan prior
to this restatement) until June 30, 1994. After that date, the Ametek Common
Stock Fund and the Insurance Contracts shall no longer be Investment Funds under
the Plan.
IN WITNESS WHEREOF, Ketema, Inc. has caused these presents to be
executed by its duly authorized officer this 4th day of June, 1993.
ATTEST: KETEMA, INC.
By By
---------------------------- ----------------------------
Assistant Secretary Vice President
(SEAL)
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EXHIBIT (10)Z
KETEMA, INC. KEY EMPLOYEE SEVERANCE PLAN
----------------------------------------
1. Purpose
-------
The Ketema, Inc. Key Employee Severance Plan (the "Plan") is intended to
provide benefits to certain key employees of Ketema, Inc. (the "Company") in the
event of a termination of employment under certain circumstances following a
change of control of the Company.
2. Definitions
-----------
For purposes of the Plan, the terms below shall have the following
definitions:
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlled by, controlling, or under common control with, such
Person.
"Benefit Period" shall mean, with respect to each Participant whose title
is listed below, the period consisting of the number of calendar months set
forth opposite the Participant's title, beginning with the month in which the
Participant's Termination of Employment occurs following a Change of Control:
Chief Executive Officer - 12 months
Chief Financial Officer - 12 months
Vice President-
Human Resources - 12 months
Comptroller - 12 months
General Manager - 12 months
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the event that is deemed to occur if (i) any
Person (except the Company or any employee benefit plan of the Company or of any
Affiliate), together with all Affiliates of such Person, shall become the
beneficial owner in the aggregate of 30% or more of the common stock of the
Company then outstanding and (ii) during any 24-month period, individuals who at
the beginning of such period constituted the Board cease for any reason to
constitute a majority thereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
<PAGE>
"Company" shall mean Ketema, Inc. and any successors thereto by merger,
consolidation, liquidation or other reorganization.
"Committee" shall mean the Compensation Committee of the Board.
"Participant" shall mean each respective employee of the Company who, on
the effective date of the Plan, holds one of the following titles: Chief
Executive Officer, Chief Financial Officer, Vice President-Human Resources,
Comptroller and General Manager.
"Person" shall mean any individual, partnership, corporation, group, trust
or other legal entity.
"Plan" shall mean this Ketema, Inc. Key Employee Severance Plan as embodied
herein and as it may be amended from time to time.
"Plan Period" shall mean, with respect to each Participant whose title is
listed below, the period consisting of the number of calendar months set forth
opposite the Participant's title, beginning with the month in which the Plan
becomes effective:
Chief Executive Officer - 24 months
Chief Financial Officer - 24 months
Vice President-
Human Resources - 24 months
Comptroller - 24 months
General Manager - 24 months
"Termination of Employment" shall mean an involuntary termination by the
Company of a Participant's employment for any reason other than "cause" as
hereinafter defined or the resignation by a Participant from his employment with
the Company for other than "good reason" as hereinafter defined. For purposes
of this definition, "cause" shall mean any action by the Participant that
constitutes (i) gross misconduct, (ii) dishonesty, (iii) gross mismanagement,
(iv) a deliberate and premeditated act against the interest of the Company or
its Affiliates or (v) the commission of a felony. For purposes of this
definition, "good reason" shall mean (i) a reduction in the Participant's title,
status or responsibilities, (ii) a reduction in the Participant's base
compensation, benefits (other than bonus) or perquisites, other than by a de
minimis amount or (iii) an involuntary relocation or movement of the primary
place of business more than 50 miles further from the Participant's residence.
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3. Effective Date
--------------
The Plan shall be effective as of April 5, 1994.
4. Administration of the Plan
--------------------------
The Plan shall be administered by the Board or, if the Board designates the
Committee to administer the Plan, by the Committee. The Committee or Board
shall establish such rules and procedures as are necessary or advisable to
administer the Plan and effectuate its purpose. The Committee or Board shall
have discretionary authority to interpret the provisions of the Plan. A
determination of the Committee or Board as to any questions which may arise with
respect to the interpretation of the provisions of the Plan shall be final.
5. Benefits
--------
In the event that, during the Plan Period, a Participant's Termination of
Employment occurs following a Change of Control, such Participant shall receive
the following benefits and payments:
(a) Base salary (at the rate in effect immediately prior to the
Participant's Termination of Employment) shall be paid monthly by the Company to
the Participant for the duration of the Benefit Period.
(b) A bonus shall be paid by the Company to the Participant in a lump sum
payment as soon as practicable following the Participant's Termination of
Employment. The amount of such bonus shall consist of that percentage of the
annual amount of the Participant's base salary (at the rate in effect
immediately prior to the Participant's Termination of Employment) which is equal
to the bonus percentage received by the Participant during the last fiscal year
of the Company ending prior to such Termination of Employment.
(c) The Participant shall be entitled to continued health and welfare
benefits for the duration of the Benefit Period at the cost level to the
Participant in effect immediately prior to the Participant's Termination of
Employment. For purposes of group health plan continuation coverage pursuant to
Section 4980B of the Code, the qualifying event as defined in said Section 4980B
shall occur on the date of the Participant's Termination of Employment; however,
for the duration of the Benefit Period, the Company shall pay the excess of (1)
the amount of the premium that would otherwise be payable by the Participant
(and any covered dependents of the Participant) for such continuation coverage
over (2) the amount for group health coverage (including coverage of the
Participant's dependents, if any) payable by the Participant
-3-
<PAGE>
immediately prior to the Participant's Termination of Employment.
(d) An amount equal to the present value of the vested benefit that would
have been accrued by the Participant under the Employees' Retirement Plan of
Ketema, Inc. during the Benefit Period, if the Participant's Termination of
Employment had not occurred, shall be paid by the Company to the Participant in
a lump sum payment as soon as practicable following the Participant's
Termination of Employment.
(e) An amount equal to the vested portion of the matching and discretionary
contributions that would have been made by the Company to the Participant's
account under the Ketema Savings and Investment Plan during the Benefit Period,
if the Participant's Termination of Employment had not occurred and the
Participant had continued his salary deferral election under said plan at the
same rate as in effect immediately prior to his Termination of Employment, shall
be paid by the Company to the Participant. Such payment shall be made in a lump
sum as soon as practicable following the later of (i) the Participant's
Termination of Employment or (ii) the date on which the amount of the Company's
discretionary contribution, if any, allocable to the plan year in which such
Termination of Employment occurs, is determined.
(f) Ownership of the Company provided vehicle shall be transferred to the
Participant as soon as practicable following the Participant's Termination of
Employment.
Notwithstanding the preceding, if the benefits payable pursuant to this Plan,
either alone or together with other payments which the Participant has the right
to receive directly or indirectly from the Company, would constitute an excess
parachute payment (the "Excess Payment") under Section 280G of the Code, the
benefits payable pursuant to this Plan shall be reduced (but not below zero) by
the amount necessary to prevent any such payments to the Participant from
constituting an Excess Payment, as determined in good faith by the Committee.
6. Amendment of the Plan
---------------------
The Board may from time to time amend the Plan, provided, however, that no
such amendment shall adversely affect the rights of any Participant with regard
to the benefits and payments under the Plan.
7. Assignability; Death
--------------------
No benefits or payments under the Plan shall be pledged, assigned or
transferred by any Participant except by a
-4-
<PAGE>
will or by the laws of descent and distribution. Any estate of any Participant
receiving any benefits or payments under the Plan shall be subject to all of the
terms and conditions of the Plan. In the event of the Participant's death
following his Termination of Employment but prior to the receipt of all benefits
and payments under the Plan, any amounts that would have been paid to the
Participant pursuant to paragraphs (d) and (e) of Section 5 shall be payable to
the Participant's estate.
8. Tax Withholding
---------------
The Company shall deduct and withhold such amounts under any federal, state
or local tax rules or regulations as it deems appropriate with respect to the
benefits by, or amounts paid to, a Participant from any cash or other payments
to be made to the Participant. In any event, the Participant shall make
available to the Company, promptly when required, sufficient funds to meet the
requirements of such withholding, and the Committee or Board shall be entitled
to take and authorize such steps as it may deem advisable in order to have such
funds available to the Company when required.
9. No Contract of Employment
-------------------------
Neither the action of the Company in establishing this Plan, nor any
provisions hereof, nor any action taken by the Company, the Committee or Board
pursuant to such provisions, shall be construed as giving to any employee or
Participant the right to be retained in the employ of the Company.
10. Plan Expenses
-------------
Any expenses and liabilities incurred by the Board, the Committee or the
Company in administering the Plan shall be paid by the Company.
11. Other Benefit Plan
------------------
Any benefits received by, or amounts paid to, a Participant under the Plan
shall have no effect on the level of benefits provided to or received by such
Participant, or the Participant's estate or beneficiaries, as a part of any
other employee benefit plan or similar arrangements provided by the Company,
except as specifically provided herein or as provided under the terms of such
other employee benefit plan or similar arrangement.
12. Governing Law
-------------
The Plan shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles of conflicts of law.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of
the 5th day of April, 1994.
ATTEST: KETEMA, INC.
____________________ By:________________________
(S E A L)
-6-
<PAGE>
EXHIBIT 11
KETEMA, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
PRIMARY 1994 1993
- - ------- ------------ ------------
<S> <C> <C>
Income (loss) from continuing operations........................ $1,541 $ (3,447)
====== ========
Net income (loss)............................................... $1,236 $ (3,789)
====== ========
Weighted average number of common shares and common stock
equivalents outstanding........................................ 3,630 3,718
====== ========
Primary earnings (loss) per common share:
Income (loss) from continuing operations....................... $ 0.42 $ (0.93)
Net income (loss).............................................. $ 0.34 $ (1.02)
====== ========
ASSUMING FULL DILUTION
- - ----------------------
Income (loss) from continuing operations........................ $1,541 $ (3,447)
Add after tax interest expense applicable to 8% subordinated
convertible debentures due 2003................................ 729 770
------ --------
Income (loss) from continuing operations as adjusted............ $2,270 $ (2,677)
Discontinued operations net of taxes .......................... (305) (342)
------ --------
Net income (loss), as adjusted.................................. $1,965 $ (3,019)
====== ========
Weighted average number of common shares outstanding............ 3,587 3,718
Assuming conversion of 8% subordinated convertible debentures
due 2003 ...................................................... 991 1,041
Assuming exercise of stock incentives reduced by the number of
shares which could have been purchased with the proceeds
from exercise of such incentives............................... 64 47
------ --------
Weighted average number of common shares outstanding as
adjusted....................................................... 4,643 4,806
====== ========
Earnings (loss) per common share assuming full dilution:
Income (loss) from continuing operations....................... $ 0.49* $ (0.56)*
Net income (loss).............................................. $ 0.42* $ (0.63)*
====== ========
</TABLE>
_______________
* This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an antidilutive result.
<PAGE>
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-29004) pertaining to the 1988 Stock Incentive Plan of Ketema,
Inc. and in the related Prospectus of our report dated April 15, 1994, except
for Note 14, as to which the date is May 11, 1994, with respect to the
consolidated financial statements and schedules of Ketema, Inc. included in this
Annual Report (Form 10-K) for the year ended February 28, 1994.
Denver, Colorado
May 11, 1994
