<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
Commission File No. 04804
TENNANT COMPANY
Incorporated in Minnesota IRS Emp Id No. 410572550
701 North Lilac Drive
P.O. Box 1452
Minneapolis, Minnesota 55440
Telephone No. 612-540-1200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of Registrant's common stock, par value $.375
on June 30, 1995, was 9,918,631 (after adjustment for two-for-one stock split
effective April 26, 1995).
<PAGE>
Page 2 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- ----------------------
EARNINGS (note 1) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $82,797 $70,784 $156,941 $129,225
Less:
Cost of sales (note 2) 47,130 41,096 89,891 74,653
Selling and administrative (note 2) 27,895 23,032 53,659 44,213
------- ------- ------- -------
Profit from operations 7,772 6,656 13,391 10,359
Other income and (expense)
Net foreign currency gain (loss) (21) (98) 123 (182)
Interest income 1,068 974 2,066 1,877
Interest expense (569) (451) (1,141) (608)
Miscellaneous income (expense), net (325) (601) (732) (920)
------- ------- ------- -------
Total other income (expense) 153 (176) 316 167
------- ------- ------- -------
Earnings before income taxes 7,925 6,480 13,707 10,526
Taxes on income 2,647 2,255 4,560 3,641
------- ------- ------- -------
Net earnings $ 5,278 $ 4,225 $ 9,147 $ 6,885
------- ------- ------- -------
------- ------- ------- -------
PER SHARE (note 5)
Net earnings $ .53 $ .43 $ .92 $ .70
Dividends $ .17 $ .16 $ .34 $ .32
Average number of shares 9,907,700 9,824,400 9,900,000 9,825,800
</TABLE>
<PAGE>
Page 3 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
BALANCE SHEET
(Condensed from Audited
(Unaudited) Financial Statements)
ASSETS June 30,1995 December 31, 1994
------------ -----------------
<S> <C> <C>
Cash and cash equivalents $ 2,298 $ 1,851
Receivables 67,523 63,411
Less deferred income from sales finance charges (1,703) (1,592)
Less allowance for doubtful accounts (2,998) (2,609)
-------- --------
Net receivables 62,822 59,210
Inventories (note 3) 39,206 30,985
Prepaid expenses 1,317 696
Deferred income taxes, current portion 6,456 6,068
-------- --------
Total current assets 112,099 98,810
Property, plant, and equipment 131,960 122,384
Less allowance for depreciation (70,658) (65,832)
-------- --------
Net property, plant, and equipment 61,302 56,552
Net noncurrent installment accounts receivable 6,878 6,353
Deferred income taxes, long-term portion 944 944
Intangible assets 18,726 19,287
Other assets 1,206 888
-------- --------
Total assets $201,155 $182,834
-------- --------
-------- --------
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
LIABILITIES June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Current debt $ 18,036 $ 23,008
Accounts payable 17,403 17,925
Accrued expenses 23,835 25,132
-------- --------
Total current liabilities 59,274 66,065
Long-term debt 22,113 6,300
Employee retirement-related benefits 14,127 13,460
Other long-term liabilities 570 760
-------- --------
Total liabilities 96,084 86,585
SHAREHOLDERS' EQUITY
Common stock (note 5) 3,719 3,690
Additional paid-in capital (note 5) 2,340 396
Equity adjustment from foreign currency translation 3,792 2,743
Common stock subscribed -- 525
Unearned restricted shares (531) (424)
Retained earnings 109,064 103,281
Receivable from ESOP (13,313) (13,962)
-------- --------
Total shareholders' equity 105,071 96,249
-------- --------
Total liabilities and shareholders' equity $201,155 $182,834
-------- --------
</TABLE>
<PAGE>
Page 4 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (note 4) Six Months Ended June 30
------------------------
1995 1994
---- ----
<S> <C> <C>
Net cash flow related to operating activities $ 3,259 $11,731
Cash flow related to investing activities:
Acquisition of property, plant, and equipment (11,295) (7,893)
Acquisition of Castex and Eagle (1,125) (27,610)
Proceeds from disposals of property, plant, and equipment 2,204 781
Settlement of foreign currency hedging contracts (681) (122)
------- -------
Net cash flow related to investing activities (10,897) (34,844)
Cash flow related to financing activities:
Net changes in current debt (5,339) 27,360
Issuance of long-term debt 15,727 --
Principal payment from ESOP 450 409
Proceeds from employee stock issues 826 751
Repurchase of common stock -- (1,622)
Dividends paid (3,364) (3,145)
------- -------
Net cash flow related to financing activities 8,300 23,753
Effect of exchange rate changes on cash (215) (33)
------- -------
Net increase (decrease) in cash and cash equivalents 447 607
Cash and cash equivalents at beginning of year 1,851 2,675
------- -------
Cash and cash equivalents at end of second quarter $2,298 $3,282
------- -------
------- -------
</TABLE>
<PAGE>
Page 5 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The Company's Summary of Significant Accounting Policies and other Related
Data and Summary of Stock Plans, Bonuses, and Profit Sharing is included in
the Company's 1994 Annual Report filed as Exhibit 13.1 to the Company's
annual filing on Form 10-K and is incorporated in this Form 10-Q by
reference.
(2) Expenses
Engineering, research and development, and bad debt expenses were charged
to operations for the three and six months ended June 30, 1995 and 1994,
as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Engineering, research and development $3,268 $2,954 $6,283 $5,649
------ ------ ------ ------
------ ------ ------ ------
Bad debts $ 13 $ 290 $ 507 $ 407
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The Company also makes accrual adjustments on a regular monthly basis for
bonus and profit sharing expenses which are settled at year-end. This
allows for a fair statement of the results for the interim periods
presented.
(3) Inventories
Inventories are valued at the lower of cost (principally on a last-in,
first-out basis) or market. The composition of inventories at June 30,
1995, and December 31, 1994, is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
------- -----------
(In Thousands)
<S> <C> <C>
FIFO Inventories:
Finished Goods $23,799 $21,491
All Other 33,559 26,174
LIFO Adjustment (18,152) (16,680)
-------- --------
LIFO Inventories $39,206 $30,985
------- -------
------- -------
</TABLE>
The category "All Other" includes production-related raw materials, parts
and supplies, and work-in-process. The Company's accounting system does
not permit a further breakdown of this category of inventories.
(4) Cash Flow
Income taxes paid during the six months ended June 30, 1995 and 1994, were
$3,736,000 and $1,478,000, respectively. Interest costs paid during the
six months ended June 30, 1995 and 1994, were $1,204,000 and $540,000,
respectively.
<PAGE>
Page 6 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Stock Split
On February 16, 1995, the Board of Directors declared a two-for-one stock
split effective April 26, 1995, for shareholders of record on April 12,
1995. For each share to be issued in connection with the stock split, an
amount equal to the par value of $.375 was transferred to the common stock
amount from additional paid-in capital retroactive to December 31, 1994.
All share and per share data in this report have been retroactively
adjusted to reflect this stock split.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Management's discussion and analysis of financial condition and results of
operations is included in Exhibit 13.1, attached, text portion of Report to
Shareholders for the Six Months Ended June 30, 1995, and is incorporated in this
Form 10-Q by reference.
<PAGE>
Page 7 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Shareholders' Meeting held on May 4, 1995, the following
matters were submitted to vote:
(a) Election of Directors
Andrew P. Czajkowski was elected to serve a three-year term as a director
of the Company. Out of 4,071,692 common shares represented, 3,979,108
voted in favor and 92,584 withheld.
William A. Hodder was elected to serve a three-year term as a director of
the Company. Out of 4,071,692 common shares represented, 3,983,697 voted
in favor and 87,995 withheld.
Arthur D. Collins, Jr., was elected to serve a three-year term as a
director of the Company. Out of 4,071,692 common shares represented,
3,913,412 voted in favor and 158,280 withheld.
The following directors each continued their term of office after the
meeting:
David C. Cox
Roger L. Hale
Delbert W. Johnson
William I. Miller
Arthur R. Schulze, Jr.
(b) 1995 Stock Incentive Plan
The approval and ratification of the Tennant Company 1995 Stock Incentive
Plan was approved. Out of 4,071,692 common shares represented, 3,685,960
voted in favor, 142,336 against, 39,174 abstained, and 204,222 broker non-
votes.
(c) Restricted Stock Plan for Nonemployee Directors
The approval and ratification of the amendments to and restatement of the
Restricted Stock Plan for Nonemployee Directors. Out of 4,071,692 common
shares represented, 3,694,034 voted in favor, 132,411 against, 110,542
abstained, and 134,705 broker non-votes.
(d) Appointment of KPMG Peat Marwick as Auditors
The appointment of KPMG Peat Marwick as independent auditors of the Company
was approved. Out of 4,071,692 common shares represented, 4,016,901 voted
in favor, 18,461 against, and 36,330 abstained.
<PAGE>
Page 8 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item # Description Method of Filing
------ ----------- ----------------
3i Articles of Incorporation Filed herewith electronically.
3ii By-Laws Incorporated by reference to
Exhibit 4.2 to the Company's
Registration Statement No.
33-59054, Form S-8, dated
March 2, 1993.
10.1 1995 Stock Incentive Plan Filed herewith electronically.
10.2 Restricted Stock Plan For Filed herewith electronically.
Nonemployee Directors
13.1 Text Portion of Report to Filed herewith electronically.
Shareholders the Six Months
Ended June 30, 1995
27.1 Financial Data Schedule Filed herewith electronically.
(b) Reports on Form 8-K
There were no reports filed on Form 8K filed for the quarter ended
June 30, 1995.
<PAGE>
Page 9 of 9
TENNANT COMPANY
Quarterly Report - Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TENNANT COMPANY
Date: August 9, 1995 /s/ Richard A. Snyder
---------------------- -------------------------------------
Richard A. Snyder
Vice President, Treasurer and
Chief Financial Officer
Date: August 9, 1995 /s/ Mahedi A. Jiwani
---------------------- -------------------------------------
Mahedi A. Jiwani
Corporate Controller and
Principal Accounting Officer
<PAGE> Exhibit 3i
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
TENNANT COMPANY
I, the undersigned, Roger L. Hale, the President and Chief Executive
Officer of Tennant Company, a Minnesota corporation (the "Company"), do hereby
certify that the Restated Articles of Incorporation of the Company were duly
adopted by the Board of Directors of the Company pursuant to Chapter 302A.135,
Subd. 5 of the Minnesota Statutes (by amendment and restatement of the Restated
Articles of Incorporation, as amended, in effect prior to the filing of these
Articles of Amendment) to read in their entirety as set forth in Appendix A
attached hereto. I further certify that the Restated Articles of Incorporation,
as so adopted are set forth in Appendix A attached hereto, merely restate (and
correctly set forth without change) the Restated Articles of Incorporation in
effect prior to the filing of these Articles of Amendment, as previously
amended.
IN WITNESS WHEREOF, I have subscribed my name hereto this 8th
day of August, 1989.
TENNANT COMPANY
/s/ Roger L. Hale
------------------------
Roger L. Hale, President
and Chief Executive Officer
<PAGE>
APPENDIX A
RESTATED ARTICLES OF INCORPORATION
OF
TENNANT COMPANY
ARTICLE I
The name of this Corporation is Tennant Company.
ARTICLE II
The registered office of this Corporation is located at 701 North Lilac
Drive, Minneapolis, Minnesota 55422.
ARTICLE III
This Corporation is authorized to issue an aggregate of 11,000,000 shares,
10,000,000 of which shall be designated as Common Stock, having a par value of
$0.375 per share, and 1,000,000 of which shall be designated as Preferred Stock,
having a par value of $.02 per share. The Board of Directors is authorized to
establish one or more series of Preferred Stock, setting forth the designation
of each such series, and fixing the relative rights and preferences of each such
series.
ARTICLE IV
No shareholder of this Corporation shall have any cumulative voting rights.
ARTICLE V
No shareholder of this Corporation shall have any preemptive rights to
subscribe for, purchase, or acquire any shares of the Corporation of any class,
whether unissued or now or hereafter authorized, or any obligations or other
securities convertible into or exchangeable for any such shares.
<PAGE>
ARTICLE VI
Any action required or permitted to be taken at a meeting of the Board of
Directors of this Corporation, other than an action requiring shareholder
approval, may be taken by written action signed by the number of directors that
would be required to take such action at a meeting of the Board of Directors at
which all directors are present.
ARTICLE VII
(a) Whether or not a vote of shareholders is otherwise required, the
affirmative vote of the holders of not less than two-thirds of the voting power
of the outstanding voting shares of the Corporation shall be required for (1)
the approval or authorization of any "Related Person Business Transaction" (as
hereinafter defined) involving the Corporation or (2) the approval or
authorization by the Corporation, in its capacity as a shareholder, of any
Related Person Business Transaction involving a "Subsidiary" (as hereinafter
defined) which requires the approval or authorization of the shareholders of the
Subsidiary; provided, however, that such two-thirds voting requirement shall not
be applicable if:
(i) The "Continuing Directors" (as hereinafter defined) of the
Corporation by a two-thirds vote (A) have expressly approved in advance the
acquisition of outstanding voting shares of the Corporation that caused each
"Related Person" (as hereinafter defined) involved in the Related Person
Business Transaction to become a Related Person or (B) have expressly approved
the Related Person Business Transaction; or
<PAGE>
(ii) The Related Person Business Transaction is solely between the
Corporation and another corporation, one hundred percent of the voting shares of
which is owned directly or indirectly by the Corporation; or
(iii) The Related Person Business Transaction is a merger or
exchange and the cash or fair market value of the property, securities, or other
consideration to be received per share by holders of Common Stock of the
Corporation in the Related Person Business Transaction is not less than the
highest per-share consideration (with appropriate adjustments to reflect any
recapitalization, reclassification, stock split, reverse stock split, stock
dividend, and like distributions) paid by any Related Person involved in the
Related Person Business Transaction in acquiring any of the Corporation's Common
Stock;
(b) For the purposes of this Article VII:
(i) The term "Related Person Business Transaction" shall mean (A) any
merger of the Corporation or a "Subsidiary" (as hereinafter defined) with or
into a Related Person, (B) any exchange of shares of the Corporation or a
Subsidiary for shares of a Related Person which, in the absence of this Article,
would have required the affirmative vote of at least a majority of the voting
power of the outstanding shares of the Corporation entitled to vote or the
affirmative vote of the Corporation, in its capacity as a shareholder of the
Subsidiary, (C) any sale, lease, exchange, transfer, or other disposition (in
one transaction or a series of transactions), including without limitation a
mortgage or any other security device, of all or any "Substantial Part" (as
hereinafter defined) of the assets either of the Corporation (including without
limitation any voting securities of a Subsidiary) or of a Subsidiary to or
with a Related Person,
<PAGE>
(D) any sale, lease, exchange, transfer, or other disposition (in one
transaction or a series of transactions) of all or any Substantial Part of the
assets of a Related Person to or with the Corporation or a Subsidiary, (E) the
issuance of any securities of the Corporation (except pursuant to stock
dividends, stock splits, or similar transactions which would not have the effect
of increasing the proportionate voting power of a Related Person) or of a
Subsidiary to a Related Person, (F) any recapitalization or reclassification
that would have the effect of increasing the proportionate voting power of a
Related Person, (G) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation at the time the Corporation has a Related
Person, and (H) any agreement, contract, arrangement, or understanding providing
for any of the transactions described in this definition of Related Person
Business Transaction.
(ii) The term "Related Person" shall mean and include (A) any person
or entity which, together with its Affiliates and Associates (both as
hereinafter defined), "beneficially owns" (as defined on March 1, 1983, in Rule
13d-3 under the Securities Exchange Act of 1934) in the aggregate 20 percent or
more of the outstanding voting shares of the Corporation, provided that
notwithstanding anything stated therein, any shares of capital stock of the
Corporation that any Related Person has the right to acquire pursuant to any
agreement, contract, arrangement, or understanding, or upon exercise of any
conversion right, warrant, or option, or otherwise shall be deemed beneficially
owned by the Related Person and (B) any Affiliate or Associate of any such
person or entity.
(iii) The term "Affiliate" shall mean, in the case of a specified
person or entity, a person or entity that directly, or indirectly through one or
more
<PAGE>
intermediaries, controls, or is controlled by, or is under common control with,
the person or entity specified.
(iv) The term "Associate," used to indicate a relationship with a
specified person or entity, shall mean (A) any entity of which such specified
person or entity is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (B)
any trust or other estate in which such specified person or entity has a
substantial beneficial interest or as to which such specified person or entity
serves as trustee or in a similar fiduciary capacity, and (C) any relative or
spouse of such specified person, or any relative of such spouse, who has the
same home as such specified person or who is a director or officer of such
specified entity or any of its parents or subsidiaries.
(v) The term "Substantial Part" shall mean more than 30 percent of
the fair market value of the total assets of the person or entity in question,
as reflected on the most recent balance sheet of such person or entity existing
at the time the shareholders of the Corporation would be required to approve or
authorize the Related Person Business Transaction involving the assets
constituting any such Substantial Part.
(vi) The term "other consideration to be received" shall include,
without limitation, Common Stock of the Corporation retained by its existing
public shareholders in the event of a Related Person Business Transaction in
which the Corporation is the surviving Corporation.
<PAGE>
(vii) The term "Subsidiary" shall mean any corporation, a majority
of the equity securities of any class which are owned by the Corporation, by
another Subsidiary, or in the aggregate by the Corporation and one or more of
its Subsidiaries.
(viii) The term "Continuing Director" shall mean a director who was
a member of the Board of Directors of the Corporation either on March 1, 1983,
or immediately prior to the time that any Related Person involved in the Related
Person Business Transaction in question became a Related Person; provided that
in no event shall a Related Person involved in the Related Person Business
Transaction in question be deemed to be a Continuing Director.
(ix) The term "voting shares" shall mean all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for the purposes of this Article as one class.
(c) The provisions set forth in this Article VII, including this
paragraph (c), may not be repealed or amended in any respect unless such action
is approved by the affirmative vote of the holders of not less than two-thirds
of the voting power of the outstanding voting shares of the Corporation.
ARTICLE VIII
No Director of the Corporation shall be personally liable to the
Corporation or its Shareholders for monetary damages for breach of fiduciary
duty as a Director; provided, however, that this Article shall not eliminate or
limit the liability of a Director to the extend provided by applicable law:
<PAGE>
(i) for any breach of the Director's duty or loyalty to the
Corporation or its Shareholders.
(ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law.
(iii) under Section 302A.559 or 80A.23 of the Minnesota Statutes.
(iv) for any transaction from which the Director derived an improper
benefit, or
(v) for any act or omission occurring prior to the effective date of
this Article. No amendment to or repeal of this Article shall apply to or have
any effect on the liability or alleged liability of any Director of the
Corporation for or with respect to any acts or omissions of such Director
occurring prior to such amendment or repeal.
ARTICLE IX
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than five nor more
than eleven persons, who need not be shareholders. The number of directors may
be increased by the shareholders or Board of Directors or decreased by the
shareholders from the number of directors on the Board of Directors immediately
prior to the effective date of this Article IX; provided, however, that any
change in the number of directors on the Board of Directors (including, without
limitation, changes at annual meetings of shareholders) shall be approved by the
affirmative vote of not less than seventy-five percent (75%) of the votes
entitled to be cast by the holders of all then outstanding Voting Shares (as
defined in Article VII), voting together as a single class, unless such
<PAGE>
change shall have been approved by a majority of the entire Board of Directors.
If such change shall not have been so approved, the number of directors shall
remain the same. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors.
At the 1989 annual meeting of shareholders, Class I directors shall be
elected for a one-year term, Class II directors for a two-year term and Class
III directors for a three-year term. At each succeeding annual meeting of
shareholders beginning in 1990, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class. In no case will
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which the director's term expires and until a successor shall be elected and
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Removal of a director from office
(including a director named by the Board of Directors to fill a vacancy or newly
created directorship), with or without cause, shall require the affirmative vote
of not less than seventy-five percent (75%) of the votes entitled to be cast by
the holders of all then outstanding Voting Shares, voting together as a single
class. Any vacancy on the Board of Directors that results from an increase in
the number of directors may be filled by a majority of the Board of Directors
then in office, any other vacancy occurring in the Board of Directors may be
filled by a majority of the
<PAGE>
Directors then in office, although less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of such
director' predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes of preferred or preference stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by or
pursuant to the applicable terms of these Articles of Incorporation, and such
directors so elected shall not be divided into classes pursuant to this Article
IX unless expressly provided by such terms.
No person (other than a person nominated by or on behalf of the Board of
Directors) shall be eligible for election as a director at any annual or special
meeting of shareholders unless a written request that his or her name be placed
in nomination is received from a shareholder of record by the Secretary of the
Corporation not less than 75 days prior to the date fixed for the meeting,
together with the written consent of such person to serve as a director.
Notwithstanding any other provisions of these Articles of Incorporation
(and notwithstanding the fact that a lesser percentage or separate class vote
may be specified by law or these Articles of Incorporation), the affirmative
vote of the holders of not less than seventy-five percent (75%) of the votes
entitled to be cast by the holders of all then outstanding Voting Shares, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article IX.
<PAGE>
ARTICLES OF MERGER
OF
TENNANT TREND, INC.
WITH AND INTO
TENNANT COMPANY
Pursuant to Sections 302A.621 and 302A.651 of the Minnesota Business
Corporation Act (the "Act"), the undersigned officers of Tennant Company, a
Minnesota corporation ("Tennant") and the holder of all of the issued and
outstanding stock of Tennant Trend, Inc., a New York corporation ("Trend"),
hereby execute and file these Articles of Merger:
1. The Plan of Merger, which has been duly adopted by the Executive
Committee of the Board of Directors of Tennant, acting pursuant to authority
duly delegated by the Board of Directors of Tennant, is attached hereto as
Exhibit A.
2. The number of outstanding shares of each class and series of
capital stock of Trend and the number of such shares owned of record by Tennant
are as follows:
Designation of Number of Number of Shares
Class and Series Outstanding Shares Owned by Tennant
---------------- ------------------ ----------------
Common Stock, no par value 150 150
Dated this 13th day of April 1990
TENNANT COMPANY
By /s/ Roger L. Hale
---------------------------------
Its President and Chief Executive
Officer
And /s/ Janet M. Dolan
---------------------------------
Its Secretary
<PAGE>
PLAN OF MERGER
Plan of Merger dated as of April 13, 1990, providing for the merger of
TENNANT TREND, INC., a New York corporation ("Trend"), and TENNANT COMPANY, a
Minnesota corporation ("Tennant") (Trend and Tennant are hereinafter sometimes
collectively referred to as the "Constituent Corporations" and each as a
"Constituent Corporation").
WITNESSETH:
WHEREAS, the authorized capital stock of Trend consists of 200 shares
of common stock, without par value ("Common Stock"), of which 150 shares have
been issued to Tennant and are outstanding as of the date hereof, constituting
all of the issued and outstanding shares of capital stock of Trend; and
WHEREAS, the Executive Committee of the Board of Directors of Tennant,
acting pursuant to authority duly delegated by the Board of Directors of
Tennant, has determined that it is desirable and in the best interests of
Tennant that Trend be merged with and into Tennant (the "Merger") on the terms
and conditions hereinafter set forth and in accordance with applicable
provisions of the laws of the States of Minnesota and New York that permit such
Merger.
NC.., THEREFORE, the Executive Committee of the Board of Directors of
Tennant has, by resolutions duly adopted, approved this Plan of Merger (the
"Plan"), as follows:
<PAGE>
Exhibit A
1. THE MERGER.
Trend shall be merged with and into Tennant, in accordance with the terms
of the Plan and the applicable provisions of the Minnesota Business Corporation
Act and the New York Business Corporation Law, and Tennant shall be the
surviving corporation (the "Surviving Corporation").
2. EFFECTIVE TIME.
Articles of Merger (the "Articles") shall be delivered to the Secretary of
State of the State of Minnesota for filing pursuant to the laws of the State of
Minnesota and a Certificate of Merger (the "Certificate") shall be delivered to
the Department of State of the State of New York for filing pursuant to the laws
of the State of New York. The Merger shall become effective upon the later of
the filing of the Articles with the Secretary of State of the State of Minnesota
or the Certificate by the Department of State of the State of New York (the
"Effective Time").
3. ARTICLES OF INCORPORATION.
The Articles of Incorporation of Tennant in effect immediately prior to the
Effective Time shall become the Articles of Incorporation of the Surviving
Corporation at the Effective Time.
4. BY-LAWS
The By-Laws of Tennant in effect immediately prior to the Effective Time
shall become the By-Laws of the Surviving Corporation at the Effective Time
<PAGE>
5. BOARD OF DIRECTORS AND OFFICERS.
The directors and officers of Tennant immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
and shall hold office until their respective successors are elected and have
qualified or as otherwise provided in the By-Laws of the Surviving Corporation.
6. CANCELLATION OF SHARES.
The manner and basis of canceling the shares of Common Stock of Trend shall
be as follows:
(a) Each share of Common Stock of Trend issued and outstanding immediately
prior to the Effective Time shall be canceled, null and void and cease to exist
as of the Effective Time, and no securities of the Surviving Corporation or any
other corporation, or any money or other property shall be issued in exchange
therefor.
(b) As soon as practicable after the Effective Time, Trend shall surrender
to the Surviving Corporation all certificates representing issued and
outstanding shares of Common Stock of Trend immediately prior to the Effective
Time, and upon such surrender such certificates shall be marked "Canceled" and
retained in the stock records of Trend by the secretary of the Surviving
Corporation.
7. EFFECT OF MERGER.
At the Effective Time, the separate existence of Trend shall cease and
Trend shall be merged with and into the Surviving Corporation. At the Effective
Time, the Surviving Corporation shall thereupon and thereafter possess all the
rights, privileges, immunities, powers, purposes and franchises, of a public as
well as of a private nature, of each of the Constituent Corporations, and be
subject to all the duties, liabilities and obligations of each of the
Constituent Corporations, and all and singular, the rights, privileges,
immunities, powers, purposes and franchises of each of the
<PAGE>
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account,
including subscriptions to shares, and all causes of action, choices in action
and every other interest of or belonging to or due to each of the Constituent
Corporations and every other asset of each of the Constituent Corporations,
shall vest in the Surviving Corporation without further act or deed; and all
property, rights, privileges, immunities, powers, purposes and franchises and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the respective Constituent
Corporations; and the title to any real estate or any interest therein, vested
by deed or otherwise, in either of the Constituent Corporations shall not revert
or be in any way impaired by reason of the Merger; but all rights of creditors,
all liens upon any property of either of the Constituent Corporations and all
liabilities, obligations and penalties due or to become due, all claims or
demands for any cause existing against either of the Constituent Corporations,
or any shareholder, officer or director thereof shall be preserved unimpaired
and shall not be released by reason of the Merger; and all debts, duties,
liabilities, obligations and penalties and all actions or proceedings, whether
civil or criminal, then pending by or against either of the Constituent
Corporations, or any shareholder, officer or director thereof shall thenceforth
attach to the Surviving Corporation, and may be enforced, prosecuted, settled or
compromised against the Surviving Corporation to the same extent as if said
debts, duties, liabilities, obligations and penalties and actions or proceedings
had been incurred or contracted by the Surviving Corporation and the Surviving
Corporation may be substituted in such action or proceeding in place of either
of the Constituent Corporations.
<PAGE>
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
TENNANT COMPANY
I, Janet M. Dolan, the Vice President, General Counsel and Secretary
of Tennant Company, a Minnesota corporation, do hereby certify that the
following resolution as hereinafter set forth was adopted pursuant to Section
302A.437 of the Minnesota Statutes by the shareholders of said corporation, at a
duly held meeting on May 7, 1992.
RESOLVED, that Article III of the Restated Articles of Incorporation of
Tennant Company be and hereby is amended to read in its entirety as
follows:
ARTICLE III
This Corporation is authorized to issue an aggregate of
16,000,000 shares, 15,000,000 of which shall be designated as
Common Stock, having a par value of $0.375 per share, and
1,000,000 of which shall be designated as Preferred Stock, having
a par value of $.02 per share. The Board of Directors is authorized
to establish one or more series of Preferred Stock, setting forth the
designation of each such series, and fixing the relative rights and
preferences of each such series."
IN WITNESS WHEREOF, I have subscribed my name this 7th day of
May, 1992.
/s/ Janet M. Dolan
-----------------------------
Janet M. Dolan
Vice President, General Counsel
and Secretary
STATE OF MINNESOTA
Department of State
Filed
May 15, 1992
Joan Anderson Growe
<PAGE>
ARTICLES OF MERGER
MERGING
CONTRACT APPLICATIONS, INC.
INTO
TENNANT COMPANY
Pursuant to Section 302A.621 of the Minnesota Business Corporation Act, the
undersigned, TENNANT COMPANY, a Minnesota corporation (hereinafter referred to
as the "Surviving Corporation"), which is the owner of all of the outstanding
capital stock of CONTRACT APPLICATIONS, INC., a Minnesota corporation
(hereinafter referred to as the "Subsidiary Corporation"), hereby executes and
files these Articles of Merger:
FIRST: The Plan of Merger, in the form of resolutions duly adopted by the
Board of Directors of the Surviving Corporation at a duly held meeting on May 6,
1993, is attached hereto as Exhibit A.
SECOND: The number of outstanding shares of each class and series of
capital stock of the Subsidiary Corporation and the number of shares of each
class and series owned by the Surviving Corporation are as follows:
Number of Shares
Owned by
Designation Number of
of Class and Series Outstanding Shares Surviving Corporation
-------------------- ------------------ ---------------------
Common Stock, par
value $.01 per share 100 100
THIRD: The Plan of Merger has been duly approved by the Surviving
Corporation under Section 302A.621 of the Minnesota Business Corporation Act.
FOURTH: The merger of the Subsidiary Corporation (CONTRACT APPLICATIONS,
INC.) with and into the Surviving Corporation (TENNANT COMPANY) shall be
effective upon the filing of these Articles of Merger with the Secretary of
State of Minnesota.
Dated this 22nd day of June, 1993.
TENNANT COMPANY
By /s/ Janet M. Dolan
---------------------------------
JANET M. DOLAN, its Secretary
<PAGE>
Exhibit A
TENNANT COMPANY
Resolutions Adopted by
Board of Directors
on May 6, 1993
--------------
WHEREAS, Tennant Company (the "Company") owns all of the issued and
outstanding capital stock of Contract Applications, Inc., a Minnesota
corporation (the "Subsidiary"), consisting of 100 shares of Common Stock, par
value .01 per share; and
WHEREAS, the Company desires to effect the merger of the Subsidiary
with and into the Company pursuant to Section 302A.621 of the Minnesota Business
Corporation Act.
NOW THEREFORE, BE IT RESOLVED, that the Subsidiary be merged with and
into the Company pursuant to Section 302A.621 of the Minnesota Business
Corporation Act, in accordance with the further resolutions set forth below
(which resolutions shall constitute the Plan of Merger) and that the Company
(Tennant Company) shall be the surviving corporation.
RESOLVED FURTHER, that at the effective time of the merger, all of the
outstanding shares of capital stock of the Subsidiary shall be canceled, and no
securities of the Company or any other corporation, or any money or other
property, shall be issued in exchange therefor.
RESOLVED FURTHER, that the merger shall be effective upon the filing
of articles of merger with the Secretary of State of the State of Minnesota in
the manner required by law.
RESOLVED FURTHER, that any officer of the Company be and hereby is
authorized and directed to make and sign, for and on behalf of the Company,
articles of merger setting forth the foregoing Plan of Merger and such other
information as required by law, and to cause such articles to be filed for
record with the Secretary of State of the State of Minnesota in the manner
required by law.
RESOLVED FURTHER, that the officers of the Company, and each of them,
be and they hereby are authorized, for and on behalf of the Company, to take
such other action as such officers, or any of them, shall deem necessary or
appropriate to carry out the purpose of the foregoing resolutions.
STATE OF MINNESOTA
Department of State
FILED
JUN 30, 1993
Joan Anderson Growe
<PAGE>
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
TENNANT COMPANY
The undersigned, Bruce J. Borgerding, Secretary of Tennant Company, a
Minnesota corporation (the "Company"), hereby certifies (i) that Article III of
the Company's Restated Articles of Incorporation has been amended, effective at
the close of business on April 26, 1995 (the "Effective Time"), to read in its
entirety as follows:
"ARTICLE III
This Corporation is authorized to issue an aggregate of
31,000,000 shares, 30,000,000 of which shall be designated as
Common Stock, having a par value of $0.375 per share, and
1,000,000 of which shall be designated as Preferred Stock, having
a par value of $.02 per share. The Board of Directors is
authorized to establish one or more series of Preferred Stock,
setting forth the designation of each such series, and fixing the
relative rights and preferences of each such series."
(ii) that such amendment has been adopted in accordance with the requirements
of, and pursuant to, Chapter 302A of the Minnesota Statutes; (iii) that such
amendment was adopted pursuant to Section 302A.402, Subd. 3, of the Minnesota
Statutes in connection with a two-for-one division of the Company's Common
Stock; and (iv) that such amendment will not adversely affect the rights or
preferences of the holders of outstanding shares of any class or series of the
Company and will not result in the percentage of authorized shares that remains
unissued after such division exceeding the percentage of authorized shares that
were unissued before the division.
The division giving rise to the amendment set forth above concerns a
two-for-one division of the Common Stock of the Company. Such division is being
effected as follows:
(i) Effective at the Effective Time, each share of Common Stock
outstanding immediately prior to the Effective Time will be split and divided
into two shares of Common Stock of the Company, par value $0.375 per share, all
of which shall be validly issued, fully paid and nonassessable;
(ii) each stock certificate representing a share or shares of Common
Stock of the Company immediately prior to the Effective Time shall continue to
represent the same number of shares following the Effective Time; and
<PAGE>
(iii) a stock certificate or certificates representing one
additional share of the authorized but previously unissued Common Stock of the
Company, par value $0.375 per share, for each share of Common Stock of the
Company outstanding immediately prior to the Effective Time shall be mailed or
delivered on April 26, 1995, or as soon thereafter as practicable. The record
date for determining the shareholders of record entitled to receive such stock
certificate or certificates with respect to Common Stock outstanding as of the
close of business on April 12, 1995, and remaining outstanding at the Effective
Time, shall be the close of business on April 12, 1995, and remaining
outstanding at the Effective Time, shall be the close of business on April 12,
1995. With respect to each share of Common Stock, if any, that is first issued
and becomes outstanding after the close of business on April 12, 1995, but prior
to the Effective Time and remains outstanding at the Effective Time, the stock
certificate for the additional share resulting from the division of any such
share of Common Stock shall be mailed or delivered to the first holder of record
to whom such share of Common Stock was issued.
The foregoing Articles of Amendment shall take effect at the Effective
Time previously stated herein.
IN WITNESS WHEREOF, I have subscribed my name this 30th day of March,
1995.
/s/ Bruce J. Borgerding
------------------------------
Bruce J. Borgerding
STATE OF MINNESOTA
Department of State
Filed
APR 05, 1995
Joan Anderson Growe
<PAGE>
TENNANT COMPANY
1995 STOCK INCENTIVE PLAN
(EFFECTIVE FEBRUARY 10, 1995)
1. PURPOSE. The purpose of this 1995 Stock Incentive Plan (the "Plan")
is to motivate key personnel to produce a superior return to the shareholders of
Tennant Company (the "Company") and its Affiliates by offering such individuals
an opportunity to realize Stock appreciation, by facilitating Stock ownership,
and by rewarding them for achieving a high level of corporate performance. This
Plan is also intended to facilitate recruiting and retaining key personnel of
outstanding ability.
2. DEFINITIONS. The capitalized terms used in this Plan have the
meanings set forth below.
(a) "Affiliate" means any corporation that is a "parent corporation"
or "subsidiary corporation" of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, or any successor provision, and, for
purposes other than the grant of Incentive Stock Options, any joint venture
in which the Company or any such "parent corporation" or "subsidiary
corporation" owns an equity interest.
(b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form (not inconsistent with this Plan) as
the Committee approves from time to time, together with all amendments
thereof, which amendments may be unilaterally made by the Company (with the
approval of the Committee) unless such amendments are deemed by the
Committee to be materially adverse to the Participant and are not required
as a matter of law.
(c) "Award" means a grant made under this Plan in the form of
Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or
any Other Stock-Based Award.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means:
(i) a majority of the directors of the Company shall be persons
other than persons
(A) for whose election proxies shall have been
solicited by the Board or
(B) who are then serving as directors appointed by the
Board to fill vacancies on the Board caused by death or
resignation (but not by removal) or to fill newly-created
directorships,
(ii) 30% or more of the (1) combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Outstanding Company
Voting Securities") or (2) the then outstanding Shares of Stock
("Outstanding Company Common Stock") is acquired or beneficially
owned (as defined in Rule 13d-3 under the Exchange Act, or any
successor rule thereto) by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), provided, however, that the following acquisitions
and beneficial ownership shall not constitute Changes in Control
pursuant to this paragraph 2(e)(ii):
(A) any acquisition or beneficial ownership by the
Company or a Subsidiary, or
1
<PAGE>
(B) any acquisition or beneficial ownership by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or one or more of its
Subsidiaries,
(C) any acquisition or beneficial ownership by the
Participant or any group that includes the Participant, or
(D) any acquisition or beneficial ownership by a
Parent or its wholly owned subsidiaries, as long as they
shall remain wholly owned subsidiaries, of 100% of the
Outstanding Company Voting Securities as a result of a
merger or statutory share exchange which complies with
paragraph 2(e)(iii)(A)(2) or the exception in paragraph
2(e)(iii)(B) hereof in all respects,
(iii) the shareholders of the Company approve a definitive
agreement or plan to
(A) merge or consolidate the Company with or into
another corporation (other than (1) a merger or
consolidation with a Subsidiary or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no Outstanding Company Voting Securities or
Outstanding Company Common Stock (other than fractional
shares) held by shareholders of the Company immediately
prior to the merger is converted into cash, securities,
or other property (except (i) voting stock of a Parent
owning directly, or indirectly through wholly owned
subsidiaries, both beneficially and of record 100% of
the Outstanding Company Voting Securities immediately
after the Merger or (ii) cash upon the exercise by
holders of Outstanding Company Voting Securities of
statutory dissenters' rights),
(c) the persons who were the beneficial owners,
respectively, of the Outstanding Company Voting
Securities and Outstanding Company Common Stock
immediately prior to such merger beneficially own,
directly or indirectly, immediately after the merger,
more than 70% of, respectively, the then outstanding
common stock and the voting power of the then
outstanding voting securities of the surviving
corporation or its Parent entitled to vote generally in
the election of directors, and
(d) if voting securities of the Parent are
exchanged for Outstanding Company Voting Securities in
the merger, all holders of any class or series of
Outstanding Company Voting Securities immediately prior
to the merger have the right to receive substantially
the same per share consideration in exchange for their
Outstanding Company Voting Securities as all other
holders of such class or series),
(B) exchange, pursuant to a statutory share exchange,
Outstanding Company Voting Securities of any one or more
classes or series held by shareholders of the Company
immediately prior to the exchange for cash, securities or
other property, except for (a) voting stock of a Parent
owning directly, or indirectly through wholly owned
subsidiaries, both beneficially and of record 100% of the
Outstanding Company Voting Securities immediately after the
statutory share exchange if (i) the persons who were the
beneficial owners, respectively, of the Outstanding Company
Voting Securities and Outstanding Company Common Stock
immediately prior to such statutory share exchange own,
directly or indirectly, immediately after the statutory
share exchange more
2
<PAGE>
than 70% of, respectively, the then outstanding common stock
and the voting power of the then outstanding voting
securities of such Parent entitled to vote generally in the
election of directors, and (ii) all holders of any class or
series of Outstanding Company Voting Securities immediately
prior to the statutory share exchange have the right to
receive substantially the same per share consideration in
exchange for their Outstanding Company Voting Securities as
all other holders of such class or series or (b) cash with
respect to fractional shares of Outstanding Company Voting
Securities or payable as a result of the exercise by holders
of Outstanding Company Voting Securities of statutory
dissenters' rights,
(C) sell or otherwise dispose of all or substantially
all of the assets of the Company (in one transaction or a
series of transactions), or
(D) liquidate or dissolve the Company,
unless a majority of the voting stock (or the voting equity
interest) of the surviving corporation or its parent corporation
or of any corporation (or other entity) acquiring all or
substantially all of the assets of the Company (in the case of a
merger, consolidation or disposition of assets) or the Company or
its Parent (in the case of a statutory share exchange) is,
immediately following the merger, consolidation, statutory share
exchange or disposition of assets, beneficially owned by the
Participant or a group of persons, including the Participant,
acting in concert.
(f) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(g) "Committee" means three or more Disinterested Persons designated
by the Board to administer this Plan under Section 3 hereof and constituted
so as to permit this Plan to comply with Exchange Act Rule 16b-3.
(h) "Company" means Tennant Company, a Minnesota corporation, or any
successor to all or substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.
(i) "Disability" means the disability of a Participant such that the
Participant is considered disabled under any retirement plan of the Company
which is qualified under Section 401 of the Code, or as otherwise
determined by the Committee.
(j) "Disinterested Person" means a member of the Board who is
considered a disinterested person within the meaning of Exchange Act Rule
16b-3.
(k) "Employee" means any full-time or part-time employee (including
an officer or director who is also an employee) of the Company or an
Affiliate. Except with respect to grants of Incentive Stock Options,
"Employee" shall also include other individuals and entities who are not
"employees" of the Company or an Affiliate but who provide services to the
Company or an Affiliate in the capacity of an independent contractor.
References in this Plan to "employment" and related terms shall include the
providing of services in any such capacity.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act as in effect with
respect to the Company or any successor regulation.
(m) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
3
<PAGE>
(i) the closing sale price of a Share (A) on the National
Association of Securities Dealers, Inc. Automated Quotation System
National Market System, or (B) if the Shares are not traded on such
system, on the composite tape for New York Stock Exchange ("NYSE")
listed shares, or (C) if the Shares are not quoted on the NYSE
composite tape, on the principal United States securities exchange
registered under the Exchange Act on which the Shares are listed, in
any case on the date immediately preceding that date, or, if no sale
of Shares shall have occurred on that date, on the next preceding day
on which a sale of Shares occurred, or
(ii) if clause (i) is not applicable, what the Committee
determines in good faith to be 100% of the fair market value of a
Share on that date.
However, if the applicable securities exchange or system has closed
for the day at the time the event occurs that triggers a determination of
Fair Market Value, all references in this paragraph to the "date
immediately preceding that date" shall be deemed to be references to "that
date." In the case of an Incentive Stock Option, if such determination of
Fair Market Value is not consistent with the then current regulations of
the Secretary of the Treasury, Fair Market Value shall be determined in
accordance with said regulations. The determination of Fair Market Value
shall be subject to adjustment as provided in Section 12(f) hereof.
(n) "Fundamental Change" means a dissolution or liquidation of the
Company, a sale of substantially all of the assets of the Company, a
merger or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, or a
statutory share exchange involving capital stock of the Company.
(o) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Code or
any successor to such section.
(p) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(q) "Other Stock-Based Award" means an Award of Stock or an Award
based on Stock other than Options, Stock Appreciation Rights, Restricted
Stock or Performance Shares.
(r) "Option" means a right to purchase Stock, including both Non-
Qualified Stock Options and Incentive Stock Options.
(s) "Parent" means a "parent corporation," as that term is defined in
Section 424(e) of the Code, or any successor provision.
(t) "Participant" means an Employee to whom an Award is made.
(u) "Performance Period" means the period of time as specified in an
Agreement over which Performance Shares are to be earned.
(v) "Performance Shares" means a contingent award of a specified
number of Performance Shares, with each Performance Share equivalent to one
Share, a variable percentage of which may vest depending upon the extent of
achievement of specified performance objectives during the applicable
Performance Period.
(w) "Plan" means this 1995 Stock Incentive Plan, as amended and in
effect from time to time.
(x) "Restricted Stock" means Stock granted under Section 10 hereof so
long as such Stock remains subject to one or more restrictions.
4
<PAGE>
(y) "Retirement" means termination of employment on or after age 55,
provided the Employee has been employed by the Company and/or one or more
Affiliates for at least ten years, or termination of employment on or after
age 62, provided in either case that the Employee has given the Company at
least six months' prior written notice of such termination, or as otherwise
determined by the Committee.
(z) "Share" means a share of Stock.
(aa) "Stock" means the common stock, $.375 par value per share (as
such par value may be adjusted from time to time), of the Company.
(bb) "Stock Appreciation Right" means a right, the value of which is
determined relative to appreciation in value of Shares pursuant to an Award
granted under Section 8 hereof.
(cc) "Subsidiary" means a "subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.
(dd) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant is
deceased, the legal representative of the estate of the Participant or the
person or persons who may, by bequest or inheritance, or under the terms of
an Award or of forms submitted by the Participant to the Committee under
Section 12(i) hereof, acquire the right to exercise an Option or Stock
Appreciation Right or receive cash and/or Shares issuable in satisfaction
of an Award in the event of a Participant's death.
(ee) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions placed on Restricted Stock or any other Award are in effect.
Except when otherwise indicated by the context, reference to the
masculine gender shall include, when used, the feminine gender and any term
used in the singular shall also include the plural.
3. ADMINISTRATION.
(a) AUTHORITY OF COMMITTEE. The Committee shall administer this
Plan. The Committee shall have exclusive power to make Awards and to
determine when and to whom Awards will be granted, and the form, amount and
other terms and conditions of each Award, subject to the provisions of this
Plan. The Committee may determine whether, to what extent and under what
circumstances Awards may be settled, paid or exercised in cash, Shares or
other Awards or other property, or canceled, forfeited or suspended. The
Committee shall have the authority to interpret this Plan and any Award or
Agreement made under this Plan, to establish, amend, waive and rescind any
rules and regulations relating to the administration of this Plan, to
determine the terms and provisions of any Agreements entered into hereunder
(not inconsistent with this Plan), and to make all other determinations
necessary or advisable for the administration of this Plan. The Committee
may correct any defect, supply any omission or reconcile any inconsistency
in this Plan or in any Award in the manner and to the extent it shall deem
desirable. The determinations of the Committee in the administration of
this Plan, as described herein, shall be final, binding and conclusive.
(b) DELEGATION OF AUTHORITY. The Committee may delegate all or any
part of its authority under this Plan to persons who are not Disinterested
Persons for purposes of determining and administering Awards solely to
Employees who are not then subject to the reporting requirements of Section
16 of the Exchange Act.
5
<PAGE>
(c) RULE 16b-3 COMPLIANCE. It is intended that this Plan and all
Awards granted pursuant to it shall be administered by the Committee so as
to permit this Plan and Awards to comply with Exchange Act Rule 16b-3. If
any provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed in this Section 3(c), that provision to
the extent possible shall be interpreted and deemed amended in the manner
determined by the Committee so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, the provision shall
be deemed void as applicable to Participants who are then subject to the
reporting requirements of Section 16 of the Exchange Act to the extent
permitted by law and in the manner deemed advisable by the Committee.
(d) INDEMNIFICATION. To the full extent permitted by law, each
member and former member of the Committee and each person to whom the
Committee delegates or has delegated authority under this Plan shall be
entitled to indemnification by the Company against and from any loss,
liability, judgment, damage, cost and reasonable expense incurred by such
member, former member or other person by reason of any action taken,
failure to act or determination made in good faith under or with respect to
this Plan.
4. SHARES AVAILABLE; MAXIMUM PAYOUTS.
(a) SHARES AVAILABLE. The number of Shares available for
distribution under this Plan is 250,000, based upon the authorized shares
of the Company on February 10, 1995, the effective date of this Plan
(subject to adjustment under Section 12(f) hereof).
(b) SHARES AGAIN AVAILABLE. Any Shares subject to the terms and
conditions of an Award under this Plan which are not used because the Award
expires without all Shares subject to such Award having been issued or
because the terms and conditions of the Award are not met may again be used
for an Award under this Plan. Any Shares that are the subject of Awards
which are subsequently forfeited to the Company pursuant to the
restrictions applicable to such Award may again be used for an Award under
this Plan. If a Participant exercises a Stock Appreciation Right, any
Shares covered by the Stock Appreciation Right in excess of the number of
Shares issued (or, in the case of a settlement in cash or any other form of
property, in excess of the number of Shares equal in value to the amount of
such settlement, based on the Fair Market Value of such Shares on the date
of such exercise) may again be used for an Award under this Plan. If, in
accordance with the Plan, a Participant uses Shares to (i) pay a purchase
or exercise price, including an Option exercise price, or (ii) satisfy tax
withholdings, such Shares may again be used for an Award under this Plan.
(c) UNEXERCISED AWARDS. Any unexercised or undistributed portion of
any terminated, expired, exchanged, or forfeited Award or any Award settled
in cash in lieu of Shares (except as provided in Section 4(b) hereof) shall
be available for further Awards.
(d) NO FRACTIONAL SHARES. No fractional Shares may be issued under
this Plan; fractional Shares will be rounded to the nearest whole Share.
(e) MAXIMUM PAYOUTS. No more than 25% of all Shares subject to this
Plan may be granted in the aggregate pursuant to Restricted Stock and Other
Stock-Based Awards.
5. ELIGIBILITY. Awards may be granted under this Plan to any Employee at
the discretion of the Committee.
6. GENERAL TERMS OF AWARDS.
(a) AWARDS. Awards under this Plan may consist of Options (either
Incentive Stock Options or Non-Qualified Stock Options), Stock Appreciation
Rights, Performance Shares, Restricted Stock and Other Stock-Based Awards.
Awards of Restricted Stock may, in the discretion of the Committee, provide
the Participant with dividends or dividend equivalents and voting rights
prior to vesting (whether vesting is based on a period of time, the
attainment of specified performance conditions or otherwise).
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(b) AMOUNT OF AWARDS. Each Agreement shall set forth the number of
Shares of Restricted Stock, Stock or Performance Shares subject to such
Agreement, or the number of Shares to which the Option applies or with
respect to which payment upon the exercise of the Stock Appreciation Right
is to be determined, as the case may be, together with such other terms and
conditions applicable to the Award (not inconsistent with this Plan) as
determined by the Committee in its sole discretion.
(c) TERM. Each Agreement, other than those relating solely to Awards
of Stock without restrictions, shall set forth the Term of the Award and
any applicable Performance Period for Performance Shares, as the case may
be, but in no event shall the Term of an Award or the Performance Period be
longer than ten years after the date of grant. An Agreement with a
Participant may permit acceleration of vesting requirements and of the
expiration of the applicable Term upon such terms and conditions as shall
be set forth in the Agreement, which may, but need not, include, without
limitation, acceleration resulting from the occurrence of a Change in
Control, a Fundamental Change, or the Participant's death, Disability or
Retirement. Acceleration of the Performance Period of Performance Shares
shall be subject to Section 9(b) hereof.
(d) AGREEMENTS. Each Award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in this Plan.
(e) TRANSFERABILITY. During the lifetime of a Participant to whom an
Award is granted, only such Participant (or such Participant's legal
representative or, if so provided in the applicable Agreement in the case
of a Non-Qualified Stock Option, a permitted transferee as hereafter
described) may exercise an Option or Stock Appreciation Right or receive
payment with respect to Performance Shares or any other Award. No Award of
Restricted Stock (prior to the expiration of the restrictions), Options,
Stock Appreciation Rights, Performance Shares or other Award (other than an
award of Stock without restrictions) may be sold, assigned, transferred,
exchanged, or otherwise encumbered, and any attempt to do so shall be of no
effect. Notwithstanding the immediately preceding sentence, (i) an
Agreement may provide that an Award shall be transferable to a Successor in
the event of a Participant's death and (ii) an Agreement may provide that a
Non-Qualified Stock Option shall be transferable to any member of a
Participant's "immediate family" (as such term is defined in Rule 16a-1(e)
promulgated under the Exchange Act, or any successor rule or regulation) or
to one or more trusts whose beneficiaries are members of such Participant's
"immediate family" or partnerships in which such family members are the
only partners; provided, however, that (1) the Participant receives no
consideration for the transfer and (2) such transferred Non-Qualified Stock
Option shall continue to be subject to the same terms and conditions as
were applicable to such Non-Qualified Stock Option immediately prior to its
transfer.
(f) TERMINATION OF EMPLOYMENT. Except as otherwise determined by the
Committee or provided by the Committee in an applicable Agreement, in case
of termination of employment, the following provisions shall apply:
(1) OPTIONS AND STOCK APPRECIATION RIGHTS.
(i) DEATH. If a Participant who has been granted an Option
or Stock Appreciation Rights shall die before such Option or
Stock Appreciation Rights have expired, the Option or Stock
Appreciation Rights shall become exercisable in full, and may be
exercised by the Participant's Successor at any time, or from
time to time, within five years after the date of the
Participant's death.
(ii) DISABILITY OR RETIREMENT. If a Participant's
employment terminates because of Disability or Retirement, the
Option or Stock Appreciation Rights shall become exercisable in
full, and the Participant may exercise his or her Options or
Stock Appreciation Rights at any time, or from time to time,
within (x) five years after the date of such termination if such
termination results from the Participant's disability or (y)
within three months, or such longer period as the Committee may
permit, after the date of such termination if such termination
results from the Participant's retirement.
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(iii) REASONS OTHER THAN DEATH, DISABILITY OR
RETIREMENT. If a Participant's employment terminates for any
reason other than death, Disability or Retirement, the unvested
or unexercised portion of any Award held by such Participant
shall terminate at the date of termination of employment.
(iv) EXPIRATION OF TERM. Notwithstanding the foregoing
paragraphs (i)-(iii), in no event shall an Option or a Stock
Appreciation Right be exercisable after expiration of the Term of
such Award.
(2) PERFORMANCE SHARES. If a Participant's employment with the
Company or any of its Affiliates terminates during a Performance
Period because of death, Disability or Retirement, or under other
circumstances provided by the Committee in its discretion in the
applicable Agreement, the Participant shall be entitled to a payment
of Performance Shares at the end of the Performance Period based upon
the extent to which achievement of performance targets was satisfied
at the end of such period (as determined at the end of the Performance
Period) and prorated for the portion of the Performance Period during
which the Participant was employed by the Company or any Affiliate.
Except as provided in this Section 6(f)(2) or in the applicable
Agreement, if a Participant's employment terminates with the Company
or any of its Affiliates during a Performance Period, then such
Participant shall not be entitled to any payment with respect to that
Performance Period.
(3) RESTRICTED STOCK. Unless otherwise provided in the
applicable Agreement, in case of a Participant's death, Disability or
Retirement, the Participant shall be entitled to receive that number
of shares of Restricted Stock under outstanding Awards which has been
pro rated for the portion of the Term of the Awards during which the
Participant was employed by the Company or any Affiliate, and with
respect to such Shares all restrictions shall lapse.
(g) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any securities covered by an Award until the
date the Participant becomes the holder of record.
7. STOCK OPTIONS.
(a) TERMS OF ALL OPTIONS. Each Option shall be granted pursuant to
an Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option. Only Non-Qualified Stock Options may be granted to Employees who
are not employees of the Company or an Affiliate. The purchase price of
each Share subject to an Option shall be determined by the Committee and
set forth in the Agreement, but shall not be less than 100% of the Fair
Market Value of a Share as of the date the Option is granted. The purchase
price of the Shares with respect to which an Option is exercised shall be
payable in full at the time of exercise, provided that, to the extent
permitted by law, Participants may simultaneously exercise Options and sell
the Shares thereby acquired pursuant to a brokerage or similar relationship
and use the proceeds from such sale to pay the purchase price of such
Shares. The purchase price may be paid in cash or, if the Committee so
permits, through a reduction of the number of Shares delivered to the
articipant upon exercise of the Option or delivery to the Company of
Shares held by such Participant (in each case, such Shares having a Fair
Market Value as of the date the Option is exercised equal to the purchase
price of the Shares being purchased pursuant to the Option), or a
combination thereof, unless otherwise provided in the Agreement. If the
Committee so determines, the Agreement relating to any Option may provide
for the issuance of "reload" Options pursuant to which, subject to the
terms and conditions established by the Committee and any applicable
requirements of Exchange Act Rule 16b-3 or any other applicable law, the
Participant will, either automatically or subject to subsequent Committee
approval, be granted a new Option when the payment of the exercise price of
the original Option, or the payment of tax withholdings pursuant to Section
12(d) hereof, is made through the delivery to the Company of Shares held by
such Participant, such new "reload" Option (i) being an Option to purchase
the number of Shares provided as consideration for the exercise price and
in payment of taxes in connection with the exercise of the original Option,
and (ii) having a per Share
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exercise price equal to the Fair Market Value as of the date of exercise of
the original Option. Each Option shall be exercisable in whole or in part
on the terms provided in the Agreement. In no event shall any Option be
exercisable at any time after its Term. When an Option is no longer
exercisable, it shall be deemed to have lapsed or terminated. No
Participant may receive any combination of Options to purchase and Stock
Appreciation Rights relating to more than 50,000 Shares in the aggregate
pursuant to Awards in any year under this Plan.
(b) INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the date
Option is granted) of the Shares with respect to which Incentive
Stock Options held by an individual first become exercisable in any
calendar year (under this Plan and all other incentive stock option
plans of the Company and its Affiliates) shall not exceed $100,000 (or
such other limit as may be required by the Code), if such limitation
is necessary to qualify the Option as an Incentive Stock Option, and
to the extent an Option or Options granted to a Participant exceed
such limit, such Option or Options shall be treated as a Non-Qualified
Stock Option;
(ii) an Incentive Stock Option shall not be exercisable and the
Term of the Award shall not be more than ten years after the date of
grant (or such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive Stock
Option;
(iii) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee determines
necessary to qualify such Option as an Incentive Stock Option; and
(iv) notwithstanding any other provision of this Plan to the
contrary, no Participant may receive an Incentive Stock Option under
this Plan if, at the time the Award is granted, the Participant owns
(after application of the rules contained in Section 424(d) of the
Code, or its successor provision) Shares possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company or its subsidiaries, unless (A) the option price for such
Incentive Stock Option is at least 110% of the Fair Market Value of
the Shares subject to such Incentive Stock Option on the date of grant
and (B) such Option is not exercisable after the date five years from
the date such Incentive Stock Option is granted.
8. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by
the by the Committee, to receive upon exercise of the Stock Appreciation Right
all or a portion of the excess of (i) the Fair Market Value of a specified
number of Shares as of the date of exercise of the Stock Appreciation Right over
(ii) a specified price which shall not be less than 100% of the Fair Market
Value of such Shares as of the date of grant of the Stock Appreciation Right.
A Stock Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. Notwithstanding anything to the contrary stated
in this Plan, no Stock Appreciation Right shall be exercisable prior to six
months from the date of grant except in the event of the death or Disability of
the Participant. No Stock Appreciation Right shall be exercisable at any time
after its Term. When a Stock Appreciation Right is no longer exercisable, it
shall be deemed to have lapsed or terminated. Except as otherwise provided in
the applicable Agreement, upon exercise of a Stock Appreciation Right, payment
to the Participant (or to his or her Successor) shall be made in the form of
cash, Stock or a combination of cash and Stock as promptly as practicable after
such exercise. The Agreement may provide for a limitation upon the amount or
percentage of the total appreciation on which payment (whether in cash and/or
Stock) may be made in the event of the exercise of a Stock Appreciation Right.
As specified in Section 7(a) hereof, no Participant may receive any combination
of Options to purchase and Stock Appreciation Rights relating to more than
50,000 Shares in the aggregate pursuant to Awards in any year under this Plan.
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9. PERFORMANCE SHARES.
(a) INITIAL AWARD. An Award of Performance Shares shall entitle a
Participant (or a Successor) to future payments based upon the achievement
of performance targets established in writing by the Committee. Payment
shall be made in Stock, or a combination of cash and Stock, as determined
by the Committee, provided that at least 25% of the value of the vested
Performance Shares shall be distributed in the form of Stock. With respect
to those Participants who are "covered employees" within the meaning of
Section 162(m) of the Code and the regulations thereunder, such performance
targets shall consist of one or any combination of two or more of earnings
or earnings per share before income tax (profit before taxes), net earnings
or net earnings per share (profits after tax), inventory, total, or net
operating asset turnover, operating income, total shareholder return,
return on equity, pre-tax and pre-interest expense return on average
invested capital, which may be expressed on a current value basis, or sales
growth, and any such targets may relate to one or any combination of two or
more of corporate, group, unit, division, Affiliate or individual
performance. The Agreement may establish that a portion of the maximum
amount of a Participant's Award will be paid for performance which exceeds
the minimum target but falls below the maximum target applicable to such
Award. The Agreement shall also provide for the timing of such payment.
Following the conclusion or acceleration of each Performance Period, the
Committee shall determine the extent to which (i) performance targets have
been attained, (ii) any other terms and conditions with respect to an Award
relating to such Performance Period have been satisfied, and (iii) payment
is due with respect to a Performance Share Award. No Participant may
receive Performance Shares relating to more than 50,000 Shares pursuant to
Awards in any year under this Plan.
(b) ACCELERATION AND ADJUSTMENT. The Agreement may permit an
acceleration of the Performance Period and an adjustment of performance
targets and payments with respect to some or all of the Performance Shares
awarded to a Participant, upon such terms and conditions as shall be set
forth in the Agreement, upon the occurrence of certain events, which may,
but need not, include without limitation a Change in Control, a Fundamental
Change, the Participant's death, Disability or Retirement, a change in
accounting practices of the Company or its Affiliates, or, with respect to
payments in Stock for Performance Share Awards, a reclassification, stock
dividend, stock split or stock combination as provided in Section 12(f)
hereof.
(c) VALUATION. Each Performance Share earned after conclusion of a
Performance Period shall have a value equal to the Fair Market Value of a
Share on the last day of such Performance Period.
10. RESTRICTED STOCK. Subject to Section 4(e), Restricted Stock may be
granted in the form of Shares registered in the name of the Participant but held
by the Company until the end of the Term of the Award. Any employment
conditions, performance conditions and the Term of the Award shall be
established by the Committee in its discretion and included in the applicable
Agreement. The Committee may provide in the applicable Agreement for the lapse
or waiver of any such restriction or condition based on such factors or criteria
as the Committee, in its sole discretion, may determine. No Award of Restricted
Stock may vest earlier than one year from the date of grant, except as provided
in the applicable Agreement.
11. OTHER STOCK-BASED AWARDS. Subject to Section 4(e), the Committee may
from time to time grant Awards of Stock, and other Awards under this Plan
(collectively herein defined as "Other Stock-Based Awards"), including without
limitation those Awards pursuant to which Shares may be acquired in the future,
such as Awards denominated in Stock units, securities convertible into Stock and
phantom securities. The Committee, in its sole discretion, shall determine the
terms and conditions of such Awards provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan. The Committee may, in
its sole discretion, direct the Company to issue Shares subject to restrictive
legends and/or stop transfer instructions which are consistent with the terms
and conditions of the Award to which such Shares relate.
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12. GENERAL PROVISIONS.
(a) EFFECTIVE DATE OF THIS PLAN. This Plan shall become effective as
of February 10,1995, provided that this Plan is approved and ratified by
the affirmative vote of the holders of a majority of the outstanding Shares
of Stock present or represented and entitled to vote in person or by proxy
at a meeting of the shareholders of the Company no later than May 31, 1995.
If this Plan is not so approved by such holders, any Awards granted under
this Plan subject to such approval shall be null and void.
(b) DURATION OF THIS PLAN. This Plan shall remain in effect until
all Stock subject to it shall be distributed or all Awards have expired or
lapsed, whichever is latest to occur, or this Plan is terminated pursuant
to Section 12(e) hereof. No Award of an Incentive Stock Option shall be
made more than ten years after the effective date provided in Section 12(a)
hereof (or such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive Stock Option.
The date and time of approval by the Committee of the granting of an Award
shall be considered the date and time at which such Award is made or
granted, notwithstanding the date of any Agreement with respect to such
Award; provided, however, that the Committee may grant Awards other than
Incentive Stock Options to be effective and deemed to be granted on the
occurrence of certain specified contingencies.
(c) RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Plan or in any
Agreement shall confer upon any Participant who is an Employee the right to
continue in the employment of the Company or any Affiliate or affect any
right which the Company or any Affiliate may have to terminate or modify
the employment of the Participant with or without cause.
(d) TAX WITHHOLDING. The Company may withhold from any payment of
cash or Stock to a Participant or other person under this Plan an amount
sufficient to cover any required withholding taxes, including the
Participant's social security and Medicare taxes (FICA) and federal, state
and local income tax with respect to income arising from payment of the
Award. The Company shall have the right to require the payment of any such
taxes before issuing any Stock pursuant to the Award. In lieu of all or
any part of a cash payment from a person receiving Stock under this Plan,
the individual may elect to cover all or any part of the required
withholdings, and to cover any additional withholdings up to the amount
needed to cover the individual's full FICA and federal, state and local
income tax with respect to income arising from payment of the Award,
through a reduction of the number of Shares delivered to such individual or
a subsequent return to the Company of Shares held by the Participant or
other person, in each case valued in the same manner as used in computing
the withholding taxes under the applicable laws, subject to the limitations
of the following sentence. Unless the Committee otherwise permits, such
elections are subject to the following limitations if, and to the extent,
such limitations are necessary to comply with Exchange Act Rule 16b-3 or
any successor provision:
(1) Except as set forth in clause (iii) below, any such election
by a Participant who is then subject to the reporting requirements of
Section 16 of the Exchange Act or any successor provision ("Section
16") or a Successor of such a Participant shall be subject to the
conditions set forth in clauses (i) and (ii) below:
(i) (A) the election shall be made during the period
beginning on the third business day following the date of public
release of the Company's quarterly or annual summary statements
of sales and earnings and ending on the twelfth business day
following such date, or (B) the election shall be made at least
six months prior to the date the Award is paid to the
Participant;
(ii) a period of at least six months shall elapse between
the date of grant of the Award to which the payment relates and
the date such Award is paid to the Participant; provided,
however, that such restriction does not apply in the event death
or Disability of the Participant occurs prior to such election
and during that six-month period;
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(iii) notwithstanding the foregoing, a Participant who
tenders previously owned Shares to the Company in payment of the
purchase price of Shares in connection with exercise of an Option
may also tender previously owned Shares to the Company in
satisfaction of any tax withholding obligations in connection
with such Option exercise without regard to the time periods set
forth in clauses (i) and (ii) above.
The foregoing restrictions do not apply to any Participant who is not
subject to the reporting requirements of Section 16 at the time of the
election.
(2) Any such election by a Participant who is subject to the
reporting requirements of Section 16 at the time is irrevocable and is
subject to approval by the Committee. The Committee's approval may be
granted in advance but is subject to revocation by the Committee at
any time.
(e) AMENDMENT, MODIFICATION AND TERMINATION OF THIS PLAN. Except as
provided in this Section 12(e), the Board may at any time amend, modify,
terminate or suspend this Plan. Except as provided in this Section 12(e),
the Committee may at any time alter or amend any or all Agreements under
this Plan to the extent permitted by law. Amendments are subject to
approval of the shareholders of the Company only if such approval is
necessary to maintain this Plan in compliance with the requirements of
Exchange Act Rule 16b-3, Section 422 of the Code, their successor
provisions, or any other applicable law or regulation. No termination,
suspension or modification of this Plan may materially and adversely affect
any right acquired by any Participant (or a Participant's legal
representative) or any Successor under an Award granted before the date of
termination, suspension or modification, unless otherwise agreed by the
Participant in the Agreement or otherwise or required as a matter of law.
It is conclusively presumed that any adjustment for changes in
capitalization provided for in Section 9(b) or 12(f) hereof does not
adversely affect any right of a Participant under an Award.
(f) ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate
adjustments in the aggregate number and type of Shares available for Awards
under this Plan, in the limitations on the number and type of Shares that
may be issued to an individual Participant, in the number and type of
Shares and amount of cash subject to Awards then outstanding, in the Option
exercise price as to any outstanding Options and, subject to Section 9(b)
hereof, in outstanding Performance Shares and payments with respect to
outstanding Performance Shares may be made by the Committee in its sole
discretion to give effect to adjustments made in the number or type of
Shares through a Fundamental Change (subject to Section 12(g) hereof),
recapitalization, reclassification, stock dividend, stock split, stock
combination, or other relevant change, provided that fractional Shares
shall be rounded to the nearest whole Share.
(g) FUNDAMENTAL CHANGE. In the event of a proposed Fundamental
Change: (a) involving a merger, consolidation or statutory share exchange,
unless appropriate provision shall be made (which the Committee may, but
shall not be obligated to, make) for the protection of the outstanding
Options and Stock Appreciation Rights by the substitution of options, stock
appreciation rights and appropriate voting common stock of the corporation
surviving any such merger or consolidation or, if appropriate, the Parent
of such surviving corporation, to be issuable upon the exercise of options
or used to calculate payments upon the exercise of stock appreciation
rights in lieu of Options, Stock Appreciation Rights and capital stock of
the Company, or (b) involving the dissolution or liquidation of the
Company, the Committee may, but shall not be obligated to, declare, at
least twenty days prior to the occurrence of the Fundamental Change, and
provide written notice to each holder of an Option or Stock Appreciation
Right of the declaration, that each outstanding Option and Stock
Appreciation Right, whether or not then exercisable, shall be canceled at
the time of, or immediately prior to the occurrence of, the Fundamental
Change in exchange for payment to each holder of an Option or Stock
Appreciation Right, within 20 days after the Fundamental Change, of cash
equal to (i) for each Share covered by the canceled Option, the amount, if
any, by which the Fair Market Value (as defined in this Section 12(g)) per
Share exceeds the exercise price per Share covered by such Option or (ii)
for each Stock Appreciation Right, the price determined pursuant to Section
8 hereof, except that Fair Market Value of the Shares as of the date of
exercise of the Stock Appreciation Right, as used in clause (i) of Section
8, shall be deemed to mean Fair Market Value for each Share with respect to
which the Stock Appreciation Right is calculated
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determined in the manner hereinafter referred to in this Section 12(g). At
the time of the declaration provided for in the immediately preceding
sentence, each Stock Appreciation Right that has been outstanding for at
least six months and each Option shall immediately become exercisable in
full and each person holding an Option or a Stock Appreciation Right shall
have the right, during the period preceding the time of cancellation of the
Option or Stock Appreciation Right, to exercise the Option as to all or any
part of the Shares covered thereby or the Stock Appreciation Right in whole
in part, as the case may be. In the event of a declaration pursuant to
this Section 12(g), each outstanding Option and Stock Appreciation Right
that shall not have been exercised prior to the Fundamental Change shall be
canceled at the time of, or immediately prior to, the Fundamental Change,
as provided in the declaration. Notwithstanding the foregoing, no person
holding an Option or Stock Appreciation Right shall be entitled to the
payment provided for in this Section 12(g) if such Option or Stock
Appreciation Right shall have expired pursuant to an Agreement. For
purposes of this Section 12(g) only, "Fair Market Value" per Share means
the cash plus the fair market value, as determined in good faith by the
Committee, of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Fundamental Change,
notwithstanding anything to the contrary provided in this Plan.
(h) OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award shall not be deemed a
part of a Participant's regular, recurring compensation for purposes of any
termination, indemnity or severance pay laws and shall not be included in,
nor have any effect on, the determination of benefits under any other
employee benefit plan, contract or similar arrangement provided by the
Company or an Affiliate, unless expressly so provided by such other plan,
contract or arrangement or the Committee determines that an Award or
portion of an Award should be included to reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion
of competitive cash compensation.
(i) BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the
transfer of a Participant's Award at death is permitted by this Plan or
under an Agreement, (i) a Participant's Award shall be transferable to the
beneficiary, if any, designated on forms prescribed by and filed with the
Committee and (ii) upon the death of the Participant, such beneficiary
shall succeed to the rights of the Participant to the extent permitted by
law and this Plan. If no such designation of a beneficiary has been made,
the Participant's legal representative shall succeed to the Awards, which
shall be transferable by will or pursuant to laws of descent and
distribution to the extent permitted by this Plan or under an Agreement.
(j) UNFUNDED PLAN. This Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented
by Awards under this Plan. Neither the Company, its Affiliates, the
Committee, nor the Board shall be deemed to be a trustee of any amounts to
be paid under this Plan nor shall anything contained in this Plan or any
action taken pursuant to its provisions create or be construed to create a
fiduciary relationship between the Company and/or its Affiliates, and a
Participant or Successor. To the extent any person acquires a right to
receive an Award under this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company.
(k) LIMITS OF LIABILITY.
(i) Any liability of the Company to any Participant with respect
to an Award shall be based solely upon contractual obligations created
by this Plan and the Agreement.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or of the Committee, nor any
other person participating (including participation pursuant to a
delegation of authority under Section 3(b) hereof) in any
determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall have
any liability to any party for any action taken, or not taken, in good
faith under this Plan.
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(l) COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS. No certificate
for Shares distributable pursuant to this Plan shall be issued and
delivered unless the issuance of such certificate complies with all
applicable legal requirements including, without limitation, compliance
with the provisions of applicable state securities laws, the Securities Act
of 1933, as amended and in effect from time to time or any successor
statute, the Exchange Act and the requirements of the exchanges, if any, on
which the Company's Shares may, at the time, be listed.
(m) DEFERRALS AND SETTLEMENTS. The Committee may require or permit
Participants to elect to defer the issuance of Shares or the settlement of
Awards in cash under such rules and procedures as it may establish under
this Plan. It may also provide that deferred settlements include the
payment or crediting of interest on the deferral amounts.
13. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
14. SEVERABILITY. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
15. PRIOR PLAN. Notwithstanding the adoption of this Plan by the Board
and approval of this Plan by the Company's shareholders as provided by Section
12(a) hereof, the Company's 1992 Stock Incentive Plan, as amended (the
"Incentive Plan"), shall remain in effect and the Committee may continue to make
grants of performance shares, restricted stock and any other awards pursuant to
and subject to the limitations of the Incentive Plan. All grants and awards
heretofore or hereafter made under the Incentive Plan shall be governed by the
terms of the Incentive Plan.
14
<PAGE>
TENNANT COMPANY
("CORPORATION")
RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS
("PLAN")
(As Amended and Restated Effective January 1, 1995)
1. COMPENSATION.
Members of the Corporation's board of directors (the "Board") who are
not employees of the Corporation ("Nonemployee Directors") are compensated by
means of fees including: (i) an annual retainer designated as a fixed dollar
amount ("Annual Retainer") for the year which commences on the day immediately
after the date of each Annual Meeting of the Corporation's shareholders and ends
on the day of the next succeeding Annual Meeting ("Board Year"); and
(ii) meeting fees for attendance at meetings of the Board and committees
thereof.
2. PURPOSE; DEFINITIONS.
The purpose of the Plan is to provide for the issuance of shares of
the Corporation's common stock ("Shares") in lieu of the Annual Retainer, such
Shares generally to be issued at the commencement of every third Board Year in
lieu of the Annual Retainers for the three succeeding Board Years.
For purposes of the Plan: (i) the first business day of the Board
Year commencing in 1993 and the first business day of every third Board Year
thereafter shall each be referred to as a "Regular Issuance Date"; and (ii) the
Annual Retainers for the two Board Years succeeding the Board Year in which a
Regular Issuance Date occurs shall be assumed to be in an amount equal to the
Annual Retainer for the Board Year in which such Regular Issuance Date occurs.
3. ISSUANCE OF RESTRICTED SHARES.
(a) In lieu of the Annual Retainers for the Board Year commencing in
1993 and the next two succeeding Board Years: (i) on the first business day of
the Board Year commencing in 1993, the Corporation shall issue to each then
incumbent Nonemployee Director Restricted Shares (as hereinafter defined) having
a Fair Market Value (as hereinafter defined) equal to 100% of the Annual
Retainers for such three Board Years; and (ii) on the first business day of
January, 1995, the Corporation shall issue to each then incumbent Nonemployee
Director Restricted Shares having a fair market value equal to 50% of the Annual
Retainers for the remaining portion (pro-rated based on the number of days
remaining in such Board Year) of the Board Year commencing in 1994 and the Board
Year commencing in 1995.
(b) On the Regular Issuance Date in the years 1996, 1999 and 2002,
the Corporation shall issue to each then incumbent Nonemployee Director, in lieu
of the Annual Retainers for the Board Year then commencing and the next two
succeeding Board Years, Restricted Shares having a Fair Market Value equal to
150% of the Annual Retainers for such three Board Years.
(c) With respect to any Nonemployee Director who is first elected or
appointed to the Board on a date other than the date of the Annual Meeting of
the Corporation's shareholders immediately preceding a Regular Issuance Date,
the Corporation shall issue to such Nonemployee Director on the date following
the date such Nonemployee Director's service commences, in lieu of the Annual
Retainer or Annual Retainers for the period from the date such Nonemployee
Director's service commences until the next Regular Issuance Date, Restricted
Shares having a Fair Market Value equal to either (i) 100% of the Annual
Retainer or Annual Retainers for such period with respect to Nonemployee
Directors first elected or appointed to the Board after the Regular Issuance
Date in 1993 and on or before January 1, 1995 or (ii) 150% of the Annual
Retainer or Annual Retainers for such period with respect to Nonemployee
Directors first elected or appointed to the Board after January 1, 1995. For
this purpose, the Annual Retainer for any fraction of a Board Year shall be pro-
rated based on the portion of the Board Year occurring from and after the date
that the Nonemployee Director's service commences.
1
<PAGE>
(d) The Board may from time to time increase or decrease the
designated fixed dollar amount of the Annual Retainer, provided that the Board
shall not change the amount of the Annual Retainer for purposes of the Plan more
frequently than once every six months. For purposes of the Plan, unless the
Board designates a subsequent effective date, any such increase or decrease in
the Annual Retainer shall be considered to be effective on the business day
immediately following the date on which the Board action was taken resulting in
such increase or decrease. If the Annual Retainer is decreased, there shall be
no adjustment in the number of Restricted Shares previously issued pursuant to
the Plan. If the Annual Retainer is increased effective as of any date other
than a Regular Issuance Date, then the Corporation shall, on the date such
increased Annual Retainer becomes effective, issue to each then incumbent
Nonemployee Director (other than a Nonemployee Director first elected or
appointed to the Board on the date preceding the date such increased Annual
Retainer became effective), in lieu of such increased amount of Annual Retainer
for the period from the date such increased Annual Retainer became effective
until the next Regular Issuance Date, Restricted Shares having a Fair Market
Value equal to 150% of the amount by which the Annual Retainer or Annual
Retainers for such period was increased. For this purpose, the Annual Retainer
for any fraction of a Board Year shall be pro-rated based on the portion of the
Board Year occurring from and after the date that the increased Annual Retainer
became effective.
4. FAIR MARKET VALUE.
For purposes of converting dollar amounts to a number of Restricted
Shares, the Fair Market Value of each Restricted Share shall be equal to the
average closing price of one share of the Corporation's Shares on the NASDAQ
National Market System on the ten trading days preceding the date on which such
Restricted Shares are issued.
5. RESTRICTED SHARES.
Shares issued under Section 3 shall be restricted ("Restricted
Shares") and may not be sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of (including, without limitation, transfer by gift or
donation). Such restrictions shall lapse upon the first to occur of the
following events:
(a) Death of the Nonemployee Director;
(b) Disability of the Nonemployee Director preventing continued
service on the Board;
(c) Retirement of the Nonemployee Director from the Board in
accordance with the policy of the Corporation, if any, on retirement of
Nonemployee Directors then in effect;
(d) Termination of service as a director by reason of (i) resignation
at the request of the Board, (ii) the director's failure to have been nominated
for re-election to the Board or to have been re-elected by the shareholders of
the Corporation or (iii) the director's removal by the shareholders of the
Corporation; or
(e) A change in control (as defined in Section 6) of the Corporation
shall occur.
Notwithstanding the foregoing, in no event shall the restrictions on
the Shares lapse prior to the expiration of six months after the date of the
issuance of the Restricted Shares pursuant to this Plan. The certificates for
Shares which are subject to this Section may, at the option of the Secretary of
the Corporation, be held by the Corporation until the lapse of restrictions as
provided in this Section, provided, however, the Nonemployee Director shall be
entitled to all voting, dividend and distribution rights for such Shares.
Upon the occurrence of an event causing the restrictions on Restricted
Shares held by a Nonemployee Director to lapse, those Restricted Shares held by
such Nonemployee Director as to which the restrictions do not lapse (that is,
the number of Restricted Shares issued to such Nonemployee Director in payment
of the Annual Retainer for Board Years commencing following the occurrence of
such event) shall be forfeited and revert to the Corporation.
2
<PAGE>
6. CHANGE IN CONTROL.
For purposes of this Plan, "change in control" means:
(a) A majority of the directors of the Corporation shall be
persons other than persons
(i) For whose election proxies shall have been solicited by
the Board, or
(ii) Who are then serving as directors appointed by the
Board to fill vacancies on the Board caused by death or resignation (but not by
removal) or to fill newly-created directorships,
(b) 30% or more of the outstanding voting stock of the Corporation
is acquired or beneficially owned (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, or any successor rule thereto) by any person
(other than the Corporation or a subsidiary of the Corporation) or group of
persons acting in concert (other than the acquisition and beneficial ownership
by a parent corporation or its wholly owned subsidiaries, as long as they remain
wholly owned subsidiaries, of 100% of the outstanding voting stock of the
Corporation as a result of a merger which complies with paragraph (c)(i) (2)
hereof in all respects), or
(c) The shareholders of the Corporation approve a definitive
agreement or plan to
(i) Merge or consolidate the Corporation with or into
another corporation other than
(1) a merger or consolidation with a subsidiary of
the Corporation or
(2) a merger in which
(A) the Corporation is the surviving corporation,
(B) no outstanding voting stock of the
Corporation (other than fractional shares) held by shareholders immediately
prior to the merger is converted into cash, securities, or other property
(except (I) voting stock of a parent corporation owning directly, or indirectly
through wholly owned subsidiaries, both beneficially and of record 100% of the
voting stock of the Corporation immediately after the merger and (II) cash upon
the exercise by holders of voting stock of the Corporation of statutory
dissenters' rights),
(C) the persons who were the beneficial owners,
respectively, of the outstanding common stock and outstanding voting stock of
the Corporation immediately prior to such merger beneficially own, directly or
indirectly, immediately after the merger, more than 70% of, respectively, the
then outstanding common stock and the then outstanding voting stock of the
surviving corporation or its parent corporation, and
(D) if voting stock of the parent corporation is
exchanged for voting stock of the Corporation in the merger, all holders of any
class or series of voting stock of the Corporation immediately prior to the
merger have the right to receive substantially the same per share consideration
in exchange for their voting stock of the Corporation as all other holders of
such class or series,
(ii) exchange, pursuant to a statutory exchange of shares of
voting stock of the Corporation held by shareholders of the Corporation
immediately prior to the exchange, shares of one or more classes or series of
voting stock of the Corporation for cash, securities, or other property,
(iii) sell or otherwise dispose of all or substantially all
of the assets of the Corporation (in one transaction or a series of
transactions), or
(iv) liquidate or dissolve the Corporation.
3
<PAGE>
7. FORFEITURE.
In addition to the forfeiture provided for in the final paragraph of
Section 5 hereof, if a Nonemployee Director ceases to be a Director of the
Corporation within six months after the date of an issuance of Restricted Shares
for any reason or thereafter for any reason other than upon the occurrence of
one of the events described in Section 5, the Restricted Shares issued to such
Nonemployee Director shall be forfeited and revert to the Corporation.
8. FRACTIONS OF SHARES.
The Corporation shall not be required to issue fractions of Shares.
Whenever under the terms of the Plan a fractional Share would be required to be
issued, an amount in lieu thereof shall be paid in cash for such fractional
Share based upon the same Fair Market Value as was utilized to determine the
number of Shares to be issued on the relevant issuance date.
9. WITHHOLDING TAXES.
Whenever under the Plan Shares are to be issued, restrictions are to
be changed or eliminated or, in the judgment of the Corporation, it is
appropriate, the Corporation shall have the right to require the recipient to
remit to the Corporation an amount in cash sufficient to satisfy any applicable
federal, state and local withholding tax requirements.
10. GENERAL RESTRICTION.
The issuance of Shares or the delivery of certificates for such Shares
to Nonemployee Directors hereunder shall be subject to the requirement that, if
at any time the Secretary of the Corporation shall reasonably determine, in his
or her discretion, that the listing, registration or qualification of such
Shares upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, such issuance or delivery hereunder,
such issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the Secretary.
11. AMENDMENT; TERM; SHARES AVAILABLE.
The Board may, at any time, amend or terminate the Plan; provided that
no amendment or termination shall, without the consent of a Nonemployee
Director, reduce such Nonemployee Director's rights in respect of Restricted
Shares previously granted, and provided further that provisions relating to
grants made pursuant to Section 3 may not be amended more often than once every
six months other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder. No Shares
shall be issued pursuant to this Plan in lieu of any Annual Retainer for any
period commencing after the Annual Meeting of the Corporation's shareholders in
2005. Not more than 25,000 Shares may be issued under this Plan; provided, that
in the event of a recapitalization, reclassification, stock dividend, stock
split, stock combination, or other relevant change affecting the capitalization
of the Corporation, the number of shares issuable under this Plan shall be
appropriately adjusted. If at any time there are not sufficient Shares
available under this Plan to permit the issuance of all of the Restricted Shares
to be issued at such time pursuant to Section 3, then this Plan shall
automatically terminate and no further Shares shall be issued hereunder.
12. RIGHTS UNDER PLAN.
The Plan confers no right to be nominated or elected to the Board nor
does it confer any rights to continue to serve on the Board independent of the
Corporation's by-laws and applicable public law. Prior to actual issuance of
Shares, no rights to dividends or voting rights are conferred by the Plan.
4
<PAGE>
13. CONSTRUCTION AND ADMINISTRATION.
The Plan shall be construed and interpreted in accordance with
Minnesota law. The ministerial duties of administering this Plan are delegated
to the Secretary.
14. EFFECTIVENESS.
The Plan originally became effective on May 7, 1993, and the Plan, as
Amended and Restated, shall be effective January 1, 1995; provided, however,
that the amendment and restatement of the Plan and the issuance of additional
shares pursuant thereto shall be subject to approval by the Corporation's
shareholders at the Annual Meeting thereof in the year 1995. If the Plan, as
Amended and Restated, is not approved by the shareholders of the Corporation at
the Annual Meeting thereof in the year 1995, then the amendment and restatement
of the Plan shall be null and void and additional Restricted Shares issued
pursuant thereto, together with any dividends or distributions thereon, shall be
forfeited and revert to the Corporation.
5
<PAGE>
TO OUR SHAREHOLDERS
SALES AND EARNINGS INCREASE
Net earnings for the 1995 second quarter were $5.3 million, or 53 cents per
share, up 25 percent compared with last year's $4.2 million, or 43 cents per
share. Net sales of $82.8 million rose 17 percent from the $70.8 million
reported for 1994's second quarter. This represented the seventh consecutive
quarter of record year-over-year gains in sales and earnings.
For the six-month period ended June 30, 1995, net earnings were $9.1
million, or 92 cents per share, up 33 percent compared with last year's $6.9
million, or 70 cents per share. Net sales of $156.9 million rose 21 per cent
from the $129.2 million reported for the same period in 1994. North American
sales increased 18 percent and overseas sales were up 32 percent. A weaker U.S.
dollar increased consolidated sales by $3.9 million.
OPERATING RESULTS CONTINUE TO IMPROVE
Our operating margin has improved to 8.5 percent of sales from 8 percent last
year on strong sales gains and a better gross margin. While reported sales and
selling and administrative expenses were both up 21 percent, about two-fifths of
the increases came from the carryover effects of 1994 acquisitions and the
weaker U.S. dollar. However, these items did not have a material effect on
profit from operations or net earnings.
Excluding currency changes and acquisition carryover effects, our strongest
year-to-date sales gains came from floor coatings products, and industrial
equipment products in North America and most other areas with the primary
exceptions being Australia, Japan, and several European countries including
Germany. Worldwide sales of commercial equipment products saw double-digit
increases.
We are quite pleased with this overall sales result, given the persistent
news reports of weak economic conditions. Key factors in the favorable result
for Tennant were the significant number of new products introduced over the past
several years and a relatively high fill rate for our North American sales
force.
1995 OUTLOOK: RECORD SALES AND EARNINGS EXPECTED
At the end of first quarter, I indicated that our primary profitability
challenges for 1995 were to improve results in Europe and in our commercial
business in North America. I am pleased to report that tangible progress was
made in the second quarter. While both units need further improvements, we
believe they are on track towards an acceptable full year result.
With the above in mind, and an expectation that worldwide economic
conditions will turn more positive, we are focused on achieving an overall
operating margin in the 9 percent range for the remainder of 1995. This would
pull the full year result above 9 percent, compared with an 8.7 percent margin
for the full year 1994. On this basis, we believe 1995 full-year profitability
will surpass last year's 18.7 percent return on beginning equity, and we have
not ruled out hitting our long-term goal of a 20 percent return.
Roger L. Hale
CHIEF EXECUTIVE OFFICER July 19, 1995
<PAGE>
TENNANT AT A GLANCE
Our vision is to work for a cleaner and safer world. That's why we are in
business. Clean work places and public places are safer and are more attractive
for both employees and customers. To be cleaner and safer is the mark of a
progressive company; to be cleaner and safer is the mark of an advanced country.
The world wants to be cleaner and safer.
Our mission is to be the preeminent company in non-residential floor
maintenance equipment, floor coatings, and related offerings. That is what we
do.
A second but equally important aspect of our mission is to create value for
our shareholders providing an above-average total return. We expect to
accomplish this by achieving our long-term financial goals which call for 5%
real (inflation adjusted) sales growth and a 20% return on shareholders' equity.
Tennant offers a broad array of products in the non-residential floor
maintenance industry:
* INDUSTRIAL FLOOR MAINTENANCE EQUIPMENT (75% OF 1994 SALES): Cleans surfaces
with vehicle and heavy foot traffic such as factories, warehouses, stadiums
and parking garages. Tennant is recognized as the world-leading
manufacturer.
* COMMERCIAL FLOOR MAINTENANCE EQUIPMENT (19% OF 1994 SALES): Cleans surfaces
with foot traffic such as office buildings, retail outlets and hospitals.
Our newest and fastest growing business.
* FLOOR COATINGS (6% OF 1994 SALES): Broad line of sealers, resurfacers, and
urethane coatings including environmentally friendly Eco-Coatings
[Trademark]. Now on faster growth track after undergoing several years of
restructuring.
The competitive strengths and growth strategies for each of the three product
lines are outlined in our 1994 Annual Report to Shareholders.
PRODUCTS FOR A CLEANER AND SAFER WORLD
Tennant floor coatings and cleaning equipment help customers maintain clean
facilities even under the most severe conditions. The manufacturer in this photo
operates round-the clock, five days a week. The floor of this 100,000 square
foot facility supports traffic from 20 forklifts that move raw materials,
stampings, and finished products to designated locations. Four hundred highly
energized employees work in the brightly lit facility.
This impressive looking main aisle is coated with Tennant STS 440 Regal
Blue urethane floor coating. Yellow strips define the edges of the aisles, as
well as the warehouse storage areas. The attractiveness of the STS 440 Regal
Blue floor, and its ability to reflect light, help contribute to strong employee
morale.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings for the Six Months Ended June 30, 1995, and
the Consolidated Balance Sheet as of June 30, 1995, pages 1 and 2, and footnote
2, page 4, of this Form 10-Q Quarterly Report, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,298
<SECURITIES> 0
<RECEIVABLES> 65,820
<ALLOWANCES> 2,998
<INVENTORY> 39,206
<CURRENT-ASSETS> 112,099
<PP&E> 131,960
<DEPRECIATION> 70,658
<TOTAL-ASSETS> 201,155
<CURRENT-LIABILITIES> 59,274
<BONDS> 22,113
<COMMON> 3,719
0
0
<OTHER-SE> 101,352
<TOTAL-LIABILITY-AND-EQUITY> 201,155
<SALES> 156,941
<TOTAL-REVENUES> 156,941
<CGS> 89,891
<TOTAL-COSTS> 89,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 507
<INTEREST-EXPENSE> 1,141
<INCOME-PRETAX> 13,707
<INCOME-TAX> 4,560
<INCOME-CONTINUING> 9,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,147
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
