<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 September 30, 1999
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 September 30, 1999, was 9,042,437.
<PAGE>
Page 2 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 104,286 $ 96,116 $ 310,412 $ 284,057
Less:
Cost of sales 62,984 56,157 185,600 165,915
Selling and administrative 33,439 30,479 99,778 91,311
Restructuring charges 3,078 0 3,078 0
--------- --------- --------- ---------
Profit from operations 4,785 9,480 21,956 26,831
Other income (expense)
Net foreign currency gain (loss) 240 93 183 (79)
Interest income 626 1,036 2,053 3,345
Interest expense (486) (573) (1,826) (1,878)
Miscellaneous income (expense), net (226) (214) (574) 165
--------- --------- --------- ---------
Total other income (expense) 154 342 (164) 1,553
--------- --------- --------- ---------
Earnings before income taxes 4,939 9,822 21,792 28,384
Taxes on income 1,784 3,514 7,767 10,115
--------- --------- --------- ---------
Net earnings $ 3,155 $ 6,308 $ 14,025 $ 18,269
========= ========= ========= =========
Comprehensive earnings adjustment
for foreign currency translation,
net of tax 414 417 (2,421) 84
--------- --------- --------- ---------
Comprehensive earnings $ 3,569 $ 6,725 $ 11,604 $ 18,353
========= ========= ========= =========
PER SHARE:
Basic net earnings $ .35 $ .67 $ 1.54 $ 1.91
Diluted net earnings $ .35 $ .67 $ 1.53 $ 1.91
Dividends $ .19 $ .19 $ .57 $ .55
Weighted average number of shares 9,079,900 9,383,900 9,110,400 9,550,800
(basic)
Weighted average number of shares 9,111,800 9,411,800 9,146,800 9,580,100
(diluted)
</TABLE>
<PAGE>
Page 3 of 15
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 September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Cash and cash equivalents $ 12,705 $ 17,693
Receivables 81,867 81,145
Less deferred income from sales finance charges (137) (954)
Less allowance for doubtful accounts (3,732) (2,956)
--------- ---------
Net receivables 77,998 77,235
Inventories 49,654 46,162
Prepaid expenses 1,880 878
Deferred income taxes, current portion 8,921 8,900
--------- ---------
Total current assets 151,158 150,868
Property, plant, and equipment 178,755 169,515
Less allowance for depreciation (111,875) (102,875)
--------- ---------
Net property, plant, and equipment 66,880 66,640
Net noncurrent installment accounts receivable 2,048 2,843
Deferred income taxes, long-term portion 2,836 2,657
Intangible assets, net 18,452 15,631
Other assets 811 459
--------- ---------
Total assets $ 242,185 $ 239,098
========= =========
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY
(Condensed from Audited
(Unaudited) Financial Statements)
LIABILITIES September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Current debt $ 6,448 $ 7,302
Accounts payable 13,264 19,042
Accrued expenses 32,669 30,647
--------- ---------
Total current liabilities 52,381 56,991
Long-term debt 24,415 23,038
Long-term employee retirement-related benefits 31,635 27,802
--------- ---------
Total liabilities 108,431 107,831
SHAREHOLDERS' EQUITY
Common stock 3,392 3,421
Common stock subscribed 153 425
Unearned restricted shares (1,090) (307)
Retained earnings 141,934 136,730
Receivable from ESOP (9,801) (10,589)
Accumulated other comprehensive income (equity
adjustment from foreign currency translation) (834) 1,587
--------- ---------
Total shareholders' equity 133,754 131,267
Total liabilities and shareholders' equity $ 242,185 $ 239,098
========= =========
</TABLE>
<PAGE>
Page 4 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
TENNANT COMPANY AND SUBSIDIARIES - CONSOLIDATED STATEMENTS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 30
------------------------------
1999 1998
---- ----
<S> <C> <C>
Net cash flow provided by operating activities $ 26,136 $ 28,682
Cash flow used in investing activities:
Acquisition of property, plant, and equipment (13,793) (14,597)
Acquisition of Paul Andra KG, less cash acquired (note 7) (6,944) 0
Proceeds from disposals of property, plant, and equipment 1,907 4,178
Proceeds from maturing long-term securities 1 0
-------- --------
Net cash flow used in investing activities (18,829) (10,419)
Cash flow related to financing activities:
Net changes in current debt (805) 4,541
Issuance (payments) of long-term debt (1,188) 4,163
Payments to settle long-term debt 0 (27)
Principal payment from ESOP 660 600
Proceeds from employee stock issues 1,727 1,521
Repurchase of common stock (7,500) (22,259)
Dividends paid (5,155) (5,201)
-------- --------
Net cash flow used in financing activities (12,261) (16,662)
Effect of exchange rate changes on cash (34) 21
-------- --------
Net increase (decrease) in cash and cash equivalents (4,988) 1,622
Cash and cash equivalents at beginning of period 17,693 16,279
-------- --------
Cash and cash equivalents at end of period $ 12,705 $ 17,901
======== ========
</TABLE>
<PAGE>
Page 5 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial statements include
all adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the interim periods presented.
The results of operations for interim periods are not necessarily indicative
of results which will be realized for the full fiscal year.
(1) Information Incorporated by Reference from Form 10-K
The Company's Summary of Significant Accounting Policies and other
Related Data and Summary of Stock Plans, Bonuses, and Profit Sharing are
included in the Company's 1998 Annual Report filed as Exhibit 13.1 to the
Company's annual filing on Form 10-K and are incorporated in this Form
10-Q by reference.
(2) Expenses
Engineering, research and development, maintenance and repairs, warranty,
and bad debt expenses were charged to operations for the three and nine
months ended September 30, 1999 and 1998, as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1999 1998 1999 1998
------ ------ ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Engineering, research and development $3,575 $4,091 $11,102 $12,555
====== ====== ======= =======
Maintenance and repairs $1,356 $1,155 $ 4,155 $ 4,174
====== ====== ======= =======
Warranty $1,591 $1,612 $ 4,769 $ 3,936
====== ====== ======= =======
Bad debts $ 78 $ 364 $ 632 $ 862
====== ====== ======= =======
</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 September
30, 1999, and December 31, 1998, is as follows:
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
------------ -----------
(In Thousands)
<S> <C> <C>
FIFO Inventories:
Finished goods $ 31,131 $ 32,895
All other 37,091 32,162
LIFO Adjustment (18,568) (18,895)
-------- --------
LIFO Inventories $ 49,654 $ 46,162
======== ========
</TABLE>
The increase in all other inventory is due largely to the acquisition of
Paul Andra KG.
<PAGE>
Page 6 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Cash Flow
Income taxes paid during the nine months ended September 30, 1999 and
1998, were $11,938,000 and $14,405,000, respectively. Interest costs
paid during the nine months ended September 30, 1999 and 1998, were
$1,688,000 and $1,866,000 respectively.
(5) Earnings Per Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended September 30, 1999
----------------------------------------
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
shareholders $3,155 9,080 $.35
Dilutive effect of stock options 32
Diluted EPS
Income available to common
shareholders plus
assumed conversions $3,155 9,112 $.35
<CAPTION>
For the Quarter Ended September 30, 1998
----------------------------------------
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
shareholders $6,308 9,383 $.67
Dilutive effect of stock options 29
Diluted EPS
Income available to common
shareholders plus
assumed conversions $6,308 9,412 $.67
</TABLE>
<PAGE>
Page 7 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Segment Reporting
The Company operates in one industry segment which consists of the
design, manufacture, and sale of products and services used in the
maintenance of nonresidential floors.
Financial data by geographic area is before interest expense and
elimination of intercompany transactions. North America sales include
sales in the United States, Canada, and Mexico. Sales in Canada and
Mexico comprise less than 10% of consolidated sales and are interrelated
with the Company's U.S. operations. Product transfers from North America
are generally made at prices that recognize return on investment
objectives for both the manufacturing and selling units. Corporate items
include general corporate expense and miscellaneous items such as net
ESOP interest income and Foundation contribution expense.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Net sales
North America
Customer sales $ 74,651 $ 73,543 $225,264 $215,392
Transfers to Europe and other
International areas 14,138 13,011 40,855 38,897
-------- -------- -------- --------
Total North America 88,789 86,554 266,119 254,289
Europe customer sales 20,912 14,866 60,088 44,669
Other international customer sales 8,723 7,707 25,060 23,995
Eliminations (14,138) (13,011) (40,855) (38,896)
-------- -------- -------- --------
Total $104,286 $ 96,116 $310,412 $284,057
======== ======== ======== ========
Earnings before income taxes
North America 2,350 7,500 17,771 22,631
Europe 1,457 1,503 3,096 4,147
Other international 1,633 1,620 3,124 3,709
Corporate items, interest income,
interest expense, and eliminations (501) (801) (2,199) (2,103)
-------- -------- -------- --------
Total earnings before income taxes $ 4,939 $ 9,822 $ 21,792 $ 28,384
======== ======== ======== ========
</TABLE>
<PAGE>
Page 8 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Acquisition of Paul Andra KG
On January 4, 1999, the Company acquired the shares and holdings in
associated businesses of Paul Andra KG, a privately owned manufacturer
of commercial floor maintenance equipment in Germany. Paul Andra KG
sells products principally under the Sorma brand name, including single
disk machines, wet/dry vacuum cleaners and vacuumized scrubbers. Sales
of $15.5 million in the first nine months of 1999 generated a $.5
million operating loss. The acquisition is not expected to have a
material impact on net income.
<TABLE>
<S> <C>
Acquisition of Paul Andra KG:
Assets acquired $ 12,763
Liabilities assumed (10,371)
Goodwill 4,551
--------
Total cash paid, less cash acquired $ 6,943
========
</TABLE>
(8) Reclassification
The Company reports revenue and costs from providing repair service in
its sales and cost of sales figures. Through 1998, in its European
operations, the related costs were included in selling and
administrative expense. Third quarter and first nine months 1998
figures were restated to reflect $693,000 and $1,840,000, respectively,
reclassification from selling and administrative expense to cost of
sales to reflect the related allocable portion of service labor costs
for those periods. This makes European reporting consistent with
Company reporting.
(9) Restructuring Charges
The company recorded a pre-tax restructuring charge of $3.1 million in
the most recent quarter, primarily related to severance and early
retirement costs as part of Tennant's shareholder value enhancement
plan. The company expects to record additional pre-tax restructuring
and other charges in the fourth quarter, which are estimated to be $3-5
million. Charges are expected to include severance costs, asset
write-offs and other costs related to closing facilities.
<PAGE>
Page 9 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
(10) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(SFAS No. 133), which is required to be adopted for fiscal years
beginning after June 15, 1999, although earlier application is
permitted as of the beginning of any fiscal quarter. In June 1999, the
Financial Accounting Standards Board issued Statement No. 137, which
defers the effective date of SFAS No. 133 to quarters of all fiscal
years beginning after June 15, 2000. SFAS No. 133 will require the
Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value
through the statement of earnings. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
hedged assets, liabilities, or firm commitments are recognized through
earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings. The Company is in the process of determining what effect the
adoption of SFAS No. 133 will have on the Company's results of
operations, cash flows or financial position
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings
Excluding a restructuring charge, net earnings for the quarter ended
September 30, 1999 were $5.2 million, or 57 cents per share diluted, down 15
percent from $6.3 million, or 67 cents per share diluted for the same period
in 1998. Excluding the restructuring charge, net earnings were $16.0 million
or $1.75 per share diluted for the nine month period ended September 30,
1999, compared to $18.3 million or $1.91 per share diluted for the comparable
period last year.
Net Sales
Net sales of $104.3 million for the third quarter ended and $310.4 million
for the nine months ended September 30, 1999 increased 9 percent compared to the
same periods last year, positively impacted by the acquisition of Paul Andra
KG in January, 1999. Excluding the impact of that acquisition, sales grew
$2.4 million or 2.5 percent over the prior year third quarter ($10.8 million
or 3.8 percent over the prior year first nine months). A temporary decrease
in manufacturing efficiency reduced shipments approximately $4-$5 million
below what they otherwise would have been. North American sales for the
quarter were $74.7 million which was 1.5 percent or $1.1 million greater than
third quarter 1998. This was largely due to continued growth in commercial
sales. Sales outside North America, excluding Paul Andra KG, increased 5
percent or $1.2 million due to improved export sales and a stronger European
economy.
<PAGE>
Page 10 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
Orders for the third quarter ended September 30, 1999 were $108.9 million.
Order growth in the third quarter, excluding the Paul Andra KG acquisition,
was $8.5 million or 9 percent over the comparable period in 1998. North
American orders grew $7.2 or 9 percent over 1998 due to continued strong
commercial business and the improving industrial economy and new outdoor
machines. Orders outside of North America, excluding Paul Andra KG
acquisition, grew $2.0 million or 9 percent due to growth in Europe base
business of 11 percent and strong Australian growth. The disparity between
order growth and sales growth in the third quarter is reflected in the
difference in backlog. Third quarter 1998 backlog declined $1.3 million while
backlog increased $4.9 million in third quarter 1999.
Gross Profit
For the first nine months, gross profit was 40.2 percent in 1999 versus 41.6
percent in 1998. Gross profit for the third quarter as a percentage of sales
was 39.6 percent compared to 41.6 percent last year. The decline was due
primarily to manufacturing variances related to implementing a flexible,
build-to order manufacturing system, a mix shift to lower margin products,
and an increased rate of discounting on North American industrial machines.
In addition, the acquisition of Paul Andra KG increased the proportion of
sales with low gross margin in the company's sales mix.
Selling, General, and Administrative Expense (SG&A)
SG&A expense for the quarter ended September 30, 1999 was $33.4 million
compared to $30.5 million for the comparable period last year largely due to
expenses of newly acquired Paul Andra KG. SG&A as a percent of sales
increased slightly from 31.7 percent a year ago to 32.1 for the current
quarter. This percentage decreased slightly year-to-date from 32.2 percent a
year ago to 32.1 for the nine months ended September 30, 1999 as other cost
savings efforts offset Paul Andra KG costs.
Restructuring Charges
The company recorded a pre-tax restructuring charge of $3.1 million in the
most recent quarter, primarily related to severance and early retirement
costs as part of Tennant's shareholder value enhancement plan. The company
expects to record additional pre-tax restructuring and other charges in the
fourth quarter, which are estimated to be $3-5 million. Charges are expected
to include severance costs, asset write-offs and other costs related to
closing facilities.
Other Income and Expense
Other income and expense for the quarter ended September 30, 1999 was a net
income of $.2 million compared to $.3 million last year. Foreign currency
gains were more than offset by a reduction of interest income from equipment
financing provided by the Company to its customers. In 1998 the Company
outsourced its product financing business. The Company transferred its
portfolio to the outsourced vendor, and continues to report interest income
and interest expense on the portfolio. The principal balance of the portfolio
is declining over time as customer balances decrease thereby reducing the
Company's interest income.
<PAGE>
Page 11 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
Income Taxes
The estimated effective tax rate for the Company's current fiscal year is 36
percent consistent with the prior year rate.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $26.1 million of cash and cash equivalents for
the nine-month period ended September 30, 1999 compared to $28.7 million for
the same period a year ago. Significant uses of cash during the nine month
period ended September 30, 1999 included the cash purchase price paid for the
acquisition of Paul Andra KG, purchases of property, plant, and equipment,
repurchases of common stock under the Company's stock purchase plan, and
dividends paid to shareholders.
MARKET RISK
The Company's market risk includes the potential loss arising from adverse
changes in foreign currency exchange rates. The Company uses forward exchange
contracts and other hedging activities to hedge the U.S. dollar value
resulting from anticipated foreign currency transactions. There have been no
material changes in the Company's market risks since December 31, 1998.
YEAR 2000 PROJECT OVERVIEW
Tennant's company-wide Year 2000 Project (Project) is proceeding on schedule.
Tennant's Project is divided into four major sections: Applications Systems,
Systems Infrastructure, External Agents
(suppliers/partners/distributors/customers) and Embedded Systems
(manufacturing and facilities). General Project phases common to all sections
are:1) inventorying Year 2000 items; 2) assigning priorities to identified
items; 3) assessing the Year 2000 compliance of items determined to be
material to the Company; 4) repairing or replacing material items that are
determined not to be Year 2000 compliant; 5) testing material items; and 6)
designing and implementing contingency and business continuation plans.
Material items are those believed by the Company to have risk involving the
safety of individuals that may cause damage to either property or the
environment, or affect revenues.
Progress status is as follows:
<TABLE>
<CAPTION>
% Complete
as of 9/30/99 Completion
------------- ----------------
<S> <C> <C>
Applications Systems 100% 2nd Quarter 1999
Systems Infrastructure 100% 2nd Quarter 1999
External Agents 100% 2nd Quarter 1999
Embedded Systems 100% 1st Quarter 1999
</TABLE>
<PAGE>
Page 12 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
A more detailed description of activities is as follows:
Applications Systems - In 1994, in order to improve access to business
information through common integrated computing systems across the Company,
Tennant began a worldwide business systems replacement project with systems
that use programs from SAP America, Inc. (SAP). The new systems are expected
to make approximately 80% of the Company's business systems Year 2000
compliant. The European and North American SAP application systems are now
completely installed. The remaining 20% of non-SAP business software is now
compliant. The North American Commercial systems remediation was completed in
September of 1998. Our activity also includes assessment and remediation of
non-mission critical personal systems. Initial survey and assessment work is
complete with repair and remediation now completed.
Systems Infrastructure - The Infrastructure section consists of hardware and
system software other than Applications Software. Activity in this area has
been continuous with the majority having been addressed and tested in
conjunction with project and regular replacement programs.
External Agents (Suppliers/Partners/Distributors/Customers) - The primary
activity in this section involves the process of identifying and prioritizing
critical suppliers, customers, distributors, and other partners at the direct
interface level and communicating with them about their plans and progress in
addressing the Year 2000 problem. The initial survey activity has been
completed and detailed evaluations of the most critical third parties have
been completed. These evaluations have been followed by selective follow-up
contact and audit.
Embedded Systems (Manufacturing and Facilities) - This section focuses on the
hardware and software associated with embedded computer chips that are used
in the operation of all facilities operated by the Company. Survey and
prioritization activities were completed and are now compliant. In addition,
our activities have included the evaluation of Year 2000 dependencies in
embedded chips produced in our own products all of which have been certified
to be compliant.
With the technical remediation and conversions now complete, our efforts for
the remainder of the year will focus on refining our business contingency
plan. This plan will identify actions to be implemented to reasonably sustain
business in the event of Y2K impacts out of our direct control.
Costs
The total cost associated with the required modifications to become Year 2000
compliant is not material to the Company's financial position. The core of
the Company's IT investments have been focused on building new capability
while satisfying Year 2000 requirements. The estimated total cost of the
planned SAP activities through 1999 is approximately $20 million, which has
been expended. Funding for Year 2000 specific activities are estimated at
$950,000, which has been expended. Funding for both SAP and Y2K activities is
integrated with operational budgets, with IT funding for fiscal year 1999
estimated to be at the same levels as fiscal year 1998.
In January 1999 Tennant Company completed the purchase of Paul Andra KG.
Activities for Year 2000 compliance have been completed using the same
process as outlined for Tennant Company. An action plan has been completed
and integrated into the corporate plan. The majority of Y2K issues were
addressed by conversion of systems to SAP in June 1999. All other activities
have been incorporated into the existing plan and are complete. Funding for
the SAP integration was approximately $650,000. Funding for the Y2K specific
activities was less than $50,000.
<PAGE>
Page 13 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
Cautionary Statement Concerning Forward-Looking Statements
Some statements in this report are forward-looking statements and are not
meant as historical facts. As discussed above, many factors are involved in
this project which contain risk and uncertainty and are beyond the control of
the Company. Included in this are the actions of suppliers, distributors,
customers, and other partners.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
and the euro, a new European currency, and adopted the euro as their common
legal currency (the "Euro Conversion"). Either the euro or a participating
country's present currency will be accepted as legal tender from January 1,
1999, to January 1, 2002, from which date forward only the euro will be
accepted.
The Company has a significant number of customers located in European Union
countries participating in the Euro Conversion. Such customers will likely
have to upgrade or modify their computer systems and software to comply with
euro requirements. The amount of money the Company anticipates spending in
connection with product development related to the Euro Conversion is not
expected to have a material adverse effect on the Company's results of
operations or financial condition. The Euro Conversion may also have
competitive implications for the Company's pricing and marketing strategies,
which could be material in nature; however, any such impact is not known at
this time.
The Company has begun to analyze which of its internal systems will need to
be modified to deal with the Euro Conversion. The Company does not currently
expect the cost of such modifications to have a material effect on the
Company's results of operations or financial condition. There is no
assurance, however, that all problems related to the Euro Conversion will be
foreseen and corrected, or that no material disruptions of the Company's
business will occur.
Additional 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 Nine Months Ended September 30, 1999, and is
incorporated in this Form 10-Q by reference.
<PAGE>
Page 14 of 15
TENNANT COMPANY
Quarterly Report - Form 10-Q
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C> <C> <C>
ITEM # DESCRIPTION METHOD OF FILING
------ ----------- ----------------
3i Articles of Incorporation Incorporated by reference to
Exhibit 4.1 to the Company's
Registration Statement No.
33-62003, Form S-8,
dated August 22, 1995.
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.
13.1 Text Portion of Report to Shareholders for Filed herewith electronically.
the Nine Months Ended September 30, 1999
10iii.1 Management Agreement with John T. Pain Filed herewith electronically.
dated October 1, 1998.
10iii.2 Employment Agreement with Janet Dolan Filed herewith electronically.
dated April 5, 1999.
10iii.3 Management Agreement with James J. Seifert Filed herewith electronically.
dated July 12, 1999.
27.1 Financial Data Schedule Filed herewith electronically.
</TABLE>
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
September 30, 1999.
<PAGE>
Page 15 of 15
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: November 12, 1999 /s/ Janet Dolan
---------------------------- --------------------------------------
November 12, 1999 Janet Dolan
President and Chief Executive Officer
Date: November 12, 1999 /s/ John T. Pain
---------------------------- --------------------------------------
November 12, 1999 John T. Pain
Vice President, Treasurer and
Chief Financial Officer
Date: November 12, 1999 /s/ Dean A. Niehus
---------------------------- --------------------------------------
November 12, 1999 Dean A. Niehus
Corporate Controller and
Principal Accounting Officer
<PAGE>
TO OUR SHAREHOLDERS
Third quarter saw stronger markets for our products with overall order growth
of 15% compared to third quarter last year. An area of particular strength
was North American industrial products which increased by 10.5% over last
year's third quarter--twice the level of the 5% growth we saw for the first
half of 1999. European orders were up 51% over third quarter last year. About
40% of this growth came from the Paul Andra acquisition earlier this year,
and the remaining 11% growth was in the base business.
Net sales for the three months were $104.3 million, up 9% from last year's
third quarter record of $96.1 million. Excluding a one-time charge, net
earnings for the latest quarter were $5.2 million, or 57 cents per diluted
share, down 15% from $6.3 million, or 67 cents per diluted share, for the
same period in 1998. Including the charge, net earnings for the latest
quarter were $3.2 million, or 35 cents per diluted share. The company took an
after-tax restructuring charge of $3.1 million, or 22 cents per diluted
share, in the most recent quarter, primarily related to severance and early
retirement costs as part of Tennant's shareholder value enhancement plan.
The latest quarter also reflected the continuing impact of implementing a
flexible, build-to-order manufacturing system based upon SAP software. A
temporary decrease in manufacturing efficiency reduced shipments
approximately $4-$5 million below what they otherwise would have been, with
associated unfavorable manufacturing variances of $.8 million. The combined
impact of these factors was to reduce net earnings approximately $1.2 million.
For the nine months ended September 30, 1999, net sales grew 9% to $310.1
million from last year's $284.1 million. Net earnings were $14.0 million,
down 23% from 1998's $18.3 million. Earnings per diluted share of $1.53 were
down 19% from $1.91 in 1998. The 1999 earnings reflected the $3.1 million
restructuring charge and an estimated $1.2 million negative earnings impact
associated with the transition in manufacturing systems.
Positioning Tennant for Greater Growth. To be a growth company and the global
leader in our industry, we need to dramatically improve our manufacturing,
logistics and customer service capabilities. Our goal is to be the best at
serving customers anywhere, anytime. To do this, we need to be much more
flexible and responsive than we are today. We need flexible manufacturing to
support short lead times, global inventory to realize faster delivery
schedules, and 24-hour customer service worldwide.
To achieve this, we believe we are among the first companies in our industry
to implement an enterprise resource planning system (SAP). It allows us to
move to a `build-to-order' manufacturing capability. It also will give us
global visibility to customer orders and inventory. We have most of the
implementation behind us--the new system is up and running in Europe and in
the biggest part of North American operations.
We "went live" with the manufacturing module of SAP in the second quarter in
our two major Minneapolis plants. We reported labor variances in that
quarter, but expected them to be a one-time event because we were striving
for a significant improvement in labor efficiency and on-time performance in
our third quarter. Efficiency did improve in our fabricating plant, which has
returned to its pre-SAP levels. However, our main assembly plant fell below
plan. We are very disappointed in the earnings drain this caused--these
results are not acceptable. Significant steps were taken in the quarter to
address the situation. We installed improved labor-reporting software, are
making adjustments to alleviate the shortages of parts that cause low
assembly output, and appointed a new director of manufacturing to oversee
this process.
<PAGE>
Progress on Shareholder Value Enhancement Plan. When we put this quarter in
perspective, we believe the most important event will be the progress made in
implementing our shareholder value enhancement plan, announced earlier this
month. It has given us the long-term goal of becoming the global leader in
the floor maintenance equipment market. This should help us become a growth
company and enable us to meet our financial goals of 10-12% increases in
sales, 10% operating margin, and improved asset efficiency. We intend to do
this by leveraging Tennant's strengths--its well-established distribution
channels, direct repair network, logistics and customer service staff, broad
line of quality equipment, and large installed base of equipment.
A number of steps in our plan already have been taken:
- - We made progress on centralizing manufacturing, purchasing and logistics
activities. These now are managed globally rather than locally, which is
increasing economies of scale, improving productivity, and improving
coordination among our worldwide facilities.
- - We are more than two-thirds of the way to our goal of reducing 150 employee
positions. This has been achieved through cutting headquarters staff, early
retirement, integrating our Paul Andra acquisition, closing our Singapore
office, selling the Eagle burnisher line, and attrition. We expect to
complete this process in the fourth quarter of next year.
- - We are eliminating facilities and operations that do not add to our
economic profit. This led to the sale of the Eagle line during the quarter.
Fourth Quarter: Higher Sales, Continued Progress on Manufacturing Transition.
We expect continued increases in sales due to a strong base of orders.
Earnings, however, will be affected by the same two factors we saw in the
third quarter. First, we will take the balance of our restructuring charge,
currently estimated to be between $3-$5 million. Second, we will see the
effects of continuing to implement the SAP system. While the situation is
improving, it will take more than one quarter for our second plant to reach
pre-SAP efficiency levels and then surpass that efficiency in later quarters.
We believe that the restructuring and enterprise resource planning system are
the right things to do. They represent near-term adjustments for employees
and hits to profitability. We expect these to be more than offset by the
long-term benefits: streamlining our organization, focusing on areas that
generate economic profit, creating an Internet interface, and increased
efficiency in asset utilization. This should put us ahead of our competition
and allow Tennant to reach its goal of becoming a growth company and being
the global leader in our industry.
This letter includes forward-looking statements involving risks and
uncertainties. These include factors that affect all businesses operating in
a global market as well as matters specific to the company and the markets it
serves. Particular risks and uncertainties presently facing Tennant include:
the ability to implement its plan to increase worldwide manufacturing
efficiencies; political and economic uncertainty throughout the world;
inflationary pressures; increased competition in the company's businesses
from competitors that have substantial financial resources; soft markets in
certain international regions including Asia, Latin America and Europe; the
continuing strength of the dollar, which increases the cost of the company's
products; the ability to successfully implement the SAP enterprise resource
planning system; and the company's plan for growth. For additional
information about factors that could materially affect Tennant's results,
please see the company's Securities and Exchange Commission filings.
Janet Dolan
President - CEO
October 21, 1999
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT entered into as of October 1, 1998, by and between Tennant
Company, a Minnesota corporation (the "Company"), and John T. Pain (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key member of the management of the Company
and has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company desires to recognize the
significant personal contribution that the Employee has made to further the
best interests of the Company and its stockholders; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to continue to obtain the benefits of the Employee's
services and attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to provide inducement for the Employee (A) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (B) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders that the Employee be in a position to make judgments and
advise the Company with respect to proposed changes in control of the Company
without regard to the possibility that Employee's employment may be
terminated without compensation in the event of certain changes in control of
the Company; and
WHEREAS, the Employee desires to be protected in the event of certain
changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and the Employee
desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and the Employee agree
as follows:
1. EMPLOYMENT. The Employee shall remain in the employ of the
Company for the term of this Agreement (the "Term"), and during the Term,
the Employee shall have such title, duties, responsibilities and authority,
and receive such remuneration and fringe benefits, as the Board of Directors
of the Company shall from time to time provide for the Employee; provided,
however, that either the Employee or the Company may terminate the employment
of the Employee at any time prior to the expiration of the Term, with or
without Cause and for any reason whatever, upon at least 30 days' prior
written notice to the other party, subject to the right of the Employee to
receive any payment and other benefits that may be due pursuant to the terms
and conditions of paragraph 2 of this Agreement.
-1-
<PAGE>
2. RIGHTS TO PAYMENT FOLLOWING CHANGE IN CONTROL. For purposes of
this paragraph 2, an "Event" shall be deemed to have occurred if:
A. a majority of the directors of the Company shall be persons other
than persons
(i) for whose election proxies shall have been solicited by the
Board of Directors of the Company or
(ii) who are then serving as directors appointed by the Board of
Directors to fill vacancies on the Board of Directors
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 Company 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 (the "Exchange Act")) 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 Events pursuant to
this paragraph 2B:
(i) any acquisition or beneficial ownership by the Company or a
subsidiary of the Company or
(ii) 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,
(iii) any acquisition or beneficial ownership by the Employee or
any group that includes the Employee, or
(iv) any acquisition or beneficial ownership by a parent
corporation or its wholly-owned subsidiaries, as long as
they shall remain wholly-owned subsidiaries, of 100% of the
outstanding voting stock of the Company as a result of a
merger or statutory share exchange which complies with
paragraph 2C(i)(2) or the exception in paragraph 2C(ii)
hereof in all respects,
C. the shareholders of the Company approve a definitive agreement or
plan to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with
a subsidiary of the Company or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no outstanding voting stock of the Company (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 Company immediately after
the merger or (II) cash upon the exercise by holders
of voting stock of the Company of statutory
dissenters' rights),
-2-
<PAGE>
(c) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Company 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 Company in the
merger, all holders of any class or series of voting
stock of the Company immediately prior to the merger
have the right to receive substantially the same per
share consideration in exchange for their voting
stock of the Company as all other holders of such
class or series),
(ii) exchange, pursuant to a statutory exchange of shares of
voting stock of the Company held by shareholders of the
Company immediately prior to the exchange, shares of one or
more classes or series of voting stock of the Company for
cash, securities or other property, except for (a) voting
stock of a parent corporation of the Company owning
directly, or indirectly through wholly-owned subsidiaries,
both beneficially and of record 100% of the voting stock of
the Company immediately after the statutory share exchange
if (I) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Company immediately prior
to such statutory share exchange own, directly or
indirectly, immediately after the statutory share exchange
more than 70% of, respectively, the then outstanding common
stock and the then outstanding voting stock of such parent
corporation, and (II) all holders of any class or series of
voting stock of the Company immediately prior to the
statutory share exchange have the right to receive
substantially the same per share consideration in exchange
for their voting stock of the Company as all other holders
of such class or series or (b) cash with respect to
fractional shares of voting stock of the Company or payable
as a result of the exercise by holders of voting stock of
the Company of statutory dissenters' rights,
(iii) sell or otherwise dispose of all or substantially all of
the assets of the Company (in one transaction or a series
of transactions), or
(iv) 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 corporation (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 Employee
or a group of persons, including the Employee, acting in
concert, or
D. (i) the Company enters into an agreement in principle or a
definitive agreement relating to an Event described in
clause A, B or C above which ultimately results in such an
Event described in clause A, B or C hereof,
-3-
<PAGE>
(ii) a tender or exchange offer or proxy contest is commenced
which ultimately results in an Event described in clause A
or B hereof, or
(iii) there shall be an involuntary termination or Constructive
Involuntary Termination of employment of Employee, and
Employee reasonably demonstrates that such event (x) was
requested by a third party that has previously taken other
steps reasonably calculated to result in an Event described
in clause A, B or C above and which ultimately result in an
Event described in clause A, B or C hereof or (y) otherwise
arose in connection with or in anticipation of an Event
described in clause A, B or C above that ultimately occurs.
If any Event shall occur during the Term of this Agreement, then the Employee
shall be entitled to receive from the Company or its successor (which term as
used herein shall include any person acquiring all or substantially all of
the assets of the Company) a cash payment and other benefits on the following
basis (unless the Employee's employment by the Company is terminated
voluntarily or involuntarily prior to the occurrence of the earliest Event to
occur (the "First Event"), in which case the Employee shall be entitled to no
payment or benefits under this paragraph 2):
(a) If at the time of, or at any time after, the occurrence of the
First Event and prior to the end of the Transition Period, the
employment of the Employee with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination
is a voluntary termination by the Employee other than a
Constructive Involuntary Termination or is on account of the death
or Disability of the Employee or is a termination by the Company
for Cause), the Employee (or the Employee's legal representative,
as the case may be), subject to the limitations set forth in
paragraph 2(e),
(i) shall be entitled to receive from the Company or its
successor, upon such termination of employment with the
Company or its successor, a cash payment in an amount equal
to A) three times the average annual compensation payable
by the Company and includible in the gross income for
Federal Income Tax purposes of the Employee during the
shorter of the period consisting of the most recent five
completed taxable years of the Employee ending before the
First Event (other than an Event described in clause D of
this paragraph 2 unless the Employee is terminated prior to
the occurrence of an Event described in clause A, B or C of
this paragraph 2) or that portion of such period during
which the Employee was employed by the Company, less
B $1.00, such payment to be made to the Employee by the
Company or its successor in a lump sum at the time of such
termination of employment; and
(ii) shall be entitled until the end of the Transition Period to
participate in any health, disability and life insurance
plan or program in which the Employee was entitled to
participate immediately prior to the First Event as if he
or she were an employee of the Company until the end of the
Transition Period (except, with respect to health insurance
coverage, for those portions remaining until the end of the
Transition Period that duplicate health insurance coverage
that is in place for the Employee under any other policy
provided at the expense of another employer); provided
however, that in the event that the Employee's
participation in any such health, disability or life
insurance plan or program is
-4-
<PAGE>
barred, the Company, at its sole cost and expense, shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plan or program.
(b) The payments provided for in this paragraph 2 shall be in addition
to any salary or other remuneration otherwise payable to the
Employee on account of employment by the Company or one or more of
its subsidiaries or its successor (including any amounts received
prior to such termination of employment for personal services
rendered after the occurrence of the First Event) but shall be
reduced by any severance pay which the Employee receives from the
Company, its subsidiaries or its successor under any other policy
or agreement of the Company in the event of involuntary
termination of Employee's employment.
(c) The Company shall also pay to the Employee all legal fees and
expenses incurred by the Employee as a result of such termination,
including, but not limited to, all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this
Agreement.
(d) In the event that at any time from the date of the First Event
until the end of the Transition Period,
(i) the Employee shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation),
in each case as compared with the Employee's status
immediately prior to the First Event, other than for Cause
or on account of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by
paragraph 4(b) hereof,
(iii) the Company shall require the Employee to relocate to any
place other than a location within twenty-five miles of the
location at which the Employee performed his duties
immediately prior to the First Event or, if the Employee
performed such duties at the Company's principal executive
offices, the Company shall relocate its principal executive
offices to any location other than a location within
twenty-five miles of the location of the principal
executive offices immediately prior to the First Event, or
(iv) the Company shall require that the Employee travel on
Company business to a substantially greater extent than
required immediately prior to the First Event,
a termination of employment with the Company by the Employee thereafter
shall constitute a Constructive Involuntary Termination.
(e) Notwithstanding any provision to the contrary contained herein
except the last sentence of this paragraph 2(e), if the lump sum
cash payment due and the other benefits to which the Employee
shall become entitled under paragraph 2(a) hereof, either alone or
together with other payments in the nature of compensation to the
Employee which are contingent on a change in the ownership or
effective control of the Company or in the ownership of a
substantial portion of the assets of the
-5-
<PAGE>
Company or otherwise, would constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986 (the
"Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not
below zero) to the largest aggregate amount as will result in no
portion thereof being subject to the excise tax imposed under
Section 4999 of the Code (or any successor provision thereto) or
being non-deductible to the Company for Federal Income Tax
purposes pursuant to Section 280G of the Code (or any successor
provision thereto). The Employee in good faith shall determine
the amount of any reduction to be made pursuant to this
paragraph 2(e) and shall select from among the foregoing benefits
and payments those which shall be reduced. No modification of, or
successor provision to, Section 280G or Section 4999 subsequent to
the date of this Agreement shall, however, reduce the benefits to
which the Employee would be entitled under this Agreement in the
absence of this paragraph 2(e) to a greater extent than they would
have been reduced if Section 280G and Section 4999 had not been
modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first
sentence of this paragraph 2(e).
(f) The Employee shall not be required to mitigate the amount of any
payment or other benefit provided for in paragraph 2 by seeking
other employment or otherwise, nor (except as specifically
provided in paragraph 2(a)(ii)) shall the amount of any payment or
other benefit provided for in paragraph 2 be reduced by any
compensation earned by the Employee as the result of employment by
another employer after termination, or otherwise.
(g) The obligations of the Company under this paragraph 2 shall
survive the termination of this Agreement.
3. DEFINITION OF CERTAIN TERMS.
(a) As used herein, the term "person" shall mean an individual,
partnership, corporation, estate, trust or other entity.
(b) As used herein, the term "Cause" shall mean, and be limited to,
(i) willful and gross neglect of duties by the Employee or (ii) an
act or acts committed by the Employee constituting a felony and
substantially detrimental to the Company or its reputation.
(c) As used herein, the term "Disability" shall mean the Employee's
absence from his duties with the Company on a full time basis for
180 consecutive business days, as a result of the Employee's
incapacity due to physical or mental illness, unless within 30
days after written notice pursuant to paragraph 1 hereof is given
following such absence, the Employee shall have returned to the
full time performance of his duties.
(d) As used herein, the term "voting stock" shall mean all outstanding
shares of capital stock entitled to vote generally in the election
of directors, considered for purposes of this Agreement as one
class, and all references to percentages of the voting stock shall
be deemed to be references to percentages of the total voting
power of the voting stock.
-6-
<PAGE>
(e) As used herein, the term "Transition Period" shall mean the
three-year period commencing on the date of the earliest to occur
of an Event described in clause A, B or C of paragraph 2 hereof
(the "Commencement Date") and ending on the third anniversary of
the Commencement Date.
4. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the successors, legal representatives and assigns of the parties
hereto; provided, however, that the Employee shall not have any
right to assign, pledge or otherwise dispose of or transfer any
interest in this Agreement or any payments hereunder, whether
directly or indirectly or in whole or in part, without the written
consent of the Company or its successor.
(b) The Company will require any successor (whether direct or
indirect, by purchase of a majority of the outstanding voting
stock of the Company or all or substantially all of the assets of
the Company, or by merger, consolidation or otherwise), by
agreement in form and substance satisfactory to the Employee, to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness of
any such succession (other than in the case of a merger or
consolidation) shall be a breach of this Agreement and shall
entitle the Employee to compensation from the Company in the same
amount and on the same terms as the Employee would be entitled
hereunder if the Employee terminated his employment on account of
a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of
termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which is required to execute and
deliver the agreement provided for in this paragraph 4(b) or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
5. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
6. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Tennant Company
701 N. Lilac Drive
Minneapolis, Minnesota 55440
Attention: Chief Executive Officer
(b) In the case of the Employee shall be:
John T. Pain
303 Macalester Street
St. Paul, MN 55105
-7-
<PAGE>
Either party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed to have been given on the registered date or
that date stamped on the certified mail receipt.
7. SEVERABILITY; SEVERANCE. In the event that any portion of this
Agreement is held to be invalid or unenforceable for any reason, it is hereby
agreed that such invalidity or unenforceability shall not affect the other
portions of this Agreement and that the remaining covenants, terms and
conditions or portions hereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify the objectionable provision as
to make it valid, reasonable and enforceable. In the event that any benefits
to the Employee provided in this Agreement are held to be unavailable to the
Employee as a matter of law, the Employee shall be entitled to severance
benefits from the Employer, in the event of an involuntary termination or
Constructive Involuntary Termination of employment of the Employee (other
than a termination on account of the death or Disability of the Employee or a
termination for Cause) during the term of this Agreement occurring at the
time of or following the occurrence of an Event, at least as favorable to the
Employee (when taken together with the benefits under this Agreement that are
actually received by the Employee) as the most advantageous benefits made
available by the Employer to employees of comparable position and seniority
to the Employee during the five-year period prior to the First Event.
8. TERM. This Agreement shall commence on the date of this Agreement
and shall terminate, and the Term of this Agreement shall end, on the later
of (A) December 31, 1998, provided that such period shall be automatically
extended for one year and from year to year thereafter until notice of
termination is given by the Employer or the Employee to the other party
hereto at least 60 days prior to December 31, 1998 or the one-year extension
period then in effect, as the case may be, or (B) if the Commencement Date
occurs prior to December 31, 1998 (or prior to the end of the extension year
then in effect as provided for in clause (A) hereof), the third anniversary
of the Commencement Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TENNANT COMPANY
By ________________________________
___________________________________
John T. Pain
-8-
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made as of April 5, 1999, by and between Tennant
Company, a Minnesota corporation (the "Company"), and Janet Dolan (the
"Executive").
WHEREAS Executive has worked for the Company for more than 12 years in
the positions of Associate General Counsel, General Counsel and Corporate
Secretary, Vice President, Senior Vice President, Executive Vice President,
President, and Chief Operating Officer;
WHEREAS the Company desires to promote Executive to the position of
Chief Executive Officer in accordance with the terms and conditions stated in
this Agreement; and
WHEREAS Executive desires to accept that promotion pursuant to the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and undertakings described below, Executive and Company agree as
follows:
I. EMPLOYMENT
1.1 EMPLOYMENT AS EXECUTIVE. The Company agrees to employ Executive
as its Chief Executive Officer ("CEO"), and Executive accepts such
employment. The term of initial employment as CEO shall be three years,
commencing on April 5, 1999, and ending on April 5, 2002, or continuing
thereafter under the terms of this Agreement, except that pursuant to
Article III of this Agreement, after April 5, 2002, Executive may be
terminated by Company upon not less than three month's prior written
notice.
1.2 DUTIES. Executive shall perform the duties and responsibilities
of Chief Executive Officer. Those duties may be revised from time to
time by the Board of Directors of the Company or its designee, to whom
Executive shall report.
1.3 EXCLUSIVE SERVICES. Executive agrees to devote her full time,
attention, and energy to performing her duties and responsibilities to
the Company under this Agreement during the period that this Agreement is
in effect.
II. COMPENSATION, BENEFITS, AND PERQUISITES
2.1 SALARY. During the period this Agreement is in effect, the
Company shall pay Executive a salary to be determined annually less
withholding and deductions required by law. The salary shall be payable
monthly. Beginning February, 2000, the Board of Directors of the Company
may review the salary periodically and may in
-1-
<PAGE>
its sole discretion increase or decrease it to reflect performance and
other factors. However, the Company is not obligated to provide for any
increases.
2.2 INCENTIVE COMPENSATION. While Executive is employed by the
Company, She shall be entitled to incentive compensation determined
according to the Tennant Annual Incentive Compensation Plan (the
"Incentive Plan") or such other incentive plans that may exist at that
time and, for as long as they continue, she shall be entitled to
participate in the Long-Term Incentive Plan, Stock Option Plan, and
Restricted Stock Plan, as per Plan documents, or such other similar or
modified plans that may hereafter be established by the Company in lieu
of or in addition to the above-described plans.
2.3 VACATIONS. Executive shall be entitled to vacation in accordance
with the policies of the Company.
2.4 EMPLOYEE BENEFITS. Executive shall be entitled to the benefits
and perquisites which the Company generally provides to its other
executive employees from time to time under the applicable Company plans
and policies then in effect. Executive's participation in such benefit
plans shall be on the same basis as applies to other executive employees
of the Company and subject to the terms of applicable law, plan
documents, and insurance policies then in effect. Executive shall pay
any contributions which are generally required of other executive
employees to receive any such benefits. The Company provides no
assurance as to the adoption or continuance of any particular employee
benefit plan or program, and Executive's participation in any such plan
or program shall be subject to the provisions, rules and regulations
applicable thereto.
2.5 COMPANY RESPONSIBILITY FOR INSURED BENEFITS. In this Article II,
to the extent the Company is providing certain benefits in the form of
premiums of insurance coverage, the Company is not itself promising to
pay the benefit an insurance company is obligated to pay under the policy
the insurance company has issued. If an insurance company does not or
cannot pay benefits it owes to Executive or her beneficiaries under the
insurance policy, neither Executive nor her personal representative or
beneficiary shall have any claim for benefits against the Company.
2.6 EXPENSES. Executive shall be entitled to receive reimbursement
from the Company (in accordance with the policies and procedures then in
effect for the Company's employees) for all reasonable travel and other
expenses incurred by her in connection with her services under this
Employment Agreement.
III. TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 TERMINATION. Executive's employment by the Company shall
terminate upon the occurrence of any of the following events:
(a) Executive's death;
-2-
<PAGE>
(b) Executive's disability (as defined below);
(c) Termination by the Company for cause (as defined below);
(d) Termination by the Executive for good reason (as defined
below);
(e) Executive's abandonment of her employment with the Company;
(f) Receipt by the Company of Executive's resignation from the
Company (whether written or oral), by timely written notice, for
any reason other than Disability; or
(g) At any time after April 5, 2002, termination by the Company
at its sole right and election, upon not less than three months'
prior written notice to Executive.
3.2 PAYMENTS UPON TERMINATION.
(a) If Executive's employment hereunder ends at the instance of
the Company without Cause (as defined below), at the instance of
Executive with Good Reason (as defined below) or due to her death
or Disability (as defined below), then as severance pay or a
death benefit (as the case may be) the Company shall pay
Executive or her heirs: 1) her regular salary, paid on a monthly
basis according to the Company's regular payroll, for one year;
2) a pro rata portion (based on the number of calendar days of
employment during the incentive plan year) of the incentive
compensation Executive would have received under the Incentive
Plan if she had been employed for the entire plan year; and in
addition, 3) a payment equal to the incentive compensation that
she would have received for one year for performance at target as
set forth in the Incentive Plan. The payments under 2) and 3)
above shall be made within six months of the termination date, or
as soon as is reasonably possible after the year-end EP has been
determined, unless otherwise mutually agreed by the parties. Any
amount paid to Executive as severance pay shall be subject to
deductions and withholding. The Company shall have no other
obligation to Executive, except as provided by law (including so
called COBRA continuation rights for group health and insurance
benefits).
(b) The Company shall not be obligated to make any payment to
Executive in the event that she qualifies for payment due to a
change of control pursuant to the Management Agreement dated June
21, 1989, and amended as of December 10, 1993, or in the event
that her employment is terminated by the Company for Cause (as
defined below) or by Executive without Good Reason (as defined
below).
(c) "Cause" for termination of Executive's employment at the
instance of the Company means termination for:
(i) Executive's material breach of this Agreement, which
is not remedied within thirty (30) days after
receipt of written notice;
-3-
<PAGE>
(ii) an act or acts of dishonesty undertaken by Executive
and intended to result in gain or personal
enrichment of her at the expense of the Company;
(iii) persistent failure by Executive to perform the
duties of her employment, which failure is
demonstrably willful and deliberate on her part and
which is not remedied within ninety (90) days after
receipt of written notice from the Company;
(iv) Executive's abandonment of her position with the
Company; or
(v) the indictment or conviction of Executive for a
felony.
(d) "Good Reason" for termination of Executive's employment at
the instance of Executive means termination for:
(i) Company's material breach of this Agreement, which
is not remedied within thirty days after receipt of
written notice from Executive;
(ii) a material reduction of Executive's base salary or a
material modification to the incentive compensation
plan that decreases by a substantial amount
Executive's opportunity to earn incentive
compensation, unless such reduction is part of a
general reduction in the base salaries and/or
incentive compensation plans for all executive
officers of the Company implemented as a result of
financial problems experienced by the Company;
(iii) the assignment to Executive of duties and
responsibilities that are substantially inconsistent
with or materially diminish Executive's position as
Chief Executive Officer of the Company; or
(iv) the Company headquarters being relocated out of
Minnesota.
(e) "Disability" means the inability of Executive, with or
without reasonable accommodation, to perform the essential
functions of her duties hereunder by reason of illness or other
physical or mental impairment or condition, if such inability
continues for an uninterrupted period of 90 calendar days or
more. A period of inability shall be "uninterrupted" unless and
until Executive returns to full-time work for a continuous period
of at least 30 calendar days.
(f) Notwithstanding the foregoing provisions of this Section
III, the Company shall have the right to deduct from any
severance pay the
-4-
<PAGE>
Company is otherwise obligated to pay to Executive the amount of
any indebtedness then established to be owed to the Company by
Executive.
(g) The payments provided under this provision replace and are
in lieu of the payments described in Section G of the Employee
Agreement, attached as Exhibit A to this Agreement.
IV. NONCOMPETITION COVENANT.
4.1 AGREEMENT NOT TO COMPETE AND NOT TO SOLICIT. Executive agrees to
be bound by the terms of the Employee Agreement, attached as Exhibit
A, except as expressly modified below: Company shall be obligated to
make twenty-three (23) such monthly payments ("Noncompete Payments")
if Executive is not receiving one year of salary payments pursuant to
paragraph 3.2(a)(1) of this Agreement ("Severance Salary Payments").
If Executive is receiving such one year of Severance Salary Payments,
the Company shall only have to make such Noncompete Payments after and
to the extent such Severance Salary Payments are exhausted or no
longer paid.
4.2 AGREEMENT NOT TO HIRE. During the term of Executive's employment
with the Company and for a period of two (2) years from the date of
the termination of such employment, whether such termination is with
or without Cause (as defined below), or whether such termination is at
the instance of Executive or the Company, Executive shall not,
directly or indirectly, solicit any person who is then an employee of
the Company or who was an employee of the Company at any time during
the twelve-month period immediately preceding Executive's termination
of employment, in any manner or capacity, including without limitation
as a proprietor, principal, agent, partner, officer, director,
stockholder, employee, member of any association, consultant or
otherwise.
4.3 BLUE PENCIL DOCTRINE. If the duration of, the scope of or any
business activity covered by any provision of this Section IV is in
excess of what is valid and enforceable under applicable law, such
provision shall be construed to cover only that duration, scope or
activity that is valid and enforceable. Executive hereby acknowledges
that this Section IV shall be given the construction which renders its
provisions valid and enforceable to the maximum extent, not exceeding
its express terms, possible under applicable law.
4.4 ACKNOWLEDGMENT. Executive hereby acknowledges that the
provisions of this Section IV are reasonable and necessary to protect
the legitimate interests of the Company and that any violation of this
Section IV by Executive shall cause substantial and irreparable harm
to the Company to such an extent that monetary damages alone would be
an inadequate remedy therefor. Therefore, in the event that Executive
violates any provision of this Section IV, the Company shall be
entitled to an injunction, in addition to all the other remedies it
may have, restraining Executive from violating or continuing to
violate such provision.
4.5 SURVIVAL. The provisions of Section IV shall survive the
termination or expiration of the term of this Agreement.
-5-
<PAGE>
V. ALTERNATIVE DISPUTE RESOLUTION
5.1 Executive and Company agree that any dispute or claim that
relates to or arises out of Executive's employment with the Company
shall be resolved by the Rules of Arbitration set forth in Exhibit B
to this Agreement. Disputes and claims encompassed by this Agreement
include all applicable federal and state employment-related claims,
whether based on common law (such as breach of contract or
defamation), or statutes (such as the Americans with Disabilities Act,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, and the Minnesota Human Rights Act). The Rules of
Arbitration are intended to be exclusive and awards issued pursuant to
the Rules are final and binding.
5.2 Executive and Company acknowledge and agree that this arbitration
provision is beneficial to both parties because it provides a quick,
less expensive and confidential manner of resolving finally any
dispute or claim.
5.3 The costs of any arbitration, including attorneys' fees and
arbitration expenses, shall be paid by the nonprevailing party, as
determined by the Arbitrator. In the event that the Arbitrator does
not designate a prevailing party, the cost of the arbitration will be
shared equally by Executive and Company.
VI. MOST FAVORED TERMS
Notwithstanding any other provision of this Agreement, Executive, at
her sole and exclusive election, may choose any more favorable payments,
benefits, protections, or other terms afforded her under the below-described
agreements or plans of the Company, to the extent applicable and then in
force.
(i) The Management Agreement, dated June 21, 1989, amended as of
December 10, 1993, and as may be further amended hereafter, and any
replacement to that Management Agreement; or
(ii) Any severance plans of the Company as may be hereafter established
or amended.
VII. MISCELLANEOUS
6.1 CONTINUED COOPERATION. Following termination of her employment
for any reason, Executive shall cooperate with Company as may
reasonably be necessary to assist it with ongoing projects,
litigation, or investigations. Company shall compensate Executive for
her time and expense in providing such cooperation on an hourly basis.
The hourly rate for such work shall be equal to Executive's annual
salary at the time of termination divided by 2080.
6.2 AMENDMENT. This Agreement may be amended only in a writing that
is signed by both parties.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with regard to the employment of the
Executive by the Company. There are no other agreements, conditions,
or representations, oral or written, expressed or
-6-
<PAGE>
implied, with regard thereto. This Agreement supersedes all prior
agreements, promises, and representations relating to the employment
of Executive by the Company.
6.4 (a) ASSIGNMENT. The Company will assign this Agreement to any
entity which succeeds to some or all of the business of the
Company through merger, consolidation, a sale of some or all of
the assets of the Company, or any similar transaction. Executive
acknowledges that the services to be rendered by her are unique
and personal. Accordingly, Executive may not assign any of her
rights or obligations under this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase of a majority of the outstanding voting
stock of the Company or all or substantially all of the assets of
the Company, or by merger, consolidation, or otherwise), by
agreement in form and substance satisfactory to the Executive, to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness
of any such succession, shall constitute "Good Reason" for
termination by the Executive pursuant to paragraph 3.2 hereof,
and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as provided in paragraph
3.2 hereof. As used in this Agreement, "Company" shall mean the
Company entering into this Agreement with Executive and any
successor to its business and/or assets as aforesaid which is
required to execute and deliver the agreement provided for in
this paragraph 6.4(b) or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
6.5 SUCCESSORS. Subject to Section 5.4, the provisions of this
Agreement shall be binding upon the parties hereto, upon any successor
to or assign of the Company, and upon Executive's heirs and the
personal representative of Executive or Executive's estate.
6.6 NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be delivered either in person or by
certified or registered mail, return receipt requested. Any notice by
mail shall be addressed as follows:
If to the Company, to:
Vice President - Human Resources
Tennant Company
701 North Lilac Drive
Minneapolis, MN 55422
If to Executive, to:
Ms. Janet Dolan
2720 - 15th Street NW
New Brighton, MN 55112
-7-
<PAGE>
or to such other addresses as either party may be designate in writing
to the other party from time to time.
6.7 WAIVER OF BREACH. Any waiver by either party of compliance with
any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any other provision of this Agreement
or of any subsequent breach by such party of a provision of this
Agreement. No waiver by the Company shall be valid unless in writing
and signed by the President of the Company.
6.8 SEVERABILITY. If any one or more of the provisions (or portions
thereof) of this Agreement shall for any reason be held by a final
determination of a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provisions (or portions
of the provisions) of this Agreement, and the invalid, illegal, or
unenforceable provision shall be deemed replaced by a provision that
is valid, legal, and enforceable and that comes closest to expressing
intention of the parties.
6.9 GOVERNING LAW. This Agreement shall be interpreted and enforced
in accordance with the laws of the State of Minnesota, without giving
effect to conflict of law principles.
6.10 HEADINGS. The headings of articles and sections herein are
included solely for convenience and reference and shall not control
the meaning of interpretation of any of the provisions of this
Agreement.
6.11 COUNTERPARTS. This Agreement may be executed by either of the
parties in counterparts, each of which shall be deemed to be an original,
but all such counterparts shall constitute a single instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.
TENNANT COMPANY
By: _________________________________
Its _________________________________
EXECUTIVE
_____________________________________
JANET DOLAN
L731-2
-8-
<PAGE>
6/96 EXHIBIT A
TENNANT COMPANY
EMPLOYEE AGREEMENT
______________________________________________________________________________
Employee's Last Name First Name Initial
(Please Print)
I AM EMPLOYED OR DESIRE TO BE EMPLOYED BY TENNANT COMPANY IN A CAPACITY IN
WHICH I MAY RECEIVE OR CONTRIBUTE TO CONFIDENTIAL INFORMATION. IN
CONSIDERATION OF SUCH EMPLOYMENT OR CONTINUED EMPLOYMENT, AND THE WAGES OR
SALARY, AND OTHER EMPLOYEE BENEFITS IN COMPENSATION FOR MY SERVICES, AND IN
CONSIDERATION OF THE POST-TERMINATION PAYMENTS DESCRIBED HEREIN, AND IN
CONSIDERATION OF BEING GIVEN ACCESS TO CONFIDENTIAL INFORMATION, ALL OF WHICH
CONSIDERATION I EXPRESSLY ACKNOWLEDGE IS VALUABLE TO ME; I AGREE THAT:
A. In this Employee Agreement:
1. "Company" means Tennant Company, a corporation of the State of
Minnesota, of Minneapolis, Minnesota, and any existing or future
subsidiaries, owned or controlled directly or indirectly by said
Company.
2. "Confidential Information" means information not generally known
and proprietary to Company, including trade secret information
about Company's methods or processes and products, including
information relating to research, development, manufacture,
purchasing, accounting, engineering, marketing, merchandising,
selling, leasing, servicing, customers, finance and business
systems and techniques. All information disclosed to me, or to
which I obtain access, whether originated by me or by others,
during the period of my employment, which I have reasonable basis
to believe to be confidential information, or which is treated by
Company as being confidential information, shall be presumed to be
Confidential Information.
3. "lnventions" means discoveries, improvements and ideas (whether or
not shown or described in writing or reduced to practice) and
works of authorship, whether or not patentable or copyrightable,
(a) which relate directly to the business of Company, or
(b) which relate to Company's actual or demonstrably
anticipated research or development, or
(c) which result from any work performed by me for Company, or
(d) for which equipment, supplies, facility or trade secret
information of Company are used, or
(e) which is developed on any Company time.
4. "Conflicting Product" means any product, method or process, system
or service of any person or organization other than Company, in
existence or under development, which is the same as or similar to
or competes with, or has a usage allied to, a product, method or
process, system or service upon which I shall have worked (in
either a sales or a non-sales capacity) during the last
three (3) years of my employment by Company, or about which I have
or shall have acquired Confidential Information.
5. "Conflicting Organization" means any person or organization which
is engaged in or about to become engaged in, research on or
development, production, marketing, leasing, selling, or servicing
of a Conflicting Product.
<PAGE>
B. With respect to Inventions made, authored or conceived by me, either
solely or jointly with others during my employment, whether or not during
normal working hours or whether or not at Company's premises; or within
one year after termination of my employment; I will:
1. Keep accurate, complete and timely records of such Inventions,
which records shall be Company property and be retained on
Company's premises.
2. Promptly and fully disclose and describe such Inventions in
writing to Company.
3. Assign (and I do hereby assign) to Company all of my rights to
such Inventions, and to applications for letters patent and/or
copyrights in all countries and to letters patent and/or
copyrights granted upon such Inventions in all countries.
4. Acknowledge and deliver promptly to Company (without charge to
Company but at the expense of Company) such written instruments
and to do such other acts, as may be necessary in the opinion of
Company, to preserve property rights against forfeiture,
abandonment or loss and to obtain and maintain letters patent
and/or copyrights and to vest the entire right and title thereto
in Company.
Company shall retain all right, title and interest in and to any
Inventions and any information on Inventions shall be held by me in trust
and solely for the benefit of Company, and shall not be disclosed to any
others without Company's written consent and shall be the sole and
exclusive property of Company.
NOTICE AND ACKNOWLEDGMENT:
I UNDERSTAND THAT PARAGRAPH B OF THIS EMPLOYEE AGREEMENT WHICH I AM BEING
ASKED TO SIGN AS A CONDITION OF MY EMPLOYMENT OR CONTINUED EMPLOYMENT DOES
NOT APPLY TO AN INVENTION FOR WHICH THERE WERE NO EQUIPMENT, SUPPLIES,
FACILITY, OR TRADE SECRET INFORMATION OF COMPANY USED AND WHICH WAS DEVELOPED
ENTIRELY ON MY OWN TIME, AND WHICH DOES NOT RELATE DIRECTLY TO THE BUSINESS
OF COMPANY OR TO COMPANY'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR
DEVELOPMENT OR WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY ME FOR
COMPANY.
C. Any information received as a result of my employment with Company is to
be the property of Company and shall be held by me in trust and solely
for Company's benefit, and except as required in my duties to Company,
I will never, either during my employment by Company or at any time
thereafter, use or disclose any Confidential Information as defined in
Paragraph A (2), hereinabove.
D. Upon termination of my employment with Company, all records and any
compositions, articles, devices, equipment, and other items which
disclose or embody Confidential Information including all copies or
specimens thereof in my possession, whether prepared or made by me or
others, will be left with Company.
E. During the course of employment and for a period of two (2) years
commencing upon expiration of employment, voluntary or involuntary, I
will not, individually or on behalf of persons not party to this
Agreement, aid or try to solicit or induce any other employee or
employees of Company to leave their employment with Company in order to
accept employment of any kind with any other person, firm, partnership,
corporation, or business.
F. For two (2) years after termination of employment with Company (for any
reason or by either party) or for two (2) years after the termination of
any breach of any of my obligations under this Employee Agreement, I will
not, directly or indirectly, either as a proprietor, partner, employee,
or agent:
1. Accept employment or association without immediately informing
Company of such employment or association and also without
informing my new employer or associate of this Employee Agreement
and provide such employer or associate with a copy thereof.
2. Sell or solicit orders for any Conflicting Products:
(a) to or from any customer whom, within the three (3) year
period immediately preceding termination of my employment
with Company, I solicited or serviced or in connection with
whom I managed the solicitation or servicing thereof for
Company, or
(b) in any territory in which, within the three (3) year period
immediately preceding termination of my employment with
Company, I was working or which I managed for Company.
<PAGE>
3. Supervise, manage, direct, promote, or assist in the development,
production, sales, or servicing of any Conflicting Products.
4. Directly or indirectly render services to any Conflicting
Organization except that I may accept employment with a
Conflicting Organization whose business is diversified and which
has separate and distinct divisions, if:
(a) my services are rendered to such a separate and distinct
division which of itself is not a Conflicting Organization,
and
(b) provided, prior to my accepting such employment, Company
shall receive, satisfactorily to Company, separate written
assurances from such Conflicting Organization and from me
that I will not directly or indirectly render services in
connection with any Conflicting Product.
G. If solely because of provisions of Paragraph F, I am unable to obtain
employment consistent with my abilities and education within one month
after termination of my employment with Company, and so advised the
Company in writing, Company shall make payments to me, equal to:
my monthly base pay at time of termination, and
if at time of termination I am also being paid a commission, my
average monthly commission that I shall have been paid under the
then current general commission plan over the period of time it
shall have been in effect for me but not to exceed the most recent
twelve (12) months, and
exclusive of any other extra compensation, bonus or employee
benefits,
for each month of such unemployment, commencing with the end of the
second month after termination of my employment with Company and ending
as described below.
1. I agree that during each month of such unemployment I will make
conscientious and aggressive efforts to find employment; and
within ten (10) days after the end of each calendar month, I will
give Company a detailed written account of my efforts to obtain
employment. Such account will include a statement by me that,
although I aggressively sought employment, I was unable to obtain
employment that would not conflict with the provisions of
Paragraph F of this Employee Agreement.
It is understood that Company shall, at its option, be relieved of
making a monthly payment to me for any month during which I shall
have failed to seek employment conscientiously and aggressively or
account to Company, as provided for immediately above.
2. Upon my fulfillment of the conditions set forth in Paragraph G (1)
above, Company is obligated to make and to continue to make such
monthly payments to me, unless:
(a) thirty (30) days before such monthly payment would
otherwise be due, Company gives me written permission to
accept available employment, or Company gives me a written
release from the obligations of Paragraph F, or
(b) I am deceased, or
(c) except as modified by subparagraph (5) below, I obtain
employment, (and I agree that I will give prompt written
notice of any such employment to Company), or
(d) I have already violated the provisions of Paragraphs C or F
above.
3. Discontinuance of such monthly payments by Company for any reason
shall not be considered to be a liquidation of any damages
suffered by Company, and Company may avail itself of any remedies
otherwise available under this Employee Agreement, or applicable
principles of law or equity for any breach or default by me of
this Employee Agreement.
4. Company's liability, under this Employee Agreement or in any
action relating thereto, shall be limited to an amount not to
exceed the equivalent of twenty-three (23) such monthly payments,
less any amounts already paid to me by Company pursuant to this
Employee Agreement; Company not being obligated under this
Employee Agreement to make a payment to me for the first month of
such unemployment.
<PAGE>
5. If, after termination of my employment with Company, I obtain
other employment but because of the provisions of Paragraph F, my
position is such that my gross monthly income is actually less
than the gross monthly payment that would be due to me while
unemployed as first described above under this Paragraph G, then
Company's obligations to make payments to me for the period
specified in this paragraph will be limited to the difference
between:
(a) the gross monthly payment that would be due to me while
unemployed as first described under this Paragraph G, and
(b) any lesser gross monthly income I receive in my subsequent
employment.
H. All my obligations under this Employee Agreement, except for Paragraphs F
and G, shall be binding upon my heirs, spouses, assigns, and legal
representatives.
I. Company and I acknowledge and agree that the law of Minnesota shall
govern the respective rights and obligations of the parties to this
Employee Agreement. If any provision of this Employee Agreement shall be
voided by reason of a statute or law, as properly and judicially applied
to this Employee Agreement, then this Employee Agreement shall be
construed as if such provision is not contained herein insofar as such
particular jurisdiction is concerned.
J. This Employee Agreement replaces any existing agreement entered into by
me and Company for the same purpose relating generally to the same
subject matter; but such replacement shall not affect either party's
rights and obligations arising out of any such prior agreement not
otherwise superseded by this Employee Agreement which remaining rights
and obligations shall then continue to be in effect for that purpose.
K. Except as listed immediately below, I will not assert any rights under
any Inventions as having been made, conceived, authored or acquired by me
prior to my being employed by Company.
(Do not disclose or describe here anything you regard as being
confidential. What is wanted in this space, OR ON A SEPARATE ATTACHED
SHEET TO BE REFERENCED HEREBELOW, pursuant to Paragraph K above, is a
brief description of the product or process, etc., plus a list of source
documents, such as patents, patent applications, drawings, or written
descriptions, identified by number, title, and date.)
I UNDERSTAND AND EXPRESSLY ACKNOWLEDGE THAT IT IS EXTREMELY IMPORTANT TO
COMPANY THAT I FULFILL MY OBLIGATIONS UNDER THIS EMPLOYEE AGREEMENT.
FURTHER, IF I DO NOT FULFILL MY OBLIGATIONS IN WHOLE OR IN PART, IT LIKELY
WILL BE VERY DIFFICULT FOR COMPANY TO ASCERTAIN OR MEASURE DAMAGES COMPANY
HAS SUFFERED OR MIGHT SUFFER FROM MY FAILURE TO FULFILL SUCH OBLIGATIONS, OR
DAMAGES, IF DETERMINED, WILL BE INADEQUATE TO COMPANY'S INTERESTS. THEREFORE,
I FURTHER ACKNOWLEDGE THAT COMPANY WILL PREFER AND BE ENTITLED TO INJUNCTIVE
RELIEF (FOR EXAMPLE, BUT NOT LIMITED THERETO, PREVENTING ME FROM ACCEPTING
SUCH EMPLOYMENT) IN THE EVENT OF MY BREACH OR DEFAULT OF THIS EMPLOYEE
AGREEMENT.
I FURTHER ACKNOWLEDGE THAT ALL OF THE FOREGOING TERMS AND CONDITIONS SHALL BE
BINDING UPON ME DURING THE TERM OF MY EMPLOYMENT WITH COMPANY AND THEREAFTER
WHETHER OR NOT MY EMPLOYMENT BY COMPANY IS TERMINATED VOLUNTARILY OR
INVOLUNTARILY.
<TABLE>
<S> <C>
EMPLOYEE: EMPLOYER:
Signed by me at ______________________ Accepted for Tennant Company at
(City, State) Minneapolis, Minnesota
this ____ day of ______________, 19___ this ____ day of ______________, 19___
______________________________________ By: __________________________________
Employee's Signature Signature
______________________________________ ______________________________________
Home Address Title
______________________________________
City State Zip Code
TENNANT COMPANY
______________________________________ P.O. BOX 1452
Employee's Social Security Number Minneapolis, Minnesota 55440
</TABLE>
<PAGE>
RULES OF ARBITRATION
1. DEMAND FOR ARBITRATION
Arbitration is commenced by either Executive or the Company under these
Rules of Arbitration ("these Rules") by serving upon the other party a demand
for arbitration. The demand for arbitration shall contain a clear statement
of the claim.
2. LOCALE OF ARBITRATION
The locale of the arbitration shall be Minneapolis, Minnesota, unless
the parties agree otherwise in writing.
3. THE ARBITRATION PROCESS
All disputes will be heard by a single arbitrator. The American
Arbitration Association National Rules for the Resolution of Employment
Disputes applicable at the time of the dispute will govern the arbitration
proceedings, so long as those guidelines incorporate the following minimum
elements of due process.
The arbitrator must apply the federal or state substantive law that
would have governed the employment dispute had it been heard in federal or
state court (including, but not limited to, the applicable statutes of
limitation, the applicable order and burdens of proof, and the applicable
remedies). The arbitrator may not grant remedies that would have been
unavailable if the dispute had been heard in federal or state court. The
arbitrator also may not award a remedy that neither Executive nor Company has
requested. Finally, the guidelines must provide for fair discovery.
4. REPRESENTATION BY COUNSEL
Any party may be represented by counsel. A party intending to be so
represented shall notify the other party and the arbitrator of the name and
address of counsel at least ten days prior to the date set for the hearing at
which counsel is first to appear.
5. CONFIDENTIALITY
All arbitration proceedings shall be confidential, information provided
in the course of discovery shall be confidential and all communications
between the parties and the arbitrator shall be confidential. The parties
and the arbitrator shall keep confidential the existence and nature of any
claim or dispute and of the arbitration proceedings, and, in the event of any
judicial proceedings relating to such arbitration or enforcement of the
award, shall cooperate to have the record of such arbitration proceedings
sealed. The arbitrator shall maintain the privacy of the hearing.
<PAGE>
6. EXCLUSIONS FROM ARBITRATION AGREEMENT
The Arbitration Agreement does not apply to:
1. Workers' Compensation claims;
2. Unemployment Insurance claims;
3. Welfare and retirement benefit claims which are covered by
special appeal procedures;
4. Claims for injunctive or equitable relief (for example,
claims by Tennant to protect its confidential, proprietary,
or trade secret information); and
5. Claims that are expressly excluded by statute from
arbitration or that are expressly required by federal
statute to be arbitrated under a different procedure.
7. BINDING NATURE OF ARBITRATION
The result of the arbitration is final and binding upon Executive and
Company.
8. AMENDMENT OF RULES
The parties to the arbitration may by mutual written agreement amend,
modify or supplement these Rules.
L731-2
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT entered into as of July 12, 1999, by and between Tennant
Company, a Minnesota corporation (the "Company"), and James J. Seifert (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key member of the management of the Company
and has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company desires to recognize the
significant personal contribution that the Employee has made to further the
best interests of the Company and its stockholders; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to continue to obtain the benefits of the Employee's
services and attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to provide inducement for the Employee (A) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (B) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders that the Employee be in a position to make judgments and
advise the Company with respect to proposed changes in control of the Company
without regard to the possibility that Employee's employment may be
terminated without compensation in the event of certain changes in control of
the Company; and
WHEREAS, the Employee desires to be protected in the event of certain
changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and the Employee
desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and the Employee agree
as follows:
1. EMPLOYMENT. The Employee shall remain in the employ of the Company
for the term of this Agreement (the "Term"), and during the Term, the
Employee shall have such title, duties, responsibilities and authority, and
receive such remuneration and fringe benefits, as the Board of Directors of
the Company shall from time to time provide for the Employee; provided,
however, that either the Employee or the Company may terminate the employment
of the Employee at any time prior to the expiration of the Term, with or
without Cause and for any reason whatever, upon at least 30 days' prior
written notice to the other party, subject to the right of the Employee to
receive any payment and other benefits that may be due pursuant to the terms
and conditions of paragraph 2 of this Agreement.
-1-
<PAGE>
2. RIGHTS TO PAYMENT FOLLOWING CHANGE IN CONTROL. For purposes of this
paragraph 2, an "Event" shall be deemed to have occurred if:
A. a majority of the directors of the Company shall be persons other
than persons
(i) for whose election proxies shall have been solicited by the
Board of Directors of the Company or
(ii) who are then serving as directors appointed by the Board of
Directors to fill vacancies on the Board of Directors
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 Company 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 (the "Exchange Act")) 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 Events pursuant to
this paragraph 2B:
(i) any acquisition or beneficial ownership by the Company or a
subsidiary of the Company or
(ii) 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,
(iii) any acquisition or beneficial ownership by the Employee or
any group that includes the Employee, or
(iv) any acquisition or beneficial ownership by a parent
corporation or its wholly-owned subsidiaries, as long as
they shall remain wholly-owned subsidiaries, of 100% of the
outstanding voting stock of the Company as a result of a
merger or statutory share exchange which complies with
paragraph 2C(i)(2) or the exception in paragraph 2C(ii)
hereof in all respects,
C. the shareholders of the Company approve a definitive agreement or
plan to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with
a subsidiary of the Company or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no outstanding voting stock of the Company (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 Company immediately after
the merger or (II) cash upon the exercise by holders
of voting stock of the Company of statutory
dissenters' rights),
-2-
<PAGE>
(c) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Company 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 Company in the merger, all
holders of any class or series of voting stock of the
Company immediately prior to the merger have the right
to receive substantially the same per share
consideration in exchange for their voting stock of the
Company as all other holders of such class or series),
(ii) exchange, pursuant to a statutory exchange of shares of
voting stock of the Company held by shareholders of the
Company immediately prior to the exchange, shares of one or
more classes or series of voting stock of the Company for
cash, securities or other property, except for (a) voting
stock of a parent corporation of the Company owning directly,
or indirectly through wholly-owned subsidiaries, both
beneficially and of record 100% of the voting stock of the
Company immediately after the statutory share exchange if (I)
the persons who were the beneficial owners, respectively, of
the outstanding common stock and outstanding voting stock of
the Company immediately prior to such statutory share
exchange own, directly or indirectly, immediately after the
statutory share exchange more than 70% of, respectively, the
then outstanding common stock and the then outstanding voting
stock of such parent corporation, and (II) all holders of any
class or series of voting stock of the Company immediately
prior to the statutory share exchange have the right to
receive substantially the same per share consideration in
exchange for their voting stock of the Company as all other
holders of such class or series or (b) cash with respect to
fractional shares of voting stock of the Company or payable
as a result of the exercise by holders of voting stock of the
Company of statutory dissenters' rights,
(iii) sell or otherwise dispose of all or substantially all of the
assets of the Company (in one transaction or a series of
transactions), or
(iv) 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
corporation (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 Employee or a group of persons, including the
Employee, acting in concert, or
D. (i) the Company enters into an agreement in principle or a
definitive agreement relating to an Event described in clause
A, B or C above which ultimately results in such an Event
described in clause A, B or C hereof,
-3-
<PAGE>
(ii) a tender or exchange offer or proxy contest is commenced
which ultimately results in an Event described in clause A or
B hereof, or
(iii) there shall be an involuntary termination or Constructive
Involuntary Termination of employment of Employee, and
Employee reasonably demonstrates that such event (x) was
requested by a third party that has previously taken other
steps reasonably calculated to result in an Event described
in clause A, B or C above and which ultimately result in an
Event described in clause A, B or C hereof or (y) otherwise
arose in connection with or in anticipation of an Event
described in clause A, B or C above that ultimately occurs.
If any Event shall occur during the Term of this Agreement, then the Employee
shall be entitled to receive from the Company or its successor (which term as
used herein shall include any person acquiring all or substantially all of
the assets of the Company) a cash payment and other benefits on the following
basis (unless the Employee's employment by the Company is terminated
voluntarily or involuntarily prior to the occurrence of the earliest Event to
occur (the "First Event"), in which case the Employee shall be entitled to no
payment or benefits under this paragraph 2):
(a) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period, the employment
of the Employee with the Company is voluntarily or involuntarily
terminated for any reason (unless such termination is a voluntary
termination by the Employee other than a Constructive Involuntary
Termination or is on account of the death or Disability of the
Employee or is a termination by the Company for Cause), the Employee
(or the Employee's legal representative, as the case may be),
subject to the limitations set forth in paragraph 2(e),
(i) shall be entitled to receive from the Company or its
successor, upon such termination of employment with the
Company or its successor, a cash payment in an amount equal
to A) three times the average annual compensation payable by
the Company and includible in the gross income for Federal
Income Tax purposes of the Employee during the shorter of
the period consisting of the most recent five completed
taxable years of the Employee ending before the First Event
(other than an Event described in clause D of this paragraph
2 unless the Employee is terminated prior to the occurrence
of an Event described in clause A, B or C of this paragraph
2) or that portion of such period during which the Employee
was employed by the Company, less B $1.00, such payment to
be made to the Employee by the Company or its successor in a
lump sum at the time of such termination of employment; and
(ii) shall be entitled until the end of the Transition Period to
participate in any health, disability and life insurance
plan or program in which the Employee was entitled to
participate immediately prior to the First Event as if he or
she were an employee of the Company until the end of the
Transition Period (except, with respect to health insurance
coverage, for those portions remaining until the end of the
Transition Period that duplicate health insurance coverage
that is in place for the Employee under any other policy
provided at the expense of another employer); provided
however, that in the event that the Employee's participation
in any such health, disability or life insurance plan or
program is
-4-
<PAGE>
barred, the Company, at its sole cost and expense, shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plan or program.
(b) The payments provided for in this paragraph 2 shall be in addition
to any salary or other remuneration otherwise payable to the
Employee on account of employment by the Company or one or more of
its subsidiaries or its successor (including any amounts received
prior to such termination of employment for personal services
rendered after the occurrence of the First Event) but shall be
reduced by any severance pay which the Employee receives from the
Company, its subsidiaries or its successor under any other policy
or agreement of the Company in the event of involuntary termination
of Employee's employment.
(c) The Company shall also pay to the Employee all legal fees and
expenses incurred by the Employee as a result of such termination,
including, but not limited to, all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this
Agreement.
(d) In the event that at any time from the date of the First Event
until the end of the Transition Period,
(i) the Employee shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation),
in each case as compared with the Employee's status
immediately prior to the First Event, other than for Cause
or on account of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by
paragraph 4(b) hereof,
(iii) the Company shall require the Employee to relocate to any
place other than a location within twenty-five miles of the
location at which the Employee performed his duties
immediately prior to the First Event or, if the Employee
performed such duties at the Company's principal executive
offices, the Company shall relocate its principal executive
offices to any location other than a location within
twenty-five miles of the location of the principal
executive offices immediately prior to the First Event, or
(iv) the Company shall require that the Employee travel on
Company business to a substantially greater extent than
required immediately prior to the First Event,
a termination of employment with the Company by the Employee thereafter
shall constitute a Constructive Involuntary Termination.
(e) Notwithstanding any provision to the contrary contained herein
except the last sentence of this paragraph 2(e), if the lump sum
cash payment due and the other benefits to which the Employee shall
become entitled under paragraph 2(a) hereof, either alone or
together with other payments in the nature of compensation to the
Employee which are contingent on a change in the ownership or
effective control of the Company or in the ownership of a
substantial portion of the assets of the
-5-
<PAGE>
Company or otherwise, would constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986 (the
"Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not
below zero) to the largest aggregate amount as will result in no
portion thereof being subject to the excise tax imposed under
Section 4999 of the Code (or any successor provision thereto) or
being non-deductible to the Company for Federal Income Tax purposes
pursuant to Section 280G of the Code (or any successor provision
thereto). The Employee in good faith shall determine the amount of
any reduction to be made pursuant to this paragraph 2(e) and shall
select from among the foregoing benefits and payments those which
shall be reduced. No modification of, or successor provision to,
Section 280G or Section 4999 subsequent to the date of this
Agreement shall, however, reduce the benefits to which the Employee
would be entitled under this Agreement in the absence of this
paragraph 2(e) to a greater extent than they would have been
reduced if Section 280G and Section 4999 had not been modified or
superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first
sentence of this paragraph 2(e).
(f) The Employee shall not be required to mitigate the amount of any
payment or other benefit provided for in paragraph 2 by seeking
other employment or otherwise, nor (except as specifically provided
in paragraph 2(a)(ii)) shall the amount of any payment or other
benefit provided for in paragraph 2 be reduced by any compensation
earned by the Employee as the result of employment by another
employer after termination, or otherwise.
(g) The obligations of the Company under this paragraph 2 shall survive
the termination of this Agreement.
3. DEFINITION OF CERTAIN TERMS.
(a) As used herein, the term "person" shall mean an individual,
partnership, corporation, estate, trust or other entity.
(b) As used herein, the term "Cause" shall mean, and be limited to,
(i) willful and gross neglect of duties by the Employee or (ii) an
act or acts committed by the Employee constituting a felony and
substantially detrimental to the Company or its reputation.
(c) As used herein, the term "Disability" shall mean the Employee's
absence from his duties with the Company on a full time basis for
180 consecutive business days, as a result of the Employee's
incapacity due to physical or mental illness, unless within 30
days after written notice pursuant to paragraph 1 hereof is given
following such absence, the Employee shall have returned to the
full time performance of his duties.
(d) As used herein, the term "voting stock" shall mean all outstanding
shares of capital stock entitled to vote generally in the election
of directors, considered for purposes of this Agreement as one
class, and all references to percentages of the voting stock shall
be deemed to be references to percentages of the total voting
power of the voting stock.
-6-
<PAGE>
(e) As used herein, the term "Transition Period" shall mean the
three-year period commencing on the date of the earliest to occur
of an Event described in clause A, B or C of paragraph 2 hereof
(the "Commencement Date") and ending on the third anniversary of
the Commencement Date.
4. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the successors, legal representatives and assigns of the parties
hereto; provided, however, that the Employee shall not have any
right to assign, pledge or otherwise dispose of or transfer any
interest in this Agreement or any payments hereunder, whether
directly or indirectly or in whole or in part, without the written
consent of the Company or its successor.
(b) The Company will require any successor (whether direct or
indirect, by purchase of a majority of the outstanding voting
stock of the Company or all or substantially all of the assets of
the Company, or by merger, consolidation or otherwise), by
agreement in form and substance satisfactory to the Employee, to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness of
any such succession (other than in the case of a merger or
consolidation) shall be a breach of this Agreement and shall
entitle the Employee to compensation from the Company in the same
amount and on the same terms as the Employee would be entitled
hereunder if the Employee terminated his employment on account of
a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of
termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which is required to execute and
deliver the agreement provided for in this paragraph 4(b) or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
5. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
6. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Tennant Company
701 N. Lilac Drive
Minneapolis, Minnesota 55440
Attention: Chief Executive Officer
(b) In the case of the Employee shall be:
James J. Seifert
3322 Churchill Drive
Woodbury, MN 55125
-7-
<PAGE>
Either party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed to have been given on the registered date or
that date stamped on the certified mail receipt.
7. SEVERABILITY; SEVERANCE. In the event that any portion of this
Agreement is held to be invalid or unenforceable for any reason, it is hereby
agreed that such invalidity or unenforceability shall not affect the other
portions of this Agreement and that the remaining covenants, terms and
conditions or portions hereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify the objectionable provision as
to make it valid, reasonable and enforceable. In the event that any benefits
to the Employee provided in this Agreement are held to be unavailable to the
Employee as a matter of law, the Employee shall be entitled to severance
benefits from the Employer, in the event of an involuntary termination or
Constructive Involuntary Termination of employment of the Employee (other
than a termination on account of the death or Disability of the Employee or a
termination for Cause) during the term of this Agreement occurring at the
time of or following the occurrence of an Event, at least as favorable to the
Employee (when taken together with the benefits under this Agreement that are
actually received by the Employee) as the most advantageous benefits made
available by the Employer to employees of comparable position and seniority
to the Employee during the five-year period prior to the First Event.
8. TERM. This Agreement shall commence on the date of this Agreement
and shall terminate, and the Term of this Agreement shall end, on the later
of (A) December 31, 1999, provided that such period shall be automatically
extended for one year and from year to year thereafter until notice of
termination is given by the Employer or the Employee to the other party
hereto at least 60 days prior to December 31, 1999 or the one-year extension
period then in effect, as the case may be, or (B) if the Commencement Date
occurs prior to December 31, 1999 (or prior to the end of the extension year
then in effect as provided for in clause (A) hereof), the third anniversary
of the Commencement Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TENNANT COMPANY
By ________________________________
___________________________________
JAMES J. SEIFERT
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS FOR THE NINE
MONTHS ENDED SEPT. 30, 1999, AND THE CONSOLIDATED BALANCE SHEET AS OF SEPT. 30,
1999, PAGES 2 AND 3, AND FOOTNOTE 2, PAGE 5, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,705
<SECURITIES> 0
<RECEIVABLES> 81,731
<ALLOWANCES> 3,732
<INVENTORY> 49,654
<CURRENT-ASSETS> 151,158
<PP&E> 178,755
<DEPRECIATION> 111,875
<TOTAL-ASSETS> 242,185
<CURRENT-LIABILITIES> 52,381
<BONDS> 24,415
0
0
<COMMON> 3,392
<OTHER-SE> 130,362
<TOTAL-LIABILITY-AND-EQUITY> 242,185
<SALES> 310,412
<TOTAL-REVENUES> 310,412
<CGS> 185,600
<TOTAL-COSTS> 185,600
<OTHER-EXPENSES> 102,856
<LOSS-PROVISION> 632
<INTEREST-EXPENSE> 1,826
<INCOME-PRETAX> 21,792
<INCOME-TAX> 7,767
<INCOME-CONTINUING> 14,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,025
<EPS-BASIC> 1.54
<EPS-DILUTED> 1.53
</TABLE>
