-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BAiu/iG3rMakRQqBROok/g0MhIM0XPpgiT2iKHRZQ2GB+VO2jBk040Ah1JcJlZyK iEc7X9b+dmKL1uIdpgKklw== 0000912057-95-001622.txt : 19950616 0000912057-95-001622.hdr.sgml : 19950616 ACCESSION NUMBER: 0000912057-95-001622 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950323 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED PRODUCTS CORP /DE/ CENTRAL INDEX KEY: 0000003941 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 380292230 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05530 FILM NUMBER: 95522743 BUSINESS ADDRESS: STREET 1: 10 S RIVERSIDE PLZ STREET 2: SUITE 1600 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124541020 10-K405 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) - ------- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) - ------- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-5530
ALLIED PRODUCTS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-0292230 --------- ----------- (State or other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 10 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606 -------------------------------------------- ----- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 454-1020 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered --------------------- ------------------------------------------ COMMON STOCK--$.01 PAR VALUE NEW YORK AND PACIFIC
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _X_ 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 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 ___ As of February 28, 1995, 9,104,482 shares of common stock, 146,800 shares of Series B Variable Rate Cumulative Preferred Stock and 115,000 shares of $10.81 Series C Cumulative Preferred Stock were outstanding, and the aggregate market value of the shares of common stock (based upon the closing price on the New York Stock Exchange) and of the Preferred Stock (based upon such stock's stated value) held by nonaffiliates of the Company was approximately $146,446,865. Determination of common stock ownership by affiliates was made solely for the purpose of responding to this requirement, and the Registrant is not bound by this determination for any other purpose. The Company's definitive Proxy Statement (which will be filed at a later date) for the Annual Meeting of Stockholders scheduled to be held May 17, 1995 and Annual Report to security holders for the year ended December 31, 1994 are incorporated by reference in Part III and Part IV herein. The Exhibit Index is located on page 43. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Allied Products Corporation (Company) was organized under Delaware law in 1967 as the successor to a Michigan corporation which was formed in 1928. Its principal executive offices are at 10 South Riverside Plaza, Chicago, Illinois 60606 and its telephone number is (312) 454-1020. The Company's operations involve a single industry segment, the manufacturing and sale of agricultural and industrial machinery and other products. The operations of the Company were realigned into one business segment in 1993 reflecting the sale or closure of several operating divisions. This restructuring of the Company, which began in 1991, was completed in 1994 with the sale of the Cooper division. Reference is made to Note 3 of Notes to Consolidated Financial Statements for a more complete description of these closures and dispositions. Approximately 2%, 8% and 6% of the Company's net sales from continuing operations in 1994, 1993 and 1992, respectively, were exported. PRODUCT LINES FARM IMPLEMENTS-- PRODUCTS. The Bush Hog division offers a comprehensive line of farm implements including rotary cutters, tractor mounted loaders, hay mowers, peanut combines, tillers and cultivators. These products are marketed under two well established brand names, Bush Hog and Lilliston. Bush Hog rotary cutters are used to shred stalks after the crop has been harvested, to mow pasture, for land maintenance and for governmental right-of-way mowing. The use season for rotary cutters extends from early spring to late fall, and even beyond in warmer climates. Bush Hog has a major market share (35%) of rotary cutters sold in North America. Front end loaders are used by farmers and ranchers for material handling, and cultivators are used for weed control after crops have been planted. Lilliston peanut combines are used in harvesting peanuts, and command approximately 30% of the market. The use season for peanut combines is from late summer to late fall. Several other implements are sold under the Bush Hog name, including disc mowers, rotary tillers, post hole diggers, flail mowers and rear mounted tractor blades. These tools offer a variety of applications, and are sold to farmers, ranchers, landscape contractors, large estate owners and municipalities. Implements tend to have a shorter life than tractors and self-propelled grain combines and purchases of implements are less likely to be deferred in times of economic uncertainty, somewhat dampening cyclical swings in demand. Parts accounted for almost one sixth of Bush Hog's total revenue in 1994. In order to maintain and expand its market position, Bush Hog continually updates and improves its product offerings. This is done through a combination of internal development and external acquisition of technology. MARKETING. Bush Hog implements are marketed through approximately 2,650 farm equipment dealers which play the primary role in sales of farm equipment. In general, they are independent, local businessmen who have an established local clientele developed over the years and represent more than 35% of the total farm equipment dealerships in the United States and Canada. The Bush Hog and Lilliston brand names are particularly strong in the southeastern and southwestern states. Marketing and sales activities in Canada and the United States are carried out by 58 commissioned manufacturers' representatives or representative organizations who operate as independent contractors and who, for the most part, are exclusive. Commissions are payable when receivables are collected rather than when sales are made. To even out the seasonal variations in its production cycles, Bush Hog provides incentives for off-season purchases, including extended payment terms to dealers in the form of floor plan financing. Bush Hog retains a security interest in this floor plan equipment. Under certain state and provincial statutes, a dealer may return floor plan equipment to a manufacturer upon termination of his relationship. Bush Hog services its network of dealers through two manufacturing facilities and eight service parts distribution centers, strategically located in the United States and Canada. COMPETITION. Competition for farm equipment includes the major line manufacturers of tractors and several hundred companies producing one or more models of shortline implements. Price, quality, service and availability are all factors in brand selection. Bush Hog's objective is to be a low cost producer of high quality products. To do this it must continue to modernize its facilities to improve efficiency. 2 INDUSTRY. The agricultural equipment industry in North America is a mature industry engaged in producing replacement equipment for a declining number of farmers. It is dominated by a small number of major line manufacturers, which market a full range of farm machinery, including tractors, grain combines and various implements through their own dealer organizations and account for approximately 60% of the dollar volume of industry shipments. The remaining 40% of the market is shared by approximately 700 companies which generally concentrate their production on shortline implements such as plows, harrows, cultivators, livestock equipment, grain handling equipment or hay equipment. During the 1980's, the farm economy was in decline and this led to a deterioration in farmers' financial condition. Capital expenditures by farmers reached a low in 1986. Since then, commodity exports have improved due to changes in governmental programs and foreign exchange rates. Individual farmers have reduced their debt load and are much less leveraged after several years of good earnings. The year 1994 was a record year for corn, soybean and cotton production. Accordingly, net farm income is estimated to have increased by $4 billion. Farm land prices have improved, and farm debt is at a historically low level. Future prospects of the industry depend largely on factors outside of industry participants' control. These include the value of the U.S. dollar, the relative level of interest rates between countries, the variations in the world demand for supplies of farm commodities and U.S. government agricultural, foreign and fiscal policies. A new government farm bill is to be enacted in 1995. It is too early to ascertain the impact this bill will have on existing farm subsidy programs, and therefore on the farmers' income and spending. METAL FORMING PRESSES-- PRODUCTS. The Verson division manufactures a broad line of both medium and large technologically advanced mechanical and hydraulic metal forming presses. These products are used in the manufacture of components for the automotive, appliance, office equipment, farm equipment, ordnance, aerospace and general metal working industries. A transfer press is a specialized mechanical press which combines a series of operations by transferring a work piece from one station to another inside of a single press. Each station in the press has a separate die which is individually adjustable. This process allows all operations from blank to finished product to take place in one press, resulting in increased output and reduced labor expense. Prices vary by type and size; a large transfer press may sell for in excess of $25 million. Approximately one fifth of Verson's revenue is generated by customer special services. Items included in the special services area are: repair parts, complete remanufacturing capability for used presses, and contract machining and manufacturing. In addition to the fabrication and machining of components, Verson provides complete tooling and engineering services necessary for turnkey systems. Verson also designs and supplies tools for metal forming, including metal stamping and cold extrusion. MARKETING. Verson's Marketing Group is headed by a Vice President of Marketing and Sales, with responsibility for all Verson products and services. Three Sales Managers, reporting to the Vice President, are responsible for press sales, tooling sales, and press rebuilding and contract services, respectively. Verson's major customers are the U.S. automobile manufacturers (both U.S. and Japanese owned) and first and second tier automotive parts producing companies, which, on average, account for about one-half Verson's annual revenue. Verson's other major market served is the appliance industry and customers include all major brand names. Verson is the technology leader, having designed the world's first transfer press in 1939, the world's first electronic feed in 1981 and, most recently, a cross bar feed which significantly improves production. COMPETITION. There are only a few companies world-wide that supply large transfer press systems similar to those provided by Verson. Verson is now the only American owned company competing in this upper end segment. Principal competition comes from German and Japanese manufacturers. Press manufacturers compete on the basis of technology, capability, reliability and price. The larger presses are huge pieces of machinery standing over three stories tall and weighing up to 2,000 tons. Consequently, the barriers to entry for new competitors are almost impossible due to required capital. INDUSTRY. Domestic automobile manufacturers are seeking to become more cost-effective by requiring quality parts, implementing Just-In-Time concepts, obtaining price reductions from suppliers, as well as redesigning cost out of automobiles, and restructuring and automating their manufacturing processes. Demand from the appliance industry remains strong as the major manufacturers seek to increase capacity, reduce costs and gear up to produce water conserving clothes washers. 3 The Verson division of Allied Products is in a strong position to capitalize on major retooling and modernization programs as they come on stream. The second wave of this demand is being felt now with major suppliers to the automakers converting to new technology. Demand from the appliance industry continues to grow, more than offsetting declines in aerospace and ordnance. In response to these market factors and an unprecedented incoming order rate in 1994, the Verson division has begun a 40,000 square foot expansion of its assembly facilities. This expansion will come on stream in the second quarter of 1995, significantly expanding the division's capacity for manufacturing large transfer presses. THERMOPLASTIC RESINS-- PRODUCTS AND SERVICES. The Coz division provides a complete line of thermoplastic resins and related services to the plastic molding and extrusion industry. Coz offers a full line of materials supply to include specialty thermoplastic compounds and compounding services, color and additive concentrates, the reprocessing of scrap thermoplastic resins, and the brokering of prime and secondary materials. Coz purchases unmodified thermoplastic resins from major basic resin suppliers and combines or alloys these resins with various additives to achieve certain desired properties such as color, heat resistance, fire retardancy, etc. The resins Coz purchases are generally in the form of small plastic pellets as are the finished products supplied by Coz to its customers. Coz's brokerage operation provides its customers with prime and off-specification materials at competitive prices in large or small quantities as required. Substantial on-site inventories facilitate short delivery cycles. As an additional service to its customers, Coz also reprocesses scrap generated in molding or extrusion activities, thereby economically turning scrap into useful materials. MARKETING. All sales are handled on a direct basis by salaried employees who receive a significant part of their compensation from commissions. The sales staff is strongly supported by technical personnel, both in product development and in customer start-ups, applications, or training. Plant-to-plant visits and technical conferences are commonplace. The bulk of Coz's sales activity is in the northeastern United States. COMPETITION. Coz's competition comes from several different levels in the plastics industry, including basic resin producers, plastic distributors, brokers, concentrate suppliers and independent thermoplastic compounders. Coz differentiates itself from its competition by covering all aspects of plastics material supply to include compounding, color and additives concentrates, toll processing customers' materials, reprocessing scrap materials, and brokering both prime and off-spec materials. Over its thirty-five year business life, Coz has developed significant technical capabilities supported by excellent laboratory and production equipment which results in Coz being positioned as a high end co-developer for special customer applications. INDUSTRY. The thermoplastic compounding industry sales approximate $5 billion and are experiencing real growth at a rate of about 5 per cent annually. Independent compounders such as Coz are numerous and generally focus on a relatively small geographic area. Industry consolidation is occurring as some larger companies have been attracted to the growth opportunities in thermoplastic compounding. SALES BACKLOG Sales backlog from continuing operations as of December 31, 1994 was $176,403,000 compared to $68,722,000 at December 31, 1993. The difference is attributable to a large press order at the Verson division for which production has yet to begin at the end of 1994. Approximately $55,000,000 of the sales backlog at December 31, 1994 related to this large press order will be produced in 1996. The remaining backlog of orders will be filled in 1995. EMPLOYEES Allied Products currently employs approximately 1,600 individuals. Approximately 24% of Allied Products' employees are represented by unions. RAW MATERIALS AND SOURCES OF SUPPLY The principal raw material used by the farm implement and metal press operations include steel and other metals and purchased components. The thermoplastic division uses thermoplastics resins and other chemicals. During 1994, the materials needed by Allied Products have generally been available from a variety of sources in adequate quantities and at prevailing market prices. No one supplier is responsible for supplying more than 10% of the principal raw materials used by Allied Products. PATENTS, TRADEMARKS AND LICENSES Allied Products owns the federally registered trademarks "Bush Hog" and "Lilliston" used on its agricultural equipment products and "Verson" on its metal forming presses, all of which it considers material to its business. While Allied Products believes that the other 4 trademarks used by each of its operations are important, none of the patents, licenses, franchises or such other trademarks are considered material to the operation of its business. MAJOR CUSTOMERS Net sales from continuing operations to the three major U.S. automobile manufacturers accounted for approximately 14% of total consolidated sales from continuing operations in 1994. Approximately 25% and 24% of Allied Products' consolidated net sales from continuing operations in 1993 and 1992, respectively, were derived from sales to the major U.S. automobile manufacturers. With the exception of the three major automobile manufacturers, no material part of Allied Products' business is dependent upon a single customer. SEASONALITY Retail sales of and cash collected for farm equipment tend to occur during or just preceding the use seasons previously described. Sales and cash receipts for the other divisions are not effected by seasonality. ENVIRONMENTAL FACTORS Reference is made to Note 11 of Notes to Consolidated Financial Statements regarding environmental factors and matters. 5 EXECUTIVE OFFICERS OF THE COMPANY The following table sets forth the names and ages of the Company's Executive Officers, together with all positions and offices held with the Company by such officers as of February 28, 1995.
NAME POSITION WITH ALLIED PRODUCTS AGE - --------------------------------------------- ----------------------------------------------------------------- --- Richard A. Drexler........................... Chairman, President and Chief Executive Officer 47 James J. Hayden*............................. Executive Vice President and Chief Financial Officer 59 Kenneth B. Light............................. Executive Vice President, Chief Administrative Officer and Secretary 62 Martin A. German............................. Senior Vice President 58 Bobby M. Middlebrooks........................ Senior Vice President 59 Robert J. Fleck.............................. Vice President-Accounting and Chief Accounting Officer 47 Patrick J. Riley............................. Vice President and Treasurer 59
No family relationships exist among the executive officers. Each executive officer, except Messrs. Hayden and German, has been employed by Allied Products for over ten years. Pursuant to Allied Products' By-laws, each officer is elected annually by the Board of Directors. Mr. Drexler, who became Chairman in 1993, has been President and a Director of Allied Products since 1982, has been Chief Executive Officer since 1986 and was Acting Chief Financial Officer from 1991 to 1992, Chief Financial Officer from 1989 to 1990 and Chief Operating Officer from 1981 to 1986. He was also Chief Financial Officer from 1977 to 1987. Prior to becoming President, Mr. Drexler served as Executive Vice President, Senior Vice President of Administration, Vice President of Administration, Staff Vice President-Development, and Director of Planning. Mr. Hayden has been Executive Vice President and Chief Financial Officer since 1993 and was Senior Vice President and Chief Financial Officer from 1992 to 1993. He was Executive Vice President and Chief Financial Officer from 1987 to 1989, at which time he left to pursue private interests. Prior to joining Allied Products in 1987, he was President of Rexnord Automation, a subsidiary of Rexnord Inc., since 1983. He became a Director of Allied Products in 1993. Mr. Light has been Executive Vice President and Chief Administrative Officer since 1982 and has also served as Secretary since 1972. From 1980 to 1982, he was Senior Vice President-Administration, from 1976 to 1980 he was Vice President-General Counsel and prior to that he was General Counsel and Director of the Corporate Law Department. He became a Director of Allied Products in 1993. Mr. German was elected Senior Vice President in 1991 and was Vice President from 1989 to 1991. Since joining Allied Products in 1986, he has been President of the Verson Allsteel Press division. Prior to joining Allied Products, he was Vice President and General Manager of the Turning Division of Warner & Swasey Company. Mr. Middlebrooks has been Senior Vice President since 1985 and was Vice President of Allied Products from 1984 to 1985 in charge of the former Agricultural Equipment Group. Prior to that, he was President-Bush Hog Implements Division. He joined Bush Hog in 1955. Mr. Fleck has been Vice President-Accounting since 1985 and Chief Accounting Officer since 1986. From 1983 to 1985 he was Staff Vice President-Accounting and prior to that he served as Corporate Controller and in various other accounting positions for Allied Products. Prior to joining Allied Products in 1974, he was an internal auditor with Marquette Cement Company, a national cement manufacturing company. Mr. Riley has been Vice President & Treasurer since 1993. Prior to that he has been Treasurer of Allied Products since 1976. Prior to that he was Assistant Treasurer and Director of Cash Management of Allied Products since 1969. - ------------------------ * Mr. Hayden resigned on March 17, 1995. 6 ITEM 2. PROPERTIES Allied Products owns or leases four manufacturing facilities in three states for the production of its various products and maintains warehouse facilities in various locations throughout the United States and Canada. Management is of the opinion that all facilities are of sound construction, in good operating condition and are adequately equipped for carrying on the business of the Company. Operations at the Bush Hog division are conducted in Selma, Alabama in two owned (one of which is mortgaged) facilities containing approximately 700,000 square feet in total. The division also maintains several leased facilities in various states and Canada which are used as warehouses and parts depots. Operations at the Verson division are conducted in Chicago, Illinois in an owned facility containing approximately 350,000 square feet. Operations at the Coz division are conducted in Northbridge, Massachusetts in a leased facility containing approximately 231,000 square feet. ITEM 3. LEGAL PROCEEDINGS Reference is made to Note 11 of Notes to Consolidated Financial Statements with respect to the Company's involvement in legal proceedings as a defending party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 7 PART II ITEM 5. MARKET PRICE OF THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's common stock is listed on the New York and Pacific Stock Exchanges. The price range of the common stock on the New York Stock Exchange is as follows:
- ----------------------------------------------------------------------------------------------------- BEGINNING END OF 1994 OF YEAR YEAR 1994 QTR HIGH LOW DIVIDEND - ----------------------------------------------------------------------------------------------------- Common $12 1/2 $14 3/8 1 $17 3/8 $12 5/8 $-- - ----------------------------------------------------------------------------------------------------- 2 15 12 1/4 -- - ----------------------------------------------------------------------------------------------------- 3 14 7/8 12 1/2 -- - ----------------------------------------------------------------------------------------------------- 4 15 1/8 12 -- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- BEGINNING END OF 1993 OF YEAR YEAR 1993 QTR HIGH LOW DIVIDEND - ----------------------------------------------------------------------------------------------------- Common $ 3 $12 1/2 1 $ 8 1/4 $ 2 3/4 $-- - ----------------------------------------------------------------------------------------------------- 2 15 7/8 7 1/4 -- - ----------------------------------------------------------------------------------------------------- 3 15 1/8 9 1/2 -- - ----------------------------------------------------------------------------------------------------- 4 13 3/8 10 1/4 -- - -----------------------------------------------------------------------------------------------------
As of February 10, 1995, the approximate number of holders of record of the Company's common stock ($.01 par value) was 2,600. The Company has paid no dividend since fiscal year 1982. At December 31, 1994, the Company was restricted from paying dividends on its common stock. Reference is made to Note 5 of Notes to Consolidated Financial Statements regarding the lifting of this restriction subsequent to the end of 1994. ITEM 6. SELECTED FINANCIAL DATA
1994 1993 1992 1991 1990 ---------------- ------------ ---------------- ------------ ------------ Net sales from continuing operations (A).......... $215,529,000 $217,988,000 $195,341,000 $159,023,000 $172,506,000 Income (loss) from continuing operations (A)...... $ 19,687,000 $ 5,951,000 $ 1,774,000(B) $ (4,500,000) $ (9,763,000) Earnings (loss) per common share from continuing operations (A).................................. $1.96 $.43 $(.08)(B) $(1.12) $(2.43) Total assets...................................... $150,555,000 $192,040,000 $284,612,000 $326,702,000 $439,526,000 Long-term debt (including capitalized leases and redeemable preferred stock)..................... $ 12,130,000 $ 23,522,000 $117,833,000 $ 37,799,000 $ 53,750,000 Cash dividend declared per common share........... $-- $-- $-- $-- $-- - ------------------------ (A) Restated prior to 1993 to reflect the effects of discontinued operations. (B) Excludes a charge of $1,739,000 ($.21 per common share) relating to the transition effect of adopting SFAS No. 106--Employers' Accounting for Postretirement Benefits Other Than Pensions--on an immediate recognition basis.
The accompanying Notes to Consolidated Financial Statements are an integral part of this summary. 8 ITEM 7: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OPERATING RESULTS Reference is made to Note 3 of Notes to Consolidated Financial Statements regarding the sale/shutdown and restructuring of operations from 1992 through the end of 1994. During 1993, the Company sold the Smith Energy Services and White-New Idea Farm Equipment divisions for cash. The Company also closed down and liquidated the R/B Die & Prototype, International Agro, Kewanee Farm Equipment and Charles City Foundry and Machining operations during 1993. During the second quarter of 1994, the Company sold the business and certain assets of the Cooper division. The Company has included the results of these operations and, in years prior to 1994, an allocation of financing costs, administrative and interest expenses and related restructuring cost provisions under the caption "Discontinued operations (net of tax)--Income (loss) from operations" in the accompanying Consolidated Statements of Income (Loss). 1994 COMPARED TO 1993 Net sales from continuing operations in 1994 were $215,529,000 compared to net sales from continuing operations of $217,988,000 for the prior year. Income from continuing operations in 1994 was $19,687,000 compared to income from continuing operations of $5,951,000 reported in 1993. Net income in 1994 was $14,333,000 compared to net income of $15,284,000 reported in 1993. Net sales at the Bush Hog division increased by over 11% in 1994 compared to 1993. The most significant increases in net sales have occurred within the loader and disc mower product lines in 1994. In general, the agricultural equipment industry has experienced improvement over the prior year due to a number of factors. The year of 1994 was a record year for corn, soybean and cotton production. Planted acreage has also increased in 1994 over 1993 levels. The most significant increase in net sales at the Bush Hog division was within the loader product line. The overall market for the front end loaders has increased this past year. The division manufactures adaptor kits so that loaders can be mounted on more than 1200 different tractor models. The division expects this growth to continue on into 1995. Disc mower and parts sales have also increased in 1994. These increases were partially offset by decreased rotary cutter sales. This decrease was primarily related to the effects of lower cattle prices. Gross profits and gross profit margins have improved in 1994 at the Bush Hog division. Approximately 60% of the increase in gross profits was directly related to the increased sales volume as discussed above. The effects of sales price increases during 1994 resulted in improved margins and increased gross profits. On an overall basis, manufacturing variances increased slightly in 1994. Increases in direct manufacturing inefficiencies (resulting from increased facility utilization and late receipt of purchased components) were mostly offset by the effects of manufacturing cost reductions and decreased warranty claims in 1994. At the Verson division, net sales decreased by approximately 17% in 1994 compared to 1993. In late 1991, the division had received a large press order. During 1993, production was completed on this order. Orders for production in 1994 to replace the work completed did not materialize in sufficient amounts. During the last half of 1994 and the early part of 1995, the division has received a significant amount of new press orders, including orders for three "A" size transfer presses with a sales value of approximately $80,000,000. These new orders should result in increased productivity and improved profitability in 1995 and 1996. While gross profits remained approximately equal to those of the prior year, gross profit margins have improved in 1994. The increase was the result of several factors, including improved margins on parts sales (prices were increased in the early part of 1994), improved mix of products sold and lower warranty expenses. Net sales at the Coz division increased by approximately 6% in 1994 compared to 1993. Processed compounds represent the largest product line increase due to expansion of the customer base and increased selling prices. Gross profits at the Coz division increased, due primarily to the effect of increased selling prices and, to a lesser extent, the mix of products sold. Partially offsetting this increase was the effect of increased material costs in 1994. Prices of certain raw materials have increased significantly during the past year. Selling prices were increased to offset these cost increases. While prices continued to escalate in the early part of 1995, such increases were not as significant as those in 1994. The division will increase selling prices where practical to offset the effect of cost increases. The ultimate net impact of future cost/selling price increases is not expected to have a material impact on the operating results of this division. Shipping costs have also increased in 1994 due to the effects of increased sales volume and increased shipping container costs. Utility expenses increased in 1994 due to additional space being leased for offices with the old office space now being utilized for manufacturing purposes. Gross profit margins remained constant in 1994 compared to 1993. 9 Selling and administrative expenses decreased to $31,072,000 (14.4% of net sales from continuing operations) from $31,427,000 (also 14.4% of net sales from continuing operations) in 1993. On an overall basis, selling expenses increased in 1994 compared to 1993. The most significant increase was related to commissions, primarily at the Bush Hog division where sales have increased in 1994. The Coz division increased the employment level of its sales force in 1994 resulting in increased costs. These increases were offset by lower commission expenses at the Verson division as this operation is phasing out the use of commissioned brokers in the sale of presses. The increase in selling expenses was more than offset by lower administrative expenses, primarily in the areas of professional fees and insurance costs. Office related costs were also reduced with the relocation of the Corporate Office during 1994. Staffing levels were reduced from 1993 levels. These decreases were partially offset by a provision of $450,000 as a supplemental contribution to the SMART pension plan, a $400,000 provision for the new Executive Retirement Plan and other normal increases experienced in operations throughout the Company. The decrease in interest expense ($1,859,000 for 1994 compared to $6,376,000 in 1993 after an allocation to discontinued operations) was directly related to a significantly reduced borrowing level and the effects of lower average interest rates associated with outstanding debt in 1994. Other expense in 1994 was $1,198,000 compared to $4,614,000 in 1993. Reference is made to Note 13 of Notes to Consolidated Financial Statements for an analysis of other (income) expense in 1994 and 1993. Loss from discontinued operations totaled $5,354,000 in 1994. Approximately half of the loss was related to the operating results of the Cooper division which was sold at the end of the second quarter following the termination of a proposed sale earlier in the year. Other significant items included environmental related issues (see Note 11 of Notes to Consolidated Financial Statements) and insurance costs associated with discontinued operations, and the final settlement of the disposition of the White-New Idea operation (see Note 3 of Notes to Consolidated Financial Statements). Reference is made to the 1993 management discussion below for an analysis of discontinued operation in 1993. 1993 COMPARED TO 1992 Net sales from continuing operations in 1993 were $217,988,000 compared to net sales from continuing operations of $195,341,000 in 1992. Net sales at all continuing operations in 1993 increased over levels reported in 1992. Income from continuing operations in 1993 was $5,951,000 compared to income from continuing operations of $1,774,000 in the previous year. At the Bush Hog division, net sales increased by over 10% in 1993 over 1992. Despite the significant flooding in the late spring and early summer months in the midwest and summer drought in the southeast portion of the country, the Bush Hog division did not feel any long-term negative impact and, in some product lines, experienced increased sales volume due to the wetter than normal weather conditions. The majority of the increase in net sales was associated with increased unit sales within the cutter and loader product lines. Service parts sales also increased with the addition of the Kewanee Farm Equipment service parts. These increases were partially offset by the effect of lower peanut combine sales in 1993. Unit sales decreased due to a larger than anticipated carryover of dealer stock from the prior year. Production was reduced in relation to this product in 1993. Gross profits and gross profit margins improved at the Bush Hog division in 1993 compared to 1992. The increase in gross profits was primarily related to the effects of increased sales volume in 1993 as discussed above. The increase in gross profit margins was primarily associated with increased efficiencies and facility utilization in 1993. The division was operating at very close to 100% capacity in 1993 and continued to produce at this capacity level in 1994. At the Verson division, net sales increased by almost 14% in 1993 over that reported in 1992. During 1993, the division completed production on a large press order received in the latter portion of 1991. The division also benefitted from the large carryover of orders received in 1992 on which production was completed in 1993. In addition, the rebuild press market has provided additional opportunities for the Verson division in 1993. Receipt of new orders in 1993 remained strong. While gross profits at the Verson division in 1993 increased, due primarily to increased sales volume as discussed above, gross profit margins decreased slightly. This decrease related to the mix of products sold in 1993 compared to that of the prior year. At the Coz division, net sales increased by almost 13% in 1993 compared to net sales of 1992. The increase was related primarily to increased volume of shipments and, to a lesser degree, mix of products sold. Gross profits increased, principally due to the increase in sales volume. Gross profit margins also improved slightly due to increased facility utilization in 1993. Selling and administrative expenses increased in 1993 to $31,427,000 (14.4% of net sales from continuing operations) from $31,117,000 (15.9% of net sales from 10 continuing operation). All manufacturing operations experienced slight increases in these expenses in 1993, with most of the increases related to normal cost changes in salaries and other employee related costs (fringe benefits, etc.). These increases were partially offset by decreases in administrative costs at the Corporate Office. These decreases were primarily represented by lower professional fees and bank costs, most of which related to costs incurred in 1992 associated with the restructuring of the Company's finances in January 1993 as described in Note 5 of Notes to Consolidated Financial Statements. Other costs savings at the Corporate Office included the elimination of the centralized Management Information Systems operation during the third quarter of 1993. Interest expense decreased to $6,376,000 in 1993 from $6,864,000 reported in 1992. These interest expense balances are net of amounts ($4,450,000 in 1993 and $7,558,000 in 1992) allocated to "Discontinued operations--Income (loss) from operations" based upon the proportionate share of invested capital of discontinued operations to total consolidated invested capital. The overall cause of the decrease in interest expense relates primarily to decreased debt levels and, to a lesser extent, lower interest rates in 1993. The majority of the cash generated from operations either shut down or sold in 1993 was used to reduce outstanding debt, primarily under the amended and restated credit and debt restructuring agreement entered into during the first quarter of 1993. Other expense in 1993 was $4,614,000 compared to other expense of $3,494,000 in 1992. Reference is made to Note 13 of Notes to Consolidated Financial Statements for an analysis of other (income) expense in 1993 and 1992. In 1993, the Company made a provision of $700,000 for additional restructuring costs, all of which was charged to "Discontinued operations--Income (loss) from operations." In 1992, the Company made a provision of $7,800,000 for restructuring costs as previously disclosed. Of this amount, $7,044,000 was charged to "Discontinued operations--Income (loss) from operations." The remaining balance in 1992 was associated with provisions for elimination of the centralized MIS operation at the Corporate Office and the consolidation of the Kewanee service parts operation into Bush Hog. Income from discontinued operations in 1993 totaled $11,385,000 compared to a loss from discontinued operations of $24,989,000 in 1992. Operating income related to discontinued operations increased by over $19,000,000 (before allocation of the provision for restructuring costs, financing costs and administrative and interest expense) due primarily to improved results at the White-New Idea and Charles City divisions in 1993. Production levels were significantly reduced 1992 in order to reduce the Company's investment in receivables at the White-New Idea division. Increased production in 1993 as well as the effect of cost reduction measures implemented, resulted in an increase of over $12,500,000 in operating income. At the Charles City division, operating income related to discontinued operations increased by over $3,000,000 (before allocation of costs described above) in 1993. In the early part of 1993, the Company announced the closing of the operation. Upon notification of the closure, customers ordered more than normal quantities of products from the division to bridge their manufacturing needs until another source of product could be identified, resulting in above normal sales and production at this division in 1993. Interest expense allocated to discontinued operations in 1993 was $4,450,000 in 1993 compared to $7,558,000 in the prior year. The restructuring reserve charged to discontinued operations ($700,000 in 1993, $7,044,000 in 1992 and $6,200,000 in 1991) included provisions for 1993 operating losses subsequent to the respective closure of the operations for which the reserve was set up. Operating losses charged to the reserve in 1993 totaled approximately $4,600,000. The gain on disposition of discontinued operations in 1993 represents the gain (net of related expenses) associated with the disposition of the White-New Idea division in the last quarter of 1993. The gain on disposition of discontinued operations in 1992 was principally related to the reversal of a reserve established in 1991 for the estimated loss on the anticipated sale of the remaining receivables related to the tractor business. The anticipated sale and loss did not take place; instead, the receivables were collected without significant loss. Reference is made to Note 5 of Notes to Consolidated Financial Statements relating to the $2,052,000 extraordinary loss on the early extinguishment of debt in 1993. FINANCIAL CONDITION 1994 The working capital at December 31, 1994 was $33,531,000 and the current ratio was 1.53 to 1.0. Net accounts receivables increased by almost $2,000,000 in 1994. The majority of the increase was related to the Bush Hog division where sales have increased in 1994 as noted above. Cash collections associated with this division are generally dependant upon the retail sales of the product by the dealer. Extended payment terms are offered in the form of floor plan financing which is customary within the agricultural equipment industry. Coz division receivables have also increased at the end of 1994. This increase was primarily associated with strong sales in the fourth quarter of 1994. Receivables at the end of 1994 also include a short-term secured note 11 taken by the Company as part of the proceeds from the sale of the Cooper division. This note was paid in full subsequent to the end of 1994. These increases were partially offset by the effects of lower press shipments at the Verson division in 1994 and the effects of the disposition of the Cooper division. On a consolidated basis, inventories have increased by approximately $3,700,000 at the end of 1994 compared to the end of 1993. The majority of the increase was related to the Bush Hog division. Production was increased in the fourth quarter of 1994 to avoid capacity limitations in the first half of 1995. Production is expected to increase at this division due to increased orders. Coz inventory levels have also increased due to increased orders and the effects of increased material prices. These increases were partially offset by the effects of the sale of the Cooper division and lower net inventory levels at the Verson division due to the effects of increased customer deposits for jobs in progress. Fixed Asset additions of $7,072,000 were financed primarily through internally generated funds. The increase in payables and borrowings under the revolving credit agreement at the end of 1994 reflects the effects of increased production at all operating divisions of the Company. References is made to Note 2 of Notes to Consolidated Financial Statements for an analysis of accrued expenses. 1993 The working capital at December 31, 1993 was $31,664,000 and the current ratio was 1.31 to 1.0. Net accounts receivables decreased by over $56,000,000 in 1993. Of that amount, approximately $29,000,000 was associated with the sale of the White-New Idea division in December 1993 and approximately $27,000,000 was associated with the winding down of other discontinued operations during 1993. There were no other significant changes in receivable levels during 1993. Inventories decreased by over $52,000,000 since the end of 1992. Approximately half of the decrease was related to the sale of the White-New Idea division discussed above. An additional reduction of over $8,000,000 was associated with the wind down of other discontinued operations. The Bush Hog division reduced their net inventory levels by over $3,000,000 in 1993 due to improved purchasing and manufacturing management and the effects of increased sales volume. Inventories also decreased significantly at the Verson division. At the end of 1992, a large press order was in process. By the end of 1993, most of this order was shipped to the customer. The decrease in Other Assets reflects the collection of notes taken in exchange for fixed assets and operation dispositions in prior years and the amortization of deferred charges (goodwill). Fixed asset additions of $8,128,000 were financed primarily through internally generated funds. Reduction in debt and accounts payable were primarily the result of funds generated from the sale of businesses (Smith Energy Services and White-New Idea) and the liquidation of assets (primarily receivables and inventories) associated with other discontinued operations. During 1993, the Company had made an additional provision of $700,000 to the restructuring reserve. In addition, amounts totaling $9,515,000 were charged against the reserve. Charges included operating results subsequent to the date of shutdown or disposition, losses/gains on the disposition of assets associated with these operations, severance costs and expenses associated with the moving of inventory and fixed assets from discontinued operations to continuing operations. At December 31, 1993, the Company had a remaining reserve of $5,097,000 for additional future costs associated with certain discontinued operations. LIQUIDITY AND CAPITAL RESOURCES At the end of 1993, the Company sold for cash substantially all of the assets and liabilities of the White-New Idea Farm Equipment division. Proceeds from the disposition were used to pay all amounts due under a restrictive credit agreement which had, for the past four years, seriously hampered the Company's ability to take actions that the Company believed were advisable and in the interests of shareholders. The sale of the Cooper division in 1994 marks the successful completion of the Company's operations divestiture program. During the first quarter of 1994, the Company terminated separate debt financing agreements at the Bush Hog, Verson and Coz divisions through the completion of a new Revolving Credit Agreement. This agreement was collateralized principally by the Company's receivables and inventories. Prior to the end of 1994, this collateral was released by the banks as the Company attained specified financial results in the first nine months of 1994. Reference is made to Note 5 of Notes to Consolidated Financial Statements regarding a further description of this financial arrangement. All amounts borrowed in March 1994 under this agreement were repaid prior to the end of the third quarter through the internal generation of funds from operations and the sale of idle facilities. In December, the Company drew down additional amounts ($10,300,000) to fund seasonal manufacturing requirements. Additional repayments will come from internally generated funds. Subsequent to the end of 1994, the Company entered 12 into an amendment to this agreement which reduced the borrowing rate and provided greater flexibility within the financial operations of the Company. Subsequent to the end of 1994, the Company announced that its Verson division received an order for several large transfer presses. Production has begun on this order. Funds necessary to complete this project will come from several sources including borrowing against the above noted revolving credit agreement, internally generated funds and deposits and progress payments from the customer. Delivery of these presses will take place in 1996. In order to complete this order and to increase plant efficiencies, the Verson division also announced an expansion of its operations. The expansion will include an additional 40,000 square feet of manufacturing space plus a specialized facility for both subassembly and final assembly of presses. The buildings should be ready for occupancy by the end of the second quarter of 1995. This expansion will result in this division having the greatest capacity for transfer press manufacturing in North America. Funding for this project (total cost, including necessary cranes and tooling, of approximately $8,000,000) will primarily be internally generated. The Bush Hog division is also in the process of upgrading its manufacturing operations. The major improvement includes the purchase of a new cleaning/ painting/assembly system in the first half of 1995. The new system will result in improved finished product quality and reduced costs. Funding for this project (total cost approximately $3,200,000) will primarily be internally generated with some temporary borrowings against the current revolving credit agreement. Effective January 29, 1993, the Company entered into agreements with holders of the Series B and Series C Preferred Stock pursuant to which the Company agreed to pay cash and subordinated notes for the past due redemption of Series B Preferred Stock as well as scheduled dividends and redemptions from January 2, 1993 to January 2, 1995. Subordinated notes issued to the preferred stockholders provided for quarterly payments of interest in cash. During 1994, all amounts due under the subordinated notes issued to the holders of the Series B and C Preferred Stock were paid in cash. The Company's failure to pay when due the October 2, 1992 dividend on its Series C Cumulative Preferred Stock constituted a default in the payment of a dividend pursuant to the Series C Preferred Stock Certificate of Designation. If the Company defaults in the payment of two additional quarterly dividends or any mandatory redemption, the Series C Preferred Stockholders shall have the right to convert the Series C Preferred Stock into shares of common stock at a ratio determined by reference to the lowest market price of the Company's Common Stock during the calendar quarter preceding the date of such default. As of December 31, 1994, the Company had cash balances of $1,654,000 and additional funds of $24,700,000 available under its revolving credit agreement. The Company believes that its expected operating cash flow and funds available under its revolving credit agreement are adequate to finance its operations and capital expenditures in the near future. During 1994, the Company has been in compliance with all provisions of loan agreements in effect. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Allied Products Corporation We have audited the consolidated balance sheets of Allied Products Corporation and consolidated subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income (loss), shareholders' investment and cash flows for each of the three years in the period ended December 31, 1994. We have also audited the financial statement schedules listed in Part IV of Form 10-K, Item 14(a)2 for each of the three years in the period ended December 31, 1994. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Allied Products Corporation and consolidated subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Note 1, the Company changed its method of accounting for postretirement benefits other than pensions in 1992. COOPERS & LYBRAND L. L. P. Chicago, Illinois February 24, 1995, except for Note 11, as to which the date is March 10, 1995 14 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS)
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1994 1993 1992 ---------------- ---------------- ---------------- Net sales from continuing operations........................ $ 215,529,000 $ 217,988,000 $ 195,341,000 Cost of products sold....................................... 160,836,000 169,184,000 151,336,000 ---------------- ---------------- ---------------- Gross profit.............................................. $ 54,693,000 $ 48,804,000 $ 44,005,000 ---------------- ---------------- ---------------- Other costs and expenses: Selling and administrative expenses....................... $ 31,072,000 $ 31,427,000 $ 31,117,000 Interest expense.......................................... 1,859,000 6,376,000 6,864,000 Other (income) expense, net............................... 1,198,000 4,614,000 3,494,000 Provision for restructuring costs......................... -- -- 756,000 ---------------- ---------------- ---------------- $ 34,129,000 $ 42,417,000 $ 42,231,000 ---------------- ---------------- ---------------- Income before taxes from continuing operations before extraordinary charge and change in accounting principle... $ 20,564,000 $ 6,387,000 $ 1,774,000 Provision for income taxes.................................. 877,000 436,000 -- ---------------- ---------------- ---------------- Income from continuing operations before extraordinary charge and change in accounting principle................. $ 19,687,000 $ 5,951,000 $ 1,774,000 ---------------- ---------------- ---------------- Discontinued operations (net of tax): Income (loss) from operations............................. $ -- $ 5,847,000 $ (25,814,000) Gain (loss) on disposition of discontinued operations and other costs.............................................. (5,354,000) 5,538,000 825,000 ---------------- ---------------- ---------------- Income (loss) from discontinued operations................ $ (5,354,000) $ 11,385,000 $ (24,989,000) ---------------- ---------------- ---------------- Income (loss) before extraordinary charge and change in accounting principle...................................... $ 14,333,000 $ 17,336,000 $ (23,215,000) Extraordinary loss on early extinguishment of debt, less applicable income tax benefit............................. -- (2,052,000) -- ---------------- ---------------- ---------------- Income (loss) before change in accounting principle......... $ 14,333,000 $ 15,284,000 $ (23,215,000) Effect of change in accounting principle.................... -- -- (1,739,000) ---------------- ---------------- ---------------- Net income (loss)........................................... $ 14,333,000 $ 15,284,000 $ (24,954,000) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Net income (loss) applicable to common stock................ $ 12,440,000 $ 13,211,000 $ (27,356,000) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Earnings (loss) per common share: Continuing operations..................................... $1.96 $ .43 $ (.08) Discontinued operations................................... (.59) 1.27 (3.03) Extraordinary loss........................................ -- (.23) -- Effect of change in accounting principle.................. -- -- (.21) ----- ----- ----- Income (loss) per common share............................ $1.37 $1.47 $(3.32) ----- ----- ----- ----- ----- ----- Average number of common shares outstanding................. 9,102,000 8,999,000 8,247,000 --------- --------- --------- --------- --------- ---------
The accompanying notes to consolidated financial statements are an integral part of these statements. 15 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, ---------------------------------- 1994 1993 ---------------- ---------------- Current Assets: Cash and cash equivalents................................................ $ 1,654,000 $ 44,416,000 ---------------- ---------------- Notes and accounts receivable, less allowances of $1,521,000 and $1,996,000, respectively................................................ $ 46,267,000 $ 44,415,000 ---------------- ---------------- Inventories: Raw materials.......................................................... $ 11,556,000 $ 9,407,000 Work in process........................................................ 16,437,000 18,161,000 Finished goods......................................................... 20,462,000 17,156,000 ---------------- ---------------- $ 48,455,000 $ 44,724,000 ---------------- ---------------- Prepaid expenses......................................................... $ 456,000 $ 1,915,000 ---------------- ---------------- Total current assets................................................. $ 96,832,000 $ 135,470,000 ---------------- ---------------- Plant and Equipment, at cost: Land..................................................................... $ 2,311,000 $ 2,454,000 Buildings and improvements............................................... 34,252,000 34,573,000 Machinery and equipment.................................................. 40,126,000 37,946,000 ---------------- ---------------- $ 76,689,000 $ 74,973,000 Less--Accumulated depreciation and amortization.......................... 46,128,000 43,923,000 ---------------- ---------------- $ 30,561,000 $ 31,050,000 ---------------- ---------------- Other Assets: Notes receivable, due after one year..................................... $ 7,658,000 $ 8,465,000 Deferred charges (goodwill), net of amortization......................... 14,626,000 16,693,000 Other.................................................................... 878,000 362,000 ---------------- ---------------- $ 23,162,000 $ 25,520,000 ---------------- ---------------- $ 150,555,000 $ 192,040,000 ---------------- ---------------- ---------------- ----------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 16 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' INVESTMENT
DECEMBER 31, ---------------------------------- 1994 1993 ---------------- ---------------- Current Liabilities: Revolving credit agreement............................................... $ 10,300,000 $ -- Revolving loan........................................................... -- 4,382,000 Current portion of long-term debt........................................ 689,000 39,343,000 Accounts payable......................................................... 20,475,000 13,957,000 Accrued expenses......................................................... 31,837,000 46,124,000 ---------------- ---------------- Total current liabilities...................................... $ 63,301,000 $ 103,806,000 ---------------- ---------------- Long-term debt, less current portion shown above........................... $ 630,000 $ 10,622,000 ---------------- ---------------- Other long-term liabilities................................................ $ 2,622,000 $ 2,701,000 ---------------- ---------------- Redeemable preferred stock: $10.81 Series C Cumulative Preferred Stock; stated value $100 per share, authorized 150,000 shares; issued and outstanding 115,000 and 129,000 shares at December 31, 1994 and 1993, respectively.............................................................. $ 11,500,000 $ 12,900,000 ---------------- ---------------- Commitments and Contingencies Shareholders' Investment: Preferred stock: Series B Variable Rate Cumulative Preferred Stock, stated value $50 per share; authorized 350,000 shares; issued and outstanding 146,800 and 180,800 shares at December 31, 1994 and 1993, respectively............ $ 7,340,000 $ 9,040,000 Undesignated--authorized 1,500,000 shares at December 31, 1994 and 1993; none issued..................................................... -- -- Common stock, par value $.01 per share; authorized 25,000,000 shares; issued 9,104,482 and 9,089,748 shares at December 31, 1994 and 1993, respectively............................................................ 91,000 91,000 Additional paid-in capital............................................... 92,146,000 92,395,000 Retained earnings (deficit).............................................. (27,075,000) (39,515,000) ---------------- ---------------- $ 72,502,000 $ 62,011,000 ---------------- ---------------- $ 150,555,000 $ 192,040,000 ---------------- ---------------- ---------------- ----------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 17 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1994 1993 1992 -------------- ---------------- -------------- Cash Flows from Operating Activities: Net income (loss)........................................................ $ 14,333,000 $ 15,284,000 $ (24,954,000) Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities: Income on disposition of discontinued operations....................... (50,000) (5,538,000) (825,000) Extraordinary loss on early extinguishment of debt..................... -- 2,052,000 -- Effect of provision for restructuring costs............................ -- 700,000 7,800,000 Effect of change in accounting principle............................... -- -- 1,739,000 Depreciation and amortization.......................................... 5,159,000 7,402,000 11,020,000 Amortization of deferred charges and (credits), net.................... 2,067,000 (216,000) (216,000) Amortization of noncash deferred loan costs............................ -- -- 1,657,000 Changes in noncash assets and liabilities, net of effects of assets/businesses sold and noncash transactions: (Increase) decrease in accounts receivable........................... (100,000) 29,581,000 26,411,000 (Increase) decrease in inventories................................... (5,596,000) 22,034,000 (4,739,000) Decrease in prepaid expenses......................................... 1,459,000 784,000 919,000 Decrease in notes receivable, due after one year..................... 807,000 997,000 3,788,000 Decrease in accounts payable and accrued expenses.................... (8,490,000) (5,219,000) (12,280,000) Other, net............................................................. (645,000) (107,000) 1,763,000 -------------- ---------------- -------------- Net cash provided from operating activities.............................. $ 8,944,000 $ 67,754,000 $ 12,083,000 -------------- ---------------- -------------- Cash Flows from Investing Activities: Additions to plant and equipment......................................... $ (6,957,000) $ (7,741,000) $ (3,856,000) Proceeds from sales of plant and equipment............................... 2,452,000 8,311,000 611,000 Proceeds from sales of assets/businesses................................. 343,000 62,834,000 2,098,000 -------------- ---------------- -------------- Net cash provided from (used for) investing activities................... $ (4,162,000) $ 63,404,000 $ (1,147,000) -------------- ---------------- -------------- Cash Flows from Financing Activities: Proceeds from issuances of long-term debt................................ $ -- $ 33,348,000 $ 7,975,000 Borrowings under the revolving loan agreements........................... 29,246,000 145,081,000 26,559,000 Payments under the revolving loan agreements............................. (48,508,000) (129,777,000) (22,945,000) Borrowings under revolving credit agreement.............................. 52,100,000 -- -- Payments under revolving credit agreement................................ (41,800,000) -- -- Payments of short and long-term debt..................................... (33,881,000) (139,769,000) (24,637,000) Payment of preferred stock redemptions and dividends..................... (4,993,000) (1,782,000) -- Stock option transactions................................................ 292,000 711,000 -- -------------- ---------------- -------------- Net cash used for financing activities................................... $ (47,544,000) $ (92,188,000) $ (13,048,000) -------------- ---------------- -------------- Net increase (decrease) in cash and cash equivalents....................... $ (42,762,000) $ 38,970,000 $ (2,112,000) Cash and cash equivalents at beginning of year............................. 44,416,000 5,446,000 7,558,000 -------------- ---------------- -------------- Cash and cash equivalents at end of year................................... $ 1,654,000 $ 44,416,000 $ 5,446,000 -------------- ---------------- -------------- -------------- ---------------- --------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 18 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------------------- 1994 1993 1992 ------------- -------------- -------------- Supplemental Information: (A) Noncash investing and financing activities: 1. Assets acquired through the assumption of debt................................................. $ 115,000 $ 387,000 $ 333,000 ------------- -------------- -------------- ------------- -------------- -------------- 2. Series B Preferred stock dividends paid/payable through the issuance of common stock......................... $ -- $ 398,000 $ 596,000 ------------- -------------- -------------- ------------- -------------- -------------- 3. Series B Preferred stock redemptions ($3,200,000) and dividends ($666,000) paid through the issuance of subordinated debt, net of $722,000 cash paid......... $ -- $ 3,144,000 $ -- ------------- -------------- -------------- ------------- -------------- -------------- 4. Series C Preferred stock dividends paid/payable through the issuance of common stock......................... $ -- $ 405,000 $ 1,216,000 ------------- -------------- -------------- ------------- -------------- -------------- 5. Series C Preferred stock redemptions ($2,100,000) and dividends ($1,527,000) paid through the issuance of subordinated debt, net of $1,060,000 cash paid....... $ -- $ 2,567,000 $ -- ------------- -------------- -------------- ------------- -------------- -------------- 6. Interest expense paid through the issuance of subordinated debt.................................... $ -- $ 161,000 $ -- ------------- -------------- -------------- ------------- -------------- -------------- 7. Debt payments through use of funds held by trustee..... $ -- $ -- $ 437,000 ------------- -------------- -------------- ------------- -------------- -------------- 8. Debt assumed by purchasers of businesses sold................................................. $ -- $ 760,000 $ -- ------------- -------------- -------------- ------------- -------------- -------------- 9. Proceeds (primarily notes receivable) received from the sales of discontinued operations..................... $ 2,011,000 $ 100,000 $ 900,000 ------------- -------------- -------------- ------------- -------------- -------------- 10. Deferred financing costs paid through the issuance of common stock......................................... $ -- $ -- $ 1,657,000 ------------- -------------- -------------- ------------- -------------- -------------- 11. Common stock issued in lieu of salary and other miscellaneous liabilities............................ $ -- $ -- $ 74,000 ------------- -------------- -------------- ------------- -------------- -------------- (B) Interest paid during year.............................. $ 2,657,000 $ 10,311,000 $ 14,368,000 ------------- -------------- -------------- ------------- -------------- -------------- (C) Income/franchise taxes paid during year, net of refunds.............................................. $ 522,000 $ 812,000 $ 778,000 ------------- -------------- -------------- ------------- -------------- --------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 19 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT PREFERRED AND COMMON STOCK
SERIES B PREFERRED ($50 COMMON ($.01 STATED VALUE PAR VALUE PER SHARE) PER SHARE) --------------- --------------- Balance at December 31, 1991................................................. $ 12,240,000 $ 74,000 Issuance of 165,011 common shares for payment of Series B preferred dividends................................................................. -- 2,000 Issuance of 422,999 common shares for payment of Series C preferred dividends................................................................. -- 4,000 Issuance of 570,686 common shares for payment of deferred financing costs..................................................................... -- 6,000 Issuance of 19,200 common shares in connection with the Company's incentive stock and bonus plan...................................................... -- -- Issuance of 3,728 common shares for payment to the Company's SMART plan.... -- -- --------------- --------------- Balance at December 31, 1992................................................. $ 12,240,000 $ 86,000 Redemption of 64,000 Series B preferred shares through the issuance of subordinated notes and cash............................................... (3,200,000) -- Issuance of 127,296 common shares for payment of Series B preferred dividends................................................................. -- 1,000 Issuance of 202,688 common shares for payment of Series C preferred dividends................................................................. -- 2,000 Issuance of 133,515 common shares in connection with the exercises of stock options................................................................... -- 2,000 --------------- --------------- Balance at December 31, 1993................................................. $ 9,040,000 $ 91,000 Redemption of 34,000 Series B preferred shares............................. (1,700,000) -- Issuance of 14,734 common shares in connection with the exercises of stock options................................................................... -- -- --------------- --------------- Balance at December 31, 1994................................................. $ 7,340,000 $ 91,000 --------------- --------------- --------------- ---------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 20 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT ADDITIONAL PAID-IN CAPITAL AND RETAINED EARNINGS (DEFICIT)
ADDITIONAL RETAINED PAID-IN EARNINGS CAPITAL (DEFICIT) -------------- --------------- Balance at December 31, 1991.................................................................. $ 87,574,000 $ (25,355,000) Net loss for the year....................................................................... -- (24,954,000) Preferred dividends paid/declared: Series B through the issuance of 165,011 common shares (variable based on prime rate--$.8125 per share).................................................................. 442,000 (198,000) Series B declared payable in January 1993--$1.625 per share............................... -- (398,000) Series C through the issuance of 422,999 common shares--$5.405 per share.................. 1,212,000 (811,000) Series C declared payable in January 1993--$2.7025 per share.............................. -- (405,000) Issuance of 570,686 common shares for payment of deferred financing costs................... 1,651,000 -- Issuance of 19,200 common shares in connection with the Company's incentive stock and bonus plan....................................................................................... 60,000 -- Issuance of 3,728 common shares for payment to the Company's SMART plan..................... 14,000 -- Excess of cost ($33,000) over fair market value of 4,571 common shares purchased and reissued in connection with the Company's incentive stock plan............................. (23,000) -- -------------- --------------- Balance at December 31, 1992.................................................................. $ 90,930,000 $ (52,121,000) Net income for the year..................................................................... -- 15,284,000 Preferred dividends paid/declared: Series B paid through the issuance of 127,296 common shares (variable based on prime rate--$1.625 per share).................................................................. 397,000 -- Series B paid through the issuance of subordinated notes and cash (variable based on prime rate--$3.00 per share)................................................................... -- (666,000) Series B declared payable in January 1994--$.75 per share................................. -- (136,000) Series C paid through the issuance of 202,688 common shares--$2.7025 per share............ 403,000 -- Series C paid through the issuance of subordinated notes and cash--$10.81 per share....... -- (1,527,000) Series C declared payable in January 1994--$2.7025 per share.............................. -- (349,000) Excess of proceeds received over cost for common shares purchased and reissued in connection with the exercise of stock options to purchase 17,710 common shares.......... 22,000 -- Issuance of 133,515 common shares in connection with exercises of stock options.................................................................................... 643,000 -- -------------- --------------- Balance at December 31, 1993.................................................................. $ 92,395,000 $ (39,515,000) Net income for the year..................................................................... -- 14,333,000 Preferred dividends declared and paid: Series B (variable based on prime rate--$3.375 per share)................................. -- (574,000) Series C--$10.81 per share................................................................ -- (1,319,000) Excess of cost ($843,000) over fair market value of 59,979 common shares purchased and reissued in connection with the Company's incentive stock plan............................. (375,000) -- Issuance of 14,734 common shares in connection with the exercises of stock options.................................................................................... 126,000 -- -------------- --------------- Balance at December 31, 1994.................................................................. $ 92,146,000 $ (27,075,000) -------------- --------------- -------------- ---------------
The accompanying notes to consolidated financial statements are an integral part of these statements. 21 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ACCOUNTING CHANGES-- Effective January 1, 1992, the Company implemented on an immediate recognition basis Statement of Financial Accounting Standards (SFAS) No. 106--Employers' Accounting for Postretirement Benefits Other Than Pensions. The transition effect of adopting SFAS No. 106 on the immediate recognition basis, as of the above noted date, resulted in a charge of $1,739,000 ($.21 per common share) to 1992 operating results and is reflected in the accompanying Consolidated Statements of Income (Loss) as "Effect of change in accounting principle." PRINCIPLES OF CONSOLIDATION-- The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany items and transactions have been eliminated. REVENUE RECOGNITION-- Sales of agricultural equipment and service parts at the Bush Hog division are recorded when they are shipped to independent dealers in accordance with industry practices. Provisions for sales incentives and other sales related expenses are made at the time of the sale. Revenues and profits are recognized on a percentage of completion basis for major contracts at the Verson division. ACCOUNTS RECEIVABLE-- Agricultural equipment current accounts receivables are net of provisions for sales incentive programs and returns and allowances. Extended payment terms (up to one year) are offered to dealers in the form of floor plan financing which is customary within the industry. Agricultural equipment receivables (with the exception of receivables associated with service parts and original equipment manufacturing--OEM--arrangements) are generally not collected until the dealer sells the related piece of equipment to a retail customer. The Company maintains a security interest in the equipment related to such receivables to minimize the risk of loss. INVENTORIES-- The basis of all of the Company's inventories is determined by using the lower of FIFO cost or market method. Included in work in process inventory are accumulated costs ($11,055,000 at December 31, 1994 and $15,397,000 at December 31, 1993) associated with contracts under which the Company recognizes revenue on a percentage of completion basis. These balances include unbilled actual production costs incurred plus a measure of profit recognized in relation to the sales recorded, less customer payments ($11,672,000 at December 31, 1994 and $7,750,000 at December 31, 1993) associated with the work in process inventory. A significant portion of the work in process inventory will be completed, shipped and invoiced prior to the end of the following year. PLANT AND EQUIPMENT-- Expenditures for the maintenance and repair of plant and equipment are charged to expense as incurred. Expenditures for major replacement or betterment are capitalized. The cost and related accumulated depreciation of plant and equipment replaced, retired or otherwise disposed of is removed from the accounts and any gain or loss is reflected in earnings. DEPRECIATION-- Depreciation of the original cost of plant and equipment is charged to expense over the estimated useful lives of such assets calculated under the straight-line method. Estimated useful lives are 20 to 40 years for buildings and improvements and 3 to 12 years for machinery and equipment. 22 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DEFERRED CHARGES (GOODWILL)-- Deferred charges (goodwill) are amortized on a straight line basis over periods of 10 to 20 years. The Company assesses at each balance sheet date whether there has been a permanent impairment in the value of goodwill. Such assessment includes obsolescence, demand, new technology, competition and other pertinent economic factors and trends that may have an impact on the value of remaining useful life of goodwill. EARNINGS (LOSS) PER COMMON SHARE-- Earnings (loss) per common share is based on the average number of common shares outstanding (9,102,000, 8,999,000 and 8,247,000 for the years ended December 31, 1994, 1993 and 1992, respectively) after decreasing net income or increasing the net loss for preferred dividend requirements ($1,893,000, $2,073,000 and $2,402,000 for the years ended December 1994, 1993 and 1992, respectively). The assumed exercise of stock options would not result in a material dilution for the years ended December 31, 1994 and 1993, and would not result in dilution for the year ended December 31, 1992. INCOME TAXES-- Effective January 1, 1993, the Company implemented on an immediate recognition basis SFAS No. 109--Accounting for Income Taxes. Under the provisions of SFAS No. 109, the Company applies an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are established for the expected future tax consequenses of temporary differences between the financial statement and tax bases of assets and liabilities, using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized, including deferred tax assets attributed to net operating loss carryforwards. The adoption of SFAS No. 109 did not have an effect on 1993 financial statements. Prior to 1993, the Company accounted for income taxes under SFAS No. 96. STATEMENT OF CASH FLOWS-- For purpose of the Consolidated Statements of Cash Flows, the Company considers investments with original maturities of three months or less to be cash equivalents. FINANCIAL INSTRUMENTS-- The fair value of cash and cash equivalents is assumed to approximate the carrying value of these assets due to the short maturity of these instruments. The fair value of the Company's debt, current and long-term, is estimated to approximate the carrying value of these liabilities based upon borrowing rates currently available to the Company for borrowings with similar terms. The fair value of the Series B and C Preferred Stocks is estimated to approximate the carrying value of these securities based upon the redemption features within the Certificate of Designation on each series of preferred stock. 23 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. ACCRUED EXPENSES: The Company's accrued expenses consist of the following:
DECEMBER 31, ------------------------------ 1994 1993 -------------- -------------- Salaries and wages.......................................................... $ 4,678,000 $ 7,051,000 Warranty.................................................................... 5,817,000 9,658,000 Self insurance accruals..................................................... 6,522,000 9,096,000 Restructuring and other costs, primarily related to discontinued operations................................................................. 3,373,000 7,900,000 Pensions, including retirees' health........................................ 4,985,000 3,712,000 Taxes, other than income taxes.............................................. 1,288,000 1,742,000 Environmental matters....................................................... 3,045,000 2,245,000 Other....................................................................... 2,129,000 4,720,000 -------------- -------------- $ 31,837,000 $ 46,124,000 -------------- -------------- -------------- --------------
Reclassification of certain amounts among accrued expenses was made during 1994. The reclassification resulted in a restatement of 1993 amounts in the above table. 3. ACQUISITIONS AND DISPOSITIONS: ACQUISITIONS-- Amortization of deferred charges (goodwill) associated with the 1986 acquisition of Lilliston, a part of the Bush Hog division, (approximately $8,900,000 with a ten year amortization period) and the 1986 acquisition of Verson (approximately $23,491,000 with a twenty year amortization period) was $2,067,000 for each of the years ended December 31, 1994, 1993 and 1992, and is included in "Other (income) expense, net" in the accompanying Consolidated Statements of Income (Loss). DISPOSITIONS-- During 1992, the Company announced the closing of manufacturing operations at the Kewanee Farm Equipment division and the Charles City machining and foundry division. Production was discontinued at these operations during 1993. During 1993, the Company discontinued manufacturing operations at the R/B Die and Prototype division. All machinery and equipment associated with these operations were sold for cash during 1993. Also during 1993, the Company sold for cash the majority of the assets of the Smith Energy Services division. The resulting gains (approximately $1,400,000) from these asset dispositions were credited to the restructuring reserve as discussed below. The Company's International Agro division was also closed during 1993. At the end of 1993, the Company sold for cash substantially all of the assets and liabilities of the White-New Idea Farm Equipment division. Real estate used in connection with this business, specifically, plants located in Coldwater, Ohio and Kewanee, Illinois, is being leased by the Company to the purchaser of the business. In connection with the sale of the White-New Idea division, the purchaser was required to purchase the real estate pending a favorable review of environmental matters at each location. The Company has completed a preliminary evaluation of the status of environmental conditions at the Coldwater, Ohio facility. Reference is made to Note 11 regarding the results of this evaluation. Subsequent to the end of 1994, the Company and the purchaser of the White-New Idea division agreed in principle to a five year lease of the Coldwater, Ohio facility while the Company resolves certain environmental issues. Sale of the facility to the purchaser of the White-New Idea division is to be completed upon the resolution of the environmental issues. The Company will retain ownership of the Kewanee, Illinois facility under this agreement. During 1994, the Company provided additional amounts under discontinued operations (based upon an independent review) for the environmental clean up of both facilities. The Company also sold the business and certain assets of the Cooper division for cash and a collateralized short-term note. In 1994, discontinued operations include 24 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) operating losses at the Cooper division related to the delayed sale of this business and additional provisions primarily related to environmental issues and a dispute resolution on a business sold in 1993, net of an income tax benefit allocation of $211,000. During 1993 and 1992, the Company also included an allocation of financing costs and administrative and interest expense (the latter based upon these operations' proportionate share of consolidated invested capital) and related restructuring cost provisions (as discussed below) under this same caption. Summarized operating results of discontinued operations are as follows:
DECEMBER 31, ---------------------------------- 1993 1992 ---------------- ---------------- Net sales................................................................ $ 152,592,000 $ 144,305,000 ---------------- ---------------- ---------------- ---------------- Operating income (loss).................................................. $ 11,851,000 $ (8,131,000) Provision for restructuring costs........................................ (700,000) (7,044,000) Finance costs, administrative and interest expense allocation............ (5,304,000) (10,639,000) ---------------- ---------------- Income (loss) from operations............................................ $ 5,847,000 $ (25,814,000) ---------------- ---------------- ---------------- ----------------
Gain on disposition of discontinued operations in 1992 was principally related to the reversal of a reserve established in 1991 for the estimated loss on the anticipated sale of the remaining receivables related to the tractor business. The anticipated sale and estimated loss did not take place. Instead, the receivables were collected without significant loss. RESTRUCTURING COSTS-- During 1991, the Company provided $6,200,000 for the impact of an operational restructuring plan designed to reduce operating losses by closing, consolidating or scaling back certain operations. During 1992 and 1993, an additional $7,800,000 and $700,000, respectively, was provided for additional restructuring costs. The restructuring of operations called for several significant changes within various operations of the Company. The changes included the closing of manufacturing operations at the Kewanee Farm Equipment division, the phase out of the operation at the Charles City, Iowa machining and foundry division (production was completed in the third quarter of 1993), the phase out of the manufacturing operations at the R/B Die and Prototype division (production was completed in the second quarter of 1993) and the sale of the Smith Energy Services division. The provision for restructuring for these operations included non-recurring, non-operating costs subsequent to the completion of production, including severance and other employee benefits, costs associated with the relocation of machinery and equipment from Charles City to other facilities, costs associated with preparation for the auctions and other facility related costs into 1995. In addition, the Company phased out its centralized Management Information Services operation at the Corporate Office in 1993. The reserve for restructuring includes a provision for severance and other employee related expenses and the estimated costs of the termination of lease agreements for the MIS facility and hardware/software. During 1994, approximately $2,000,000 (primarily related to accruals for environmental issues at discontinued operations) was reclassified from other accrued expense classifications to the restructuring reserve. Net charges to the restructuring reserve in 1994, 1993 and 1992 were $3,931,000, $9,515,000 and $88,000, respectively. As of December 31, 1994, the accompanying consolidated balance sheet includes real estate with a net book value of $4,434,000 which is held for sale including $2,403,000 related to real estate under lease to the purchaser of the White-New Idea division discussed above. 25 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. INCOME TAXES: Provision for income taxes in 1994 and 1993 consists of the following:
YEAR ENDED DECEMBER 31, ------------------------ 1994 1993 ----------- ----------- Federal (current)................................................................. $ 422,000 $ 514,000 State (current)................................................................... 244,000 232,000 ----------- ----------- Total provision................................................................. $ 666,000 $ 746,000 ----------- ----------- ----------- -----------
The Company recorded no benefit for income taxes in 1992 as the Company had no tax loss carrybacks available to reduce the pre-tax loss of that year. Allocation of the provision for income taxes in the 1994 and 1993 Consolidated Statements of Income (Loss) include the following:
YEAR ENDED DECEMBER 31, ------------------------- 1994 1993 ----------- ------------ Continuing operations............................................................ $ 877,000 $ 436,000 Discontinued operations-income (loss) from operations............................ -- 182,000 Discontinued operations-gain (loss) on disposition of discontinued operations and other costs..................................................................... (211,000) 200,000 Extraordinary loss on early extinguishment of debt............................... -- (72,000) ----------- ------------ Total provision................................................................ $ 666,000 $ 746,000 ----------- ------------ ----------- ------------
The provision for income taxes in 1994 and 1993 differs from amounts computed by applying the statutory rate to pre-tax income as follows:
YEAR ENDED DECEMBER 31, ------------------------------ 1994 1993 -------------- -------------- Income tax at statutory rate................................................. $ 5,250,000 $ 5,450,000 Utilization of net operating loss carryforwards.............................. (5,547,000) (4,972,000) State income tax, net of federal tax benefit................................. 159,000 153,000 Permanent book over tax, net of tax over book, differences on acquired assets...................................................................... 910,000 108,000 Other, net................................................................... (106,000) 7,000 -------------- -------------- Total provision............................................................ $ 666,000 $ 746,000 -------------- -------------- -------------- --------------
26 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The significant components of deferred tax assets and liabilities were as follows:
DECEMBER 31, ---------------------------------- 1994 1993 ---------------- ---------------- Deferred tax assets: Net operating loss and investment tax credits carryforwards........... $ 87,546,000 $ 92,319,000 Self insurance accruals............................................... 2,941,000 3,731,000 Inventories........................................................... 2,636,000 2,983,000 Sale/leaseback transaction............................................ 3,730,000 3,629,000 Restructuring reserves................................................ 1,316,000 1,998,000 Employee benefits, including pensions................................. 4,150,000 3,759,000 Warranty.............................................................. 2,269,000 3,337,000 Sales allowances...................................................... 2,000,000 1,588,000 Environmental matters................................................. 1,120,000 876,000 Other................................................................. 900,000 212,000 ---------------- ---------------- Total deferred tax asset............................................ $ 108,608,000 $ 114,432,000 ---------------- ---------------- Deferred tax liabilities: Depreciation.......................................................... $ 3,510,000 $ 4,044,000 Other................................................................. -- 366,000 ---------------- ---------------- Total deferred tax liabilities...................................... $ 3,510,000 $ 4,410,000 ---------------- ---------------- Net deferred tax asset before valuation allowance................... $ 105,098,000 $ 110,022,000 Valuation allowance................................................. (105,098,000) (110,022,000) ---------------- ---------------- Net deferred tax asset.............................................. $ -- $ -- ---------------- ---------------- ---------------- ----------------
The valuation allowance is associated primarily with net operating loss carryforwards. Such valuation allowance has been provided based on the inherent uncertainty of predicting the taxable income necessary to realize net deferred tax assets considering the Company's recent loss history and the cyclical nature of the businesses in which the Company operates. At December 31, 1994, the Company has available net operating loss carryforwards of up to $242,403,000 (of which $160,384,000 results from various acquisitions) which expire between 1996 and 2008 and investment tax credit carryforwards of $2,704,000 (which expire between 1995 and 2004) including up to $496,000 resulting from acquisitions. Tax returns for the years subsequent to 1990 are potentially subject to audit by the Internal Revenue Service. 27 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. FINANCIAL ARRANGEMENTS: The Company's debt consists of the following:
DECEMBER 31, -------------------- 1994 1993 --------- --------- (IN THOUSANDS OF DOLLARS) SENIOR DEBT Capitalized lease obligations, at interest rates from 7.3% to 12% (weighted average of 8.7%), due in varying amounts through 1998 (Note 6)............................. $ 1,215 $ 7,090 Revolving credit agreement, interest at prime plus 2.0%............................. -- 14,883 Note payable with interest at prime plus 2.0%....................................... -- 10,000 Note payable with interest at prime plus 2.8%....................................... -- 10,000 Notes/mortgages payable at various interest rates................................... 104 392 --------- --------- $ 1,319 $ 42,365 SUBORDINATED DEBT Subordinated notes with interest at the prime rate plus 13%......................... -- 1,838 Subordinated notes with interest at 10.8%........................................... -- 3,062 Subordinated notes with interest at 13.5%........................................... -- 2,700 --------- --------- $ 1,319 $ 49,965 Less current portion................................................................ 689 39,343 --------- --------- $ 630 $ 10,622 --------- --------- --------- ---------
Scheduled maturities of the noncurrent poriton of long-term debt at December 31, 1994 are due as follows (in thousands of dollars):
CAPITALIZED LEASE OBLIGATION OTHER TOTAL ------------------ -------------- -------------- 1996....................................... $ 500 $ 54 $ 554 1997....................................... 70 -- 70 1998....................................... 6 -- 6 ------------------ -------------- -------------- $ 576 $ 54 $ 630 ------------------ -------------- -------------- ------------------ -------------- --------------
In March 1994, the Company terminated previous financing agreements through the completion of a new Revolving Credit Agreement. The termination of these agreements resulted in the payment of termination fees and the write-off of unamortized loan costs related to these agreements. These amounts, net of a tax benefit of $72,000, have been included in the accompanying Consolidated Statement of Income (Loss) for 1993 under the caption "Extraordinary loss on early extinguishment of debt, less applicable income tax benefit." The new three year Revolving Credit Agreement with two banks provides for up to $35,000,000 in working capital related loans and up to $15,000,000 in standby letters of credit required for the Company's self-insurance programs and for other commercial purposes, of which $10,300,000 has been borrowed and approximately $13,000,000 of standby letters of credit are outstanding at December 31, 1994. Interest is at prime rate or at other alternate variable rates as provided within the agreement. This facility was collateralized principally by the Company's receivables and inventories; however, all collateral was released as the Company attained certain financial results for the first nine months of 1994. The weighted average interest rate on borrowings outstanding at December 31, 1994 was 8.5%. Under the Revolving Credit Agreement, the Company must meet certain periodic financial tests, including minimum net worth, minimum operating income, ratio of funded debt to operating income, and ratio of operating income to interest expense. 28 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Subsequent to the end of 1994, the Company entered into an amendment of the Revolving Credit Agreement. Under the terms of the amendment, interest rates have been reduced. In addition, the amendment provides for an increase in permitted capital expenditures for 1995 and allows the Company to accelerate preferred stock redemptions, pay dividends on Common Stock, repurchase Common Stock and permit limited acquisitions. 6. LEASES: CAPITAL LEASES-- The Company conducts a portion of its business in leased facilities, one of which is leased from a municipal agency under an Industrial Revenue Bond arrangement. The Company also leases various types of manufacturing, office and transportation equipment. Capital leases included in Plant and Equipment in the accompanying balance sheets are as follows:
DECEMBER 31, -------------------- 1994 1993 --------- --------- (IN THOUSANDS OF DOLLARS) Land....................................................... $ 396 $ 605 Buildings and improvements................................. 2,013 4,806 Machinery and equipment.................................... 4,533 9,589 --------- --------- $ 6,942 $ 15,000 Less--Accumulated amortization............................. 4,353 9,595 --------- --------- $ 2,589 $ 5,405 --------- --------- --------- ---------
See Note 5 for information as to future debt payments relating to the above leases. OPERATING LEASES-- Rent expense for operating leases, which is charged against income, was as follows:
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS OF DOLLARS) Minimum rentals................................ $ 2,165 $ 4,062 $ 4,251 Contingent rentals............................. 657 1,084 916 --------- --------- --------- $ 2,822 $ 5,146 $ 5,167 --------- --------- --------- --------- --------- ---------
Contingent rentals are composed primarily of truck fleet mileage charges for actual usage. Some leases contain renewal and purchase options. The leases generally provide that the Company pay taxes, maintenance, insurance and certain other operating expenses. 29 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1994, future minimum rental payment commitments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are as follows:
MINIMUM NET MINIMUM ANNUAL SUBLEASE ANNUAL RENTAL RENTAL RENTAL PAYMENTS INCOME PAYMENTS ----------- ----------- ----------- (IN THOUSANDS OF DOLLARS) Year ending December 31, 1995.......................................... $ 1,549 $ (245) $ 1,304 1996.......................................... 1,535 (245) 1,290 1997.......................................... 1,456 (245) 1,211 1998.......................................... 1,420 (233) 1,187 1999.......................................... 1,131 (98) 1,033 Later......................................... 2,493 (197) 2,296 ----------- ----------- ----------- $ 9,584 $ (1,263) $ 8,321 ----------- ----------- ----------- ----------- ----------- -----------
7. SERIES B PREFERRED STOCK: The Company has 2,000,000 shares of authorized preferred stock. Of this amount, 350,000 shares were designated as Series B Variable Rate Cumulative Preferred Stock 146,800 and 180,800 shares of which were outstanding at December 31, 1994 and 1993, respectively. The holder of the Series B Preferred Stock is entitled to receive cumulative quarterly dividends at variable rates, computed by multiplying $50 times 1/4 of the prime rate in effect on the first day of the quarter preceding the dividend date. The shares of Series B Preferred Stock are subject to redemption by the Company in whole or in part at any time by payment of the price of $51.50 per share plus accrued and unpaid dividends. The holder of the shares of Series B Preferred Stock shall be entitled to a liquidation preference in the amount of $50 per share plus accrued and unpaid cumulative dividends. Each share is entitled to one vote on all corporate matters upon which shareholders of the Company are entitled to vote. In addition, the affirmative vote of the holder of the Series B Preferred Stock is required for certain corporate transactions. In 1990, the Company entered into an agreement with the holder of the Series B Preferred Stock to revise the original schedule of redemption. The redemption amounts were payable in cash or, at the Company's option, in shares of the Company's Common Stock. If paid in shares of the Company's Common Stock, the value per share will be (1) its average closing price for the last ten or two trading days prior to the rescheduled redemption date (whichever average price is less), less (2) the lower of 10% of such average closing price or $1.00. In 1992, the holder of the Series B Preferred Stock agreed to extend the terms of this agreement and the Company agreed to amend and restate the certificate of designation of the Series B Preferred Stock to accelerate the scheduled mandatory redemption. The terms of this agreement provide for the redemption of the remaining outstanding shares as follows: semi-annual installments of 17,000 shares through November 30, 1998; and 10,800 shares on May 31, 1999. In 1993, the Company entered into an agreement with the holder to pay cash and subordinated notes for the past due redemption of the Series B Preferred Stock scheduled for November 30, 1992, as well as all scheduled dividends and redemptions from January 2, 1993 through January 2, 1995. This agreement was terminated at the end of 1993. Series B Preferred Stock redemptions subsequent to the end of 1993 may be satisfied through cash payments or, at the Company's option, shares of Common Stock as described above using the revised redemption schedule in the 1992 agreement described above. Future dividends will be paid in cash. In January 1993, the Company issued 127,296 shares of Common Stock to the holder of the Series B Preferred Stock in satisfaction of dividends declared prior to December 31, 1992. During 1993, the Company also issued subordinated notes ($3,144,000) and cash ($722,000) to satisfy redemptions of the Series B Preferred 30 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Stock ($3,200,000) and dividends declared and paid ($666,000). Subordinated notes outstanding at December 31, 1993 which were issued in connection with the redemption of and dividends related to the Series B Preferred Stock were paid in full during 1994. Under the terms of the certificate of designation of the Series B Preferred Stock, holders of such stock are entitled to elect two members to the Board of Directors of the Company if the Company is in default of six full quarterly dividends or two mandatory redemptions. An additional 150,000 shares were designated in 1988 as Series C Cumulative Preferred Stock (see Note 8). The remaining 1,500,000 shares of authorized preferred stock are undesignated and unissued at December 31, 1994. 8. SERIES C PREFERRED STOCK: The Company has 150,000 shares designated as Series C Cumulative Preferred Stock, of which 115,000 and 129,000 shares were outstanding as of December 31, 1994 and 1993, respectively. Holders of the Series C Cumulative Preferred Stock are entitled to receive cumulative quarterly dividends at the annual rate of $10.81 per share and a liquidation preference in the amount of $100 per share plus accrued and unpaid cumulative dividends. In 1992, the holders of the Series C Cumulative Preferred Stock agreed to an amended redemption schedule. The outstanding shares are redeemable as follows: 25,000 shares on October 2, 1995 and 30,000 shares in October of each year thereafter. Each share is entitled to one vote on all corporate matters upon which shareholders of the Company are entitled to vote. In addition, the affirmative vote of the holders of the majority of the Series C Cumulative Preferred Stock, voting as a class, is required for certain corporate transactions. During 1991, the Company obtained an agreement with the holders that quarterly dividends through October 2, 1992 would be paid in shares of the Company's Common Stock. In 1993, the Company entered into an agreement with the holders to pay cash and subordinated notes for all scheduled dividends and redemptions from January 2, 1993 through January 2, 1995. This agreement was terminated at the end of 1993. Redemptions subsequent to the end of 1993, as well as dividends, will be paid in cash. In January 1993, the Company issued 202,688 shares of Common Stock to the holders of the Series C Cumulative Preferred Stock in satisfaction of dividends declared prior to December 31, 1992. During 1993, the Company also issued subordinated notes ($2,567,000) and cash ($1,060,000) to satisfy redemptions of the Series C Cumulative Preferred Stock ($2,100,000) and dividends declared and paid ($1,527,000). These notes were paid in full during 1994. The Company's failure to pay when due the October 2, 1992 dividend constituted a default in the payment of a dividend pursuant to the Series C Cumulative Preferred Stock certificate of designation. If the Company defaults in the payment of two additional quarterly dividends or any mandatory redemption, the Series C Cumulative Preferred Stock holders shall have the right to convert such shares into shares of common stock at a defined price based on market prices at that time. In addition, under such circumstances holders of such stock would be entitled to elect two members to the Board of Directors of the Company. 9. COMMON STOCK AND OPTIONS: The Company has an incentive stock plan (the 1977 plan) which authorizes stock incentives for key employees in the form of stock awards, stock appreciation rights and stock options. Options under the 1977 plan, which are granted at fair market value at date of grant, are non-qualified options (not "incentive stock options" as defined by the Internal Revenue Code). Options currently outstanding under the 1977 plan become exercisable to the extent of 25% one year from date of grant and 25% in each of the next three years, and expire ten years from the date of grant. There were no stock awards issued under this plan in 1994, 1993 or 1992. No stock appreciation rights have been granted to date under this plan. There are 160,799 options outstanding under this plan at December 31, 1994 and are included in the table below. 31 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In 1990, the Company's Board of Directors approved a new incentive stock plan, the 1990 Long Term Incentive Stock Plan (the 1990 plan) which authorizes stock incentives for key employees in the form of stock awards and stock options. The 1990 plan, as amended on March 1, 1993, authorizes the issuance of up to 1,000,000 shares of the Company's Common Stock. Options under the 1990 plan, which are granted at fair market value at date of grant, may be granted as either incentive stock options or non-statutory stock options. Options granted become exercisable to the extent of 50% one year from date of grant and the remaining 50% two years from date of grant. Since the inception of the 1990 plan, the Company issued options to purchase 762,250 shares of the Company's Common Stock at prices between $1.50 and $12.50 per share. There are 523,550 options outstanding under this plan at December 31, 1994 and are included in the table below. In 1994, shareholders approved a new incentive plan, the 1993 Directors Incentive Plan (the 1993 plan) which authorizes the issuance of stock options to members of the Board of Directors who are not employees of the Company. Options under the 1993 plan, which are granted at fair market value at date of grant, are granted as non-statutory stock options. Options granted become exercisable to the extent of 50% one year from date of grant and the remaining 50% two years from date of grant. Since the inception of the 1993 plan, the Company issued options to purchase 60,000 shares of the Company's Common Stock at $12.50 per share. All options issued are outstanding under this plan at December 31, 1994 and are included in the table below. Stock option transactions for 1993 and 1994 were as follows:
OPTIONS OUTSTANDING (SHARES) ---------------------------------------- AVERAGE OPTION NOT PRICE AT DATE OF EXERCISABLE EXERCISABLE TOTAL GRANT ------------ ------------ ------------ ---------------- Outstanding, December 31, 1992....................... 187,875 409,497 597,372 $ 8.90 Granted............................................ 103,000 -- 103,000 5.25 Became exercisable................................. (93,125) 93,125 -- 2.89 Exercised.......................................... -- (151,225) (151,225) 5.19 Expired............................................ -- -- -- -- Terminated......................................... (23,500) (6,010) (29,510) 5.33 ------------ ------------ ------------ ------- Outstanding, December 31, 1993....................... 174,250 345,387 519,637 $ 9.45 Granted............................................ 318,500 -- 318,500 12.50 Became exercisable................................. (124,750) 124,750 -- 3.61 Exercised.......................................... -- (74,713) (74,713) 7.96 Expired............................................ -- (375) (375) 12.25 Terminated......................................... (7,000) (11,700) (18,700) 11.81 ------------ ------------ ------------ ------- Outstanding, December 31, 1994....................... 361,000 383,349 744,349 $ 10.85 ------------ ------------ ------------ ------- ------------ ------------ ------------ -------
32 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) On February 15, 1991, the Company declared a dividend distribution of one right ("Right") to purchase an additional share of the Company's Common Stock for $50 on each share of Common Stock outstanding. The Rights become exercisable ten days after a person or group acquires, or tenders for, 20% or more of the Company's Common Stock. The Company is entitled to redeem the Rights at $.01 per Right at any time until ten days after any person or group has acquired 20% of the Common Shares. If a person or group acquires 20% or more of the Company's Common Stock (other than pursuant to an acquisition from the Company or pursuant to a tender offer deemed fair by the board of directors), then each Right, other than Rights held by the acquiring person or group, entitles the holder to purchase for $50 that number of shares of the Company's Common Stock having a current market value of $100. If a person or group acquires 20% or more of the Company's Common Stock and prior to the person or group acquiring 50% of such outstanding stock, the Company may convert each outstanding Right, other than the Rights held by the acquiring person or group, into one new share of the Company's Common Stock. If a person or group acquiring more than 20% of the Company's Common Stock merges with the Company or engages in certain other transactions with the Company, each Right, other than Rights held by the acquiring person or group, entitles the holder to purchase shares of common stock of the acquiring person or group having a current market value of $100 for $50. The Rights attach to all of the Company's Common Stock outstanding as of February 15, 1991, or subsequently issued, and have a term of ten years. The Rights also expire upon a merger or acquisition of the Company undertaken with the consent of the Company's board of directors. 10. RETIREMENT, PENSION AND POSTRETIREMENT HEALTH PLANS: The Company sponsors several defined benefit pension plans which cover certain union and office employees. Benefits under these plans generally are based on the employee's years of service and compensation during the years immediately preceding retirement. The Company's general funding policy is to contribute amounts deductible for Federal income tax purposes. Effective January 1, 1994, the Company instituted an unfunded deferred compensation defined benefit pension plan called the Executive Retirement Plan. The noncontributory plan is designed to provide supplemental retirement benefits to certain executive officers of the Company as determined by the Board of Directors. Retirement benefits will be reduced by benefits received under the Target Benefit Plan described below. Net periodic pension costs as they relate to defined benefit plans for continuing operations were as follows:
DECEMBER 31, ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS OF DOLLARS) Service cost.......................................................... $ 652 $ 411 $ 405 Interest cost......................................................... 2,260 2,152 2,113 Actual loss (gain) on plan assets..................................... 327 (7,903) (2,608) Net amortization and deferral......................................... (2,422) 6,090 609 --------- --------- --------- Net periodic pension cost............................................. $ 817 $ 750 $ 519 --------- --------- --------- --------- --------- ---------
Although the actual return on plan assets is shown, the expected long-term rate of return used in determining the net periodic pension cost in all years was approximately 7.5%. The difference between the actual return and the expected return is included in the "Net amortization and deferral" in the above table. The actuarial present value of benefits was determined using a discount rate of approximately 7.25% in 1994 and 1993 (8% in 1992). The rate of compensation increase used to measure the projected benefit obligation in two plans was approximately 5%. All other plans are based on current compensation levels. 33 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table sets forth the funded status of the Company's defined benefits plans:
DECEMBER 31, ---------------------------------------------------------- 1994 1993 ---------------------------- ---------------------------- ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS ------------- ------------- ------------- ------------- (IN THOUSANDS OF DOLLARS) Plan assets at fair value........................... $ 19,724 $ 10,971 $ 17,173 $ 16,187 ------------- ------------- ------------- ------------- Actuarial present value of benefit obligations: Vested benefits................................... $ 16,730 $ 12,522 $ 12,587 $ 15,006 Nonvested benefits................................ 819 776 290 784 ------------- ------------- ------------- ------------- Accumulated benefit obligation...................... $ 17,549 $ 13,298 $ 12,877 $ 15,790 Effect of projected future compensation increases... 1,933 -- -- 1,889 ------------- ------------- ------------- ------------- Projected benefit obligation........................ $ 19,482 $ 13,298 $ 12,877 $ 17,679 ------------- ------------- ------------- ------------- Plan assets in excess of (less than) projected benefit obligation................................. $ 242 $ (2,327) $ 4,296 $ (1,492) Unrecorded net (gain) loss from past experience different from that assumed and effect of changes in assumptions..................................... 1,568 (300) (2,041) 350 Unrecorded prior service cost....................... 1 700 1 -- Unrecognized net (asset) at date of initial application........................................ (1,405) (968) (1,249) (1,596) ------------- ------------- ------------- ------------- Prepaid (accrued) pension costs..................... $ 406 $ (2,895) $ 1,007 $ (2,738) ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The plans' assets include common stocks, fixed income securities, short-term investments and cash. Common stock investments at December 31, 1994 and 1993 include approximately 315,000 and 479,000 shares, respectively, of the Company's common stock. The Company also has a defined contribution retirement plan which covers certain employees. There are no prior service costs associated with this plan. The Company follows the policy of funding retirement contributions under this plan as accrued. Contributions to this plan for continuing operations were $255,000 in 1994, $252,000 in 1993 and $261,000 in 1992. The Company employees are also eligible to become participants in the Save Money and Reduce Taxes (SMART) plan. Prior to January 1, 1993, voluntary deposits by employees (up to 6% of their salaries) were matched by the Company on the basis of $1 for every $3 deposited. A portion of the voluntary deposits and all of the matching funds were used to purchase the Company's Common Stock for the account of the participating employees. The trustee is directed by each employee on how to invest the portion of the employee's deposit which was not required by the plan to be put toward the purchase of the Company's stock. The investment alternatives include a money market fund, two mutual funds, a fixed income fund and additional investment in the Company's stock. The Company's total contribution under this plan amounted to approximately $365,000 in 1992. Effective January 1, 1993, the Company terminated its matching contribution to the SMART plan. Under the revised provisions of this plan, employees can no longer purchase Company stock with their voluntary contributions. Employees may continue to invest their voluntary contribution in any of the other investment alternatives noted above. As of December 31, 1994 and 1993, assets of the SMART plan include approximately 532,000 and 630,000 shares, respectively, of the Company's common stock. 34 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company has a noncontributory defined contribution plan (the Employee Stock Plan). All non-union employees not covered by pension plans are covered under the Employee Stock Plan. Company contributions were $450,000 in 1994 and $497,000 in 1992. No contribution was made in 1993. Effective January 1, 1995, the Company instituted a noncontributory defined contribution retirement plan called the Target Benefit Plan. All employees covered by the Employee Stock Plan are covered under the Target Benefit Plan. Under the terms of the Target Benefit Plan, the Company will make an actuarially determined annual contribution based upon each eligible employee's years of service and earnings as defined. Employee investment alternatives include a money market fund, two mutual funds and a fixed income fund. Employees become vested in the Company contribution after five years of service. Effective January 1, 1992, the Company implemented on an immediate recognition basis Statement of Financial Accounting Standards (SFAS) No. 106--Employers' Accounting for Postretirement Benefits Other Than Pensions. This statement requires that the cost of these benefits, which are primarily for health care, be recognized in the financial statements during the employee's active working career. The Company's previous practice was to expense these net costs as incurred. The transition effect of adopting SFAS No. 106 on an immediate recognition basis as of January 1, 1992 resulted in a charge of $1,739,000 ($.21 per common share) to 1992 operating results. At December 31, 1994, the Company provides medical benefits for retirees and their spouses at one operating division and certain other individuals related to several discontinued operations. Contributions are required of most retirees for medical coverage. The current obligation was determined by application of the terms of the related medical plans, including the effects of established maximums on covered costs, together with relevant actuarial assumptions and health-care cost trend rates projected at annual rates ranging ratably from 9% for retirees under age 65 (7.8% for retirees age 65 and older) in 1995 to 5.5% over 27 years. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation by approximately $47,000. The annual service costs would not be materially affected. The total cost for all plans amounted to $82,000 in 1994, ($782,000) in 1993 (net of a curtailment gain of approximately $1,000,000 included in discontinued operations) and $189,000 in 1992. The following table provides information on the status of these plans:
DECEMBER 31, -------------------- 1994 1993 --------- --------- (IN THOUSANDS OF DOLLARS) Accumulated postretirement benefit obligation: Retirees and their dependents........................................... $ (266) $ (505) Fully eligible active plan participants................................. (26) (19) Active employees not fully eligible..................................... (395) (423) --------- --------- Accumulated postretirement benefit obligation............................. $ (687) $ (947) Plan Assets............................................................... -- -- Unrecognized prior service costs.......................................... 15 -- Unamortized plan amendments............................................... -- -- Unamortized net (gain) loss............................................... (236) 55 --------- --------- Accued postretirement benefit costs....................................... $ (908) $ (892) --------- --------- --------- ---------
35 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net periodic postretirement benefit costs include the following:
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS OF DOLLARS) Service cost...................................................... $ 31 $ 58 $ 55 Interest cost..................................................... 53 154 134 Amortization of unrecognized net (gain) loss...................... (3) 11 -- Amortization of prior plan amendment.............................. 1 -- -- Curtailment (gain)................................................ -- (1,000) -- Settlement (gain)................................................. -- (5) -- --------- --------- --------- Net periodic postretirement benefit cost (benefit)................ $ 82 $ (782) $ 189 --------- --------- --------- --------- --------- ---------
Measurement of the accumulated postretirement benefit obligation was based on a discount rate of 8.0% in 1994, 7.5% in 1993 and 8% in 1992. During 1993, the Company provided $1,261,000 (included in "Other (income) expenses, net"-- see Note 13) for deferred compensation related to the retirement of certain executive officers of the Company. 11. ENVIRONMENTAL, LEGAL AND CONTINGENT LIABILITIES: ENVIRONMENTAL MATTERS -- The Company's manufacturing plants generate both hazardous and nonhazardous wastes, the treatment, storage, transportation and disposal of which are subject to federal, state and local laws and regulations. The Company believes that its manufacturing plants are in substantial compliance with the various federal, state and local laws and regulations, and does not anticipate any material expenditures to remain in compliance. Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (CERCLA), and other statutes, the United States Environmental Protection Agency (EPA) and the states have the authority to impose liability on waste generators, site owners and operators, and others regardless of fault or the legality of the original disposal activity. Accordingly, the Company has been named as a potentially responsible party (PRP), or may otherwise face potential liability for environmental remediation or cleanup, in connection with the sites described below that are in various stages of investigation or remediation. At one site, the Company is one of seven PRP's because of its apparent absentee ownership of four parcels of land from 1967 to 1969 which may have held part or all of one or more settling ponds operated by a tenant business. The Company has already paid $85,000 as its share of a settlement of an EPA demand for $415,000 in past response costs, and the EPA has sought payment from the PRP's of an additional $572,000 in response costs. The EPA has ordered the Company and one other PRP to undertake the design and construction of the remediation project. All PRP's have agreed to undertake the design and construction of the remediation project pursuant to a financial participation agreement. The EPA estimates the present value of the cost to implement its selected cleanup method to be approximately $1,868,900. The Company has accrued its estimated share of the remaining cleanup cost which is not considered significant. The Company has also filed a claim against its insurers. Pursuant to a Consent Decree entered into in November 1991 with the EPA, the Company has agreed to close and remediate a landfill leased by the Company and formerly used for the disposal of spent foundry sands. The Company established a reserve of $1,400,000 during 1990 and 1991 (of which approximately $750,000 for remediation has been spent through December 31, 1994) which it believes is adequate to cover the estimated cost of compliance with the Consent Decree. 36 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company has also been named as a PRP, along with numerous parties, at various hazardous waste sites undergoing cleanup or investigation for cleanup. The Company believes that at each of these sites, it has been improperly named or will be considered to be a "de minimis" party. The Company is a defendant in two actions where a private party seeks recovery of costs associated with an environmental cleanup at a site formerly owned by the Company. At one site, which the Company or one of its subsidiaries owned from 1968 until 1976, the plaintiff and current owner seeks to recover in excess of $1,500,000 from the Company and other defendants. The estimated present value of a remediation plan proposed by the state environmental agency is approximately $1,900,000. The Company has denied liability and asserted a counter-claim against plaintiff and cross-claims against the co-defendants. At the other site, which the Company owned from 1967 until 1978, the plaintiff, which owned the site from 1991 until 1993, filed suit seeking in excess of $472,000 from the Company and other former owners and operators for costs and damages allegedly incurred while cleaning up the property in preparation for sale. The Company and the other defendants have recently entered into an agreement with the plaintiff to settle all aspects of the litigation. The Company has accrued its share of the settlement. The Company has also filed claims against its insurers seeking indemnification against losses in this suit. The Company is in the process of investigating or has determined the need to perform environmental remediation or cleanup at certain manufacturing sites formerly operated and still owned by the Company. At the sites where the Company has determined that some remediation or cleanup will be required, the estimated cost for such remediation or cleanup was provided for in 1994 and 1993. At one site, located in Coldwater, Ohio, the Company had entered into an agreement with the purchaser of the White-New Idea business to sell the related real estate pending a favorable review of environmental matters. An independent consultant retained by the Company indicated cleanup costs could range from $500,000 to $5,300,000 for the Coldwater, Ohio facility. The Company has provided in 1994 and 1993 for amounts equal to the lower value of this range. The Company intends to seek financial participation from the prior owner of the facility for any cleanup costs as a significant portion of the environmental conditions existed prior to the Company's ownership of this facility. The purchaser of the White-New Idea business retained an independent consultant who had indicated estimated cleanup costs to be significantly greater than the above noted range. Further studies are planned to better define site conditions and necessary remediation. During 1994 and 1993 the Company made provisions of approximately $1,383,000 and $3,136,000, respectively, (no significant amounts in 1992) toward various environmental matters discussed above. At December 31, 1994, the Company has accruals, including those discussed above, of $3,693,000 (including amounts provided for within the restructuring reserve) for the estimated cost to resolve its potential liability with the above and other, less significant, matters. The above provisions and accruals exclude any potential recovery from insurers or other third parties. Additional liabilities are possible and the ultimate outcome of these matters may have a material effect on the financial position or results of operations in a future period. However, the Company believes the above accruals are adequate for the resolution of known environmental matters and that the outcome of these matters is not expected to have a material adverse effect on the Company's financial position or its ongoing results of operations. JUSTICE DEPARTMENT INVESTIGATION-- During 1994, the Company learned the United States Department of Justice was investigating possible improper payments made in connection with a foreign sale by the Company's Cooper division in mid-1993. On August 5, 1993, the Company announced that a routine internal audit had uncovered a diversion of $350,000 to an account opened by a former employee of the Cooper division in Brady, 37 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Texas, and that up to $60,000 of this sum may possibly constitute improper payments to a foreign government. At that time, the Company voluntarily turned its findings over to the Department of Justice. The Company is cooperating fully with the authorities in resolving this matter. OTHER-- In connection with the sale of the business and assets of the Littell division in 1991, the Company entered into a "License Agreement" pursuant to which the Company licensed certain technology to the purchaser for which the purchaser agreed to pay royalties totaling $8,064,000 plus interest, in minimum quarterly installments of $312,500 commencing in November 1992, with a final lump sum payment ($7,342,000) due May 22, 1996. The Company recorded this agreement as a long-term note receivable. This receivable is secured by the technology granted and is guaranteed by the purchaser. The license agreement contains a non-compete covenant by the Company as well as a covenant to refer to the purchaser relevant customer inquiries. The agreement provides that in the event of a violation of the covenant not to compete, the purchaser's royalty payments are reduced by approximately $8,000,000 and the purchaser is also entitled to actual damages. Through the end of the third quarter of 1994, the Company had received the required minimum quarterly payments, usually 30 days after the due date. During the fourth quarter of 1994, the purchaser withheld payment of the minimum quarterly payment beyond 30 days and asserted that the Company had violated the non-compete and non-referral covenants noted above. At December 31, 1994, the amount due the Company under this agreement was $8,052,000 (including $7,457,000 classified as "Notes receivable, due after one year") plus $285,000 of accrued interest. On March 10, 1995, an action was filed by the purchaser in the Circuit Court of Cook County, Illinois. After taking into consideration counsel's evaluation of the above facts, the Company is of the opinion that the outcome of this action would not have a significant adverse effect on the Company's consolidated financial statements. The Company is involved in a number of other legal proceedings as a defending party, including product liability claims for which additional liability is reasonably possible. It is the Company's policy to reserve on a non-discounted basis for all known product liability claims, with necessary reserves ($2,790,000 and $4,258,000 at December 31, 1994 and 1993, respectively) determined in consultation with independent insurance companies and legal counsel. Payment of these claims may take place over the next several years. Additional liabilities are possible and the ultimate outcome of these matters may have a material effect on the financial position or results of operations in a future period. However, after consideration of relevant data (review of insurance coverage, accruals, etc.), management believes that the eventual outcome of these matters will not have a material adverse effect on the Company's financial position or its ongoing results of operations. At December 31, 1994, the Company was contingently liable for approximately $1,898,000 primarily relating to outstanding letters of credit. During 1994, the Company entered into agreements with certain executive officers of the Company which provide that, if within one year following a defined change in ownership or control of the Company there shall be an involuntary termination of such executive's employment, or if there shall be defined patterns of activity during such period by the Company causing such executive to resign, then, subject to prevailing tax laws and regulations, the executive shall be entitled to payments equal to approximately three years' compensation. Subsequent to the end of 1994, the Company entered into an agreement with the purchaser of the Cooper business. As part of this agreement, the Company would be a co-applicant on a letter of credit in the amount of $4,252,000. The letter of credit secures the performance of the purchaser's obligation to manufacture five rigs and certain related spare parts against a specific foreign order. In exchange 38 ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) for this arrangement, the Company has received all amounts due under the purchase agreement as well as a fee for expenses incurred in connection with this arrangement. In addition, the Company received additional collateral securing the letter of credit. 12. OPERATIONS BY INDUSTRY SEGMENT: The Company's operations involve a single industry segment, the manufacturing and sale of agricultural and industrial machinery and other products. Approximately 2%,8% and 6% of the Company's net sales from continuing operations in 1994, 1993 and 1992, respectively, were exported principally to Canada and Mexico. Approximately 14%, 25% and 24% of the Company's net sales from continuing operations in 1994, 1993 and 1992, respectively, were derived from sales to the three major U.S. automobile manufacturers. 13. SUMMARY OF OTHER INCOME (EXPENSE): Other income (expense) consists of the following:
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS OF DOLLARS) Interest income......................................................... $ 1,293 $ 1,832 $ 1,994 Goodwill amortization................................................... (2,067) (2,067) (2,067) Loan cost expenses...................................................... (563) (988) (1,886) Rent income............................................................. 35 61 236 Environmental related expenses.......................................... (410) (1,486) (266) Net gain on sales of operating and non-operating assets................. 222 462 397 Loss on loan guarantee to affiliated company............................ -- -- (1,098) Deferred compensation (Note 10)......................................... -- (1,261) -- Litigation settlement................................................... -- (650) -- Other miscellaneous..................................................... 292 (517) (804) --------- --------- --------- $ (1,198) $ (4,614) $ (3,494) --------- --------- --------- --------- --------- ---------
39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY See the Company's Proxy Statement incorporated by reference as part of this Part III, under the caption "Proposal 1: Election of Directors" for information with respect to the directors. In addition, see the information under the caption "Executive Officers of the Company" as part of Part I, Item 1 of this Report which is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See the Company's Proxy Statement incorporated by reference as part of Part III, Item 10 of this report, under the captions "Management Compensation" for information with respect to executive compensation. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners. See the Company's Proxy Statement incorporated by reference as part of Part III, Item 10 of this report, under the captions "Outstanding Stock and Voting Rights", "Beneficial Owners" and "Principal Stockholders and Management Ownership" for information with respect to the ownership of certain beneficial owners of Common Stock, Series B Variable Rate Cumulative Preferred Stock and $10.81 Series C Cumulative Preferred Stock of the Company. (b) Security Ownership of Management. See the Company's Proxy Statement incorporated by reference as part of Part III, Item 10 of this report, under the caption "Principal Stockholders and Management Ownership" for information with respect to the beneficial ownership by management of capital stock of the Company. (c) Changes in Control. There is no arrangement known to the Company, the operation of which may at a subsequent date result in a change in control of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the Company's Proxy Statement incorporated by reference as part of Part III, Item 10 of this report, under the captions "Proposal 1: Election of Directors" and "Management Compensation" for information with respect to certain relationships and related transactions with management. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS Included in Part II of this report: Report of Independent Accountants Consolidated statements of income (loss) for the years ended December 31, 1994, 1993 and 1992 Consolidated balance sheets as of December 31, 1994 and 1993 Consolidated statements of cash flows for the years ended December 31, 1994, 1993 and 1992 Consolidated statements of shareholders' investment for the years ended December 31, 1994, 1993 and 1992 Notes to consolidated financial statements 40 (a) 2. FINANCIAL STATEMENT SCHEDULES Included in Part IV of this report: Schedule II--Allowance for losses in collection for the years ended December 31, 1994, 1993 and 1992 (a) 3. EXHIBITS The following exhibits are incorporated by reference as noted below: 3(a) The Registrant's Restated Certificate of Incorporation, as amended, is incorporated by reference to Exhibit 3 of the Company's 1988 Annual Report on Form 10-K (File No. 1-5530). 3(b) The Registrant's Amendments to Restated Certificate of Incorporation is incorporated by reference to Exhibit 3 of the Company's 1990 Annual Report on Form 10-K (File No. 1-5530). 3(c) The Registrant's By-Laws of the Company, as amended, are incorporated by reference to Exhibit 3 of the Company's 1989 Annual Report on Form 10-K (File No. 1-5530). 4(a) The Registrant's Certificate of Designation of a series of preferred stock as Series B Variable Rate Cumulative Preferred Stock, as amended, is incorporated by reference to Item 16, Exhibit 4.2 of the Company's Registration Statement on Form S-1, Amendment No. 1 (Registration No. 33-4950). 4(b) The Registrant's Amendments to Certificate of Designation for Series B Preferred Stock, are incorporated by reference to Exhibit 3(a) of the Company's report on Form 8-K, dated February 10, 1993 (File No. 1-5530). 4(c) The Registrant's Series B Preferred Stock Agreement dated as of January 29, 1993 between Allied and the holder of Allied's Series B Preferred Stock is incorporated by reference to Exhibit 4(a) of the Company's report on Form 8-K, dated February 10, 1993 (File No. 1-5530). 4(d) The Registrant's Form of Subordinated Note to be issued to Allied Series B Preferred Stock holder is incorporated by reference to Exhibit 4(b) of the Company's report on Form 8-K, dated February 10, 1993 (File No. 1-5530). 4(e) The Registrant's Certificate of Designation creating a series of preferred stock as $10.81 Series C Cumulative Preferred Stock is incorporated by reference to Exhibit 4 of the Company's report on Form 10-Q dated November 11, 1988 (File No. 1-5530). 4(f) The Registrant's Amendments of Certificate of Designation for Series C Preferred Stock are incorporated by reference to Exhibit 3(b) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 4(g) The Registrant's Series C Preferred Stock Agreement dated as of January 29, 1993 between Allied and the holders of Allied's Series C Preferred Stock is incorporated by reference to Exhibit 4(c) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 4(h) The Registrant's Form of Subordinated Note issued to holders of Allied's Series C Preferred Stock is incorporated by reference to Exhibit 4(d) of the Company's report on Form 8-K, dated February 10, 1993 (File No. 1-5530). 4(i) The Registrant's Form of Amended and Restated Subordinated Note dated August 28, 1990 which are a part of a group of notes with the same terms and the same date in the aggregate principal amount of $1,105,769 is incorporated by reference to Exhibit 4(e) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 4(j) The Registrant's Form of Restated and Amended Subordinated Note dated September 6, 1985 which is a part of a group of notes having the same terms and same date in the aggregate principal amount of $733,000 is incorporated by reference to Exhibit 4(f) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530).
41 10(a) The Registrant's Credit and Debt Restructuring Agreement dated as of January 22, 1990 among Allied, Continental Bank N.A., as Agent, and the Lenders named therein is incorporated by reference to Exhibit 10(a) of the Company's report on Form 8-K dated February 6, 1990 (File No. 1-5530). 10(b) The Registrant's Amended and Restated Credit and Debt Restructuring Agreement dated as of January 28, 1993 among Allied, Continental Bank N.A., as Agent, and the Lenders named therein is incorporated by reference to Exhibit 10(a) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(c) The Registrant's Credit Agreement dated as of January 28, 1993 among Verson Corporation, Continental Bank N.A., as Agent, and the lenders named therein is incorporated by reference to Exhibit 10(b) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(d) The Registrant's Intercompany Service Agreement dated as of January 29, 1993 between Allied and Verson Corporation is incorporated by reference to Exhibit 10(c) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(e) The Registrant's Tax Sharing Agreement dated as of January 29, 1993 between Allied and Verson Corporation is incorporated by reference to Exhibit 10(d) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(f) The Registrant's Accounts Financing Agreement dated as of January 29, 1993 between Congress Financial Corporation (Southern) and Bush Hog Corporation is incorporated by reference to Exhibit 10(e) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(g) The Registrant's Letter Agreement dated as of January 29, 1993 between Bush Hog Corporation and Congress Financial Corporation (Southern) entitled "Additional Representations, Covenants and Other Terms -- Supplement to Accounts Financing Agreement . . ." is incorporated by reference to Exhibit 10(f) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(h) The Registrant's Letter Agreement dated as of January 29, 1993 between Bush Hog Corporation and Congress Financial Corporation (Southern) regarding Inventory Loans is incorporated by reference to Exhibit 10(g) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(i) The Registrant's Intercompany Service Agreement dated as of January 29, 1993 between Allied and Bush Hog Corporation is incorporated by reference to Exhibit 10(h) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(j) The Registrant's Tax Sharing Agreement dated as of January 29, 1993 between Allied and Bush Hog Corporation is incorporated by reference to Exhibit 10(i) of the Company's report on Form 8-K dated February 10, 1993 (File No. 1-5530). 10(k) The Registrant's 1977 Incentive Stock Plan is incorporated by reference to Exhibit 10(a) of the Company's 1980 Annual Report on Form 10-K (File No. 1-5530). 10(l) The Registrant's SMART Plan is incorporated by reference to Exhibit 10(d) of the Company's 1984 Annual Report on Form 10-K (File No. 1-5530). 10(m) The Registrant's 1990 Long-Term Incentive Stock Plan is incorporated by reference to Exhibit 10 of the Company's 1991 Annual Report on Form 10-K (File No. 1-5530). 10(n) The Registrant's Agreement for the sale of the assets of the White-New Idea Farm Equipment Division of Allied Products Corporation is incorporated by reference to Exhibit (c)(2)(w)(i) of the Company's report on Form 8-K dated January 14, 1994 (File No. 1-5530). 10(o) The Registrant's Credit Agreement dated as of March 17, 1994 among Allied Products Corporation, the Banks Named Herein and Continental Bank N.A., individually and as agent is incorporated by reference to Exhibit 10(i) of the Company's report on Form 8-K dated April 8, 1994 (File No. 1-5530).
42 The following exhibits are attached only to the copies of this report filed with the Securities and Exchange Commission:
EXHIBIT NO. NAME OF EXHIBIT - --------------- -------------------------------------------------------------------------------------- 10a Material Contract--Allied Products Corporation Executive Retirement Plan. 10b Material Contract--Executive Officer's Agreement in Event of Change in Control or Ownership of Allied Products Corporation. 10c Material Contract--Second Amendment to Credit Agreement. 10d Material Contract--Allied Products Corporation Combined Retirement Plan. 10e Material Contract--Bush Hog Segment of the Allied Products Corporation Combined Retirement Plan. 10f Material Contract--Verson Segment of the Allied Products Corporation Combined Retirement Plan. 10g Material Contract--Littell Segment of the Allied Products Corporation Combined Retirement Plan. 21 Subsidiaries of the Registrant. 23 Consents of Independent Accountants. 24 Powers of Attorney. 27 Financial Data Schedule.
Reference is made to Note 1 of Notes to Consolidated Financial Statements regarding the computation of earnings per share. Other financial statements, schedules and exhibits not included above have been omitted as inapplicable or because the required information is included in the consolidated financial statements or notes thereto. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the fourth quarter of the year ended December 31, 1994. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES SCHEDULE II--ALLOWANCE FOR LOSSES IN COLLECTION FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (IN THOUSANDS OF DOLLARS)
1994 1993 1992 - --------------------------------------------------------------------------- Balance at beginning of year.............. $ 1,996 $ 2,914 $ 3,108 Add (deduct)-- Provision charged to income............. 256 229 1,346 Receivables charged off as bad debts, net of recoveries...................... (731) (1,147) (1,540) --------- --------- --------- Balance at end of year.................... $ 1,521 $ 1,996 $ 2,914 --------- --------- --------- --------- --------- ---------
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLIED PRODUCTS CORPORATION (Registrant) RICHARD A. DREXLER BY: ------------------------------------------ RICHARD A. DREXLER, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: March 13, 1995 43 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. * [RICHARD A. DREXLER] ---------------------------------------------- Richard A. Drexler, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER; DIRECTOR * [JAMES J. HAYDEN] ---------------------------------------------- James J. Hayden, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER; DIRECTOR * [ROBERT J. FLECK] ---------------------------------------------- Robert J. Fleck, VICE PRESIDENT --ACCOUNTING AND CHIEF ACCOUNTING OFFICER March 13, 1995 * [KENNETH B. LIGHT] ---------------------------------------------- Kenneth B. Light, EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER AND SECRETARY; DIRECTOR * [LLOYD DREXLER] ---------------------------------------------- Lloyd Drexler, DIRECTOR * [WILLIAM D. FISCHER] ---------------------------------------------- William D. Fischer, DIRECTOR * [STANLEY J. GOLDRING] ---------------------------------------------- Stanley J. Goldring, DIRECTOR * [JOHN E. JONES] ---------------------------------------------- John E. Jones, DIRECTOR * [JOHN W. PUTH] ---------------------------------------------- John W. Puth, DIRECTOR * [MITCHELL I. QUAIN] ---------------------------------------------- Mitchell I. Quain, DIRECTOR * [S. S. SHERMAN] ---------------------------------------------- S. S. Sherman, DIRECTOR * By: [KENNETH B. LIGHT] ------------------------------------------- Kenneth B. Light, ATTORNEY-IN-FACT
44 EX-10.A 2 EXHIBIT 10A EXHIBIT 10A ALLIED PRODUCTS CORPORATION EXECUTIVE RETIREMENT PLAN (ADOPTED EFFECTIVE JANUARY 1, 1994) PREAMBLE The purpose of the Allied Products Corporation Executive Retirement Plan (the "Plan") is to provide supplemental retirement benefits to a select group of executives of Allied Products Corporation. The Plan is intended to be an unfunded deferred compensation plan established and maintained for a select group of highly compensated management employees. All amounts payable under the Plan shall remain the property of Allied Products Corporation until paid to the Participant or his Beneficiary, as provided herein. CONTENTS Page ---- ARTICLE ONE DEFINITIONS 1 ARTICLE TWO ELIGIBILITY 5 ARTICLE THREE BENEFITS 6 ARTICLE FOUR PLAN ADMINISTRATION 10 ARTICLE FIVE CLAIMS PROCEDURE 12 ARTICLE SIX AMENDMENT OR TERMINATION 13 ARTICLE SEVEN MISCELLANEOUS PROVISIONS 14 ARTICLE ONE DEFINITIONS 1.01 When used herein, the following terms shall have the following meanings: BENEFICIARY means the person or entity designated by the Participant in accordance with the rules adopted by the Committee. BOARD means the Board of Directors of Allied Products Corporation. CHANGE IN CONTROL means (a) An acquisition by any "person" or "group" (as those terms are defined or used in Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) of "beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange Act, as enacted and in force on the date hereof) of securities of the Company representing 24.99% or more of the combined voting power of the Company's securities then outstanding; (b) A merger, consolidation, or other reorganization of the Company, except where the resulting entity is controlled, directly or indirectly, by the Company; (c) A merger, consolidation, or other reorganization of the Company, except where shareholders of the Company immediately prior to consummation of any such transaction continue to hold at least a majority of the voting power of the outstanding voting securities of the legal entity resulting from or existing after any transaction and a majority of the members of the Board of the legal entity resulting from or existing after a transaction are former members of the Company's Board; (d) A sale, exchange, transfer or other disposition of substantially all of the assets of the Company to another entity, except to an entity controlled, directly or indirectly, by the Company; (e) A sale, exchange, transfer, or other disposition of substantially all of the assets of the Company to another entity, or a corporate division involving the Company; or 1 (f) A contested proxy solicitation of the Company's shareholders that results in the contesting party obtaining the ability to cast 25% or more of the votes entitled to be cast in an election of directors of the Company. COMMITTEE means the Stock Option and Compensation Committee of the Board. COMPANY means Allied Products Corporation and any successor thereof. COMPENSATION means the total cash compensation paid to an Employee during a calendar year, including bonuses and overtime, but excluding any income imputed to the Employee in accordance with tax laws as a result of fringe benefits provided by the Company and all other forms of unusual, special, or extraordinary remuneration, as determined by the Committee. Compensation shall include amy amount of remuneration deferred under a salary reduction agreement pursuant to participation in the Allied Products Corporation SMART Plan. DISABILITY means the same as the term "Total and Permanent Disability," as defined in the Allied Products Corporation SMART Plan. DISABILITY BENEFIT means the benefit payable pursuant to Section 3.02 of the Plan. EFFECTIVE DATE means January 1, 1994. EMPLOYEE means a person who is in the regular full-time employ of the Company. FINAL AVERAGE COMPENSATION means the average of the Participant's Compensation during the thirty-six (36) months prior to the Participant's separation from service. MONTH OF SERVICE means any calendar month in which an Employee completes at least an hour of service. NORMAL RETIREMENT BENEFIT means the benefit payable pursuant to Section 3.01 of the Plan. NORMAL RETIREMENT DATE means the earlier of age sixty-five (65) or completion of twenty-five (25) Years of Service, but in no event prior to reaching age fifty-five (55). 2 PARTICIPANT means an Employee who is designated by the Board as a Participant pursuant to Section 2.01 of the Plan. PLAN means the Allied Products Corporation Executive Retirement Plan, as set forth in this document, as amended from time to time. PLAN YEAR means the twelve (12) month period beginning on January 1 and ending on the following December 31. SURVIVOR'S BENEFIT means the benefit payable pursuant to Section 3.04 of the Plan. YEAR OF SERVICE means a period of twelve (12) Months of Service. 1.02 CONSTRUCTION Wherever appropriate, pronouns of any gender shall be deemed synonymous, as shall singular and plural pronouns. The titles and headings of the provisions in this document are inserted merely for convenience of reference and shall be given no legal effect. ARTICLE TWO ELIGIBILITY 2.01 ELIGIBILITY The Board shall have sole discretion to determine the Employees who become Participants in the Plan. The class of eligible Employees, however, shall be restricted to highly compensated or management Employees of the Company. 2.02 PARTICIPATION An Employee who is within the class of eligible Employees, as defined in Section 2.01, shall become a Participant in the Plan at such time as such individual is designated by the Board in a written resolution adopted by the Board. 3 ARTICLE THREE BENEFITS 3.01 NORMAL RETIREMENT BENEFIT (a) A Participant who retires on or after his Normal Retirement Date shall be eligible to receive a Normal Retirement Benefit equal to three (3) times his Final Average Compensation. (b) A Participant's Normal Retirement Benefit shall be paid in one hundred twenty (120) equal monthly installments commencing as of the later of January 1, 1997 or the first day of the month next following the date the Participant terminates service with the Company. No interest shall be credited or paid on such amounts. 3.02 DISABILITY BENEFIT (a) A Participant who terminates employment with the Company on account of Disability before his Normal Retirement Date shall be eligible to receive a Disability Benefit equal to three (3) times his Final Average Compensation. (b) A Participant's Disability Benefit shall be paid in one hundred twenty (120) equal monthly installments commencing as of the later of January 1, 1997 or the first day of the month next following the Participant's Normal Retirement Date. No interest shall be credited or paid on such amounts. 3.03 BENEFIT ON OTHER TERMINATION OF EMPLOYMENT (a) A Participant whose employment is terminated for any reason prior to his death, Disability, or attainment of his Normal Retirement Date shall be eligible to receive a benefit equal to the sum of three (3) times his Final Average Compensation multiplied by his vesting percentage. Except as provided in Section 3.05, the Participant's vesting percentage is determined according to the following schedule: 4
Years of Service Vested Percentage ---------------- ----------------- Less than 1 0% 1 10% 2 20% 3 30% 4 40% 5 50% 6 60% 7 70% 8 80% 9 90% 10 or more 100%
Notwithstanding the preceding sentence, if the number of years between the Participant's date of hire and attainment of age 65 is less than 10 years, the Participant's vesting percentage shall equal a fraction (not to exceed 1) the numerator of which is the Years of Service completed by the Participant and the denominator of which is the number of full years between the Participant's date of hire and attainment of age 65. (b) The benefit payable pursuant to this Section 3.03 shall be paid in one hundred twenty (120) equal monthly installments commencing on the later of January 1, 1997 or the first day of the month next following the Participant's Normal Retirement Date. 3.04 SURVIVOR'S BENEFIT (a) If the Participant dies after distribution of his benefit has commenced, the remaining portion of such benefit will continue to be distributed to his Beneficiary. (b) If the Participant dies prior to retirement, the Participant's Beneficiary shall be eligible to receive a Survivor's Benefit equal to three (3) times the Participant's Average Compensation multiplied by his vesting percentage (as determined pursuant to Section 3.03). (c) The Beneficiary's Survivor Benefit, determined pursuant to Section 3.04(b), shall be paid in one hundred twenty (120) equal monthly installments commencing on the first day of the month next following the date of the Participant's death. No interest shall be credited or paid on such amounts. (d) Notwithstanding Section 3.04(c), if the Participant made and filed with the Plan Administrator a valid election pursuant to Section 3.06, the Beneficiary's Survivor shall be paid in a lump sum as soon as practicable following the Participant's death. 5 3.05 VESTING ON CHANGE IN CONTROL In the event of a Change in Control, the Participant's vesting percentage shall equal 100%. 3.06 COMPETITION FOLLOWING RESIGNATION Notwithstanding any other provision in the Plan, all benefits otherwise payable pursuant to this Article III shall be canceled, the Participant's entire interest under the Plan shall be forfeited, and the Company shall be relieved of any obligation to make any future payments under the Plan with respect to the Participant if the Committee determines that the Participant, directly or indirectly, by or for himself or as the agent of another or through others as his agents, within one (1) year after termination of employment: (a) Owns, manages, operates, is employed by, participates in, renders advice to, or controls any other business directly or indirectly engaged in similar lines of business as the Company in the United States or any foreign country; provided, however, that the Participant may own securities of any publicly-held corporation as long as such ownership in the aggregate does not exceed one percent (1%) of the outstanding voting securities of that corporation; (b) Solicits or accepts any business from customers of the Company or requests, induces, or advises customers of that company to withdraw, curtail, or cancel their business with the Company; or (c) Solicits for employment any present or future employee of the Company, or requests, induces, or advises any employee to leave the employ of the Company. 3.07 CERTAIN DISCHARGES In the event a Participant is discharged by the Company for serious cause, all benefits otherwise payable pursuant to this Article III may be canceled, and the Participant's entire interest under the Plan shall be forfeited. For purposes of this Section 3.07, "serious cause" means: (a) The Company determines that the Participant committed a fraud, misappropriation, theft, or embezzlement involving Company property; or (b) Conviction of the Participant for the commission of a felony. 6 3.08 LITIGATION In the event the Company fails to make payments due a Participant under the Plan, the Company shall pay all attorneys fees, court costs, and other costs resulting from a suit brought by the Participant to enforce his rights under the Plan, but only if the court rules that the Participant is entitled to benefits under the Plan. ARTICLE FOUR PLAN ADMINISTRATION 4.01 ADMINISTRATION The Committee shall act by a majority of its members at the time in office, and such action may be taken either by a vote at a meeting or by written consent without a meeting. No member of the Committee or any other individual to whom administrative authority is delegated under the Plan shall be entitled to act on or decide any matters relating solely to himself or any of his rights or benefits under the Plan. The Committee may authorize any one (1) or more of its members to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Company, in writing, or such authorization and the name or names of its member or members so designated. 4.02 DUTIES OF THE COMMITTEE The Committee shall have such authority as may be necessary to discharge its responsibilities under the Plan, including the following rights, powers, and duties: (a) The Committee shall adopt rules governing its procedures not inconsistent herewith, and shall keep a permanent record of its meetings and actions. The Committee shall administer the Plan uniformly and consistently with respect to persons who are similarly situated. (b) The Committee shall have the sole responsibility for the administration of the Plan and, except as herein expressly provided, the Committee shall have the exclusive right to interpret the provisions of the Plan and to determine any question arising hereunder or in connection with the administration of the Plan, including the remedying of any omission, inconsistency, or ambiguity, and its decision or action in respect thereof shall be conclusive and binding upon any and all Participants, former Participants, Beneficiaries, heirs, distributees, executors, administrators, and assigns. Any final determination by the Committee shall be binding on all parties. 7 (c) The Committee may employ such counsel and agents in such clerical, accounting, and other services as it may require in carrying out the provisions of the Plan. 4.03 INDEMNIFICATION The Company shall indemnify the Committee and all officers and Employees assigned any powers or duties under the Plan to the extent that such officers or Employees incur loss or damage which may result from such officers' or Employees' duties, exercises of discretion under the Plan, or any other acts or omissions hereunder. Such duties, exercises of discretion, acts, or omissions will not be indemnified by the Company in the event that such loss or damage is judicially determined or agreed by the officers or Employees to be due to their respective gross negligence or willful misconduct. 4.04 COMPENSATION Any individual who is acting as agent of the Committee shall serve without compensation for services as such, but all proper expenses incurred by the individual incident to the functioning of the Plan shall be paid by the Company. ARTICLE FIVE CLAIMS PROCEDURE 5.01 PROCEDURE The claims procedure shall be the same as the claims procedure in the Allied Products Corporation SMART Plan as of January 1, 1994. ARTICLE SIX AMENDMENT OR TERMINATION 6.01 AMENDMENT AND TERMINATION (a) Subject to Section 6.01(b), the Company reserves the right at any time, by resolution of the Board, to amend, suspend, or terminate the Plan for any reason and without the consent of any eligible Employee, Beneficiary, or other person. Notwithstanding the previous sentence, no such amendment shall result in the forfeiture of any benefit vested under 8 the Plan. If the Company shall amend the Plan to provide for a reduction in benefits payable hereunder, the benefits earned prior to the time of such amendment shall be determined without regard to such amendment by assuming the Participant retired on the date of the amendment and that the benefit is calculated at that time. If the Company shall terminate the Plan, each Participant shall be 100% vested in his benefit under the Plan. (b) The Company shall give notice of any amendment, suspension, or termination pursuant to Section 6.01 to all Participants. ARTICLE SEVEN MISCELLANEOUS PROVISIONS 7.01 NO CONTRACT OF EMPLOYMENT Nothing contained herein shall give any individual the right to be retained in the employment of the Company or affect the right of the Company to terminate any individual's employment. The adoption and maintenance of the Plan shall not constitute a contract between the Company and any individual, or consideration for, inducement to, or condition of the employment of any individual. 7.02 NO ASSIGNMENT Except insofar as may otherwise be required by law, no amount payable at any time under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind, and any attempt to so alienate such amount, whether presently or thereafter payable, shall be void. If any person shall attempt to or shall so alienate any amount payable under the Plan, or any part thereof, or if, by reason of bankruptcy or other event happening at any time, such amount would not be enjoyed by the person to whom it is payable under the Plan, then the Committee, if it so elects, may direct that such amount be withheld and that the same or any part thereof be paid to or for the benefit of such person, his spouse, children, or other dependents, or any of them, in such manner and proportion as the Committee may deem proper. 7.03 COMPANY'S ASSETS All benefits hereunder shall be paid from the general assets of the Company. All amounts to which a Participant is entitled under the Plan shall remain (until paid to the Participant or Beneficiary) solely the property and rights of the Company and shall be subject to the claims of the Company's general creditors. 9 7.04 GOVERNING LAW The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of Illinois, to the extent that such laws are not preempted by ERISA. 7.05 OTHER PLANS If the Company shall implement a general retirement plan for all or substantially all employees, the annual payment received by an Employee hereunder shall be reduced by any annual payment received under such general retirement plan. IN WITNESS WHEREOF, this Plan has been executed this ____ day of _______________, 1994. ALLIED PRODUCTS CORPORATION By:_________________________________ Receipt Acknowledged: ________________________ ________________________ (Date) 10 EX-10.B 3 EXHIBIT 10B EXHIBIT 10b EXECUTIVE OFFICER'S AGREEMENT IN EVENT OF CHANGE IN CONTROL OR OWNERSHIP OF ALLIED PRODUCTS CORPORATION PARTIES: ALLIED PRODUCTS CORPORATION (herein called the "Employer") And (herein called the "Employee" or the "Executive"). BACKGROUND STATEMENT: The Employer is engaged in the business of manufacturing farm implements, industrial presses, and additives for the plastic compounding industry. The Employee is currently employed by Employer and is experienced in various phases of the Employer's business. The Employer desires to extend to the Employee and the Employee desires to accept as part of his employment conditions certain protection in the event of change in control or ownership of Employer. NOW THEREFORE, in consideration of the mutual promises set forth in this Agreement, and intending to be legally bound, the parties agree as follows: Section 1. CHANGE IN CONTROL OR OWNERSHIP (A) CHANGE IN CONTROL OR OWNERSHIP MEANS: i. An acquisition by any "person" or "group" (as those terms are defined or used in Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) of "beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange Act, as enacted and in force on the date hereof) of securities of the Employer representing 24.99% or more of the combined voting power of the Employer's securities then outstanding; ii. A merger, consolidation or other reorganization of the Employer, except where the resulting entity is controlled, directly or indirectly, by the Employer; iii. A merger, consolidation or other reorganization of the Employer, except where shareholders of the Employer immediately prior to consummation of any such transaction continue to hold at least a majority of the voting power of the outstanding voting securities of the legal entity resulting from or existing after any 1 transaction and a majority of the members of the Board of Directors of the legal entity resulting from or existing after a transaction are former members of the Employer's Board of Directors; iv. A sale, exchange, transfer or other disposition of substantially all of the assets of the Employer to another entity, except to an entity controlled, directly or indirectly, by the Employer; v. A sale, exchange, transfer or other disposition of substantially all of the assets of the Employer to another entity, or a corporate division involving the Employer; or vi. A contested proxy solicitation of the Employer's shareholders that results in the contesting party obtaining the ability to cast 25% or more of the votes entitled to be cast in an election of directors of the Employer. (B) RESIGNATION OF EXECUTIVE. If a Change in Control or Ownership shall occur and if, within one year thereafter, there shall be: i. Any involuntary termination of the Executive's employment (other than for Cause or Disability); ii. Any reduction in the Executive's title, responsibilities, including reporting responsibilities, or authority, including title, responsibilities or authority as it may be increased from time to time; iii. The assignment to the Executive of duties inconsistent with the Executive's office immediately prior to a Change in Control or Ownership or as the same may be increased from time to time after a change in Control or Ownership; iv. Any reassignment of the Executive to a location farther than a one hour commute by automobile from Chicago, Illinois; v. Any reduction in the Executive's annual base salary in effect immediately prior to a Change in Control or Ownership or as the same may be increased from time to time after a Change in Control or Ownership; vi. Any failure to continue the Executive's participation, on substantially similar terms, in any of the incentive compensation or bonus plans of the Employer or an affiliate in which the Executive participated at the time of the Change in Control or Ownership or any change or amendment to any of the substantive provisions of any of such plans which would materially decrease the potential benefits to the Executive under any of these plans; 2 vii. Any failure to provide the Executive with benefits at least as favorable as those enjoyed by the Executive under any of the pension, life insurance, medical, health and accident, disability or other employee plans of the Employer or an affiliate in which the Executive participated immediately prior to a Change in Control or Ownership, or the taking of any action that would materially reduce any of such benefits in effect at the time of the Change in Control or Ownership, unless this reduction relates to a reduction in benefits applicable to all employees generally; viii. Any requirement that the Executive travel in performance of his duties on behalf of the Employer or an affiliate for a materially greater period of time during any year than was required of the Executive during the year preceding the year in which the Change in Control or Ownership occurred; ix. Any sustained pattern of interruption or disruption of the Executive for matters substantially unrelated to the Executive's performance of the Executive's duties on behalf of the Employer or an affiliate; or x. Any breach of this Agreement of any nature whatsoever on the part of the Employer; then, at the option of the Executive, exercisable by the Executive within one hundred eighty (180) days of the occurrence of each and every of the foregoing events, the Executive may resign from employment (or, if involuntarily terminated, give notice of intention to collect benefits hereunder) by delivering a notice in writing (the "Notice of Termination") to the Employer, and the Continuing Compensation and Benefits' provisions of this Agreement shall apply. (C) CONTINUING COMPENSATION AND BENEFITS. i. (a) If, at the time of termination of the Executive's employment in accordance with Section B hereof, a change in the ownership or effective control of the Employer or in the ownership of a substantial portion of the assets of the Employer, as defined in Section 280 G(b)(2)(A)(i) of the Internal Revenue Code has also occurred, the Employer shall make a lump-sum cash payment to the Executive no later than thirty (30) days following the date of such termination in an amount ("X") determined pursuant to the following formula: X=(2.99A-B)x(1+C). For the purpose of the foregoing formula, A=The Executive's W-2 earnings (determined pursuant to Internal Revenue Code Section 280G(b)(3)(A)) on the date of the Tax Change; 3 B=The present value of all other amounts which qualify as parachute payments under Internal Revenue Code Section 280G(b)(2)(A) or (B) (without regard to the provisions of Code Section 280G(b)(2)(A)(ii)), such present value to be determined pursuant to the provisions of Internal Revenue Code Section 280G; C=120% of one-half of the semiannual applicable federal rate in effect on the date of the Tax Change, times the number of whole semiannual periods plus any fraction of a semiannual period from the date of the Tax Change to the date of payment of the Continuing Compensation and Benefits described herein. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, if the amount determined under "B" above equals or exceeds 2.99 times the amount determined under "A" above, no payment shall be made to the Executive under this Section. (b) If, at the time of termination of the Executive's employment in accordance with Section B hereof, a Tax Change has not occurred, the Employer shall make a lump-sum cash payment to the Executive no later than thirty (30) days following the date of such termination in an amount equal to (A) 2.99 times the lesser of (I) the Executive's base amount determined pursuant to the principles set forth in the regulations promulgated under Code Section 280G(b)(3)(A) and as though a Tax Change has occurred on the date of the Executive's termination of employment and (II) the Executive's base amount so determined but as though a Tax Change will occur in the calendar year following the date of the Executive's termination of employment, minus (B) any other amounts paid or payable which would constitute (or be presumed to constitute) parachute payments under Code Section 280G(b)(2)(A) or (B) (without regard to the provisions of Code Section 280G(b)(2)(A)(ii)) if a Tax Change had occurred on the date of such termination of employment. ii. The Executive shall not be required to mitigate the amount of any payment provided for in subsection C(i) by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in subsection C(i) be reduced by any compensation earned by the Executive as the result of employment by another employer or by reason of the Executive's receipt of or right to receive any retirement or other benefits not constituting parachute payments under Section 280 (G) after the date of termination of employment or otherwise, except as otherwise provided therein. iii. Upon written request of the Executive, the Employer's obligation to make the payment under this Section shall be secured in total (i) by a standby letter of credit obtained by the Employer from a recognized financial institution the long-term obligations of which are rated, on the date of the request, investment grade or 4 better by Standard & Poor's Corporation or Moody's Investors Service, Inc. or (ii) by other security as the Executive shall approve, obtained within ten (10) days of the Executive's written request following a Change in Control or Ownership. iv. The Employer shall pay all reasonable legal fees and related expenses (including the costs of experts, evidence and counsel and expenses included in connection with an arbitration or in other litigation or appeal) incurred by the Executive as a result of (i)(a) his delivery of a Notice of Termination or (i)(b) his seeking to obtain or enforce any right or benefit provided by this Agreement. D. TERMINATION FOR CAUSE. For purposes of this Section 15, the Employer may terminate the Executive's Employment for "Cause." For purposes of this Agreement, "Cause" means the occurrence of either of the following: i. The Executive's conviction of, or plea of guilty or nolo contendere to, a felony or a crime of falsehood or involving moral turpitude; or ii. The willful failure by the Executive to substantially perform his duties to the Employer, other than a failure resulting from the Executive's incapacity as a result of the Executive's Disability, which willful failure results in demonstrable material injury and damage to the Employer. Notwithstanding the foregoing, the Executive's Employment shall not be deemed to have been terminated for Cause if such termination took place as a result of: a. Questionable judgment on the part of the Executive; b. Any act or omission believed by the Executive in good faith, to have been in or not opposed to the best interests of the Employer; or c. Any act or omission in respect of which a determination could properly be made that the Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the Employer's By-laws or the laws of the State of Delaware, or the directors and officers' liability insurance of the Employer or any Employer, in each case as in effect at the time of such act or omission. If the Executive's Employment is terminated for Cause, all rights of the Executive under this Agreement shall cease as of the effective date of such termination, except that the Executive (i) shall be entitled to receive accrued Salary through the date of such termination and (ii) shall be entitled to receive the payments and benefits to which he is then entitled under the employee benefit plans of the Employer or any affiliate thereof as of the 5 date of this termination. Section 2. NOTICES. All notices, requests, demands, and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid: (a) To the Employer: Allied Products Corporation 10 South Riverside Plaza Chicago, Illinois 60606 (b) To the Employee: At his home address as shown on Employer's records Section 3. ARBITRATION. Any dispute or disagreement arising out of this Agreement or a claimed breach, except that which involves a right to injunctive relief, shall be resolved by arbitration under the Voluntary Labor Arbitration Rules of the American Arbitration Association. The arbitrator's decisions shall be final and binding upon the parties and judgment may be entered in any court. Section 4. GOVERNING LAWS. This Agreement shall be construed and enforced in accordance with the laws of the State of Illinois. Section 5. ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to change in ownership and control. This Agreement may not be amended or revised except by a writing signed by all the parties. Section 6. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, and successors of the respective parties; provided however, that this Agreement and all its rights may not be assigned by any party except by or with the written consent of the other parties. IN WITNESS WHEREOF, this Agreement has been executed effective this day of , 199 . EMPLOYER BY: __________________________ EMPLOYEE ______________________________ 6 EX-10.C 4 EXHIBIT 10C EXHIBIT 10C SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment") is made and entered into as of the 15th day of February, 1995 (the "Second Amendment Effective Date"), by and among Allied Products Corporation (the "Company"), Bank of America Illinois, formerly known as Continental Bank N.A. (individually and as Agent for LaSalle National Bank), and LaSalle National Bank. R E C I T A L S: - - - - - - - - A. The Company and the Banks are parties to a Credit Agreement dated March 17, 1994 (the " Original Credit Agreement"), pursuant to which the Banks agreed, among other things, to loan the Company up to $50,000,000 upon the terms and subject to the conditions set forth therein. B. On September 30, 1994, the Company and the Banks executed the First Amendment to Credit Agreement (the "First Amendment") amending certain terms and provisions of the Original Credit Agreement (the Original Credit Agreement and the First Amendment are hereinafter collectively referred to as the "Credit Agreement"). C. The Company and the Banks desire to amend the Credit Agreement further in certain respects. NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows: 1. AMENDMENT. Upon satisfaction by the Company of the conditions set forth in Section 3 hereof, the Credit Agreement shall be amended as of the date hereof as follows: (a) The Company and the Banks acknowledge that the Banks have terminated the Security Agreement and released the security interest in the Collateral described in Section 4 of the Credit Agreement pursuant to Section 4.5 of the Credit Agreement, and that as such, all references to "Collateral," "Security Interest," "Security Agreement," "Borrowing Base," "Financing Statements," and similar terms and descriptions relating thereto, including certain definitions contained in Section 13 of the Credit Agreement, and certain Exhibits and agreements attached and pertaining to the Credit Agreement, are of no further legal effect. (b) Section 1.1.3 is hereby deleted in its entirety and a new Section 1.1.3 is added as follows: "SECTION 1.1.3 COMMITMENT LIMITS. Notwithstanding any other provision of this Agreement (i) the aggregate principal amount of the Revolving Loans which all Banks are committed to lend to the Company as of January 1, 1995 is $25,000,000, (ii) the aggregate Stated Amount of all Letters of Credit shall not at any time, except as provided herein, exceed $15,000,000 (less any reductions made pursuant to Section 6.1), and (iii) the aggregate of each Bank's participation in the Revolving Loans shall not exceed the amounts set forth opposite such Bank's name in column I of Exhibit A and the aggregate amounts of each Bank's participation in all Letters of Credit, except as provided herein, shall not exceed the amounts set forth opposite such Bank's name in Column II of Exhibit A (less the reductions to the Facility or its availability pursuant to the terms of this Agreement). Notwithstanding the foregoing limitations in the aggregate principal amount of Revolving Loans and the Stated Amount of all Letters of Credit, and subject to the Borrowing Procedures and the Letter of Credit Procedures as set forth in Sections 1.3 and 1.6 respectively, the Company may request, from time to time, that up to $5,000,000 of the Revolving Loan aggregate principal amount be made available to be redesignated as either includible in the Revolving Loan Commitment or the Stated Amount of the Letter of Credit. Upon expiration or reduction of any Letter of Credit drawn upon such redesignated funds, such amount redesignated as includible in the Stated Amount of all Letters of Credit shall revert to and be redesignated as includible in the aggregate principal amount of Revolving Loans." (c) A new Section 1.1.5 is hereby added as follows: - 2 - "SECTION 1.1.5 INCREASE IN REVOLVING LOAN COMMITMENT LIMITS. Notwithstanding the provisions of SECTION 1.1.3 AND 1.1.4, as of the Second Amendment Effective Date the aggregate amount of the Revolving Loan Commitment shall permanently increase to $35,000,000 and the Facility shall permanently increase to $50,000,000 (such increases shall be pro rata among the Banks according to their respective Percentages)." (d) Section 5.2 is deleted, and a new Section 5.2 is added as follows: "SECTION 5.2 FACILITY FEE. The Company agrees to pay each Bank a facility fee, for the period from and including the Second Amendment Effective Date up to and including the Revolving Termination Date, of 3/8 of 1% per annum on the Facility of $50,000,000 (as may be reduced by Section 6.1). Such facility fee shall be payable in arrears on the last day of each Fiscal Quarter and on the Revolving Termination Date for any period then ending for which such facility fee shall not have been theretofore paid. The facility fee shall be computed for the actual number of days elapsed on the basis of a year of 360 days." (e) Section 10.1.3 is deleted, and a new Section 10.1.3 is added as follows: "SECTION 10.1.3 MONTHLY REPORTS. Within 30 days after the end of each month, the Directors' Statement which at a minimum provides the unaudited financial statements of the Company and its Subsidiaries prepared in substantially the same manner as Schedule 10.1.3, and is signed by the Chief Financial Officer of the Company. In addition, within thirty (30) days after the end of each month, the Company shall deliver to the Agent an updated Monthly Asset Report in the form acceptable to the Agent. Notwithstanding the foregoing, the Directors' Statement and Monthly Asset Report for the last month of the Company's fiscal year shall be due within forty-five (45) days after the end of that month." - 3 - (f) Section 10.1.4 is deleted, and a new Section 10.1.4 is added as follows: "SECTION 10.1.4 COMPLIANCE CERTIFICATES. Within 45 days after the end of each Fiscal Quarter, a certificate signed by the President or the Chief Financial Officer of the Company to the effect that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and containing a computation of, and showing compliance with, each of the financial ratios, including the Margin Ratio, and the restrictions contained in this SECTION 10." (g) Section 10.9.2 is deleted, and a new Section 10.9.2 is added as follows: "SECTION 10.9.2 PURCHASE OR REDEMPTION OF COMPANY'S SECURITIES; DIVIDEND RESTRICTIONS. Not purchase or redeem any shares of the capital stock of the Company, declare or pay any dividends thereon (other than stock dividends), make any distribution to stockholders or set aside any funds for any such purpose, and not prepay, purchase or redeem, and not permit any Subsidiary to purchase, any subordinated indebtedness of the Company; PROVIDED, HOWEVER, that so long as no Event of Default or Unmatured Event of Default exists or would result therefrom, the Company may, in its sole discretion (i) pay or declare cash dividends to the holders of common stock of the Company such that no more than an aggregate of $2,500,000 in such dividends are paid or declared during any consecutive twelve (12) month period; (ii) make cash dividends to and repurchase the shares from the holders of the Preferred Stock of the Company, in each case, in the amounts specified in the Amended and Restated Certificate of Incorporation of the Company as of the date hereof ("Scheduled Redemptions"); (iii) repurchase Preferred Stock, and make payments for Scheduled Redemptions, such that the aggregate total cost of such repurchase(s) and Scheduled Redemptions, including prepayment premiums and/or penalties, but excluding Scheduled Redemptions through May 31, 1995, which, in the aggregate, shall not exceed $850,000, does not exceed $19,500,000; and (iv) purchase the common stock of the Company to be held by the Company as treasury shares for its own account or otherwise considered - 4 - treasury shares, or cancel the common stock of the Company, up to $7,000,000 in the aggregate." (h) Section 10.9.3 is deleted, and a new Section 10.9.3 is added as follows: "SECTION 10.9.3 CAPITAL EXPENDITURES. Effective December 31, 1994, except as otherwise permitted by SECTION 10.13(B) and the exercise by the Company of its option to purchase certain equipment in the CIT Sale/Leaseback, not, and not permit any Subsidiary to purchase or otherwise acquire any fixed assets in the aggregate in excess of $18,000,000 for the fiscal year of the Company ending on December 31, 1995, and $11,500,000 for the fiscal year of the Company ending on December 31, 1996. The dollar amounts set forth in the preceding sentence shall exclude future commitments and shall only include capital expenditures actually made during the period being measured. (i) Section 10.13(b) is deleted, and a new Section 10.13(b) is added as follows: "(b) a negotiated acquisition of any Person which, in the Agent's sole discretion, is compatible with the business or the Company or Subsidiaries and that the total consideration paid or given for such acquisitions during any four consecutive calendar quarters shall not exceed $12,500,000; and" (j) Section 11.2.2 is hereby deleted in its entirety. (k) Section 13 entitled "Definitions" is amended by deleting the current definition of "Margin," and adding a new definition of "Margin" as follows: "MARGIN shall mean either 100, 125, 150 or 175 basis points based on the Company's Margin Ratio (the "Ratio") calculated initially as of March 31, 1995, and thereafter as of the end of the second and third fiscal quarters of 1995, in each case on an incremental quarterly annualized basis (i.e., the Ratio determined as of March 31, 1995 shall be based on annualized Consolidated Operating Income from the first fiscal quarter of 1995 only; the Ratio determined as of June 30, 1995 shall be based on annualized Consolidated Operating Income from the first and second fiscal quarters of - 5 - 1995; and the Ratio determined as of September 30, 1995 shall be based on Consolidated Operating Income from the first, second and third fiscal quarters of 1995). Thereafter, and through the remaining term of this Agreement, the Ratio will be calculated on a rolling four- quarter basis, with the Ratio during the most recent four fiscal quarters determining the applicable Margin. As of the effective date of the Second Amendment to Credit Agreement, the Margin is 100 basis points; this Margin is subject to change 45 days after the end of the first fiscal quarter of 1995, and each fiscal quarter thereafter, pursuant to the foregoing calculations. If the Ratio calculated as aforesaid is 1.50 or less, the Margin shall be 100 basis points; if the Ratio is greater than 1.50, but less than or equal to 2.00, the Margin shall be 125 basis points; if the Ratio is greater than 2.00, but less than or equal to 2.50, the Margin shall be 150 basis points, and if the Ratio is greater than 2.50, but less than or equal to 3.00, the Margin shall be 175 basis points. If any certificate or report delivered by the Company shall give rise to any adjustment in the Margin pursuant to the foregoing, such adjustment shall be effective for all Eurodollar Loans (including any then-outstanding Eurodollar Loans) on the date which is 45 days (90 days in the case of any certificate delivered in connection with the annual audit report of the Company) after the end of the fiscal quarter for which such certificate was prepared." (l) Section 13 entitled "Definitions" is further amended by adding the definition of Margin Ratio and Monthly Asset Report, which definitions are as follows: "MARGIN RATIO shall mean the ratio of (x) Consolidated Total Funded Debt to (y) Consolidated Operating Income." "MONTHLY ASSET REPORT shall mean the report, together with the supporting calculations attached thereto, executed on behalf of the Company by its chief financial - 6 - officer or treasurer, in form reasonably acceptable to the Banks." 2. EFFECT OF AMENDMENT. From and after the effective date hereof, reference in the Credit Agreement and all other documents executed pursuant to the Credit Agreement (as each of the foregoing are amended hereby or pursuant hereto) shall be deemed to be references to the Credit Agreement as amended hereby. 3. EFFECTIVE DATE; CONDITIONS. This Second Amendment shall not become effective until: (a) The Company and the Banks shall have executed and delivered to Bank of America Illinois this Second Amendment; (b) The Company shall have delivered to the Banks resolutions of the executive committee of the board of directors of the Company authorizing the execution and delivery by the Company of this Second Amendment; (c) The Company shall have delivered to the Banks such other documents and instruments as the Banks may reasonably request in connection herewith. 4. REPRESENTATIONS. To induce the Banks to enter into this Second Amendment, the Company represents to the Banks as of the date hereof that: (a) The representations and warranties contained in Section 9 of the Credit Agreement are true and correct; and (b) No Event of Default or Unmatured Event of Default (as defined in the Credit Agreement) has occurred and is continuing. 5. DEFINITIONS; RATIFICATION. Any term used but not defined herein shall have the meaning ascribed to it in the Credit Agreement. The Credit Agreement, as amended, certificates and other documents, are hereby ratified and confirmed and shall remain in full force and effect. 6. GOVERNING LAW. This Second Amendment shall be construed in accordance with and governed by the laws of the State of Illinois applicable to contracts made and to be performed therein without regard to the conflicts of law provisions thereof. 7. COUNTERPARTS. This Second Amendment may be executed in counterparts, each of which shall be deemed an original, but each of which together shall constitute but one and the same instrument. - 7 - 8. HEADINGS. The headings of the sections of this Second Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Second Amendment. IN WITNESS WHEREOF, the parties have executed this Second Amendment to be effective on the date provided herein. ALLIED PRODUCTS CORPORATION By_______________________________ Its____________________________ 10 South Riverside Plaza Chicago, Illinois 60606 Facsimile No.: (312) 454-9608 - 8 - BANK OF AMERICA ILLINOIS, individually and as Agent By_______________________________ Barbara A. Hamel Vice President 231 South LaSalle Street Chicago, Illinois 60697 Facsimile No.: (312) 765-2193 LASALLE NATIONAL BANK By_______________________________ Michael Foster First Vice President 120 South LaSalle Street Chicago, Illinois 60603 Facsimile No.: (312) 781-8544 - 9 - EX-10.D 5 EXHIBIT 10D s EXHIBIT 10D ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) TABLE OF CONTENTS Page ARTICLE I. HISTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. History of Verson Retirement Plan . . . . . . . . . . . . . . . 1 1.2. History of Bush Hog Plan. . . . . . . . . . . . . . . . . . . . 2 ARTICLE II. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . 2 2.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE III. MERGER OF PLANS. . . . . . . . . . . . . . . . . . . . . . . . 3 3.1. Merger of Plans.. . . . . . . . . . . . . . . . . . . . . . . . 3 3.2. Amendment and Restatement of Merged Plan. . . . . . . . . . . . 3 3.3. Segments of Merged Plan.. . . . . . . . . . . . . . . . . . . . 3 3.4. Incorporation By Reference. . . . . . . . . . . . . . . . . . . 4 ARTICLE IV. FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4.1. Method of Funding.. . . . . . . . . . . . . . . . . . . . . . . 4 4.2. Contributions.. . . . . . . . . . . . . . . . . . . . . . . . . 4 4.3. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4.4. Exclusive Benefit.. . . . . . . . . . . . . . . . . . . . . . . 5 4.5. No Right To Assets. . . . . . . . . . . . . . . . . . . . . . . 5 4.6. Separate Accounting.. . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE V. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . 5 5.1. Allocation of Responsibility Among Fiduciaries. . . . . . . . . 5 5.2. Plan Administrator. . . . . . . . . . . . . . . . . . . . . . . 6 5.3. Claims Procedure. . . . . . . . . . . . . . . . . . . . . . . . 6 5.4. Records and Reports . . . . . . . . . . . . . . . . . . . . . . 7 5.5. Other Plan Administrator Powers and Duties. . . . . . . . . . . 7 5.6. Rules and Decisions . . . . . . . . . . . . . . . . . . . . . . 8 5.7. Administration Procedures.. . . . . . . . . . . . . . . . . . . 8 5.8. Authorization of Benefit Payments . . . . . . . . . . . . . . . 8 5.9. Application and Forms for Pension . . . . . . . . . . . . . . . 9 5.10. Facility of Payment . . . . . . . . . . . . . . . . . . . . . . 9 5.11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .10 5.12. Fiduciary Duties. . . . . . . . . . . . . . . . . . . . . . . .10 5.13. Agent For Service.. . . . . . . . . . . . . . . . . . . . . . .10 ARTICLE VI. MAXIMUM PENSION . . . . . . . . . . . . . . . . . . . . . . . .10 6.1. Maximum Pension Benefits. . . . . . . . . . . . . . . . . . . .10 -i- TABLE OF CONTENTS Page ARTICLE VII. RESTRICTED BENEFITS TO CERTAIN PARTICIPANTS. . . . . . . . . .12 7.1. Applicability of Restrictions.. . . . . . . . . . . . . . . . .12 7.2. Participants Whose Pension Payments Are Restricted. . . . . . .12 7.3. Restricted Benefit Definitions. . . . . . . . . . . . . . . . .13 7.4. Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.5. Inapplicability of Restrictions.. . . . . . . . . . . . . . . .13 7.6. Restrictions On Termination.. . . . . . . . . . . . . . . . . .14 ARTICLE VIII. AMENDMENTS, TERMINATION, AND ACTION BY THE COMPANY. . . . . .14 8.1. Right to Terminate. . . . . . . . . . . . . . . . . . . . . . .14 8.2. Amendment of the Merged Plan. . . . . . . . . . . . . . . . . .14 8.3. Action by the Company.. . . . . . . . . . . . . . . . . . . . .15 ARTICLE IX. SUCCESSORS AND MERGER OR CONSOLIDATION OF PLANS . . . . . . . .15 9.1. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . .15 9.2. Conditions Applicable to Mergers or Consolidation of Plans. . .15 ARTICLE X. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .16 10.1. Termination.. . . . . . . . . . . . . . . . . . . . . . . . . .16 10.2. Terms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 10.3. Partial Termination.. . . . . . . . . . . . . . . . . . . . . .16 10.4. Restricted Benefits.. . . . . . . . . . . . . . . . . . . . . .17 10.5. Vesting at Termination. . . . . . . . . . . . . . . . . . . . .17 10.6. Benefits in Pay Status or Paid Within Three Years Before Plan Termination.. . . . . . . . . . . . . . . . . . . . . . . . . .17 10.7. Liquidation.. . . . . . . . . . . . . . . . . . . . . . . . . .17 10.8. Allocation of Assets. . . . . . . . . . . . . . . . . . . . . .19 10.9. Further Allocation. . . . . . . . . . . . . . . . . . . . . . .19 10.10. Reallocation Required by Secretary of the Treasury. . . . . . .20 10.11. Form of Distributions.. . . . . . . . . . . . . . . . . . . . .20 10.12. Reversion of Excess Assets. . . . . . . . . . . . . . . . . . .20 ARTICLE XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .20 11.1. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . .20 11.2. Tax-Qualified Plan. . . . . . . . . . . . . . . . . . . . . . .21 -ii- TABLE OF CONTENTS Page ARTICLE XII. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . .21 12.1. Determination of Top-Heavy. . . . . . . . . . . . . . . . . . .21 12.2. Minimum Benefit.. . . . . . . . . . . . . . . . . . . . . . . .21 12.3. Minimum Vesting.. . . . . . . . . . . . . . . . . . . . . . . .22 12.4. Death after Minimum Vesting.. . . . . . . . . . . . . . . . . .22 12.5. Change in Top-Heavy Status. . . . . . . . . . . . . . . . . . .22 12.6. Impact on Maximum Benefits. . . . . . . . . . . . . . . . . . .23 12.7. Aggregation with Other Plans. . . . . . . . . . . . . . . . . .23 12.8. Present Value . . . . . . . . . . . . . . . . . . . . . . . . .24 12.9. Computation of Benefit. . . . . . . . . . . . . . . . . . . . .24 -iii- ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) ARTICLE I. HISTORY 1.1. HISTORY OF VERSON RETIREMENT PLAN. Allied Products Corporation (the "Company") has from time to time maintained the Verson Division of Allied Products Corporation Employees Retirement Plan (the "Verson Retirement Plan"). The Company transferred sponsorship of the Verson Retirement Plan to Verson Corporation, effective January 29, 1993. Verson Corporation transferred sponsorship of the Verson Retirement Plan back to the Company, effective December 31, 1993. (a) The Verson Allsteel Press Company Employees Retirement Plan (the "Verson Plan") was established by Verson Allsteel Press Company, Inc., effective as of January 1, 1953. The F.J. Littell Machine Co. Pension Plan for Office, Engineering, Sales and Supervisory Employees (the "Littell Plan") was established by F.J. Littell Machine Co., effective as of January 1, 1968. In 1986 both of these companies became divisions of the Company, known as the Verson Allsteel Press Company Division (the "Verson Division") and the F.J. Littell Machine Company Division (the "Littell Division"), respectively. Both the Verson Plan and the Littell Plan continued in existence under the sponsorship of the Company. The Verson Plan was amended and restated as of August 1, 1984 and subsequently was amended effective August 1 and October 31, 1986. The Littell Plan was amended and restated as of January 1, 1976 and subsequently was amended effective July 1, 1978, May 1, 1981, January 1, 1984, January 1, 1985 and October 31, 1986. (b) Effective October 31, 1986, the benefits of participants under both the Verson Plan and the Littell Plan were frozen, and no further accrual of benefits has occurred under either the Verson Plan or the Littell Plan after that date. (c) Effective as of August 19, 1991, the Company divested itself of the Littell Division. As a result of this divestiture, all employees of the Littell Division terminated employment with the Company, effective as of August 19, 1991. (d) Effective December 31, 1991, the Littell Plan was merged into the Verson Plan under the name Verson Division of Allied Products Corporation Employees Retirement Plan (the "Verson Retirement Plan"). 1.2. HISTORY OF BUSH HOG PLAN. The Company has from time to time maintained the Bush Hog Division of Allied Products Corporation Salaried Pension Plan (the "Bush Hog Plan"). The Company transferred sponsorship of the Bush Hog Plan to Bush Hog Corporation, effective January 29, 1993. Bush Hog Corporation transferred sponsorship of the Bush Hog Plan back to the Company, effective December 31, 1993. ARTICLE II. DEFINITIONS AND CONSTRUCTION 2.1. DEFINITIONS. The following terms, alphabetically arranged, when used in the Merged Plan and initially capitalized as below indicated, shall, unless expressly otherwise provided, have the following respective meanings: "ACTUARY" means the individual enrolled actuary or firm of one or more enrolled actuaries selected by the Company to provide actuarial services in connection with the administration of the Merged Plan. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMPANY" means Allied Products Corporation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "FIDUCIARIES" means the Company, the Plan Administrator, the Employers, the Insurance Company, and the Trustee, but only with respect to the responsibilities of each for administration of the Merged Plan, the Group Annuity Contract and the Trust. "FUND" means all assets of the Merged Plan, namely the Group Annuity Contract and the Trust. "GROUP ANNUITY CONTACT" means one or more contracts issued by an Insurance Company for the payment of retirement benefits to Merged Plan participants who become entitled to such benefits in accordance with the provisions of the Merged Plan. "INSURANCE COMPANY" means one or more legal reserve life insurance company(ies) organized or incorporated under the laws of any one of the United States of America and duly licensed in any State. "MERGED PLAN" means the Allied Products Corporation Combined Retirement Plan. "PLAN ADMINISTRATOR" means the Plan Administrator of the Merged Plan appointed as such under Section 5.2. -2- "PLAN YEAR" means, with respect to the Merged Plan and except as otherwise provided in the Segments, the calendar year; provided however, that, prior to January 1, 1995, "Plan Year" means the twelve month period from August 1 through July 1, and the short period from August 1, 1994 through December 31, 1994. "TRUST OR TRUST FUND" means the fund known as the Allied Products Corporation Retirement Trust, maintained in accordance with the terms of the trust agreement, as from time to time amended, and/or any other trust adopted by the Company for purposes of funding the Merged Plan. "TRUSTEE" means the corporation(s) and/or individual(s) appointed by the Board of Directors of the Company to administer the Trust. 2.2. CONSTRUCTION. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise and wherever used herein a pronoun in the singular form shall be considered as being in the plural form unless the context clearly indicates otherwise. The words "hereof", "herein", "hereunder" and other similar compounds of the word "here" shall mean and refer to this Merged Plan document. All references herein to specific Articles and/or Sections shall mean and refer to Articles and/or Sections of the Merged Plan document unless otherwise qualified. Article and Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Merged Plan. Terms used in this Merged Plan when not defined in this Merged Plan shall have the meanings given them by the Segments of the Merged Plan; the term Employers shall mean all three of the Employers defined in the Segments of the Merged Plan. ARTICLE III. MERGER OF PLANS 3.1. MERGER OF PLANS. The Bush Hog Plan was merged into the Verson Retirement Plan, and the combined plan was renamed the Allied Products Corporation Combined Retirement Plan (the "Merged Plan"), effective December 31, 1993. 3.2. AMENDMENT AND RESTATEMENT OF MERGED PLAN. The Merged Plan is hereby amended and restated effective as of December 31, 1993, and it is renamed as of that date as the Allied Products Corporation Combined Retirement Plan. 3.3. SEGMENTS OF MERGED PLAN. The Merged Plan consists of three Segments: one which contains the provisions applicable to participants in the former Verson Plan (the "Verson Segment"),one which contains the provisions applicable to participants in the former Littell Plan (the "Littell Segment"), and one which contains the provisions applicable to participants in the former Bush Hog Plan (the "Bush Hog Segment"). -3- 3.4. INCORPORATION BY REFERENCE. The following three Segments of the Merged Plan, each of which is hereby amended and restated effective as of December 31, 1993, with certain provisions effective as of the dates specified in certain provisions therein, are incorporated herein by this reference and are made a part hereof as though fully set forth herein: the Verson Segment, which is attached hereto as Exhibit 1, the Littell Segment, which is attached hereto as Exhibit 2, and the Bush Hog Segment, which is attached hereto as Exhibit 3. ARTICLE IV. FUNDING 4.1. METHOD OF FUNDING. The Company may fund the Merged Plan by purchase of one or more Group Annuity Contracts. Alternatively or in addition, the Company may fund the Merged Plan by use of one or more Trusts, in accord with the provisions of ERISA. The Company expressly reserves the right to change funding agencies or vehicles at any time at its own election and without the consent of any person or organization. 4.2. CONTRIBUTIONS. The Company shall establish a funding method and policy which will be consistent with Merged Plan objectives. No contributions shall be required or permitted under the Merged Plan from any Merged Plan participant. The Company and/or the Employers of Merged Plan participants shall make contributions in such amounts and at such times as determined by their Boards of Directors in accordance with the funding method and policy established by the Company. Forfeitures arising under the Merged Plan because of severance of employment before a Merged Plan participant becomes eligible for a Pension, or for any other reason, shall be applied to reduce the contributions otherwise required to be made to the Merged Plan and shall not be used to increase the benefit otherwise payable to any Merged Plan participant. 4.3. ASSETS. All contributions made by the Company or by an Employer under the Merged Plan shall be paid to the Insurance Company and deposited in the Group Annuity Contract and/or shall be paid to the Trustee and deposited in the Trust, as directed by the Company. However, all contributions made by the Company or by an Employer are expressly conditioned upon the initial qualification of the Merged Plan under the Code, and upon the deductibility under Section 404 of the Code of contributions made to provide Merged Plan benefits. Notwithstanding any provision of the Merged Plan to the contrary, any portion of a contribution made to the Merged Plan by the Company or by an Employer shall be returned to the Company or to such Employer if that portion of the contribution was made by a mistake of fact or its -4- deductibility was disallowed, so long as it is returned within one year after the mistaken payment of the portion of the contribution or the disallowance of the deduction. 4.4. EXCLUSIVE BENEFIT. Except as otherwise provided in the Merged Plan (including the Segments), all assets of the Merged Plan, however held, including investment income, shall be retained for the exclusive benefit of Merged Plan participants and their spouses or beneficiaries, shall be used to pay benefits to such persons or to pay administrative expenses to the extent not paid by the Company or by an Employer and shall not revert to or inure to the benefit of the Company or of any Employer prior to the satisfaction of all liabilities under the Merged Plan. 4.5. NO RIGHT TO ASSETS. No person shall have any interest in or right to any of the funds contributed to or held under the Merged Plan, except as expressly provided in the Merged Plan, the Group Annuity Contract and/or the Trust, and then only to the extent that such funds have been contributed by the Company or by an Employer to the Insurance Company or to the Trustee. 4.6. SEPARATE ACCOUNTING. There shall be separate accounting within the Group Annuity Contract and/or Trust as between the assets held under each of the Segments of the Merged Plan, namely, the Verson Segment, the Littell Segment, and the Bush Hog Segment. Notwithstanding the separate accounting described in this Section, all assets held under the Group Annuity Contract and/or under the Trust shall be available to pay any Merged Plan benefit liabilities arising under any of the three Segments of the Merged Plan. ARTICLE V. ADMINISTRATION 5.1. ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES. The Fiduciaries shall have only those powers, duties, responsibilities and obligations as are specifically given them under this Merged Plan (including each of the Segments), the Insurance Contract, and/or the Trust. The Company shall be the "Named Fiduciary" within the meaning of ERISA and as such shall have the sole responsibility for making the contributions necessary to provide benefits under the Merged Plan. The Company shall have the sole authority to appoint and remove the Insurance Company, the Trustee, the Plan Administrator, and any Investment Manager, and to amend or terminate, in whole or in part, the Merged Plan, the Group Annuity Contract, or the Trust. The Company shall also have final responsibility for administration of the Merged Plan. The Plan Administrator shall have the specific delegated powers and duties described in the further provisions of this Article, and such further powers and duties as hereinafter may be delegated to it by the Company. The Trustee shall have the sole responsibility for the administration of the Trust and the management of the assets held under the Trust, all as specifically provided in the Trust. The Insurance Company shall have the sole responsibility for the administration of the -5- Group Annuity Contract and the management of the assets held under the Group Annuity Contract, all as specifically provided in the Group Annuity Contract. Each Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Merged Plan, the Group Annuity Contract, or the Trust, as the case may be, authorizing or providing for such direction, information or action. Furthermore, each Fiduciary may rely upon any such direction, information or action of another Fiduciary as being proper under the Merged Plan, the Group Annuity Contract, or the Trust, and is not required under the Merged Plan, the Group Annuity Contract, or the Trust to inquire into the propriety of any such direction, information or action. It is intended under the Merged Plan, the Group Annuity Contract, and the Trust that each Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under the Merged Plan, the Group Annuity Contract, and the Trust and shall not be responsible for any act or failure to act of another Fiduciary. No Fiduciary guarantees the Trust Fund in any manner against investment loss or depreciation in asset value. 5.2. PLAN ADMINISTRATOR. The Company shall appoint a Plan Administrator to administer the Merged Plan in accordance with the Merged Plan, the Group Annuity Contract and the Trust. In the absence of any appointment of a Plan Administrator, the Company shall be the Plan Administrator. All usual and reasonable expenses of the Plan Administrator may be paid in whole or in part by the Company or by any of the Employers, and any expenses not so paid shall be paid by the Insurance Company and/or by the Trustee out of the principal or income of the Group Annuity Contract and/or of the Trust Fund, respectively. A Plan Administrator who is an employee of the Company or of any of the Employers shall not receive compensation with respect to his duties under the Merged Plan. 5.3. CLAIMS PROCEDURE. The Plan Administrator shall make all determinations as to the right of any person to a benefit. If a Merged Plan participant or his beneficiary files a claim for Pension benefits under the Merged Plan, the claim should be submitted in writing to the Plan Administrator which shall process it and approve or disapprove it within ninety (90) days of the date that the claim is received. If special circumstances arise and the Plan Administrator cannot process the claim within ninety (90) days, the Plan Administrator shall notify the claimant that the time for making the decision is extended for up to ninety (90) additional days. If the Plan Administrator fails to notify the claimant within the applicable period, the claim shall be considered denied. If the Plan Administrator makes a determination to deny Pension benefits to a Merged Plan participant or his beneficiary, the denial shall be stated in writing and delivered or mailed to such Merged Plan participant or beneficiary. Such notice shall set forth the specific reasons for the denial, written to the best of the Plan Administrator's ability in a manner that may be understood by the Merged Plan participant or beneficiary without legal or -6- actuarial counsel and shall describe the steps necessary for appeal. A Merged Plan participant or beneficiary whose claim for Pension benefits has been denied shall have a period of sixty (60) days in which to appeal to the Plan Administrator and submit additional information to the Plan Administrator. The Plan Administrator shall consider the request within a reasonable period of time. If the claim is again denied in writing, the Merged Plan participant or beneficiary may request a hearing within thirty (30) days after the second denial, and the Plan Administrator shall afford a reasonable opportunity for a hearing to any Merged Plan participant or beneficiary for a review of its decision denying the claim, which hearing shall be held within sixty(60) days after its receipt of the request. The claimant shall have an opportunity to present evidence and appear before authorized representatives of the Plan Administrator. The Plan Administrator shall review all evidence submitted by the claimant, shall make its decision regarding the claim within one hundred twenty (120) days after its receipt of the request for a hearing and shall provide the claimant with a written decision. The decision of the Plan Administrator regarding the claim shall be final and conclusive. 5.4. RECORDS AND REPORTS. The Plan Administrator shall exercise such authority and responsibility as it deems appropriate in order to comply with ERISA and governmental regulations issued thereunder relating to records of Service, Accrued Benefits and the percentage of such Benefits which are nonforfeitable under the Merged Plan; notification to Merged Plan participants; annual registration with the Internal Revenue Service; annual reports to the Department of Labor; and reports and premium payments to the Pension Benefit Guaranty Corporation. 5.5. OTHER PLAN ADMINISTRATOR POWERS AND DUTIES. The Plan Administrator shall have all such powers and duties as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following: (a) to construe and interpret the Merged Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder; (b) to prescribe procedures to be followed by Merged Plan participants or beneficiaries filing applications for benefits; (c) to prepare and distribute, in such manner as the Plan Administrator determines to be appropriate, information explaining the Merged Plan; (d) to receive from the Company, from the Employers, and from Merged Plan participants, such information as shall be necessary for the proper administration of the Merged Plan; -7- (e) to furnish the Company, upon request, such annual reports with respect to the administration of the Merged Plan as the Plan Administrator deems advisable; (f) to receive and review the periodic reports of the Actuary and the Merged Plan accountant; (g) to receive, review and keep on file (as it deems convenient or proper) financial reports received from the Insurance Company and/or from the Trustee; (h) to receive, review and keep on file reports of benefit payments and reports of disbursements for expenses as he or it deems advisable; and (i) to appoint or employ individuals to assist in the administration of the Merged Plan and any other agents it deems advisable, including legal, accounting, and actuarial counsel. The Plan Administrator shall have full discretionary authority to exercise these powers. However, the Plan Administrator shall have no power to add to, subtract from or modify any of the terms of the Merged Plan, or to change or add to any benefits provided by the Merged Plan, or to waive or fail to apply any requirements of eligibility for a Pension under the Merged Plan. 5.6. RULES AND DECISIONS. The Plan Administrator may adopt such rules as it deems necessary, desirable, or appropriate. All rules and decisions of the Plan Administrator shall be uniformly and consistently applied to all Merged Plan participants in similar circumstances. When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished by a Merged Plan participant or beneficiary, the Employers, the legal counsel of the Company, the Insurance Company, the Trustee, the Merged Plan accountant, or the Actuary. 5.7. ADMINISTRATION PROCEDURES. The Plan Administrator shall keep a record of all meetings and forward all necessary communications to the Company, the Insurance Company, the Trustee, or the Actuary. The Plan Administrator may adopt such rules and regulations as it deems desirable for the conduct of its affairs. 5.8. AUTHORIZATION OF BENEFIT PAYMENTS. The Plan Administrator shall issue directions to the Insurance Company and/or to the Trustee concerning all benefits which -8- are to be paid from the Group Annuity Contract and/or from the Trust pursuant to the provisions of the Merged Plan. 5.9. APPLICATION AND FORMS FOR PENSION. The Plan Administrator may require a Merged Plan participant or beneficiary to complete and file with the Plan Administrator an application for Pension benefits and all other forms approved by the Plan Administrator, and to furnish all pertinent information requested by the Plan Administrator. The Plan Administrator may rely upon all such information so furnished to it, including a Merged Plan participant's current mailing address. 5.10. FACILITY OF PAYMENT. If the Plan Administrator finds that a Merged Plan participant, former participant or beneficiary is unable to care for his affairs because of illness or accident, or is a minor, or, in the case of a beneficiary who is entitled to a benefit under the Merged Plan, he dies before such benefit is distributed in its entirety, the Plan Administrator may direct that any payment due him, unless claim therefor shall have been made by a duly appointed legal representative, shall be paid in any one or more of the following ways: (a) Directly to such person; (b) To such person's duly appointed legal guardian or conservator; (c) To such person's spouse, child, parent or other blood relative or to a person with whom he resides; (d) To a custodian under any applicable Uniform Transfers to Minors Act; (e) To a relative or friend of such person for the benefit of the Merged Plan participant or beneficiary; (f) By the Plan Administrator itself for the benefit of the Merged Plan participant or beneficiary; or (g) In the case of a deceased beneficiary who is entitled to a benefit under the Merged Plan, to the estate of such beneficiary. The decision of the Plan Administrator in each case shall be final and binding upon all persons in interest and the Trustee shall be under no duty to see to the proper application of -9- such funds. In addition, any such payment so made shall be in complete discharge of any liability for the making of such payment under the provisions of the Merged Plan. 5.11. INDEMNIFICATION. The persons authorized to act on behalf of the Plan Administrator shall be indemnified by the Company and not from the Group Annuity Contract or from the Trust against any and all liability, joint or several, for their acts and omissions and for the acts and omissions of their agents and other Fiduciaries in the administration and operation of the Merged Plan. The persons authorized to act on behalf of the Plan Administrator shall also be indemnified by the company against all costs and expenses reasonably incurred by them in connection with the defense of any action, suit or proceeding in which they may be made party defendants by reason of their being or having been persons authorized to act on behalf of the Plan Administrator, whether or not then acting as such, including the cost of reasonable settlements (other than amounts paid to the Company) made to avoid costs of litigation and payment of any judgment or decree entered in such action, suit or proceeding. The Company shall not, however, indemnify the persons authorized to act on behalf of the Plan Administrator with respect to any act finally adjudicated to have been caused by the willful misconduct of such an individual; or with respect to the cost of any settlement unless the settlement has been approved by a court of competent jurisdiction. The right of indemnification shall not be exclusive of any other right to which the persons authorized to act on behalf of the Plan Administrator may be legally entitled and it shall inure to the benefit of the duly appointed legal representatives of such individual. The provisions of this Section shall apply equally to any member of the Board of Directors of the Company or of any of the Employers. 5.12. FIDUCIARY DUTIES. All Fiduciaries shall discharge their duties solely in the interest of Merged Plan participants and beneficiaries and for the exclusive purpose of (a) providing benefits to Merged Plan participants and their beneficiaries, and (b) defraying reasonable expenses of administering the Merged Plan 5.13. AGENT FOR SERVICE. The agent for service of legal process shall be such person as may be designated by the Board of Directors of the Company; in the absence of any such designation, the Plan Administrator shall be the agent for service of legal process for the Merged Plan. ARTICLE VI. MAXIMUM PENSION 6.1. MAXIMUM PENSION BENEFITS. Notwithstanding anything to the contrary in the Merged Plan, Pension benefits shall be subject to Section 415 of the Code and shall be reduced, to the extent necessary, to meet the requirements of such Code Section as follows. The total maximum Pension benefits under the Merged Plan for a limitation year -10- shall not exceed the lesser of an amount equal to (i) $90,000 or (ii) 100% of a Merged Plan participant's average annual compensation for the highest three consecutive years during which the Merged Plan participant was participating in the Merged Plan, subject to the following: (a) The limits on the annual amount of Pension benefits are based on payment in the form of a single life annuity or in the form of a qualified joint and survivor annuity (as such term is defined in Section 417 of the Code), if applicable. In the event payment is made under a different form of annuity payment, such specified maximum annual amount shall be subject to adjustment to reflect the Actuarial Equivalent of the form of payment chosen hereunder as compared to the form of a single life annuity. (b) If benefits begin prior to social security retirement age (as that term is defined in Section 415(b)(8) of the Code), the maximum dollar limitation will be the Actuarial Equivalent of the $90,000 maximum payable at social security retirement age. For a Merged Plan participant whose benefits begin after social security retirement age, the dollar limitation shall be the Actuarial Equivalent of a $90,000 Pension payable at social security retirement age; provided, however, that such Actuarial Equivalent shall be based on an interest rate of 5% per annum, in lieu of the interest rate otherwise used in the determination of the Actuarial Equivalent of such maximum benefit payable at social security retirement age. (c) If the Merged Plan participant has fewer than ten (10) years of participation in the Merged Plan (and in the segment in which he participated prior to December 31, 1993) at retirement, the applicable maximum shall be multiplied by a fraction, the numerator of which is the number of his years of participation in the Merged Plan (or appropriate segment), and the denominator of which is ten (10). (d) amount specified in Section 415(b)(1)(A) is adjusted by the Internal Revenue Service pursuant to Section 415(d)(1)(A) of the Code. (e) Notwithstanding the foregoing, the Pension payable under the Merged Plan will be reduced to the extent necessary to prevent disqualification of the Merged Plan and other qualified plans of the Company under Section 415 of the Code. These additional limitations provide that, if an individual participates at any time in both a defined- benefit plan and a defined-contribution plan maintained by the Company, the sum of the "defined-benefit plan fraction" and the "defined-contribution plan fraction" for any limitation year may not exceed 1.0. For purposes of this Section, the limitation year is the Plan Year. The "defined-benefit -11- plan fraction" for any Plan Year is a fraction, the numerator of which is the sum of the Merged Plan participant's projected annual benefits under all defined-benefit plans (whether or not terminated) maintained by the Company in the current and all prior limitation years, and the denominator of which is the lesser of (i) 1.25 multiplied by the annual dollar limitation in effect under the Merged Plan or (ii) 1.4 multiplied by 100% of the Merged Plan participant's compensation, as defined in Section 1.415-2(d)(1)(i) of the Income Tax Regulations, during the three consecutive limitation years when his compensation was the highest. The "defined-contribution plan fraction" for any Plan Year is a fraction, the numerator of which is the sum of the annual additions to the Merged Plan participant's accounts under all defined-contribution plans (whether or not terminated) maintained by the Company in the current and all prior limitation years, and the denominator of which is the sum of the maximum aggregate amounts which could have been paid under Section 415(c) of the Code for the current and all prior limitation years of such Merged Plan participant's employment. The "maximum aggregate amount" for any limitation year shall be equal to the lesser of 1.25 multiplied by the dollar limitation in effect for such limitation year under Section 415(c)(1)(A) of the Code or 1.4 multiplied by 25% of the Merged Plan participant's total compensation for the limitation year. (f) The Plan Administrator shall advise any Merged Plan participant of any additional limitation on his Pension required by this Section. ARTICLE VII. RESTRICTED BENEFITS TO CERTAIN PARTICIPANTS 7.1. APPLICABILITY OF RESTRICTIONS. This Article is effective as of August 1, 1989 with respect to the Verson Segment, and it is effective as of January 1, 1989 with respect to the Littell Segment and the Bush Hog Segment. The purpose of this Article is to conform the Merged Plan to the requirements of Section 1.401(a)(4)-5(b) of the Income Tax Regulations. Notwithstanding any contrary provision of the Merged Plan, all Pension distributions under the Merged Plan are restricted as described in Sections 7.4 and 7.6; the restrictions set forth in Section 7.4 below are subject, however, to the exception set forth in Section 7.5. 7.2. PARTICIPANTS WHOSE PENSION PAYMENTS ARE RESTRICTED. The Merged Plan participants to whom Pension payments are restricted are all HCEs and all former HCEs (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12; that is, as the terms highly compensated employees and highly compensated former employees, respectively, are defined in Treasury Regulation Section 1.410(b)-9) who benefit under the Merged Plan for the Plan Year; provided however, that distributions of Pension benefits shall not be restricted under this Article to such an individual if he is not one of the 25 nonexcludable employees and former employees (as both such terms are defined in -12- Treasury Regulation Section 1.401(a)(4)-12) with the largest amount of compensation in the current or any prior year. 7.3. RESTRICTED BENEFIT DEFINITIONS. For the purposes of these restrictions: (a) "Benefit" includes, among other benefits, loans in excess of the amounts set forth in Section 72(p)(2)(A) of the Code, any periodic income, any withdrawal values payable to a living employee or former employee, and any death benefits not provided for by insurance on the employee's or former employee's life. (b) "Current liabilities" and the "value of Merged Plan assets" means any reasonable and consistent method for determining the value of current liabilities and the value of Merged Plan assets, as determined by the actuary for the Merged Plan. 7.4. RESTRICTIONS. Except as provided in Section 7.5, in any year, Pension payments made to or on behalf of a Merged Plan participant described in Section 7.2 shall not exceed an amount equal in each year to the payments that would be made to or on behalf of the Merged Plan participant under: (a) A straight life annuity that is the Actuarial Equivalent of the Accrued Benefit and other benefits to which the Employee is entitled under the Merged Plan, and (b) The amount of payments that the Merged Plan participant is entitled to receive under a social security supplement. 7.5. INAPPLICABILITY OF RESTRICTIONS. However, the restrictions do not apply if one of the following requirements is satisfied: (a) After taking into account payment to or on behalf of a Merged Plan participant described in Section 7.2 of all Pension benefits payable to the Merged Plan participant, the value of Merged Plan assets equals or exceeds one hundred ten percent (110%) of the value of current liabilities, as defined in Section 412(l)(7) of the Code; (b) The value of benefits payable under the Merged Plan to or on behalf of a Merged Plan participant described in Section 7.2 is less than one percent (1%) of the current liabilities before distribution; or -13- (c) The value of benefits payable under the Merged Plan to or on behalf of a Merged Plan participant described in Section 7.2 does not exceed the amount described in Section 411(a)(11)(A) of the Code (restrictions on certain mandatory distributions). 7.6. RESTRICTIONS ON TERMINATION. In the event of termination of the Merged Plan, the benefit of any Merged Plan participant described in Section 7.2 is limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code. ARTICLE VIII. AMENDMENTS, TERMINATION, AND ACTION BY THE COMPANY 8.1. RIGHT TO TERMINATE. The Company intends to continue its sponsorship of the Merged Plan and payment of contributions to the Merged Plan indefinitely; but continuance of such sponsorship and such contributions is not assumed as a contractual obligation of the Company, and the right is reserved by the Company to cease its sponsorship of the Merged Plan or to reduce, suspend, or discontinue its contributions under the Merged Plan at any time. 8.2. AMENDMENT OF THE MERGED PLAN. The Company may amend the Merged Plan at any time and from time to time, but such power of amendment shall under no circumstances include the right in any way or to any extent to revest or otherwise transfer any interest in or to the Group Annuity Contract and/or the Trust, or any income therefrom, to the Company or to any of the Employers, except as otherwise provided in the Merged Plan; nor shall the power of amendment include the right in any way or to any extent to divest any Merged Plan participant of the benefit to which he would be entitled if he had resigned as of the date of such amendment. Neither shall such power of amendment be exercised in any way which would or could give to any Merged Plan participant any right or thing of exchangeable value in advance of the receipt of distributions in accordance with the terms provided therefor. No amendment shall ever operate to enable any part of the corpus or income or other assets of the Group Annuity Contract and/or of the Trust to be used for or diverted to any purpose other than the exclusive benefit of Merged Plan participants or their beneficiaries. Notwithstanding the foregoing provisions of this Section, however, the Merged Plan may be amended in any manner whatsoever, with prospective or retroactive effect, for the purpose of qualifying it under ERISA or the Code. The Company shall file a certified copy of each amendment to the Merged Plan with the Insurance Company, if any, the Trustee, if any, and the Plan Administrator, if any, promptly upon its adoption. -14- 8.3. ACTION BY THE COMPANY. Any action by the Company under the Merged Plan may be by resolution of its Board of Directors, or by any person or persons duly authorized by resolution of said Board to take such action. ARTICLE IX. SUCCESSORS AND MERGER OR CONSOLIDATION OF PLANS 9.1. SUCCESSORS. In the event of the dissolution, merger, consolidation or reorganization of the Company, provision may be made by which the Merged Plan, the Group Annuity Contract and/or the Trust will be continued by the successor; and, in that event, such successor shall be substituted for the Company under the Merged Plan. The substitution of the successor shall constitute an assumption of Merged Plan liabilities by the successor and the successor shall have all of the powers, duties and responsibilities of the Company under the Merged Plan. In the event of the dissolution, merger, consolidation or reorganization of an Employer, provision may be made by which the successor shall be substituted for such Employer under the Segment applicable to such Employer's employees. 9.2. CONDITIONS APPLICABLE TO MERGERS OR CONSOLIDATION OF PLANS. In the event of any merger or consolidation of the Merged Plan with, or transfer in whole or in part of the assets and liabilities of the Group Annuity Contract and/or the Trust to another trust fund held under any other plan of deferred compensation maintained or to be established for the benefit of all or some of the Merged Plan participants, the assets of the Group Annuity Contract and/or of the Trust Fund applicable to such participants shall be merged or consolidated with or transferred to the other trust fund only if: (a) Each Merged Plan participant would (if either the Merged Plan or the other plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Merged Plan had then terminated), and the determination of such benefits shall be made in the manner and at the time prescribed in regulations issued under ERISA; (b) Resolutions of the Boards of Directors of the Company, and of any new or successor employer of the affected Merged Plan participants, shall authorize such transfer of assets; and, in the case of the new or successor employer of the affected Merged Plan participants, its resolutions shall include an assumption of liabilities with respect to such Merged Plan participants' inclusion in the new employer's plan; and -15- (c) Such other plan and trust are qualified under Sections 401(a) and 501(a) of the Code. ARTICLE X. TERMINATION 10.1. TERMINATION. In accordance with the procedures set forth in this Article, the Company may terminate the Merged Plan at any time. In the event of the dissolution, merger, consolidation or reorganization of the Company, the Merged Plan shall terminate and the Group Annuity Contract and the Trust Fund shall be liquidated unless the Merged Plan is continued by a successor to the Company in accordance with Section 9.1. Subject to the applicable requirements, if any, of ERISA governing termination of "employee pension benefit plans" and/or the applicable requirements, if any, of the Code governing termination of retirement plans which satisfy the requirements of Section 401(a) of the Code, the Company shall direct and require the Insurance Company to liquidate the Group Annuity Contract and shall direct and require the Trustee to liquidate the Trust Fund, or the applicable portion thereof, in accordance with the provisions of this Article. 10.2. TERMS. The terms termination, partial termination and date thereof, as used in the Merged Plan, shall have the same meaning imparted thereto under ERISA. If the termination or partial termination of the Merged Plan occurs, such of the following procedures as may be required in the circumstances under ERISA shall be carried out with respect to those Merged Plan participants affected by such termination or partial termination. 10.3. PARTIAL TERMINATION. Upon termination of the Merged Plan with respect to a group of Merged Plan participants which constitutes a partial termination of the Merged Plan, the Company shall cause the proportionate interest of the Merged Plan participants affected by such partial termination to be determined. The determination of such proportionate interest shall be done in an equitable manner, considering the remaining Merged Plan participants as well as the Merged Plan participants affected by the termination, on the basis of the contributions made by the Company and by the Employers under the terms of the Merged Plan, the provisions of this Article, and other appropriate considerations. After such proportionate interest has been determined, the Company shall allocate portions of the Group Annuity Contract and/or of the Trust and shall direct the Insurance Company and/or the Trustee to segregate the assets of the Group Annuity Contract and/or of the Trust according to such proportionate interest. Neither the Insurance Company, the Trustee nor the Plan Administrator shall have any responsibility with respect to the determination of any such proportionate interest. The assets of the Group Annuity Contract and/or of the Trust so allocated and segregated shall be used by the Insurance Company and/or by the Trustee to pay benefits to or on behalf of Merged Plan participants in accordance with Section 10.7. -16- 10.4. RESTRICTED BENEFITS. If the termination of partial termination of the Merged Plan occurs, the provisions of Article VII hereof, if not previously carried out, shall then be carried out. 10.5. VESTING AT TERMINATION. If the termination or partial termination of the Merged Plan occurs, the rights of all affected Merged Plan participants to Accrued Benefits to the date of such termination or partial termination, to the extent funded as of such date, shall then become nonforfeitable, except to the extent that certain forfeitures may be required in accordance with the provisions of this Article and those of Article VII. As to those Merged Plan participants whose employment with an Employer was terminated prior to the date of termination or partial termination of the Merged Plan, the provisions of this Section shall not increase the nonforfeitable rights, if any, applicable to such Merged Plan participants as of their respective dates of termination of employment with such Employer except to the extent required by the Internal Revenue Service as a condition to its granting a favorable determination letter in connection with the termination of the Merged Plan. 10.6. BENEFITS IN PAY STATUS OR PAID WITHIN THREE YEARS BEFORE PLAN TERMINATION. If the termination or partial termination of the Merged Plan occurs, all benefits then in pay status with respect to retired Merged Plan participants and their spouses or beneficiaries shall be subject to reduction only as required under ERISA to the extent that such benefit amounts exceed the benefit amounts allocable to such retired Merged Plan participants, spouses and beneficiaries under Section 10.7. Further, with respect to benefits under the Merged Plan which commenced within the three (3) year period ending on the date of termination or partial termination of the Merged Plan, such previously paid benefits shall be subject to recovery from the retired Merged Plan participant for the benefit of the Merged Plan, as required under ERISA, to the extent that such previously paid benefit amounts exceed limitations applicable thereto under ERISA. 10.7. LIQUIDATION. If the termination or partial termination of the Merged Plan occurs, the assets of the Merged Plan available to provide benefits shall be allocated among those Merged Plan participants, spouses and beneficiaries affected by such termination or partial termination in the following order: (a) First, equally among individuals in the following two categories: (i) in the case of each benefit of a retired Merged Plan participant, spouse or beneficiary which was in pay status under the Merged Plan as of the beginning of the three (3) year period ending on the date of termination or partial termination of the Merged Plan, to each such benefit, based upon the provisions of the Merged Plan (as in effect during -17- the five (5) year period ending on the effective date of Merged Plan termination) under which such benefit would be the least. (ii) in the case of a Merged Plan participant's, spouse's or beneficiary's benefit (other than a benefit described in (1) above) which would have been in pay status under the Merged Plan as of the beginning of such three (3) year period if the Merged Plan participant had retired prior to the beginning of such three (3) year period and if his benefits had commenced as of the beginning of such period, to each such benefit based on the provisions of the Merged Plan (as in effect during the five (5) year period ending on the effective date of Merged Plan termination) under which such benefit would be the least. (b) Second, in the case of each benefit of a retired Merged Plan participant, spouse or beneficiary which was in pay status under the Merged Plan immediately prior to the date of termination or partial termination of the Merged Plan, to the extent that such benefits are not otherwise provided for under (a) above, to each such benefit based upon the provisions of the Merged Plan but subject to such limitations on amounts of such benefits as shall then be applicable under ERISA. (c) Third, in the case of all other benefits guaranteed under Title IV of ERISA which are not otherwise provided for under (a) or (b) above, to each such benefit based upon the provisions of the Merged Plan but subject to such limitations on amount of such benefits as shall then be applicable under ERISA. (d) Fourth, in the case of all other benefits which were nonforfeitable immediately prior to the date of termination or partial termination of the Merged Plan which are not otherwise provided for under (a), (b) or (c) above, to each such benefit based upon the provisions of the Merged Plan. (e) Fifth, in the case of all other benefits under the Merged Plan which are not otherwise provided for under (a), (b), (c) or (d) above, to each such benefit based upon the provisions of the Merged Plan. If the assets of the Group Annuity Contract and of the Trust applicable to any of the above categories are insufficient to provide full benefits for all persons in such group, the benefits otherwise payable to such persons shall be reduced proportionately. The Actuary -18- shall calculate the allocation of the assets of the Group Annuity Contact and of the Trust in accordance with the above priority categories, and certify his calculations to the Fiduciaries. The provisions of this Section are intended to comply with the provisions of ERISA (and any regulations issued thereunder). If there is any discrepancy between the provisions of this Section and the provisions of ERISA, such discrepancy shall be resolved in such a way as to comply with ERISA. No liquidation of assets and payment of benefit (or provisions therefor) shall actually be made by the Insurance Company and/or by the Trustee until after it is or they are advised by the Company in writing that applicable requirements, if any, of ERISA governing termination of "employee pension benefit plans" have been, or are being, complied with or that appropriate authorizations, waivers, exemptions or variances have been, or are being, obtained. For purposes of this Section, references to the provisions of the Merged Plan at a time prior to December 31, 1993 shall be considered to be references to provisions of each of the Segments at that time. 10.8. ALLOCATION OF ASSETS. If the assets of the Merged Plan available for allocation under any subparagraph of Section 10.7, other than subparagraph (d) thereof, are insufficient to satisfy in full the benefits of all individuals which are described in that subparagraph, the assets shall be allocated pro rata among individuals on the basis of the present value (as of the date of termination or partial termination of the Merged Plan) of their respective benefits described in that subparagraph. 10.9. FURTHER ALLOCATION. If the assets of the Merged Plan available for allocation under Section 10.7(d) are insufficient to satisfy in full the benefits of individuals described in Section 10.7(d), the following shall apply: (a) Except as provided in Section 10.7(b), the assets shall be allocated to the benefits of individuals described in Section 10.7(d) on the basis of the benefits of individuals which would have been described in Section 10.7(d) under the Merged Plan as in effect at the beginning of the five (5) year period ending on the date of termination or partial termination of the Merged Plan. (b) If the assets available for allocation under Section 10.9(a) are sufficient to satisfy in full the benefits described therein (without regard to this Section 10.9(b)) then for purposes of Section 10.9(a), benefits of individuals described therein shall be determined on the basis of the Merged Plan as amended by the most recent amendment to the Merged Plan effective during such five (5) year period under which the assets available for allocation are sufficient to satisfy in full the benefits of individuals described in Section 10.9(a) and shall be allocated thereunder on the basis of the Merged Plan effective during such period. -19- (c) If the assets of the Merged Plan available for allocation under any category set forth in this Section are insufficient to satisfy in full the benefits which are described in that category, the assets shall be allocated pro rata among such benefits on the basis of present value (as of the date of termination or partial termination of the Merged Plan) of the respective benefits described in that category. 10.10. REALLOCATION REQUIRED BY SECRETARY OF THE TREASURY. If the Secretary of the Treasury determines that the allocation made pursuant to this Article (without regard to this paragraph) results in discrimination prohibited by Section 401(a)(4) of the Code then, if required to prevent the disqualification of the Merged Plan under Section 401(a) of the Code, the assets allocated under subparagraphs (b), (c), (d) or (e) of Section 10.7 shall be reallocated to the extent necessary to avoid such discrimination. 10.11. FORM OF DISTRIBUTIONS. The allocation procedures described in this Article may be carried out by means of the annuities purchased under the Group Annuity Contract prior to the date of termination or partial termination of the Merged Plan, by means of further purchases of annuities under the Group Annuity Contract after such date or by any other means selected by the Company and permitted by law. Further, subject to the foregoing provisions of this Article and any applicable regulations promulgated by the Pension Benefit Guaranty Corporation or the Internal Revenue Service, any distribution after termination of the Merged Plan may be made, in whole or in part, to the extent that no discrimination in value results, in cash, in securities or other assets in kind, or in nontransferable annuity contracts, as the Plan Administrator, in its sole discretion, shall determine. 10.12. REVERSION OF EXCESS ASSETS. Any assets of the Merged Plan which remain after provision has been made to satisfy all liabilities of the Merged Plan to Merged Plan participants, their spouses and their beneficiaries shall, unless in contravention of any provision of law, be deemed to have become available as a result of actuarial error and shall be distributed to the Company in cash. ARTICLE XI. MISCELLANEOUS 11.1. GOVERNING LAW. The Merged Plan, the Group Annuity Contract and the Trust shall be construed and administered according to the laws of the State of Illinois to the extent such laws are not preempted by ERISA or subsequent amendments thereto or any other laws of the United States of America. -20- 11.2. TAX-QUALIFIED PLAN. The Merged Plan, the Group Annuity Contract, and the Trust are intended to be qualified under the provisions of Sections 401(a) and 501(a) of the Code. The Plan Administrator or the Company shall seek a determination letter to that effect and keep the Company, the Insurance Company, and the Trustee advised of any changes in the federal income tax qualification status of the Merged Plan, the Group Annuity Contract or the Trust. ARTICLE XII. TOP-HEAVY PROVISIONS 12.1. DETERMINATION OF TOP-HEAVY. The Merged Plan will be considered a "Top-Heavy Plan" for the Plan Year if, as of the last day of the preceding Plan Year, (1) the present value of the Accrued Benefits of Merged Plan participants who are Key Employees (as defined in Section 416(i) of the Code, but in making such determination considering compensation as defined in Section 1.415-2(d) of the Income Tax Regulations) exceeds 60% of the present value of the Accrued Benefits of all Merged Plan participants (the "60% Test") or (2) the Merged Plan is part of a required aggregation group (as defined below) and the required aggregation group is top-heavy. However, and notwithstanding the results of the 60% Test, the Merged Plan shall not be considered a Top-Heavy Plan for any Plan Year in which the Merged Plan is a part of a required or permissive aggregation group (as defined below) which is not top-heavy. For the purposes of making the "60% Test" for any Plan Year, Accrued Benefits shall be those amounts calculated as of the first day of the preceding Plan Year and the present value of those amounts shall be based on the actuarial assumptions used by the Actuary in the actuarial valuation made as of the first day of such preceding Plan Year. 12.2. MINIMUM BENEFIT. For any Plan Year in which the Merged Plan is determined to by a Top-Heavy Plan, the minimum Normal Retirement Pension for a Merged Plan participant who is not a Key Employee terminating employment at or after age 65, and the minimum Accrued Benefit, payable at Normal Retirement Date for a Merged Plan participant who terminates employment prior thereto with entitlement to a Pension, shall be equal to the lesser of (1) the product of 2% of his "average monthly compensation", as defined in Section 1.415-2(d) of the Income Tax Regulations, during his five highest-paid consecutive calendar "years of service" as determined under Section 411(a)(4), (5), and (6) of the Code (or during his period of such service, if less than 5 years) excluding such years of service before June 30, 1984 and such years of service after the last Plan Year in which the Merged Plan is a Top-Heavy Plan; and (2) 20% of such compensation. In computing the minimum benefit under this Section, it will be assumed that such benefit shall be payable at the Merged Plan participant's Normal Retirement Date in the form of a single-life annuity. No minimum benefit will be required for a Merged Plan participant if the company maintains another plan which satisfies the requirements of Section 401(a) of the Code under which a minimum benefit -21- or contribution is being made or funded for such year for the Merged Plan participant and the Company elects by written resolution or in such other plan to have such other plan satisfy such minimum benefit or contribution requirements. However, if the other plan does not satisfy the minimum benefit or contribution requirements for both that plan and the Merged Plan, the minimum benefit will be provided under the Merged Plan; provided, however, that any benefit or contribution under that plan may be used in a comparability analysis to prove that both plans are providing benefits at least equal to the defined- benefit minimum, as provided in Treasury Regulation Section 1.416-1, Q&A-12. 12.3. MINIMUM VESTING. Notwithstanding the requirements under each of the Segments for a Merged Plan participant to be eligible for a deferred vested Pension, a Merged Plan participant shall be eligible for a deferred vested Pension if, while the Merged Plan is a Top-Heavy Plan, his employment is terminated before death or Retirement after he has completed at least 3 years of Service. If he has completed at least 3 years of Service, the amount of his Deferred Vested Pension on a single-life basis, commencing as of the first day of the month following the Merged Plan participant's Normal Retirement Date, shall be equal to his Accrued Benefit. If he has not completed at least 3 years of Service, he shall forfeit all rights to benefits under the Merged Plan. 12.4. DEATH AFTER MINIMUM VESTING. Upon the death of a Merged Plan participant whose death occurs prior to the date his Pension commences hereunder, who has completed less than 5 years of Service at the date of his death but who has a vested interest under the Merged Plan prior to his death pursuant to the provisions of Section 12.3, a Pension shall be payable to his eligible spouse, if any. The Pension payable to the eligible spouse of such a Merged Plan participant shall be equal to the amount the eligible spouse would have been entitled to receive had the Merged Plan participant commenced to receive a deferred vested Pension in the form of a qualified joint and survivor annuity (as defined in Section 417(b) of the Code) as of his Normal Retirement Date, based on his Service and Credited Service immediately prior to the earlier of his death or termination of employment, and then died immediately thereafter. The Pension payable to such an eligible spouse shall commence as of the Merged Plan participant's Normal Retirement Date and shall continue until the beginning of the month in which the death of the eligible spouse occurs. 12.5. CHANGE IN TOP-HEAVY STATUS. If the Merged Plan becomes a Top- Heavy Plan and subsequently ceases to be such, the minimum benefit accrued under Section 12.2 while the Merged Plan was a Top-Heavy Plan shall continue to apply. If the Merged Plan becomes a Top-Heavy Plan and subsequently ceases to be such, the vesting provisions in Section 12.3 shall continue to apply in determining the deferred vested Pension of any Merged Plan participant who had at least three years of Service as of the last day of the last Plan Year during which the Merged Plan was a Top-Heavy Plan. -22- 12.6. IMPACT ON MAXIMUM BENEFITS. For any Plan Year in which the Merged Plan is a Top-Heavy Plan, for purposes of the limitations of Section 415 of the Code described in Section 6.1, the defined-benefit plan fraction and the defined-contribution plan fraction shall be changed by substituting the number "1.00" for the number "1.25" therein, except such substitution shall not have the effect of reducing any benefit accrued under a defined benefit plan prior to the first day of the Plan Year in which this provision becomes applicable. Alternately, in the discretion of the Plan Administrator, for any Plan Year when the Merged Plan is a Top-Heavy Plan, the minimum benefit under Section 12.2 shall be increased to not more than the lesser of three percent (3%) per "year of service" (as defined in Section 12.2) or thirty percent (30%) of such Merged Plan participant's "average monthly compensation" (as defined in Section 12.2) for any year in which the Company also maintains a defined contribution plan if necessary to avoid the application of Section 416(h)(1) of the Code (relating to the adjustment of the combined plan contributions and benefits limitation which would substitute 1.00 for 1.25 in the defined contribution and benefit plan fractions under Section 415 of the Code). 12.7. AGGREGATION WITH OTHER PLANS. (a) REQUIRED AGGREGATION. If a Key Employee under the Merged Plan also participates in another plan of the Company, an Employer or a Related Employer which is qualified under Section 401(a) of the Code or which is a simplified employee pension plan under Section 408(k) of the Code, or if the Merged Plan and another plan must be aggregated so that either the Merged Plan or the other plan will meet the anti-discrimination and coverage requirements of Sections 401(a)(4) or 410(b) of the Code, then the Merged Plan and any such other plan will be aggregated for purposes of determining top-heaviness. The Merged Plan automatically will be deemed top-heavy if such required aggregation of plans is top-heavy as a group and automatically will be deemed not top-heavy if such required aggregation of plans is not top-heavy as a group. (b) PERMISSIVE AGGREGATION. Any other plan of the Company, an Employer or a Related Employer which is qualified under Section 401(a) of the Code or which is a simplified employee pension plan under Section 408(k) of the Code, and which is not in the required aggregation referenced in (1) above, may be aggregated with the Merged Plan (and with any other plan(s) in the required aggregation group in (1) above) for purposes of determining top-heaviness if such aggregation would continue to meet the nondiscrimination and coverage requirements of Sections 401(a)(4) and 410(b) of the Code. The Merged Plan automatically will be deemed not top-heavy if such permissive aggregation of plans is not top-heavy as a group. -23- (c) DETERMINING AGGREGATE TOP-HEAVY STATUS. The top-heavy status of the plans as a group is determined by aggregating the plans' respective top-heavy determinations that are made as of determination dates that fall within the same calendar year. 12.8. PRESENT VALUE. For the purposes of this Article, the present value of Accrued Benefits shall be the amounts calculated as of the most recent valuation date which is within the twelve month period ending with the date of the Top-Heavy Plan determination. For this purpose, Accrued Benefits shall be determined using the accrual method used for all plans maintained by the Company or, if there is no common method, using the slowest accrual rate permitted under Section 411(b)(1)(C) of the Code. 12.9. COMPUTATION OF BENEFIT. If the form of benefit determined in accordance with the Merged Plan is in a form of annuity other than a single life annuity, the Merged Plan participant must receive the greater of: (a) the Merged Plan participant's Accrued Benefit; or (b) an amount which is the Actuarial Equivalent of the Merged Plan participant's minimum benefit determined under this Article. If a benefit becomes payable to a Merged Plan participant at a date other than on such Merged Plan participant's Normal Retirement Date, the Merged Plan participant must receive the greater of: (a) the Merged Plan participant's Accrued Benefit; or (b) an amount which is the Actuarial Equivalent of the Merged Plan participant's minimum benefit determined under this Article. Executed as of this ___ day of_________, 1994. Attest: ALLIED PRODUCTS CORPORATION By: ______________________ By:____________________________ Assistant Secretary Its: ________________________ -24- EX-10.E 6 EXHIBIT 10E EXHIBIT 10E BUSH HOG SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) TABLE OF CONTENTS ARTICLE I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II. Types of Service. . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Participation Service. . . . . . . . . . . . . . . . . . 5 2.2. Vesting Service. . . . . . . . . . . . . . . . . . . . . 5 2.3. Credited Service.. . . . . . . . . . . . . . . . . . . . 6 2.4. Qualified Leave of Absence.. . . . . . . . . . . . . . . 6 ARTICLE III. Conditions for Participation. . . . . . . . . . . . . . . . . 6 3.1. Requirements for Participation.. . . . . . . . . . . . . 6 3.2. Exclusions from Participation. . . . . . . . . . . . . . 7 ARTICLE IV. Retirement Dates. . . . . . . . . . . . . . . . . . . . . . . 7 4.1. Normal Retirement Date . . . . . . . . . . . . . . . . . 7 4.2. Early Retirement Date. . . . . . . . . . . . . . . . . . 7 4.3. Deferred Retirement Date.. . . . . . . . . . . . . . . . 7 4.4. Terminations Prior to Effective Date.. . . . . . . . . . 7 ARTICLE V. Accrued Benefits and Pensions . . . . . . . . . . . . . . . . 8 5.1. Accrued Benefit. . . . . . . . . . . . . . . . . . . . . 8 5.2. Normal Retirement Pension. . . . . . . . . . . . . . . . 8 5.3. Early Retirement Pension.. . . . . . . . . . . . . . . . 8 5.4. Deferred Retirement Pension. . . . . . . . . . . . . . . 9 5.5. Suspended Pension Adjustment.. . . . . . . . . . . . . . 9 5.6. Pension Offset.. . . . . . . . . . . . . . . . . . . . . 9 5.7. Termination Prior to Effective Date. . . . . . . . . . . 9 5.8. Special Employment/Re-employment Provisions. . . . . . . 9 ARTICLE VI. Form and Payment of Benefits. . . . . . . . . . . . . . . . .10 6.1. Joint and Survivor Annuity Form. . . . . . . . . . . . .10 6.2. Life Annuity Form. . . . . . . . . . . . . . . . . . . .12 6.3. Life Annuity with Guaranteed Number of Monthly Payments Form.. . . . . . . . . . . . . . . . . . . . . . . . . .12 6.4. Pre-Retirement Death Benefit.. . . . . . . . . . . . . .13 6.5. Pre-Retirement Survivor Annuity. . . . . . . . . . . . .13 6.6. Pension Protection.. . . . . . . . . . . . . . . . . . .14 6.7. Termination Prior to Effective Date. . . . . . . . . . .14 6.8. Minimum Distribution Requirements. . . . . . . . . . . .14 6.9. Pension Payment Commencement.. . . . . . . . . . . . . .14 6.10. Direct Rollover Provisions.. . . . . . . . . . . . . . .14 -i- TABLE OF CONTENTS (continued) ARTICLE VII. Termination of Employment . . . . . . . . . . . . . . . . . .15 7.1. Retirement.. . . . . . . . . . . . . . . . . . . . . . .15 7.2. Other Employment Termination.. . . . . . . . . . . . . .15 7.3. Death. . . . . . . . . . . . . . . . . . . . . . . . . .15 7.4. Early Retirement.. . . . . . . . . . . . . . . . . . . .16 7.5. Termination Prior to Effective Date. . . . . . . . . . .16 ARTICLE VIII. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . .16 8.1. No Guarantee of Employment.. . . . . . . . . . . . . . .16 8.2. Cash-Out of Small Pensions.. . . . . . . . . . . . . . .16 8.3. Nonalienation of Pensions. . . . . . . . . . . . . . . .16 -ii- BUSH HOG SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) ARTICLE I. DEFINITIONS 1.1. APPLICATION OF BUSH HOG SEGMENT. Effective December 31, 1993, the Bush Hog Division of Allied Products Corporation Salaried Pension Plan (the "Bush Hog Segment") was merged into the Verson Division of Allied Products Corporation Employees Retirement Plan and the resulting combined plan was renamed the Allied Products Corporation Combined Retirement Plan (the "Merged Plan"). The segment of the Merged Plan applicable to salaried employees of the Employer is now being amended and restated as of December 31, 1993, with certain amendments effective as of the dates specified in the affected provisions. This amendment and restatement of the Bush Hog Segment shall apply only to Employees (and their Beneficiaries) who complete at least one Hour of Work on or after the Effective Date. 1.2. "Employer," for purposes of the Bush Hog Segment, means Bush Hog Division of Allied Products Corporation, a Delaware corporation. Notwithstanding the preceding provisions of this Section, effective from January 29, 1993 through March 18, 1994 "Employer," for purposes of the Bush Hog Segment means Bush Hog Corporation, a Delaware corporation. 1.3. "Employee" means any person enrolled on the active employment rolls of the Employer at its Selma Plant who is not an hourly-paid employee. The term Employee includes any leased employee who performs services for the Employer only to the extent required by Section 414(n) of the Code. Any employer contribution to a tax-qualified pension plan provided on behalf of such leased employee by the leasing organization for service provided to the Employer shall for all purposes of the Bush Hog Segment be treated as Employer contributions. 1.4. "Participant" means an Employee or former Employee who has met the requirements of Article III. 1.5. "Bush Hog Segment" means the Bush Hog Segment of the Allied Products Corporation Combined Retirement Plan, effective as of the Effective Date, as it may from time to time be amended; "Bush Hog Segment" also means prior versions of the Bush Hog Segment known as the Bush Hog Division of Allied Products Corporation Salaried Pension Plan until December 31, 1993; the Bush Hog, Inc. Salaried Employees Pension Trust and the Bush Hog, Inc. Hourly Employees Pension Trust, both adopted effective as of September 1, 1967, and the Retirement Plan for Non-Bargaining Employees of Bush Hog Division of Allied Products Corporation, all as in effect prior to the Effective Date. 1.6. "Plan Year" means the calendar year; provided, however, that, prior to January 1, 1995, "Plan Year" means the twelve month period from August 1 through July 31 and the short period beginning August 1, 1994 and ending December 31, 1994. 1.7. "Effective Date" means the effective date of this amendment and restatement of the Bush Hog Segment, namely, December 31, 1993. Notwithstanding the preceding provisions of this Section, certain amendments are effective as of the dates specified in the affected provisions. 1.8. "Retired Participant" means a former Participant who is retired under this Bush Hog Segment and who is receiving Pension benefits provided for hereunder. 1.9. "Pension" means the monthly payments to which a Participant shall become entitled hereunder. 1.10. "Average Monthly Compensation" means the monthly average for the five (5) consecutive twelve (12) month periods (or, if shorter, the Employee's period of employment) of highest Compensation received or accrued by the Participant during the previous ten (10) consecutive twelve (12) month periods ending on the last day of the calendar month coincident with or immediately preceding the date such Participant's Vesting Service terminates. The monthly average shall be determined by dividing the average for the five (5) consecutive twelve (12) month periods of highest Compensation by twelve (12). Notwithstanding any contrary provision of the Bush Hog Segment, a Participant's Compensation for each twelve (12) month period considered under this Section shall be limited to (a) effective on and after January 1, 1989, $200,000, as such figure is adjusted from time to time by the Secretary of the Treasury pursuant to Section 401(a)(17) of the Code; and (b) effective as of January 1, 1994, $150,000, as such figure is adjusted from time to time by the Secretary of the Treasury pursuant to Section 401(a)(17) of the Code; provided, however, that if, during any Plan Year beginning on or after January 1, 1994, a Participant's Pension is based on Compensation for a year beginning prior to January 1, 1994 that exceeded $150,000, his Pension shall be the greater of: (a) the Participant's Pension determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Participant's Credited Service; or (b) the sum of: (i) the Participant's Pension as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13; and (ii) the Participant's Pension determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to -2- the Participant's Credited Service credited for Plan Years beginning on or after January 1, 1994. 1.11. "Hour of Work" means: (a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours shall be credited to the Employee for the computation period in which the duties are performed. (b) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including permanent disability), layoff, jury duty, military duty or other Qualified Leave of Absence authorized by the Employer under its standard personnel practices administered in a uniform and nondiscriminatory manner. No more than 501 Hours of Work shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer; provided, however, that in the event the Employer agrees to back pay pursuant to an enforceable, arm's-length negotiation with an Employee, nothing in this paragraph (c) shall preclude the Employee from waiving his right to credit for such hours in consideration for the Employer's agreement. The same Hours of Work shall not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made; (d) Employees for whom the Employer does not maintain records of the number of hours worked shall be credited under paragraph (a), (b) or (c) with forty-five(45) Hours of Work per week; (e) Notwithstanding anything in the Bush Hog Segment to the contrary, an Employee who is absent from work due to (i) the pregnancy of the Employee, (ii) the birth of a child of the Employee, (iii) the placement of a child in connection with the adoption of the child by the Employee, or (iv) the caring for the child by the Employee during the period immediately following the child's birth or placement for adoption, shall be treated as having completed certain Hours of Work for a limited period. The Employee will be treated as completing either (i) the number of Hours of Work that normally would have been credited but for the absence or, (ii) if the normal work hours are unknown, eight Hours of Work for each normal workday during the leave, to a maximum of 501 Hours of Work in a twelve-month period beginning on the Employee's date of hire or anniversary thereof (the "Twelve-Month Period"). The Hours of Work -3- required to be credited under this subsection must be credited only for the purpose of preventing a one-year break in Vesting Service in the Twelve- Month Period in which the absence begins for one of the permitted reasons or, if crediting in such Twelve-Month Period is not necessary to prevent a one-year break in Vesting Service in the following Twelve-Month Period. 1.12. "Actuarial (or Actuarially) Equivalent" means equality in value of the aggregate amounts expected to be received under different forms of payment, based on actuarial assumptions selected by the actuary. The actuarial assumptions used in determining Actuarial Equivalents for the Bush Hog Segment are as follows: Interest: 7% compounded annually; Mortality: Unisex Pension 1984. 1.13. "Company" means the Bush Hog Division of Allied Products Corporation, a Delaware corporation, and any successor thereof which continues the Bush Hog Segment, as provided in Article IX of the Merged Plan document. Notwithstanding the preceding provisions of this Section: (a) Effective from January 29, 1993 through December 31, 1993, "Company" means Bush Hog Corporation, a Delaware corporation; (b) Effective on and after December 31, 1993, "Company" means Allied Products Corporation. 1.14. "Accrued Benefit" means such term as it is described in Section 5.1. 1.15. "Merged Plan" means the Allied Products Corporation Combined Retirement Plan. 1.16. "Compensation" means all of the taxable compensation paid to the Employee by the Employer as reported on IRS Form W-2 for the period in question. 1.17. GENDER, NUMBER AND CROSS REFERENCES. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise, and wherever used herein a pronoun in the singular form shall be considered as being in the plural form unless the context clearly indicates otherwise. The words "hereof", "herein", "hereunder" and other similar compounds of the word "here" shall mean and refer to the entire Bush Hog Segment and not to any particular provision of the Bush Hog Segment. All references herein to specific Articles and/or Sections shall mean and refer to Articles and/or Sections of the Bush Hog Segment unless otherwise qualified. Article and Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Bush Hog Segment. Terms used in the Bush Hog Segment when not defined in this Bush Hog Segment shall have the meanings given them by the Merged Plan. -4- ARTICLE II. TYPES OF SERVICE For purposes of the Bush Hog Segment an Employee's years of service with the Employer shall be determined and reported by the Plan Administrator in accordance with the following: 2.1. PARTICIPATION SERVICE. Participation Service shall be any twelve (12) month period determined from the Employee's latest date of hire or anniversary thereof in which he completes one thousand (1,000) Hours of Work for the Employer, regardless of employment classification. Service with a "related employer" shall be included in determining an Employee's Participation Service. A "related employer" is (i) any trade or business under common control (as defined in Sections 414(b) and (c) of the Code) with the Employer, and/or (ii) members of a controlled group of corporations (as defined in Section 1563(a) of the Code, applied without regard to subsections 1563(a)(4) and 1563(e)(3)(C)) of which the Employer is also a member, and/or (iii) any member of an affiliated service group (as defined in Section 414(m) of the Code) of which the Employer is also a member, and/or (iv) any other entity required to be aggregated with the Employer under Section 414(o) of the Code and applicable Treasury Regulations. If a Participant incurs a break in Vesting Service, as provided in Section 2.2, and is later re-employed by the Employer, he shall begin to participate in the Bush Hog Segment again on the date he performs his first Hour of Work after his re-employment, provided that the Vesting Service he completed prior to such break is not disregarded under Section 2.2. Any other Participant who incurs a break in Vesting Service and who is later re-employed by the Employer shall recommence participation in the Bush Hog Segment when he again satisfies the requirements of Article III after his re-employment. 2.2. VESTING SERVICE. Vesting Service for a Participant shall be the sum of all twelve (12) month periods during which the Participant has completed one thousand (1,000) Hours of Work for the Employer, regardless of employment classification. Such twelve (12) month periods shall be computed from a Participant's date of hire to the anniversary of his date of hire coincident with or next following the date of his termination of employment. Service with a "related employer" (as defined in Section 2.1) shall be included in determining an Employee's Vesting Service. A break in Vesting Service shall occur when a Participant completes less than five hundred one (501) Hours of Work during any twelve (12) month period as set forth above. Should a break in Vesting Service actually occur, Vesting Service completed prior to such break shall not be counted until such time as the Participant completes one (1) full year of Participation Service subsequent to such break. If a Participant does not have a nonforfeitable right to any Accrued Benefit as set forth in Article VII before a break in Vesting Service occurs, the years of Vesting Service completed prior to the break in Vesting Service shall not be taken into account for Plan Years beginning before September 1, 1985, if the number of consecutive one (1) year breaks in Vesting Service equals or exceeds the total number of years of Vesting Service -5- completed prior to such break. For Plan Years beginning on or after September 1, 1985, years of Vesting Service completed prior to such break shall not be taken into account if the number of consecutive one (1) year breaks equals or exceeds the greater of five (5) or the total number of years of Vesting Service completed prior to such break. If any break in Vesting Service occurs as a result of a Qualified Leave of Absence, it shall not restrict any Participant from immediately beginning to receive credit for Vesting Service immediately upon his return from such Qualified Leave of Absence. Upon his return to work his original date of hire shall be advanced by the period of the Qualified Leave of Absence and Vesting Service shall be treated as continuous from such advanced date of hire. 2.3. CREDITED SERVICE. Credited Service for a Participant shall be the sum of: (a) The number of full years and fractions of Credited Service credited to the Participant immediately prior to the Effective Date under the terms of the Bush Hog Segment in effect at that time; plus (b) The number of full years and fractions of Participation Service completed by the Participant as a Participant on or after the Effective Date. 2.4. QUALIFIED LEAVE OF ABSENCE. A Qualified Leave of Absence shall consist of one of the following: (a) Absence with the consent of the Plan Administrator during a period not in excess of one (1) year except that the Plan Administrator may consent to extend the period of leave. (b) Absence from work because of occupational injury or disease incurred as a result of employment with the Employer, for which absence a Participant shall be entitled to Worker's Compensation payments. (c) Absence in the service of the armed forces of the United States provided the Participant shall reenter the employ of the Employer within the statutory period during which his right to re-employment is guaranteed after he has first become eligible for discharge or separation from active duty. In interpreting the provisions of this Section, the Plan Administrator will apply uniform rules in a like manner to all Participants under similar circumstances. ARTICLE III. CONDITIONS FOR PARTICIPATION 3.1. REQUIREMENTS FOR PARTICIPATION. An Employee who was a Participant in the Bush Hog Segment immediately prior to the Effective Date will continue to be a Participant on the Effective Date if he continues to be an Employee on that date. Any other Employee will be -6- included in the Bush Hog Segment as a Participant on the first day of the month coincident with or next following the later of: (a) attainment of age eighteen (18), or (b) the completion of one (1) year of Participation Service completed from and after the Participant's date of hire. 3.2. EXCLUSIONS FROM PARTICIPATION. No Employee will be included in the Bush Hog Segment if he is an hourly-paid Employee at the Selma Plant. ARTICLE IV. RETIREMENT DATES 4.1. NORMAL RETIREMENT DATE. A Participant's Normal Retirement Date shall be the first day of the month coincident with or next following the later of: (a) the Participant's sixty-fifth (65th) birthday; or (b) the fifth (5th) anniversary of the date the Employee first became a Participant in the Bush Hog Segment. 4.2. EARLY RETIREMENT DATE. A Participant may elect to retire on an Early Retirement Date which shall be the first day of any month specified by the Participant which coincides with or follows the latest of: (a) the Participant's completion of fifteen (15) years of Vesting Service, (b) the date which is five (5) years prior to the Participant's Normal Retirement Date, or (c) the Participant's termination of employment with the Employer. 4.3. DEFERRED RETIREMENT DATE. Subject to the provisions of Section 6.8, the Deferred Retirement Date of any Participant who is in the employment of the Employer beyond his Normal Retirement Date shall be the first day of the month coincident with or next following the date the Participant terminates employment with the Employer. 4.4. TERMINATIONS PRIOR TO EFFECTIVE DATE. The Normal or Early Retirement Date for a Participant who terminated employment prior to the Effective Date, who is not subsequently re-employed and who retains a nonforfeitable right to a Pension hereunder shall be determined in accordance with the provisions of the Bush Hog Segment in effect as of the date of such Participant's termination of employment. -7- ARTICLE V. ACCRUED BENEFITS AND PENSIONS 5.1. ACCRUED BENEFIT. A Participant's Accrued Benefit as of any date of determination shall be an amount equal to one percent (1%) of the Participant's Average Monthly Compensation as of such date of determination multiplied by the number of years of his Credited Service as of such date of determination. In computing an Accrued Benefit, it will be assumed that such benefit shall be payable in accordance with the terms of the Life Annuity with One Hundred Twenty (120) Monthly Payments Guaranteed Form as set forth in Section 6.3. Pensions payable in accordance with any other form will be the Actuarial Equivalent of the same Pension payable in accordance with the Life Annuity with One Hundred Twenty (120) Monthly Payments Guaranteed Form. In no event will the Accrued Benefit be less than the paid-up annuity amount, if any, purchased under Group Annuity Contract GR-11105; issued by The Travelers Insurance Company, Hartford, Connecticut. If payment of a Participant's Pension begins while he is still employed by an Employer or by the Company pursuant to Section 6.8, any subsequent increases in his Pension (as a result of Credited Service earned after his Pension payments begin) for a Plan Year shall be reduced (but not below zero) by the Actuarial Equivalent (as specified in Section 1.12) of the Pension payment(s) he received during the preceding Plan Years; provided, however, that the Actuarial equivalent value of a Participant's Pension shall not be reduced by application of this sentence. 5.2. NORMAL RETIREMENT PENSION. The monthly amount of Normal Retirement Pension payable to a Participant retiring on his Normal Retirement Date shall be equal to his Accrued Benefit determined as of such Participant's Normal Retirement Date. 5.3. EARLY RETIREMENT PENSION. The monthly amount of Early Retirement Pension payable to a Participant retiring on his Early Retirement Date shall be equal to his Accrued Benefit determined as of such Participant's Early Retirement Date multiplied by the appropriate percentage below:
NUMBER OF YEARS EARLY RETIREMENT DATE ------------------------------------- PRECEDES NORMAL RETIREMENT DATE ------------------------------- 0 1 2 3 4 5 ----- ---- ---- ---- ---- ---- 100.0 93.3 86.6 79.9 73.2 66.5
If the period between the Early Retirement Date and Normal Retirement Date is not an integral number of years, the percentage to be applied shall be the percentage for the next higher integral number of years, increased by a proportionate part of the difference between that percentage and the percentage for the next lower integral number of years. -8- 5.4. DEFERRED RETIREMENT PENSION. The monthly amount of Deferred Retirement Pension payable to a Participant retiring on his Deferred Retirement Date shall be equal to his Accrued Benefit determined as of such Participant's Deferred Retirement Date. Notwithstanding the preceding provisions of this Section, if payment of a Participant's Pension begins while he is still employed by an Employer or by the Company pursuant to Section 6.8, any subsequent increases in his Pension (as a result of Credited Service earned after his Pension payments begin) for a Plan Year shall be reduced (but not below zero) by the Actuarial Equivalent (as specified in Section 1.12) of the Pension payment(s) he received during the preceding Plan Years; provided, however, that the Actuarial equivalent value of a Participant's Pension shall not be reduced by application of this sentence. 5.5. SUSPENDED PENSION ADJUSTMENT. The Early, Normal or Deferred Pension payable to any Participant who has already received Pension payments and whose payments shall have been subsequently suspended by reason of his re-employment with the Employer shall be actuarially adjusted to reflect the Pension payments previously received. 5.6. PENSION OFFSET. The monthly amount of Pension payable to a Participant covered under the Bush Hog Segment will be determined in accordance with the Bush Hog Segment and the benefit payable will be offset by the amount of paid-up annuity, if any, unless the Participant had previously received the value of his paid-up annuity, in which event the monthly amount of Pension payable will be actuarially reduced in order to avoid any duplication of benefits. 5.7. TERMINATION PRIOR TO EFFECTIVE DATE. Retired Participants will continue to receive Pension payments in the same amount as was being paid immediately prior to the Effective Date. A Participant who terminated employment prior to the Effective Date who is not subsequently re-employed and who retains a nonforfeitable right to a Pension hereunder, shall have such Pension determined in accordance with the provisions of the Bush Hog Segment in effect as of the date of such Participant's termination of employment. Such Pensions shall be subject to the limitations set forth in Article VI of the Merged Plan document. 5.8. SPECIAL EMPLOYMENT/RE-EMPLOYMENT PROVISIONS. The provisions of this Section shall apply only if: (a) A Participant has his Pension payments suspended for any month of re-employment after his Normal Retirement Date in which he has forty or more Hours of Work; or (b) A Participant remains in employment after his Normal Retirement Date without commencement of Pension payments for forty or more Hours of Work in a month. Upon a suspension of Pension payments described in paragraph (a) or (b) above, the Plan Administrator shall notify the Participant of such suspension, shall afford him an opportunity to obtain a review of such suspension and shall otherwise administer such -9- suspension and any subsequent resumption of Pension payments in a manner consistent with final U.S. Department of Labor Regulations Section 2530.203-3. Notwithstanding any provision of the Bush Hog Segment to the contrary, (i) no Pension payments once they have commenced shall be suspended for any month in which a Participant is re-employed after his Normal Retirement Date for fewer than forty Hours of Work; and (ii) in the event a Participant remains in the employ of the Employer after his Normal Retirement Date for fewer than forty Hours of Work in any month, his Pension shall be payable and begin as of the first day of the calendar month in which he first has fewer than forty of such Hours of Work. ARTICLE VI. FORM AND PAYMENT OF BENEFITS If a Participant has a spouse who satisfies the length of marriage requirement in Section 6.1(f)(i) at the date of his actual retirement and he has not made any other annuity election provided for in this Article, the Pension payable to him hereunder shall be in the form of a Joint and Survivor Annuity. If a Participant has no qualified spouse at the date of his actual retirement and he has not made any other annuity election provided for in this Article, the Pension payable to him hereunder shall be in the Life Annuity Form, as provided in Section 6.2. 6.1. JOINT AND SURVIVOR ANNUITY FORM. (a) The Joint and Survivor Annuity Form shall provide for the payment of a Pension, actuarially adjusted, in accordance with Section 5.1, to the Retired Participant during his lifetime and shall further provide for the continuation of such Pension payments to the surviving spouse, if living, after the death of the Retired Participant. The amount of such Pension payments made to the surviving spouse shall be a specified percentage of the Pension payments then being paid to the Retired Participant determined as of the first of the month in which the Retired Participant died. (b) The Participant must designate in writing to the Plan Administrator the specified percentage of his Pension payments to be payable to his surviving spouse upon his death. He may elect either a fifty percent (50%), seventy-five percent (75%) or one hundred percent (100%) continuation. If no election in writing is received by the Plan Administrator prior to a Participant's Retirement Date, such Participant shall be deemed to have elected the fifty percent (50%) continuation and benefits will be payable accordingly. (c) Pension payments to the surviving spouse shall commence on the first day of the month following the month in which the Retired Participant dies, and shall continue monthly with the last payment due for the month in which the surviving spouse's death occurs. -10- (d) If the surviving spouse predeceases the Retired Participant, the Pension payments will cease upon the Retired Participant's death. (e) No Pension will be payable under this form to a surviving spouse if the Participant dies before his first Pension payment becomes due. If, however, this form is in effect and the Participant should die after his Normal Retirement Date and prior to his Deferred Retirement Date, then the spouse, if living, shall become a surviving spouse and shall be entitled to Pension payments in an amount equal to the amount which would have been payable to the spouse had the Participant retired on the date of his death with the Joint and Survivor Annuity Form operative. Such Pension payments shall be payable for the surviving spouse's further lifetime and shall cease upon the surviving spouse's death. (f) General Provisions (i) The surviving spouse, to be eligible to receive a benefit hereunder, must be married to the Participant at all times during the one-year period ending on the earlier of (A) the Participant's annuity starting date or (B) the date of the Participant's death. (ii) No more than 90 days and no less than 30 days prior to a Participant's annuity starting date, the Plan Administrator shall provide such Participant, either by mail or personal delivery, (A) with a written explanation of the terms and conditions of the Joint and Survivor Annuity provided under this Section; (B) the Participant's right to make, and the financial effect of an election to have his Pension paid to him in the Life Annuity Form or Life Annuity with Guaranteed Number of Monthly Payments Form; (C) the rights of a Participant's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the Joint and Survivor Annuity. (iii) The period within which the Participant may elect to have his Pension paid in any other form offered hereunder shall be the 90-day period ending on his annuity starting date. Any election shall be in writing in such form as the Plan Administrator shall require. If a Participant elects not to receive the Joint and Survivor Annuity, such election shall be effective only if his spouse consents on a form provided by the Plan Administrator. The spouse's consent must acknowledge the financial effect of the waiver and must be witnessed by a notary public or the Plan Administrator. The spouse's consent shall be valid only with respect to the specified non-spouse beneficiary, class of beneficiaries or contingent beneficiaries designated, if any; if such non-spouse beneficiary(ies) is or are subsequently changed, a new consent by the spouse will be required. Notwithstanding the provisions of the preceding sentence, a spouse may make a general consent, as described in Treasury Regulation Section 1.401(a)-20, Q&A-31(c). -11- 6.2. LIFE ANNUITY FORM. (a) In lieu of the Joint and Survivor Annuity Form, a Participant who has a spouse who satisfies the length of marriage requirement of Section 6.1(f)(i) may elect a Life Annuity which provides for a Pension payable to the Participant, commencing on his actual retirement date and ceasing with the last payment due immediately preceding the Retired Participant's death. (b) This form may be elected by any Participant pursuant to the rules specified in Sections 6.1(f)(ii) and 6.1(f)(iii) above. (c) No monthly benefit will be payable under this form if the Participant dies before his first Pension payment becomes due. 6.3. LIFE ANNUITY WITH GUARANTEED NUMBER OF MONTHLY PAYMENTS FORM. (a) In lieu of the Joint and Survivor Annuity Form, a Participant may elect a Life Annuity with a specified number of monthly payments (60, 120 or 180) guaranteed; provided, however, that such specified number of monthly payments cannot exceed the life expectancy of the Participant or the joint life expectancies of the Participant and his beneficiary. This form would provide for an actuarially adjusted Pension payable to the Retired Participant during his lifetime with the guarantee that not less than a total of the specified number of monthly Pension payments will be made to the Retired Participant and his named beneficiary. (b) If this form is elected and the Retired Participant dies prior to the receipt of the specified number of monthly payments, the balance of the guaranteed number of monthly payments will be paid to the Retired Participant's named beneficiary until a total of the number of specified monthly payments has been made to the Retired Participant and his named beneficiary. The first such payment to the beneficiary shall be due and payable as of the first day of the month following the Retired Participant's death. (c) In the event there is no named beneficiary living at the death of the Retired Participant, the balance of the specified number of guaranteed monthly payments, which would otherwise have become payable to the Retired Participant's beneficiary, shall be commuted to a single sum and shall be paid to the Retired Participant's executors or administrators. (d) If the beneficiary of a deceased Retired Participant should die prior to receiving the balance of the specified number of guaranteed monthly payments, the balance of the specified number of guaranteed monthly payments which would otherwise have become payable to the Retired Participant's beneficiary shall be commuted to a single sum and shall be paid to the beneficiary's executors or administrators. (e) No monthly benefit will be payable under this form to a beneficiary if the Participant dies before his first Pension payment becomes due. If a Participant, however, -12- who has elected this form should die after his Normal Retirement Date and prior to his Deferred Retirement Date, his beneficiary shall become a beneficiary annuitant and shall be entitled to benefits payable for the specified number of months in an amount equal to the amount which would have been payable to the Participant had the Participant retired on the date of his death with this form effective. (f) This form may be elected by the Participant by written notice to the Plan Administrator pursuant to the rules specified in Sections 6.1(f)(ii) and 6.1(f)(iii). 6.4. PRE-RETIREMENT DEATH BENEFIT. Upon the death of a Participant prior to his actual retirement, there shall be payable to a designated beneficiary a lump sum Death Benefit in an amount equal to one hundred (100) times the Participant's estimated Accrued Benefit. For purposes of this Section, the estimated Accrued Benefit will be determined on the basis of the Participant's Average Monthly Compensation and Credited Service as of his date of death. The lump sum Death Benefit provided in this Section shall be reduced (but not below zero) by the Actuarial Equivalent of the Pre-Retirement Survivor Annuity described in Section 6.5. 6.5. PRE-RETIREMENT SURVIVOR ANNUITY. A Participant who is legally married under the laws of any jurisdiction, and has completed at least 5 years of Vesting Service, shall have a Pre-Retirement Survivor Annuity paid to the surviving spouse to whom he is married on the date of his death in the event of the Participant's death prior to his Normal or Early Retirement Date or annuity starting date. Such Pre-Retirement Survivor Annuity shall be paid over the life of the surviving spouse and shall be in an amount equal to the amount that would have been payable as a Joint and Survivor Annuity had the Participant retired or had his annuity starting date been on the day immediately preceding the date of his death. If the Participant had not attained his Early Retirement Date on the date of his death and if his surviving spouse is eligible for a Pre-Retirement Survivor Annuity, then the amount payable shall be equal to the amount that would have been payable had the Participant (i) separated from service on the date of his death; (ii) survived to his Early Retirement Date; (iii) retired with an immediate Joint and Survivor Annuity at his Early Retirement Date; and (iv) died on the day after the day he would have attained his Early Retirement Date. The Plan Administrator shall provide each Participant within the period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year in which the Participant attains age 35, a written explanation of the Pre-Retirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the above requirements applicable to the Joint and Survivor Annuity Form. Subject to the spousal consent requirements of Section 6.1(f)(iii), the Participant may elect to waive the Pre-Retirement Survivor Annuity during the period beginning on the first day of the Plan Year in which the Participant attains age 35 and ending on the date of the Participant's death. If a Participant separates from service before the first day of the Plan Year in which he attains age 35, the waiver period shall begin on the date of such separation. If a Participant enters the Bush Hog Segment after the first day of the Plan Year in which the Participant attained age 32, the Plan Administrator shall provide notice no later than the close of the second Plan Year succeeding the entry of the Participant in the Bush Hog Segment. -13- In lieu of receiving monthly payments, eligible spouses shall have the option of electing to receive the lump sum Actuarial Equivalent of the Pre- Retirement Survivor Annuity subject to the election rules described in this Section. 6.6. PENSION PROTECTION. Anything in the Bush Hog Segment to the contrary notwithstanding, the Participant shall not have the right prior to his retirement irrevocably to elect to have all or part of his interest in the Bush Hog Segment, which would otherwise become available to him during his lifetime, paid only to his beneficiary after his death. In no event shall a beneficiary be entitled to receive Pension payments in excess of 49.99% of the total value of a Participant's Pension payments. 6.7. TERMINATION PRIOR TO EFFECTIVE DATE. A Retired Participant who commenced receiving Pension payments prior to the Effective Date shall have such benefits continued in the same form as such benefits were being paid to him immediately preceding the Effective Date. 6.8. MINIMUM DISTRIBUTION REQUIREMENTS. Notwithstanding any of the provisions herein to the contrary, distribution of a Participant's Pension shall commence no later than the April 1 immediately following the calendar year in which he attains age 70-1/2 and shall comply with the requirements of Section 401(a)(9) of the Code. 6.9. PENSION PAYMENT COMMENCEMENT. Distributions made hereunder on account of (i) retirement, (ii) death or (iii) termination of employment for any reason after a Participant's Normal Retirement Date shall commence within 60 days after the Participant's retirement, death or other termination of employment. Any other distributions shall commence no later than 60 days after the end of the Plan Year in which occurs the latest of the following: (a) the Participant's Normal Retirement Date; (b) the tenth (10th) anniversary of the Participant's commencement of participation in the Bush Hog Segment; or (c) the Participant's termination of employment with the Employer. 6.10. DIRECT ROLLOVER PROVISIONS. For distributions made on or after January 1,1993, a "distributee" who is reasonably expected to receive one or more "eligible rollover distributions" in one taxable year of the distributee may elect, at the time and in the manner prescribed by the Company in accordance with reasonable administrative procedures as may from time to time be established by the Company to the extent permitted by law, to have any such eligible rollover distribution made in the form of a direct rollover to an "eligible retirement plan" specified by the distributee, provided that such eligible retirement plan provides for the acceptance of a direct rollover, subject to the requirements of Section 401(a)(31) of the Code, and regulations thereunder. -14- For purposes of this Section, the term "eligible rollover distribution" means, subject to the limitations of Section 401(a)(31) of the Code, and regulations thereunder, any distribution of all or any portion of the balance to the credit of the distributee (including a distribution the value of which does not exceed $3,500), except that such term shall not include any distribution which is: (i) one of a series of substantially equal periodic payments (made not less frequently than annually) for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary or for a specified period of 10 years or more; (ii) required under Section 401(a)(9) of the Code; or (iii) not includible in gross income. For purposes of this Section, the term "distributee" means (i)a Participant, (ii) a Participant's surviving spouse, and (iii) a Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. For purposes of this Section, subject to the requirements of Section 401(a)(31) of the Code, and regulations thereunder and including any additional eligible retirement plans as may be included therein, "eligible retirement plan" means (i) an individual retirement account described in Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) a defined contribution plan qualified under Section 401(a) of the Code, or (iv) an annuity plan described in Section 403(a) of the Code; provided, however, that in the case of an eligible rollover distribution to a surviving spouse, a direct rollover may be made only to an individual retirement account or individual retirement annuity. ARTICLE VII. TERMINATION OF EMPLOYMENT 7.1. RETIREMENT. A Participant who terminates his employment with the Employer on or after attaining age sixty-five(65), shall have a nonforfeitable right to his Accrued Benefit determined as of the date of his termination of employment. 7.2. OTHER EMPLOYMENT TERMINATION. A Participant who terminates his employment prior to attaining age sixty-five (65), and prior to the termination of the Merged Plan, with less than five (5) years of Vesting Service, shall forfeit all rights to benefits under the Bush Hog Segment. A Participant who has at least five (5) years of Vesting Service on the date his employment terminates, or who terminates his employment with the Employer on or after attaining age sixty-five (65), shall retain a nonforfeitable right to 100% of his Accrued Benefit determined as of the date his employment terminates. The Participant's nonforfeitable Accrued Benefit shall be payable at either the Participant's Normal Retirement Date or his Early Retirement Date (as described in Section 7.4) in a form as determined in accordance with Article VI. 7.3. DEATH. Should a Participant's termination of employment with the Employer be caused by the Participant's death or should the Participant die subsequent to his date of termination and prior to his Early or Normal Retirement Date, he shall not, in the absence of any contrary provision of Article VI, retain any nonforfeitable rights hereunder. -15- 7.4. EARLY RETIREMENT. If a Participant meets the years of Vesting Service requirement as set forth in Section 4.2(a) at the date of his termination of employment and the date described in Section 4.2(b) subsequently occurs, such Participant may elect, in lieu of a Pension payable at his Normal Retirement Date, to receive a Pension payable on an Early Retirement Date. Such Early Retirement Pension will be payable in accordance with Section 5.3 and will be payable in a form as determined in accordance with Article VI. 7.5. TERMINATION PRIOR TO EFFECTIVE DATE. A Participant who terminated employment prior to the Effective Date who is not subsequently re-employed and who retains a nonforfeitable right to a Pension hereunder shall have the amount of his nonforfeitable right determined in accordance with the provisions of the Bush Hog Segment in effect as of the date of such Participant's termination of employment. ARTICLE VIII. MISCELLANEOUS 8.1. NO GUARANTEE OF EMPLOYMENT. Inclusion in the Bush Hog Segment shall not be construed as giving the Participant any right to be retained in the service of the Employer without the Employer's consent, nor shall it interfere with the right of the Employer to discharge the Participant, nor shall it give the Participant any right, claim or interest in any Pension benefits herein described except upon fulfillment of the provisions and requirements of the Bush Hog Segment. 8.2. CASH-OUT OF SMALL PENSIONS. If Pension payments have not yet commenced and the Actuarial Equivalent lump sum value of the Pension payable to a Participant who has terminated employment with the Employer or the person designated by him to receive payments upon his death (if applicable) does not exceed $3,500, such Pension shall be paid to such individual in a lump sum even if the recipient is not otherwise entitled to commencement of Pension payments at such time. For purposes of this Section, the Actuarial Equivalent lump sum value of a Pension shall be the Actuarial Equivalent of such benefits calculated using the immediate and deferred interest rates which would be used (as of the date of distribution) by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on a plan termination. 8.3. NONALIENATION OF PENSIONS. Except as required for Federal income tax withholding purposes or pursuant to a "qualified domestic relations order" under Sections 401(a)(13) and 414(p) of the Code and Section 206(d)(3) of ERISA, no person entitled to benefits under the Bush Hog Segment shall have the right to assign, commute or encumber the benefits herein provided. To the maximum extent permitted by law, the benefits or payments herein provided shall not in any way be liable to attachment, garnishment or other process, or to be seized, taken, appropriated or applied by any legal or equitable process, to pay any debt or liability of such person. -16- EX-10.F 7 EXHIBIT 10F EXHIBIT 10F VERSON SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) TABLE OF CONTENTS ARTICLE I. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II. Definitions and Construction. . . . . . . . . . . . . . . 2 2.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2 2.2. Principal Entities . . . . . . . . . . . . . . . . . . . . 2 2.3. Determination of Benefits. . . . . . . . . . . . . . . . . 3 2.4. Other Definitions. . . . . . . . . . . . . . . . . . . . . 7 2.5. Construction . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III. Participation and Service. . . . . . . . . . . . . . . . 7 3.1. Participation. . . . . . . . . . . . . . . . . . . . . . . 7 3.2. Service. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3. Credited Service . . . . . . . . . . . . . . . . . . . . . 8 3.4. Participation and Service Upon Re-employment . . . . . . . 10 3.5. Transfers. . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE IV. Requirements for Retirement Benefits. . . . . . . . . . 13 4.1. Normal Retirement. . . . . . . . . . . . . . . . . . . . . 13 4.2. Early Retirement . . . . . . . . . . . . . . . . . . . . . 13 4.3. Disability Retirement. . . . . . . . . . . . . . . . . . . 13 4.4. Deferred Vested Pension. . . . . . . . . . . . . . . . . . 14 4.5. Commencement of Benefits . . . . . . . . . . . . . . . . . 15 ARTICLE V. Amount of Retirement Benefits. . . . . . . . . . . . . . 15 5.1. Normal Retirement Pension. . . . . . . . . . . . . . . . . 15 5.2. Early Retirement Pension . . . . . . . . . . . . . . . . . 16 5.3. Disability Retirement Pension. . . . . . . . . . . . . . . 16 5.4. Deferred Vested Pension. . . . . . . . . . . . . . . . . . 16 5.5. Minimum Pensions for Participants Included Under Prior Provisions of the Verson Segment as of August 1, 1976. . . 17 ARTICLE VI. Manner of Payment and Other Benefits. . . . . . . . . . 17 6.1. Payment of Pensions. . . . . . . . . . . . . . . . . . . . 17 6.2. Death Before Retirement. . . . . . . . . . . . . . . . . . 19 6.3. Death After Retirement . . . . . . . . . . . . . . . . . . 19 6.4. Death After Termination of Employment and Before Pension Payments Commence or While Receiving a Disability Retirement Pension. . . . . . . . . . . . . . . . . . . . . . . . . . 19 6.5. Contingent Beneficiary Option. . . . . . . . . . . . . . . 20 6.6. Level Income Option. . . . . . . . . . . . . . . . . . . . 21 6.7. Designation of Beneficiary . . . . . . . . . . . . . . . . 22 6.8. Small Pensions . . . . . . . . . . . . . . . . . . . . . . 23 -i- TABLE OF CONTENTS CONTINUED 6.9. Re-employment and Continued Employment After Retirement. . 24 6.10. Non-alienation of Benefits . . . . . . . . . . . . . . . . 25 6.11. Lump Sum Option. . . . . . . . . . . . . . . . . . . . . . 27 6.12. Direct Rollover. . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE VII. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 28 7.1. Non-guarantee of Employment. . . . . . . . . . . . . . . . 28 7.2. Rights to Fund Assets. . . . . . . . . . . . . . . . . . . 28 7.3. Non-forfeitability of Benefits . . . . . . . . . . . . . . 28 ARTICLE VIII. Adoption of the Verson Segment. . . . . . . . . . . . 28 8.1. Adoption Procedure . . . . . . . . . . . . . . . . . . . . 28 8.2. Joint Employers. . . . . . . . . . . . . . . . . . . . . . 29 8.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.4. Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . 29 8.5. Superseded Plans . . . . . . . . . . . . . . . . . . . . . 29 -ii- VERSON SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) ARTICLE I. PURPOSE The Verson Allsteel Press Company, Inc. ("Verson") adopted the Verson Allsteel Press Company Employees Retirement Plan (the "Plan") effective as of January 1, 1953, to provide retirement benefits for its employees. The Plan was amended and restated effective as of August 1, 1976. The Plan was again amended and restated effective August 1, 1984, and it subsequently was amended effective August 1, and October 31, 1986. Verson was acquired by Allied Products Corporation ("Allied") in 1986, became a division of Allied at that time, and Allied became the sponsor of the Plan at that time. Participants' benefits under the Plan were frozen as of October 31, 1986, and no further accrual of benefits has occurred under the Plan after that date. Effective December 31, 1991, the F.J. Littell Machine Co. Pension Plan for Office, Engineering, Sales and Supervisory Employees was merged into the Plan under the name Verson Division of Allied Products Corporation Employees Retirement Plan (the "Combined Plan"). Effective January 29, 1993, sponsorship of the Combined Plan was transferred to Verson Corporation. Effective December 31, 1993, sponsorship of the Combined Plan was transferred to Allied. Also effective December 31, 1993, the Bush Hog Division of Allied Products Corporation Salaried Pension Plan was merged into the Combined Plan and the resulting plan was renamed the Allied Products Corporation Combined Retirement Plan (the "Merged Plan"). The segment of the Merged Plan applicable to employees of the Employer (the "Verson Segment") is now being amended and restated, effective as of December 31, 1993, with certain amendments effective as of the dates indicated in the affected provisions. The Merged Plan and the Fund are intended to meet the requirements of Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Merged Plan shall apply only to a Participant who terminates employment with the Company or another Employer on or after the Effective Date. Except as otherwise specifically provided for herein, a former employee's eligibility for benefits, and the amount of benefits, if any, payable to or on behalf of a former employee shall be determined in accordance with the provisions of the Plan, the Combined Plan or the Merged Plan in effect on the date his employment terminated. The benefit payable to or on behalf of a Participant included under such plan shall not be affected by the terms of any plan amendment effective after such Participant's employment terminates, unless the amendment expressly provides otherwise. ARTICLE II. DEFINITIONS AND CONSTRUCTION 2.1. DEFINITIONS: Words and phrases appearing in the Verson Segment shall have the respective meanings set forth in this Article, unless the context clearly indicates to the contrary. 2.2. Principal Entities: (a) MERGED PLAN: The Allied Products Corporation Combined Retirement Plan. (b) VERSON SEGMENT: The Verson Allsteel Press Company Employees Retirement Plan until December 31, 1991; effective from December 31, 1991, through December 31, 1993, the portion of the Verson Division of Allied Products Corporation Employees Retirement Plan As Applicable to Employees Other Than Former Employees of the F.J. Littell Machine Co. Division of Allied Products Corporation; and, effective from and after December 31, 1993, the segment of the Allied Products Corporation Combined Retirement Plan set forth herein, as amended from time to time. (c) COMPANY: Allied Products Corporation, a corporation organized and existing under the laws of the state of Delaware, or its successor or successors. Notwithstanding the preceding provisions of this subsection, from January 29, 1993 through December 31, 1993, the term "Company" means Verson Corporation, a corporation organized and existing under the laws of the state of Delaware. (d) EMPLOYER: For purposes of the Verson Segment, the term EMPLOYER means the Verson Division of Allied Products Corporation and such other subsidiary or affiliated companies that adopt the Verson Segment with the consent of the Company in accordance with the provisions of Article VIII. The term Employer, for purposes of the Verson Segment, may refer to an individual Employer or to all Employers collectively, as the context requires. Notwithstanding the preceding provisions of this subsection, effective from January 29, 1993 through March 18, 1994, the term EMPLOYER means Verson Corporation in lieu of the Verson Division of Allied Products Corporation. -2- (e) EMPLOYEE: Any person who, on or before October 31, 1986, is receiving remuneration in an employer-employee relationship for personal services rendered to the Employer (or would be receiving such remuneration except for an Authorized Leave of Absence), other than an Employee covered under the terms of the Littell Segment of the Allied Products Corporation Combined Retirement Plan (covering former employees of the F.J. Littell Machine Co. Division of Allied Products Corporation). Employee does not include leased employees (as defined under Section 414(n)(2) of the Code) who perform services for the Employer, except to the extent required by applicable law. (f) NON-UNION EMPLOYEE: An Employee who is not within a collective bargaining unit recognized as such by the Employer and represented by a Union, whereby pensions are the subject of collective bargaining. (g) PARTICIPANT: A Non-Union Employee participating in the Verson Segment in accordance with the provisions of Section 3.1. (h) ELIGIBLE SPOUSE: The husband or wife of a Participant to whom he or she is married on the date the Participant's Pension payments under the Verson Segment commence. However, if the Participant should die prior to the date Pension payments under the Verson Segment would have commenced to him or her, then the Eligible Spouse shall be the husband or wife to whom the Participant had been married throughout the one-year period preceding the date of his or her death. 2.3. DETERMINATION OF BENEFITS: (a) PENSION: A series of monthly amounts which are payable to a person who is entitled to receive benefits under the Verson Segment. (b) RETIREMENT: Termination of employment for any reason other than death after a Participant has fulfilled all requirements for a Normal, Early or Disability Retirement Pension. A Participant's Retirement date shall be deemed to be the day immediately following his last day of Service under Section 3.2. Additionally, a Participant will be deemed to be retired if after his Retirement he continues to perform services for the Employer or receives payment for vacation, holiday, illness, incapacity including disability, layoff, jury duty, military duty or leave of absence for less than 8 days of employment in any calendar month. A Participant who is deemed to be retired under the provisions of the preceding sentence shall be considered to have commenced (or continued) his Retirement on -3- the first day of the calendar month in which such Participant received remuneration for less than 8 days of employment. (c) NORMAL RETIREMENT DATE: The Participant's 65th birthday, and, as of such date, benefits shall be nonforfeitable. (d) SERVICE: The period of a Participant's employment considered in accordance with Section 3.2 in determining his eligibility for benefits under the Verson Segment. (e) CREDITED SERVICE: The period of a Participant's employment through October 31, 1986 considered in accordance with Section 3.3 in determining the amount of benefits payable to or on behalf of the Participant. (f) AUTHORIZED LEAVE OF ABSENCE: Any absence authorized by the Employer under the Employer's standard personnel practices, provided that all persons under similar circumstances are treated alike in the granting of such Authorized Leaves of Absence, and provided further that the Participant returns or retires within the period specified in the Authorized Leave of Absence. An absence due to service in the Armed Forces of the United States shall be considered an Authorized Leave of Absence provided that the Employee complies with all of the requirements of Federal law in order to be entitled to re-employment and provided further that the Employee returns to employment with the Employer within the period provided by such law. (g) AUTOMATIC LEAVE OF ABSENCE: Any period of absence before or after termination of active employment during which an Employee is directly or indirectly paid by the Employer, but limited to a maximum of 12 months for each such period (and without duplication of a period of Authorized Leave of Absence). Such periods shall not include any period for which a payment is made or due under the Verson Segment or under a plan maintained solely for the purpose of complying with workmen's compensation or unemployment compensation or disability insurance laws, or solely to reimburse the Employee for medical or medically-related expenses. An Employee shall be deemed to be "directly or indirectly paid or entitled to payment" regardless of whether such payment is made by or due from the Employer directly, or made indirectly through a trust fund, insurer or other entity to which the Employer contributes or pays premiums. (h) COMPENSATION: The amounts paid to an Employee through October 31, 1986 for personal services during the period considered as Service under the Verson Segment (1) by an Employer, and (2) by an affiliate of an Employer while the Employee is on a special assignment by that Employer. For -4- purposes of the Verson Segment, Compensation shall not include commissions, premium payments for overtime, supplemental payments for employees serving outside the United States, or severance pay. If benefits in the Verson Segment are ever not frozen so Participants earn Compensation after July 31, 1989, the limit on annual compensation contained in Section 401(a)(17) of the Code shall apply. (i) AVERAGE MONTHLY COMPENSATION: The result obtained by dividing the total Compensation of a Participant during the 5 consecutive completed calendar years of Service in which Compensation was highest within the last 10 completed calendar years of Service through his Normal Retirement Date (or, if earlier, October 31, 1986) by 60 (or by the actual number of months of Service if fewer than 60) or; if greater, the Compensation of a Participant during the 4 consecutive completed calendar years plus the partial calendar year ending coincident with or immediately prior to his Normal Retirement Date (or, if earlier, October 31, 1986) divided by 60. (j) PRIMARY SOCIAL SECURITY BENEFIT: The monthly amount available to the Participant at age 65 determined under the provisions of Title II of the Social Security Act in effect at the time of the earliest to occur of his termination of employment, his attainment of age 65 or October 31, 1986 (such earliest date being referred to in this subsection as the "determination date"), without regard to any increases in the wage base or benefit levels that take effect after such date, subject to the following: (1) If the determination date occurs before the Participant reaches age 65, the Participant's Primary Social Security Benefit shall be calculated by assuming continuation of his Compensation until age 65 at the same rate as in effect on the determination date. However, if the determination date is the date on which employment terminates because of Disability and the Participant qualifies for a Disability Insurance Benefit under the Social Security Act, the Primary Social Security Benefit shall be the monthly amount payable as a Disability Insurance Benefit. (2) If records of a Participant's Compensation for any years prior to the determination date are not reasonably accessible from the records of the Employer, then for the purposes of calculating a Primary Social Security Benefit hereunder, the amount of Compensation for any given year shall be equal to the Participant's Compensation in the earliest calendar year for which Compensation records are available, reduced on a compounded basis by 6% for each year that the year in question precedes the earliest year for which Compensation records are available. In lieu of such assumed Compensation, actual wages will be used if, within the time period -5- described below, a Participant furnishes the Plan Administrator with an accurate record of his actual wages. The Plan Administrator shall notify a Participant of his right to provide the Plan Administrator with an accurate record of his actual wages and the Participant shall have 180 days from the later of the determination date or the date of such notification to furnish the accurate record of his actual wages. (3) The Plan Administrator may adopt rules which do not conflict with the previous provisions of this subsection, but which govern the computation of a Primary Social Security Benefit hereunder, and the fact that an Employee does not actually receive such amount from the Social Security Administration because of failure to apply or continuance of work, or for any other reason, shall be disregarded. (k) ACCRUED BENEFIT: The amount of the pension benefit under the Verson Segment earned by a Participant as of the earlier of his Retirement or October 31, 1986, determined in accordance with Section 5.1. (l) INTEGRATED BENEFITS: Temporary disability benefits available to a retired Participant under any Workmen's Compensation or Occupational Disease law or under any Federal, State or other system to which the Employer is required by law to contribute or pay all or part of the costs, exclusive of Unemployment Compensation benefits and any benefit payable under Title II of the Social Security Act. (m) ACTUARIAL (OR ACTUARIALLY) EQUIVALENT: For purposes of the Verson Segment, equality in value of the aggregate amounts expected to be received under different forms of payment, and except as provided below, based on the UP-1984 Mortality Table with no set forward or set back for Participants, Participants' spouses, contingent beneficiaries or beneficiaries and with interest at 7-1/2% per annum. However, with respect to any lump sum payment that may be payable under the Verson Segment, the Actuarial Equivalent lump sum value for payments made in any Plan Year shall be based on immediate and deferred rates which would be used (as of the beginning of the Plan Year) by the Pension Benefit Guaranty Corporation for purposes of valuing immediate annuities on a plan termination. (n) DISABILITY: A physical or mental condition which totally and presumably permanently prevents a Participant from engaging in any substantially gainful activity, as determined in accordance with the provisions of Section 4.3. Entitlement to a Disability Insurance Benefit under the Social Security Act is sufficient but not required evidence of Disability. -6- 2.4. OTHER DEFINITIONS: (a) EFFECTIVE DATE: December 31, 1993, the date of this amendment and restatement of the Verson Segment. Notwithstanding the preceding provisions of this paragraph, certain provisions of the Verson Segment are effective as of the dates specified therein. (b) PLAN YEAR: The calendar year; provided, however, that, prior to January 1, 1995, the Plan Year is the 12-month period commencing on August 1, and ending on July 31 and the short year commencing on August 1, 1994 and ending on December 31, 1994. 2.5. CONSTRUCTION: The masculine gender, where appearing in the Verson Segment, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. The words "hereof", "herein", "hereunder" and other similar compounds of the word "here" shall mean and refer to the entire Verson Segment, not to any particular provision or Section of the Verson Segment. All references herein to Articles and/or Sections shall mean and refer to Articles and/or Sections of the Verson Segment unless otherwise qualified. Article and Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Verson Segment. Terms used in the Verson Segment when not defined in the Verson Segment shall have the meanings given them by the Merged Plan. ARTICLE III. PARTICIPATION AND SERVICE 3.1. PARTICIPATION: Any Non-Union Employee included under the prior provisions of the Verson Segment as of the day before the Effective Date shall continue to participate in accordance with the provisions of this amended and restated Verson Segment. In addition, any Employee who participates in the Verson Segment under the provisions of the Verson Segment in effect as of October 30, 1986 shall continue to participate after such date. Because the Verson Segment was frozen as of October 31, 1986, an Employee hired after that date shall not be eligible to participate in the Verson Segment. After a termination of employment, a rehired Employee's subsequent participation in the Verson Segment shall be subject to the re-employment provisions of Section 3.4. -7- A former Employee entitled to receive a Pension under the Verson Segment shall continue as a Participant until the date of his death. 3.2. SERVICE: A Participant's eligibility for benefits under the Verson Segment shall be determined by his period of Service. Subject to the re- employment provisions of Section 3.4, a Participant shall receive Service for years of employment with the Employer from and after the date his last period of continuous employment commenced. Service shall terminate under the Verson Segment as of the date of termination of employment or the subsequent expiration of an Automatic Leave of Absence, subject to the following: (a) If re-employment occurs within 12 months after the Participant's first day of absence from employment, the re-employment provisions of Section 3.4(b) shall be applicable. (b) If upon termination of employment a Participant receives Compensation for an accrued vacation extending beyond the 12-month period of an Automatic Leave of Absence, his Service and Credited Service shall terminate as of the date such period of accrued vacation ends. (c) An Authorized Leave of Absence (whether or not compensated), including an Authorized Leave of Absence for service in the Armed Forces of the United States, which extends beyond 12 months shall be included in a Participant's period of Service, subject to the provisions of Section 2.3(f). Service also shall include periods of temporary illness and an Automatic Leave of Absence. (d) With respect to all Employees who were in the employ of the Company or its predecessor on November 19, 1973, Service shall not be considered to have been broken by reason of the last termination of employment prior to November 19, 1973, no matter how such termination of employment occurred. The transfer provisions of Section 3.5 shall apply in the case of a transferred employee. Notwithstanding the foregoing, Service prior to August 1, 1976 under this Section shall not be less than that determined under the prior provisions of the Verson Segment for Employees who were included under the prior provisions of the Verson Segment on July 31, 1976. -8- 3.3. CREDITED SERVICE: The amount of benefit payable to or on behalf of a Participant shall be determined on the basis of his Credited Service earned through October 31, 1986. Subject to the re-employment provisions of Section 3.4 and the transfer provisions of Section 3.5, a Participant shall receive Credited Service during his years of employment as a Non-Union Employee, from and after the date his last period of employment by the Employer commenced, and ending no later than the earlier of his employment termination or October 31, 1986, subject to the following: (a) Credited Service shall not include the months between two periods of a Participant's employment unless he is re-employed by the Employer within a twelve consecutive month period after his first day of absence from employment, as described in the re-employment provisions of Section 3.4(b). (b) Credited Service prior to August 1, 1976 for a Participant who was included under the prior provisions of the Verson Segment on July 31, 1976 shall be determined in accordance with the prior provisions of the Verson Segment (but without duplication of credit for employment as a Union and Non-union Employee). With respect to all Employees who were in the employ of the Company on November 19, 1973, Credited Service shall not be considered to have been broken by reason of the last termination of employment prior to November 19, 1973, no matter how such termination of employment occurred. (c) Credited Service shall include the same periods of Automatic Leaves of Absence considered as Service in Section 3.2(b), any Authorized Leave of Absence for illness, or while on special assignment by the Employer, or service in the Armed Forces of the United States pursuant to the provisions of Section 2.3(f), and a maximum of 30 days for any other uncompensated Authorized Leave of Absence. (d) A fractional year of Credited Service shall provide proportional credits in the computation of the Participant's Pension. (e) In the event a Participant ceases to be an Employee eligible to accrue benefits under the Verson Segment but remains in the employ of the Employer, he shall receive no Credited Service until he is again in eligible employment. (f) Anything in the Verson Segment to the contrary notwithstanding, Credited Service shall not include any service, period of employment or period of Automatic Leave of Absence or Authorized Leave of Absence after October 31, 1986. The Credited Service of each Employee who was a Participant on October 31, 1986 shall be determined as of October 31, 1986 and shall not exceed that figure. -9- 3.4. PARTICIPATION AND SERVICE UPON RE-EMPLOYMENT: The following rules shall apply upon re-employment: (a) Upon re-employment of an Employee whose termination of employment with the Employer occurred before August 1, 1976 without entitlement to a Pension, he shall be treated as a new Employee for all purposes of the Verson Segment. (b) The first day of absence from employment shall commence a twelve consecutive month period to be used to determine whether the Employee had a one-year break in employment. Re-employment within such twelve-month period shall result in no break in employment; and for purposes of determining Verson Segment participation under Section 3.1 and the Employee's Service under Section 3.2, the period of absence shall be considered a part of his period of continuous employment. However, Credited Service under Section 3.3 shall consist of the sum of the Employee's calendar months of actual employment, subject to the rules in Section 3.3(f). (c) Upon re-employment of an Employee who previously terminated employment with the Employer after becoming entitled to a Pension under the Verson Segment, his prior Service and Credited Service shall be added to his new Service and Credited Service in determining his rights and benefits under the Verson Segment, subject to the rules in Section 3.3(f). (d) Upon re-employment of an Employee who previously terminated employment with the Employer without entitlement to a Pension under the Verson Segment, his prior Service and Credited Service shall be canceled; provided, however, that his prior Service and Credited Service shall not be canceled and shall be restored if at least one of the following is applicable: (1) the period between his termination of employment and his date of re-employment is shorter than the length of his prior period of Service, or (2) as of July 31, 1985, the period between his termination of employment and July 31, 1985 is shorter than the length of his prior period of Service, and upon re-employment the period between his termination of employment and his re-employment was shorter than 5 years, or -10- (3) the Employee's termination of employment commenced on or after August 1, 1985 and the period between his termination of employment and his date of re-employment is less than 5 years, or (4) the Employee's termination of employment commenced on or after August 1, 1985 due to a "maternity or paternity leave" and the period between his termination of employment and his re-employment is shorter than the length of his prior period of Service plus one year, or (5) the Employee's termination of employment commenced on or after August 1, 1985 due to a "maternity or paternity leave" and the period between his termination of employment and his re-employment is shorter than 6 years. (e) When Service and Credited Service are restored under subparagraph (d) above, (1) in the case of a Participant, active participation in the Verson Segment shall be deemed to have recommenced as of the date of re-employment, and (2) in the case of a non-Participant, the re-employed Employee shall become a Participant on the date as of which he has completed the requirements of Section 3.1 and, for this purpose, his employment during both his prior and new periods of employment shall be recognized. If an Employee's pre-break Service and Credited Service are not restored due to the length of the period between this termination of employment and his re-employment, his participation in the Verson Segment shall be determined under Section 3.1 as if he were a new Employee. Subject to the provisions of Sections 4.5 and 6.9, no Pension payments shall be made during a period of employment; and if the Participant had received any Pension payments under the Verson Segment, the Pension payable upon his subsequent Retirement shall be reduced by the Actuarial Equivalent of the Pension payments, except Disability Retirement Pension payments, he received prior to his Normal Retirement Date. The Pension subsequently payable to any Participant who has a break in continuity of employment shall not be reduced, because of increases in benefits payable under the Social Security Act, below the amount of Pension (if any) that would have been payable under the Verson Segment before the Participant's break in continuity of employment. For the purposes of the Verson Segment, "maternity or paternity leave" means separation from employment or absence from work due to the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child in connection with the adoption of the child by an Employee, or the caring for an Employee's child -11- during the period immediately following the child's birth or placement for adoption. The Plan Administrator shall determine, under rules of uniform application and based on information provided to the Plan Administrator by the Employee, whether or not the Employee's termination of employment or absence from work is due to "maternity or paternity leave". 3.5. TRANSFERS: (a) BETWEEN EMPLOYERS: If a Participant is transferred to the employment of another Employer, he shall maintain all of his rights under the Verson Segment and his employment and participation herein shall be considered uninterrupted as if no transfer had been made. (b) EMPLOYMENT BY RELATED EMPLOYER: A Participant shall receive Service in accordance with the provisions of Section 3.2 for all employment by a Related Employer, but subject to the re-employment provisions of Section 3.4. For purposes of this Section, "Related Employer" shall mean (1) any corporation which is a member of the controlled group of corporations of which the Employer is a part, (2) any trade or business which is under common control with the Employer, and (3) any member of an affiliated service group which includes the Employer, all as defined by Section 414 of the Code. (c) EMPLOYMENT BY PREDECESSOR COMPANY: Employment for predecessor or affiliated companies, if certified by the Employer, prior to inclusion in the Verson Segment, for which no retirement benefits are payable under a qualified retirement plan of any such predecessor or affiliate, shall be considered as employment by the Employer under the Verson Segment. (d) TO AND FROM VERSON SEGMENT COVERAGE: In the event of transfer to or from employment providing coverage by another defined benefit retirement plan that is qualified under Section 401(a) of the Code maintained by the Company, the Employer or a Related Employer, a Participant shall receive Credited Service under Section 3.3 only for the period of his employment by the Employer while participating under the prior provisions of the Verson Segment before August 1, 1976 and while participating in the Verson Segment from and after August 1, 1977 except as is otherwise provided in the following sentence. Upon retirement or other termination of employment with the Employer and all Related Employers, the Pension (if any) to which the Employee becomes entitled under the Verson Segment shall be computed on the basis of his Credited Service under Section 3.3, and the provisions of the Verson Segment in effect as of the date of termination of employment with all such organizations. However, if employment terminates under the Verson Segment after a transfer from -12- employment that had provided coverage by either the Verson Allsteel Press Company Pension Plan or the Retirement Plan for Employees of the Hearne, Texas Plant of Verson Allsteel Press Company ("Other Plan"), the Participant's benefit under the Verson Segment shall be determined on the following basis: (a) the vested portion of the Participant's Accrued Benefit shall be determined under the Verson Segment as if his Credited Service under both the Verson Segment and the Other Plan had been Credited Service under the Verson Segment; and there shall then be deducted (b) the Actuarial Equivalent of the vested portion of the Participant's accrued benefit under the Other Plan. The time and manner of payment of the Participant's Pension shall then determine the factors to be applied to such vested Accrued Benefit, in accordance with the provisions of the Verson Segment, to compute the amount of Pension payable under the Verson Segment to or on behalf of the Participant. (e) ADDITIONAL PROVISIONS: Notwithstanding anything herein contained to the contrary, if an individual was an employee of Verson Manufacturing Company (or any subsidiary or affiliate thereof) immediately prior to the merger of Verson Manufacturing Company with Verson Allsteel Press Company, and if he became an employee of the Employer as a consequence of the merger, the period he was an employee of Verson Manufacturing Company (or any of its subsidiaries or affiliates) shall be considered employment by the Employer. ARTICLE IV. REQUIREMENTS FOR RETIREMENT BENEFITS 4.1. NORMAL RETIREMENT: A Participant shall be eligible for a Normal Retirement Pension if his employment is terminated on or after his Normal Retirement Date. Payment of a Normal Retirement Pension shall commence as of the first day of the month coinciding with or next following the date of Retirement. 4.2. EARLY RETIREMENT: A Participant shall be eligible for an Early Retirement Pension if his employment is terminated on or after his 55th birthday and after he has completed 10 or more years of Service. Payment of an Early Retirement Pension shall commence as of the first day of the month following the Participant's Normal Retirement Date. However, if a Participant requests the Plan Administrator to authorize the commencement of his Early Retirement Pension as of the first day of the month coinciding with or next following his Retirement, or as of the first day of any subsequent month which precedes his Normal Retirement Date, his Pension shall commence as of the beginning of the month so requested, but the amount thereof shall be reduced as provided in Section 5.2. -13- 4.3. DISABILITY RETIREMENT: A Participant shall be eligible for a Disability Retirement Pension if his employment is terminated by reason of Disability after he has completed 10 or more years of Service. Payment of a Disability Retirement Pension shall commence as of the first day of the month coinciding with or next following Retirement. "Disability" under the Verson Segment shall mean a physical or mental condition which totally and presumably permanently prevents a Participant from engaging in any substantially gainful activity, based on a medical examination by a doctor or clinic appointed by the Plan Administrator. Entitlement to a Disability Insurance Benefit under the Social Security Act is sufficient but not required evidence of Disability. Notwithstanding any other provision of this Section, no Participant shall qualify for a Disability Retirement Pension if, on the basis of a medical examination, the Plan Administrator determines that his Disability results from (a) an injury suffered while engaged in a criminal act or enterprise, (b) a self-inflicted injury, or (c) service in the Armed Forces of the United States which entitles the Participant to a veteran's disability pension; but this provision shall not prevent the Participant from qualifying for a Pension under another provision of the Verson Segment. Disability shall be considered to have ended and entitlement to a Disability Retirement Pension shall cease if, prior to his Normal Retirement Date, the Participant (1) is re-employed by the Employer, (2) engages in any substantially gainful activity, except for such occupation or employment as is found by the Plan Administrator to be for the primary purpose of rehabilitation or not incompatible with a finding of total and permanent disability, or (3) has sufficiently recovered, in the opinion of the Plan Administrator based on a medical examination by a doctor or clinic appointed by the Plan Administrator, to be able to engage in regular employment with the Employer and refuses an offer of employment by the Employer, (4) refuses to undergo any medical examination requested by the Plan Administrator, provided that a medical examination shall not be required more frequently than twice in any calendar year, or (5) becomes ineligible, before attainment of age 65, to receive additional Disability Insurance Benefits under the Social Security Act. If entitlement to a Disability Retirement Pension ceases in accordance with the provisions of this paragraph for a reason other than re-employment by the Employer, such a Participant shall not be prevented from qualifying for a Pension under another provision of the Verson Segment based on his Credited Service and Compensation prior to Disability Retirement; and the Disability Retirement Pension payments received shall be disregarded. If a Participant recovers from Disability and returns to employment with the Employer, subsequent entitlement to a Pension shall be determined in accordance with the provisions of the Verson Segment based on both periods of Service and Credited Service, and the Disability Retirement Pension payments previously received shall be disregarded. -14- 4.4. DEFERRED VESTED PENSION: A Participant shall be eligible for a Deferred Vested Pension in accordance with the provisions of Section 5.4 if his employment is terminated before death or Retirement after he has completed 5 or more years of Service. Payment of a Deferred Vested Pension shall commence as of the first day of the month following the Participant's Normal Retirement Date. However, if a Participant who had 10 or more years of Service requests the Plan Administrator to authorize the commencement of his Deferred Vested Pension as of the first day of any calendar month within the 10-year period preceding his Normal Retirement Date, his Pension shall commence as of the date so requested, but the amount thereof shall be reduced as is provided in the second paragraph of Section 5.4. 4.5. COMMENCEMENT OF BENEFITS: Subject to the following sentence, payment of any benefit provided under the Verson Segment shall commence no later than the 60th day after the end of the Plan Year in which the Participant both has attained age 65 and terminated his employment with the Employer. Regardless of the foregoing, the payment of benefits under the Verson Segment to a Participant must commence by the April 1st after the end of the calendar year in which he reaches age 70-1/2. ARTICLE V. AMOUNT OF RETIREMENT BENEFITS 5.1. NORMAL RETIREMENT PENSION: Subject to the provisions of Section 5.5, the monthly amount of the Normal Retirement Pension on a single-life basis shall be equal to the greater of the following: (a) One percent (1%) of the Participant's Average Monthly Compensation multiplied by his years of Credited Service, except that such amount shall be reduced by Integrated Benefits and the lesser of $85 or 75% of the Primary Social Security Benefit; or (b) The Participant's years of Credited Service multiplied by Fifteen Dollars ($15.00). If a Participant retires after his Normal Retirement Date, his Pension shall not be less than the amount that would have been payable had Retirement occurred as of his Normal Retirement Date. If payment of a Participant's Pension begins while he is still employed by the Employer pursuant to the second sentence of Section 4.5, any subsequent increases in his -15- Normal Retirement Pension (as a result of Credited Service earned after his Pension payments begin) for a Plan Year shall be reduced (but not below zero) by the Actuarial Equivalent (as specified in the first sentence of Section 2.3(m)) of the Pension payment(s) he received during the preceding Plan Years; provided, however, that the Actuarial Equivalent value of a Paricipant's Pension shall not be reduced by application of this sentence. 5.2. EARLY RETIREMENT PENSION: Subject to the provisions of Section 5.5, the monthly amount of the Early Retirement Pension on a single-life basis payable at the Participant's Normal Retirement Date shall be equal to his Accrued Benefit as of October 31, 1986. If payment of an Early Retirement Pension commences prior to the Participant's Normal Retirement Date, the amount of the Pension shall be reduced on an Actuarially Equivalent basis. However, there shall be no reduction by reason of payments commencing prior to attainment of age 65 in the Pension of a Participant whose Retirement occurs after attainment of (a) age 64 and on or after August 1, 1979, or (b) age 63 and on or after August 1, 1980, or (c) age 62 and on or after August 1, 1981. 5.3. DISABILITY RETIREMENT PENSION: Subject to the provisions of Section 5.5, the monthly amount of the Disability Retirement Pension shall be computed in the same manner as a Normal Retirement Pension under Section 5.1; except that, if subsection 5.1(a) becomes applicable, (1) there shall be no reduction for Integrated Benefits, (2) if the Employee is eligible for a Disability Insurance Benefit under the Social Security Act, the reduction shall be the lesser of $85 or 64% of said Disability Insurance Benefit, and (3) otherwise, the Participant's Primary Social Security Benefit shall be deemed to be zero (and there shall be no offset based on the lesser of 75% thereof or $85) for any period prior to age 65 during which the Participant is not eligible for a Disability Insurance Benefit under the Social Security Act. A Disability Retirement Pension shall not be reduced because of payments commencing before the Participant's Normal Retirement Date. 5.4. DEFERRED VESTED PENSION: Subject to the provisions of Section 5.5, the amount of a Deferred Vested Pension on a single-life basis, commencing as of the Participant's Normal Retirement Date shall be equal to the Vested Percentage of the Participant's Accrued Benefit as of October 31, 1986 computed in accordance with Section 5.1 hereof. A Participant's Vested Percentage shall be 100% if he has 5 years of Service (regardless of age), and it shall be 0% until he has 5 years of Service. -16- If payment of a Deferred Vested Pension commences prior to the Participant's Normal Retirement Date (pursuant to the last sentence of Section 4.4), the amount of the Pension shall be reduced on an Actuarially Equivalent basis. 5.5. MINIMUM PENSIONS FOR PARTICIPANTS INCLUDED UNDER PRIOR PROVISIONS OF THE VERSON SEGMENT AS OF AUGUST 1, 1976: Anything to the contrary notwithstanding, if a Participant was included under the prior provisions of the Verson Segment as of August 1, 1976 and a Pension becomes payable under the Verson Segment resulting from termination of employment on or after August 1, 1976, such Pension shall not be less than the Pension which would have been payable had the provisions of the Verson Segment which were in effect immediately prior to August 1, 1976 remained in effect until the Participant's termination of employment. ARTICLE VI. MANNER OF PAYMENT AND OTHER BENEFITS 6.1. PAYMENT OF PENSIONS: If a Participant who is entitled to receive a Normal or an Early Retirement Pension, a Deferred Vested Pension, or a Disability Retirement Pension commencing at or after attainment of age 55 has an Eligible Spouse on the date as of which his Pension payments commence, his Pension shall be paid in the form of a 50% Joint and Survivor Pension, unless he elects otherwise in writing and his Eligible Spouse, if necessary, consents to such election. Under a 50% Joint and Survivor Pension, a reduced monthly amount shall be paid to the Participant for his lifetime; and his Eligible Spouse, if surviving at the Participant's death, shall be entitled to receive thereafter a lifetime survivorship Pension in a monthly amount equal to 50% of the reduced monthly amount which had been payable to the Participant. Subject to the following sentence, the reduced amount payable to the Participant under the 50% Joint and Survivor Pension shall be determined so that the aggregate of the Pension payments expected to be made to the Participant and his Eligible Spouse shall be the Actuarial Equivalent of the single-life Pension determined under Article V. Notwithstanding the foregoing sentence, the Pension payable to the Eligible Spouse of a Participant who retired by reason of Disability shall be based on the portion of the Disability Retirement Pension which would have been payable to the Participant as an Early Retirement Pension. The last payment of the 50% Joint and Survivor Pension shall be made as of the first day of the month in which the death of the survivor occurs. In lieu of the 50% Joint and Survivor Pension, a Participant may elect in writing, within the 90-day period prior to the date his Pension payments commence, only with the consent of his Eligible Spouse, to receive a monthly amount in the form of the single-life Pension computed under Article V. A Participant entitled to receive a Normal Retirement -17- Pension also may elect instead an optional form of benefit under Section 6.5 and a Participant entitled to receive an Early Retirement Pension may elect instead a Level Income Option under Section 6.6. A Participant also may revoke any election made under this Section at any time during the 90-day period preceding the date the Participant's Pension commences if the purpose of such revocation is to reinstate coverage under the 50% Joint and Survivor Pension. The Eligible Spouse's consent to any election made pursuant to the Verson Segment and requiring the Eligible Spouse's consent shall be in writing and shall acknowledge the effect of such consent. In addition, the Eligible Spouse's signature on the written consent must be witnessed by a Merged Plan representative or by a notary public. The Eligible Spouse's consent need not be obtained if the Plan Administrator is satisfied that there is no Eligible Spouse, that the Eligible Spouse cannot be located or because of any other circumstances which may be prescribed in regulations issued by the Secretary of the Treasury. An Eligible Spouse's consent under the Verson Segment shall be valid only with respect to the specified alternate beneficiary or beneficiaries designated by the Participant; if such alternate beneficiary of beneficiaries is or are subsequently changed, a new consent by the Eligible Spouse will be required. Notwithstanding the provisions of the preceding sentence, a spouse may make a general consent, as described in Treasury Regulation Section 1.401(a)-20, Q&A-31(c). The Eligible Spouse's consent to any election made by a Participant pursuant to the Verson Segment, once made, may not be revoked by the Eligible Spouse. Within a reasonable period of time preceding the date his Pension commences, and subject to regulations issued by the Secretary of the Treasury, a Participant shall be supplied with a written explanation of (a) the terms and conditions of the 50% Joint and Survivor Pension, (b) the Participant's right, if any, to elect a single-life Pension or an optional form of payment under Section 6.5 or 6.6 in lieu of the 50% Joint and Survivor Pension and subject, in certain cases, to his Eligible Spouse's consent and (c) the Participant's right to reinstate coverage under the 50% Joint and Survivor Pension prior to his Pension commencement date by revoking an election of a single-life Pension or an optional form of benefit under Section 6.5 or 6.6. If a Participant is entitled to receive a Disability Retirement Pension commencing before age 55, or if a Participant does not have an Eligible Spouse on the date his Pension payments commence, he shall receive the single-life Pension computed under Article V, subject to his right, if any, to elect an optional form of benefit; provided that, the Eligible Spouse of a Participant who receives a Disability Retirement Pension prior to age 55 shall be covered by the 50% Joint and Survivor Pension pursuant to the provisions of -18- Section 6.4. The last payment of the single-life Pension shall be made as of the first day of the month in which the death of the Participant occurs. 6.2. DEATH BEFORE RETIREMENT: Upon the death of a Participant before other termination of employment, but after he has attained age 65 or after he has completed at least 5 years of Service, a Pension shall be payable to his Eligible Spouse, if any. The Pension payable to an Eligible Spouse of a Participant who was age 55 or older on the date of his death shall be equal to the amount the Eligible Spouse would have been entitled to receive had the Participant retired immediately preceding death and commenced to receive a Normal Retirement Pension or an Early Retirement Pension, whichever is applicable, under either Section 5.1 or Section 5.2 and the 50% Joint and Survivor Pension provisions of Section 6.1. The Pension payable to such an Eligible Spouse shall commence as of the first day of the month coinciding with or next following the Participant's death and shall continue until the beginning of the month in which the death of the Eligible Spouse occurs. The Pension payable to an Eligible Spouse of a Participant who was younger than age 55 on the date of his death shall be equal to the amount the Eligible Spouse would have been entitled to receive had the Participant (a) terminated employment immediately prior to death, (b) commenced to receive a Deferred Vested Pension under the provisions of Sections 4.4 and 5.4 and under the 50% Joint and Survivor Pension provisions of Section 6.1 as of the beginning of the month coincidental with or next following the date he would have attained age 55 and (c) then died immediately thereafter. The Pension payable to such an Eligible Spouse of a Participant who was younger than age 55 on the date of his death shall commence as of the beginning of the month coincidental with or next following the date the Participant would have attained age 55 and shall continue until the beginning of the month in which the death of the Eligible Spouse occurs. No benefit shall be payable under this Section for death during employment after the Participant has satisfied the requirements for Normal Retirement if an option is effective under Section 6.6. 6.3. DEATH AFTER RETIREMENT: In addition to any benefit that may become payable under the Verson Segment, a lump-sum benefit shall be payable upon the death after Retirement of a Participant entitled to receive a Normal, Early or Disability Retirement Pension. The benefit shall be payable in accordance with the Designation of Beneficiary provisions of Section 6.7, in the amount of $2,500. 6.4. DEATH AFTER TERMINATION OF EMPLOYMENT AND BEFORE PENSION PAYMENTS COMMENCE OR WHILE RECEIVING A DISABILITY RETIREMENT PENSION: A Participant who has -19- terminated employment with entitlement to a Normal Retirement Pension, an Early Retirement Pension or a Deferred Vested Pension hereunder, but whose Pension has not commenced, and who has not elected an effective option under Sections 6.5 or 6.6, shall be covered by the 50% Joint and Survivor Pension provisions of Section 6.1 until the date his Pension payments commence. In the event of his death prior thereto, his surviving Eligible Spouse shall receive a Pension computed in accordance with the applicable provisions of Section 5.1, 5.2 or 5.4 and Section 6.1 as if the Participant's Pension payments had commenced on the first day of the month in which the later of his date of death or his attainment of age 55 occurred. The Pension payable to such an Eligible Spouse shall commence on the first day of the month in which the later of the Participant's date of death or his 55th birthday occurred, and shall continue until the beginning of the month in which the death of the Eligible Spouse occurs. A Participant who has terminated employment with entitlement to a Disability Retirement Pension, but whose Pension has not commenced, and a Participant who commences to receive a Disability Retirement Pension prior to attainment of age 55 shall be covered by the 50% Joint and Survivor Pension provisions of Section 6.1. In the event of his death prior thereto, his surviving Eligible Spouse shall receive a Pension computed in accordance with the applicable provisions of Sections 5.3 and 6.1 as if the Participant's Pension payments had commenced on the first day of the month in which the Participant's death occurred; provided that the Pension payable to the Eligible Spouse shall be based on the Disability Retirement Pension which would have been payable to the Participant if such Pension had been reduced for early commencement. The provisions of this Section shall not affect the right of a Participant to elect the single-life Pension computed under Article V, pursuant to the provisions of Section 6.1. 6.5. CONTINGENT BENEFICIARY OPTION: In lieu of a Normal Retirement Pension, by filing a timely election with the Plan Administrator, a Participant may designate his spouse as his contingent beneficiary and elect to receive a Pension payable in accordance with one of the options described below. Such option may be elected by a Participant only on behalf of a spouse to whom he has been married for a period of at least three years immediately prior to his date of election and from whom he is not legally separated as of such date. An option shall be elected in writing on a form approved by the Plan Administrator, and the aggregate of the Pension payments expected to be made shall be the Actuarial Equivalent of the Pension which the Participant is otherwise entitled to receive upon Retirement. (a) OPTION 1: A Participant may elect to receive a reduced Pension payable during the joint lives of the Participant and his spouse; so that, following -20- the death of the Participant, payment of the Pension in an amount equal to 100 percent of the Participant's reduced Pension shall continue to his spouse, if surviving, during the lifetime of the spouse, with the last payment to be made as of the first day of the month in which the death of the survivor occurs. (b) OPTION 2: A Participant may elect to receive a reduced Pension payable during the joint lives of the Participant and his spouse; so that, following the death of the Participant, payment of the Pension in an amount equal to 75 percent of the Participant's reduced Pension shall continue to his spouse, if surviving, during the lifetime of the spouse, with the last payment to be made as of the first day of the month in which the death of the survivor occurs. Subject to the provisions of Sections 6.1 and 6.7(b), a Participant may elect, change or revoke an option without the approval of the Plan Administrator if such decision is filed in writing with the Plan Administrator at least two years but not more than three years prior to the Participant's Retirement. An option may not be elected, changed or revoked at any other time except with the approval of the Plan Administrator and the Participant's submission of such evidence of the good health of the Participant or his contingent beneficiary as the Plan Administrator shall require and which shall be satisfactory to the Plan Administrator. In no event may an option be changed or revoked after a Participant retires. Subject to the provisions of Section 6.9 with respect to employment after age 65, an election made pursuant to this Section shall become inoperative (1) if the Participant's employment terminates before he becomes eligible for a Normal Retirement Pension, (2) if the Participant dies or is divorced from the contingent beneficiary while employed but before his Normal Retirement Date, or (3) if his contingent beneficiary dies before his Retirement or other termination of employment. If an option under this Section is effective upon a Participant's Normal Retirement, it will be in place of any benefit otherwise payable under the Verson Segment, and the form made available by the Employer for election of the option shall so specify. 6.6. LEVEL INCOME OPTION: If payment of an Early Retirement Pension commences prior to the earliest age as of which the Participant will become eligible for an Old-Age, Survivor and Disability Insurance Benefit under the Social Security Act, the Participant may elect upon written application filed with the Plan Administrator, only with the consent of his Eligible Spouse within the 90 day-period prior to the date his Pension payments commence, to have the amount of his Early Retirement Pension adjusted so that an increased amount will be paid until he attains such age, and a reduced amount thereafter. The purpose of this adjustment is to enable the Participant to receive, from the Verson Segment and under the Social Security Act, aggregate income in an approximately level amount for life. Such adjusted Pension payments shall be the -21- Actuarial Equivalent of the Pension otherwise payable to such Participant. Application of this option shall be in place of any benefit otherwise payable under the Verson Segment, and the form made available by the Plan Administrator for election of the option shall so specify. 6.7. DESIGNATION OF BENEFICIARY: Designation of a beneficiary or beneficiaries under the Verson Segment shall be governed by the following rules: (a) DESIGNATION PROCEDURE: Subject to the provisions of Section 6.7(b), each Participant or former Participant from time to time may designate any person or persons (who may be designated primarily, contingently or successively and who may be an entity other than a natural person) as his beneficiary or beneficiaries to receive the death benefit provided under Section 6.3. Each beneficiary designation filed with the Plan Administrator will cancel all beneficiary designations previously filed with the Plan Administrator. The revocation of a beneficiary designation no matter how effected, shall not require the consent of any designated beneficiary except as provided in subparagraph (b) below. (b) SPOUSAL CONSENT: No beneficiary designation shall be effective under the Verson Segment unless the Participant's Eligible Spouse consents in writing to such designation, the Eligible Spouse's consent acknowledges the effect of such designation and the Eligible Spouse's signature is witnessed by the Plan Administrator or a notary public. Consequently, any beneficiary designation previously made by a Participant shall be automatically revoked on the marriage or remarriage of a Participant. A spouse's consent shall be valid under the Verson Segment only with respect to the specified beneficiary or beneficiaries designated by the Participant. If the beneficiary or beneficiaries subsequently are changed by the Participant, a new consent by the Eligible Spouse will be required. The Eligible Spouse's consent to any beneficiary designation made by a Participant pursuant to the Verson Segment, once made, may not be revoked by the Eligible Spouse. Notwithstanding the foregoing, spousal consent to a Participant's beneficiary designation shall not be required if it is established to the satisfaction of the Plan Administrator that spousal consent cannot be obtained because there is no Eligible Spouse, because the Eligible Spouse cannot be located or because of such other circumstances as may be prescribed in regulations issued by the Secretary of the Treasury. -22- Any consent by an Eligible Spouse or any determination that the consent is not required pursuant to the above paragraph shall be effective only with respect to such spouse. (c) LACK OF DESIGNATION: If any Participant or former Participant fails to designate a beneficiary in the manner provided above, or if the beneficiary designated by a deceased Participant dies before him or before complete distribution of the Participant's benefits, the amount payable upon the death of the Participant or former Participant shall be paid in accordance with the following order of priority: (1) to the Participant's Eligible Spouse, or if there be none surviving, (2) to the Participant's surviving spouse, or if there be none surviving, (3) to the Participant's children, in equal parts, or if there be none surviving, (4) to the Participant's father and mother, in equal parts, or if there be none surviving, (5) to the Participant's estate. 6.8. SMALL PENSIONS: If the Actuarial Equivalent lump sum value of a Pension payable under the Verson Segment is no more than $3,500, the Plan Administrator shall direct that, in lieu of such Pension, such lump sum shall be paid, but subject to the following sentence. A lump sum settlement of a small amount may not be directed if the Participant is age 55 or older, unless the Participant and his Eligible Spouse (or where the Participant has died, the Eligible Spouse) consent in writing, not more than 90 days before the distribution, to such lump sum settlement. A lump sum settlement of a small amount shall be made at any time after the Participant's termination of employment even though the Participant and/or his Eligible Spouse is not otherwise entitled to commencement of a Pension at such time under other provisions of the Verson Segment. If a lump sum settlement is made, the Plan Administrator shall provide each recipient receiving such a settlement with an official notice supplied by the Secretary of the Treasury which specifies certain information regarding the federal income tax treatment of certain Verson Segment benefits. -23- 6.9. RE-EMPLOYMENT AND CONTINUED EMPLOYMENT AFTER RETIREMENT: Subject to the provisions of Section 4.5, no Participant, regardless of his vesting status hereunder, shall receive a Pension payment for any month including or following the month in which he completes the requirements for a Normal Retirement Pension, if during each such month he receives payment for hours of service performed on at least 8 days of employment with the Employer or receives payment for vacation, holiday, illness, incapacity including disability, layoff, jury duty, military duty or leave of absence for at least 8 days in any calendar month. If a Participant who continues to be employed by the Employer after he completes the requirements for a Normal Retirement Pension receives remuneration for less than 8 days in any given calendar month, such Participant is considered retired according to the provisions of Section 2.3(b) and is entitled to Pension payments hereunder. Any employment by the Participant during the month he receives remuneration for less than 8 days of employment and for any month thereafter shall be disregarded as Service and Credited Service hereunder. If a former Participant who is entitled to receive a Pension hereunder is re-employed on or after his Normal Retirement Date, he shall not receive a Pension payment for any month in which he receives payment for hours of service performed on at least 8 days of employment with the Employer. If pension payments have been suspended pursuant to this paragraph, they shall resume no later than the first day of the third month after the calendar month in which he ceases to be employed for at least 8 days in a calendar month, and the initial payment upon resumption shall include the payment scheduled to occur in that month and any amounts withheld during the period from cessation of employment and resumption of payments. Upon a suspension of such pension payments, the Plan Administrator shall notify the Participant of such suspension, shall afford him an opportunity to obtain a review of such suspension and shall otherwise administer such suspension and any subsequent resumption of pension payments in a manner consistent with final U.S. Department of Labor Regulations Section 2530.203-3. Upon the death of a Participant who continues his employment beyond his Normal Retirement Date and who is not considered retired in accordance with the foregoing provisions of this Section, the provisions of Section 6.1 or an effective election under Section 6.5 shall be operative, and the survivorship Pension to his Eligible Spouse, if any, shall commence as of the first day of the month next following the Participant's death in the amount which would have been payable had the Participant retired immediately prior to his death. However, if the death of the Eligible Spouse occurs while the Participant is in such continued employment, his Pension shall not be reduced for the 50% Joint and Survivor Pension under Section 6.1 or a Contingent Beneficiary Option under Section 6.5. -24- 6.10. NON-ALIENATION OF BENEFITS: Except with respect to federal income tax withholding, benefits payable under the Verson Segment shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Verson Segment; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder, shall be void. The Fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. Notwithstanding the above, the Plan Administrator may direct the Insurance Company and/or the Trustee to comply with a Qualified Domestic Relations Order. A Qualified Domestic Relations Order is a judgment, decree or order (including approval of a property settlement agreement) made pursuant to a state domestic relations law (including community property law) that relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant ("Alternate Payee") and which: (a) creates or recognizes the existence of an Alternate Payee's right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable to a Participant under the Verson Segment; and (b) specifies (1) the name and last known mailing address (if any) of the Participant and each Alternate Payee covered by the order, (2) the amount or percentage of the Participant's Verson Segment benefits to be paid to any Alternate Payee, or the manner in which such amount or percentage is to be determined and (3) the number of payments or the period to which the order applies and each plan to which the order relates; and (c) does not require the Verson Segment to (1) provide any type or form of benefit or any option not otherwise provided under the Verson Segment, (2) pay any benefits to any Alternate Payee prior to the earliest age that the affected Participant could have received a Pension under the Verson Segment (whether for reason of Disability or other termination of employment), except that the fact that the Participant may not have terminated his employment shall be disregarded, -25- (3) provide increased benefits, or (4) pay benefits to an Alternate Payee that are required to be paid to another Alternate Payee under a prior Qualified Domestic Relations Order. For purposes of the Verson Segment, an Alternate Payee who had been married to the Participant for at least one year may be treated as an Eligible Spouse with respect to the portion of the Participant's benefit in which such Alternate Payee has an interest provided that the Qualified Domestic Relations Order provides for such treatment. However, under no circumstances may the spouse of any Alternate Payee (who is not a Participant hereunder) be treated as an Eligible Spouse under the terms of the Verson Segment. Upon receipt of any judgment, decree or order (including approval of a property settlement agreement) relating to the provision of payment by the Verson Segment to an Alternate Payee pursuant to a state domestic relations law, the Plan Administrator promptly shall notify the affected Participant and any Alternate Payee of the receipt of such judgment, decree or order and shall notify the affected Participant and any Alternate Payee of the Plan Administrator's procedure for determining whether or not the judgment, decree or order is a Qualified Domestic Relations Order. The Plan Administrator shall establish a procedure to determine the status of a judgment, decree or order as a Qualified Domestic Relations Order and to administer Verson Segment distributions in accordance with Qualified Domestic Relations Orders. Such procedure shall be in writing, shall include a provision specifying the notification requirements enumerated in the preceding paragraph, shall permit an Alternate Payee to designate a representative for receipt of communications from the Plan Administrator and shall include such other provisions as the Plan Administrator shall determine, including provisions required under regulations promulgated by the Secretary of the Treasury. During any period in which the issue of whether a judgment, decree or order is a Qualified Domestic Relations Order is being determined (by the Plan Administrator, a court of competent jurisdiction or otherwise), the Plan Administrator shall segregate in a separate account under the Verson Segment the amount, if any, which would have been payable to the Alternate Payee during such period if the judgment, decree or order had been determined to be a Qualified Domestic Relations Order. Such segregated account under the Verson Segment shall be held as uninvested cash. If the judgment, decree or order is determined to be a Qualified Domestic Relations Order within the 18-month period following the receipt by the Plan Administrator of the Qualified Domestic Relations Order, then payment from the -26- segregated account shall be paid to the appropriate Alternate Payee. If such a determination is not made within the 18-month period, the segregated account shall be returned to the general assets of the Fund and shall be paid at the time and in the manner provided under the Verson Segment as if no order, judgment or decree had been received by the Plan Administrator. 6.11. LUMP SUM OPTION: In addition to the circumstances for lump sum settlements outlined in Section 6.8 above, with the consent of the Participant, a lump sum settlement is available, as an optional form of distribution, to or on behalf of a Participant if his/her employment terminates with the Employer as a result of a plant closure of the Employer. For purposes of this Section, the determination of the amount of such lump sum settlements shall be based on the interest rates and mortality tables, issued by the Pension Benefit Guaranty Corporation ("PBGC") in Appendices B and C of PBGC Regulation Section 2619.65, in effect at the time the Participant election process commences. 6.12. DIRECT ROLLOVER: For distributions made on or after January 1, 1993, a "distributee" who is reasonably expected to receive one or more "eligible rollover distributions" from the Verson Segment in one taxable year of the distributee may elect, at the time and in the manner prescribed by the Plan Administrator in accordance with reasonable administrative procedures as may from time to time be established by the Plan Administrator to the extent permitted by law, to have any such eligible rollover distribution made in the form of a direct rollover to an "eligible retirement plan" specified by the distributee, provided that such eligible retirement plan provides for the acceptance of a direct rollover, subject to the requirements of Section 401(a)(31) of the Code and regulations thereunder. For purposes of this Section, the term "eligible rollover distribution" means, subject to the limitations of Section 401(a)(31) of the Code and regulations thereunder, any distribution of all or any portion of the balance to the credit of the distributee (including a distribution the value of which does not exceed $3,500), except that such term shall not include any distribution which is: (i) one of a series of substantially equal periodic payments (made not less frequently than annually) for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary or for a specified period of 10 years or more; (ii) required under Section 401(a)(9) of the Code; or (iii) not includible in gross income. For purposes of this Section, the term "distributee" means (i) a Participant, (ii) a Participant's surviving spouse, and (iii) a Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. For purposes of this Section, subject to the requirements of Section 401(a)(31) of the Code and regulations thereunder and including any additional eligible retirement plans as may be included therein, "eligible retirement plan" means -27- (i) an individual retirement account described in Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) a defined contribution plan qualified under Section 401(a) of the Code, or (iv) an annuity plan described in Section 403(a) of the Code; provided, however, that in the case of an eligible rollover distribution to a surviving spouse, a direct rollover may be made only to an individual retirement account or individual retirement annuity. ARTICLE VII. MISCELLANEOUS 7.1. NON-GUARANTEE OF EMPLOYMENT: Nothing contained in the Verson Segment will be construed as a contract of employment between the Employer and any Employee, or as a right of any Employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its Employees, with or without cause. 7.2. RIGHTS TO FUND ASSETS: No Employee shall have any right to, or interest in, any assets of the Fund upon termination of his employment or otherwise, except as provided from time to time under the Verson Segment, and then only to the extent of the benefits payable under the Verson Segment to such Employee out of the assets of the Fund. Except as otherwise may be provided under Title IV of ERISA, all payments of benefits as provided for in the Verson Segment shall be made solely out of the assets of the Fund and none of the Fiduciaries shall be liable therefor in any manner. 7.3. NON-FORFEITABILITY OF BENEFITS: Subject only to the specific provisions of the Verson Segment, nothing shall be deemed to divest a Participant during his lifetime of his right to the nonforfeitable benefit to which he becomes entitled in accordance with the provisions of the Verson Segment. ARTICLE VIII. ADOPTION OF THE VERSON SEGMENT 8.1. ADOPTION PROCEDURE: With the written consent of the Company, any other organization may adopt the Verson Segment, the Group Annuity Contract and the Trust for its eligible Employees by appropriate resolution, which shall specify the effective date of such adoption and which may contain such changes and variations in Verson Segment terms as the Company approves. An Employer adopting the Verson Segment shall -28- compile and submit all information required by the Plan Administrator with reference to its eligible Employees. 8.2. JOINT EMPLOYERS: If an Employee receives compensation simultaneously from more than one participating Employer, the total amount of such compensation shall be considered for the purposes of the Verson Segment as having been paid by one participating Employer, the respective participating Employers shall share proratably in contributions to the Merged Plan on account of said Employee, and any benefits paid from the Fund to him or to his beneficiaries also shall be allocated proratably between the applicable portions of the Fund. 8.3. EXPENSES: Each participating Employer shall pay such proportionate part of actuarial and other necessary expenses incurred in the administration of the Verson Segment as the Company shall determine. 8.4. WITHDRAWAL: A participating Employer may withdraw from the Verson Segment (and the Merged Plan) by giving 60 days' written notice of its intention to the Company, the Insurance Company, and the Trustee, unless a shorter notice shall be agreed to by the Company. 8.5. SUPERSEDED PLANS: If an Employer adopting the Verson Segment already maintains a pension plan covering employees who will be covered by the Verson Segment, it may, with the consent of the Company, provide in its resolution adopting the Verson Segment for the merger, restatement and continuance, without discontinuance or termination, of its plan by the Verson Segment. -29- EX-10.G 8 EXHIBIT 10G EXHIBIT 10G LITTELL SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) TABLE OF CONTENTS ARTICLE I. Purpose, Intent and Effective Date . . . . . . . . . . . 1 1.1. Purpose and History. . . . . . . . . . . . . . . . . . . . 1 1.2. Intent . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3. Effective Date . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II. Definitions. . . . . . . . . . . . . . . . . . . . . . . 2 2.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Gender, Number . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE III. Eligibility and Participation . . . . . . . . . . . . . 9 3.1. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . 9 3.2. Duration . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV. Pension Benefits . . . . . . . . . . . . . . . . . . . . 10 4.1. Normal Retirement. . . . . . . . . . . . . . . . . . . . . 10 4.2. Deferred Retirement. . . . . . . . . . . . . . . . . . . . 10 4.3. Early Retirement . . . . . . . . . . . . . . . . . . . . . 11 4.4. Disability Retirement. . . . . . . . . . . . . . . . . . . 11 4.5. Vested Benefit Commencing at Normal (or Early) Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.6. Pre-Retirement Survivor Annuity. . . . . . . . . . . . . . 12 4.7. Transfer to Shop Plan. . . . . . . . . . . . . . . . . . . 14 4.8. Payment of Benefits; Required Distributions. . . . . . . . 15 4.9. Required Joint and Survivor Benefit. . . . . . . . . . . . 16 4.10. Re-Employment After Retirement . . . . . . . . . . . . . . 16 4.11. Effect of Amendments to Littell Segment Changing Benefits. 17 4.12. No Additional Benefits From Forfeitures. . . . . . . . . . 17 4.13. Consents . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.14. Actuarial Equivalent . . . . . . . . . . . . . . . . . . . 17 4.15. Information to be Provided by Plan Administrator . . . . . 17 ARTICLE V. Alternative Optional Forms of Pensions . . . . . . . . . . 18 5.1. Election to Decline Qualified Joint and Survivor Annuity . 18 5.2. Payment in Optional Form . . . . . . . . . . . . . . . . . 19 5.3. Effect of Participant's Death Before Retirement. . . . . . 20 5.4. Failure of Beneficiary . . . . . . . . . . . . . . . . . . 20 5.5. Designation of Beneficiary . . . . . . . . . . . . . . . . 21 5.6. Small Payment Provisions . . . . . . . . . . . . . . . . . 21 5.7. Direct Rollover Provisions . . . . . . . . . . . . . . . . 22 -i- TABLE OF CONTENTS CONTINUED ARTICLE VI. Miscellaneous Provisions Respecting Participants . . . . 22 6.1. Information on Employees . . . . . . . . . . . . . . . . . 22 6.2. Regularly Kept Records Are Binding . . . . . . . . . . . . 23 6.3. Spendthrift Clause . . . . . . . . . . . . . . . . . . . . 23 6.4. Not a Contract of Employment . . . . . . . . . . . . . . . 23 6.5. Addresses. . . . . . . . . . . . . . . . . . . . . . . . . 23 -ii- LITTELL SEGMENT OF THE ALLIED PRODUCTS CORPORATION COMBINED RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993) ARTICLE I. PURPOSE, INTENT AND EFFECTIVE DATE 1.1. PURPOSE AND HISTORY. The F.J. Littell Machine Co. Pension Plan For Office, Engineering, Sales and Supervisory Employees (the "Plan") was originally established by F. J. Littell Machine Co., which was acquired by and became a Division of Allied Products Corporation ("Allied") in 1986. Allied has continued to maintain the Plan to aid its eligible office, engineering, sales and supervisory employees in the Littell Division of Allied to attain a greater degree of post-retirement financial security for themselves and their families. The Plan was amended and restated as of January 1, 1976, and it was subsequently amended by amendments effective July 1, 1978, May 1, 1981, January 1, 1984, January 1, 1985 and October 31, 1986. Participants' benefits under the Plan were frozen as of October 31, 1986, and no further accrual of benefits shall occur under the Plan after that date. Effective as of August 19, 1991, Allied divested itself of the Littell Division. As a result of this divestiture, all employees of the Littell Division terminated employment with Allied effective as of August 19, 1991. Effective December 31, 1991, the Plan was merged into the Verson Allsteel Press Company Employees Retirement Plan under the name Verson Division of Allied Products Corporation Employees Retirement Plan (the "Combined Plan"). Effective January 29, 1993, sponsorship of the Combined Plan was transferred to Verson Corporation. Effective December 31, 1993, sponsorship of the Combined Plan was transferred to Allied. Also effective December 31, 1993, the Bush Hog Division of Allied Products Corporation Salaried Pension Plan was merged into the Combined Plan under the name Allied Products Corporation Combined Retirement Plan (the "Merged Plan"). The segment of the Merged Plan applicable to Employees (the "Littell Segment") is now being amended and restated as of December 31, 1993, with certain amendments effective as of the dates specified in the affected provisions. 1.2. INTENT. The Company intends that the Littell Segment provided by this amendment and restatement, and as the same may from time to time be further amended, shall constitute a qualified plan under the provisions of Section 401(a) (and further or successor applicable provisions) of the Code and shall be in full compliance with the provisions of ERISA. The Company intends that the Littell Segment shall be a frozen plan, subject, always, however, to the rights reserved in the Company to amend and terminate as herein below set forth. 1.3. EFFECTIVE DATE. The provisions of the Littell Segment as herein amended and restated shall be effective December 31, 1993, with certain amendments effective as of the dates specified therein. ARTICLE II. DEFINITIONS 2.1. DEFINITIONS. The following terms, alphabetically arranged, when used herein and initially capitalized as below indicated, shall, unless expressly otherwise provided, have the following respective meanings: "ACCRUED BENEFIT" means the Pension benefit under the Littell Segment earned by a Participant as of the earlier of his Retirement or October 31, 1986. A Participant's Accrued Benefit shall be computed in the same manner as a normal retirement pension under Section 4.1. "ACTUARIAL (OR ACTUARIALLY) EQUIVALENT" means the equality in value of the aggregate amounts expected to be received under different forms of payment, as specified in Section 4.14. The basic form of payment, subject to Sections 4.6 and 4.9, is a life annuity with 60 guaranteed monthly payments. "AVERAGE MONTHLY COMPENSATION" means the Participant's monthly Compensation averaged over the last five years of Employment prior to October 31, 1986. "BENEFICIARY" means such person or persons as are concurrently or successively entitled to receive benefits under the Littell Segment by reason of the death of a Participant. "BOARD" means the Board of Directors of the Company as from time to time constituted. "COMPANY" means Allied Products Corporation, a Delaware corporation. Notwithstanding the preceding provisions of this paragraph: (a) Effective from January 29, 1993 through December 31, 1993, "Company" means Verson Corporation, a Delaware corporation. -2- (b) Effective on and after December 31, 1993, "Company" means Allied Products Corporation, a Delaware corporation. "COMPENSATION" means the Participant's basic compensation from the Employer exclusive of any special compensation, such as, but not limited to, overtime, premium pay, bonuses, Christmas cash gifts and contributions under the Merged Plan or the Shop Plan. If benefits in the Littell Segment are ever not frozen so Participants earn Compensation after July 31, 1989, the limit on annual compensation contained in Code Section 401(a)(17) shall apply. "CREDITED SERVICE" when used in reference to a Participant means the following years of service prior to October 31, 1986: (c) each year (and fraction of a year) of service prior to January 1, 1976 which counted as credited service under the Littell Segment (as that term is defined in the Littell Segment as in existence immediately prior to December 31, 1991), and (d) each Plan Year after December 31, 1975 in which he completes at least 1730 Hours of Service as a Participant PROVIDED, HOWEVER, that if he completes less than 1730 Hours of Service during a Plan Year, he shall be given credit for a fraction of a year of Credited Service for whichever of the following two methods of calculation ((i) or (ii)) yields the greater fraction: (i) if he completes at least 1000 Hours of Service as a Participant during such Plan Year, a fraction (not exceeding 1) the numerator of which is the number of such completed Hours of Service and the denominator of which is 1730; or (ii) a fraction (not exceeding 1) equal to 1/10 multiplied by the number of calendar months in such Plan Year during which he completes at least the number of Hours of Service arrived at by multiplying the number of normal work days in such month by 8; PROVIDED, HOWEVER, that in case of an Employee who does not have any nonforfeitable right to an Accrued Benefit, years of service which would otherwise be Credited Service before any period of One-Year Breaks in Service shall not be taken into account if the number of successive One- Year Breaks in Service equals or exceeds the greater of five, or the aggregate number of years of -4- such Credited Service prior to such period of One-Year Breaks in Service; and the aggregate number of years of Credited Service before such period of One-Year Breaks in Service shall be deemed not to include any Credited Service similarly not required to be taken into account by reason of one or more prior One-Year Breaks in Service. "DEFERRED RETIREMENT DATE" means the date on which a Participant, who has remained in Employment after his Normal Retirement Date, retires. "DISABLED" or "DISABILITY" when used in reference to a Participant means a physical or mental impairment that substantially limits a Participant's ability to engage in a major life activity. A substantial impairment is one that significantly limits or restricts a major life activity such as hearing, seeing, speaking, breathing, performing manual tasks, walking, caring for oneself, learning or working. Participants who have a record of, or are regarded as suffering from a substantial impairment are also considered disabled. "DISABILITY RETIREMENT DATE" when used in reference to a Participant, means the date on which his Employment terminates by reason of Disability which has continued for not less than 6 months, provided he has attained age 50 and completed at least 15 years of Vesting Service by that date. "EARLY RETIREMENT DATE" when used in reference to a Participant, means the date on which his Employment terminates after he has completed at least 15 years of Credited Service prior to October 31, 1986 and has attained age 55. "EFFECTIVE DATE" means the effective date of this amendment and restatement of the Littell Segment, namely December 31, 1993. Notwithstanding the preceding provisions of this paragraph, certain provisions of the Littell Segment are effective as of the dates specified therein. "EMPLOYEE" means each person who, on or before October 31, 1986, was in an employee-employer relationship with the Company in its F.J. Littell Machine Co. Division, which subsequently became part of its Verson Division. Employee does not include leased employees (as defined under Section 414(n)(2) of the Code) who perform services for the Employer, except to the extent required by applicable law. "EMPLOYER", for purposes of the Littell Segment, means F.J. Littell Machine Co. and/or F.J. Littell Machine Co. Division of Allied Products Corporation through August 18, 1991; effective August 19, 1991, "EMPLOYER", for purposes of the Littell Segment, means the Verson Division of Allied Products Corporation. Notwithstanding -4- the preceding provisions of this paragraph, from January 29, 1993 through March 18, 1994, "EMPLOYER", for purposes of the Littell Segment, means Verson Corporation. "EMPLOYMENT" means service with the Employer as an Employee. "FORFEITURE" means a Participant's Accrued Benefit which shall not be distributable to him or his Beneficiary by reason of his Retirement or as a vested benefit under Section 4.5 and is thus forfeited. "HOUR OF SERVICE" means (a) Each hour for which an Employee is paid, or entitled to payment by the Employer for the performance of duties. Hours under this paragraph shall be credited to the Employee for the computation period or periods in which the duties are performed; and (e) Each hour for which an Employee is paid, or entitled to payment by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 hours shall be credited under this paragraph for any single period (whether or not such period occurs in a single computation period). Hours under this paragraph shall be credited to the Employee for the computation period or periods in which the period during which no duties are performed occurs; and (f) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same hours shall not be credited under both paragraph (a) or paragraph (b), as the case may be, and this paragraph (c). Hours under this paragraph shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award or agreement is made. (g) Solely for the purpose of determining whether an Employee has incurred a One-Year Break in Service, if an Employee begins a maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the Code, his Hours of Service shall include the Hours of Service that would have been credited to him if he had not been so absent (or eight (8) Hours of Service for each normal work day of such absence if the -5- actual Hours of Service cannot be determined). An Employee shall be credited for such Hours of Service (up to a maximum of 501 Hours of Service) in the Plan Year in which his absence begins (if such crediting will prevent him from incurring a One-Year Break in Service in such Plan Year) or in the following Plan Year. (h) The provisions of this definition shall be construed so as to resolve any ambiguities in favor of crediting an Employee with Hours of Service. (i) Each Hour of Service shall be credited in accordance with Section 2530.200b-2 of the Department of Labor Regulations. "LITTELL SEGMENT" means the F.J. Littell Machine Co. Pension Plan For Office, Engineering, Sales and Supervisory Employees until December 31, 1991; effective from December 31, 1991 through December 31, 1993, "LITTELL SEGMENT" means the Littell Segment of the Verson Division of Allied Products Corporation Employees Retirement Plan (covering former employees of the F.J. Littell Machine Co. Division of Allied Products Corporation); and, effective from and after December 31, 1993, "LITTELL SEGMENT" means the segment of the Allied Products Corporation Combined Retirement Plan set forth herein, as amended from time to time. "MERGED PLAN" means the Allied Products Corporation Combined Retirement Plan. "NORMAL RETIREMENT DATE" means the later of: (a) the time a Participant attains age 65; or (b) the fifth anniversary of the date the Employee became a Participant in the Littell Segment. "OFFICE EMPLOYEE" means an Employee who, on or before October 31, 1986, was employed in an office, engineering, sales or supervisory position by F.J. Littell Machine Co. or the F.J. Littell Machine Co. Division of Allied Products Corporation, which subsequently became the Verson Division of Allied Products Corporation. "ONE-YEAR BREAK IN SERVICE" when used in reference to an Employee means a Plan Year during which he has completed not more than 500 Hours of Service and, for these purposes only, credit shall be given at the rate of 40 Hours of Service per week (8 Hours of Service per day for fractions of weeks) for absences due to the following: -6- (a) Lay-off by the Employer; (b) Non-occupational sickness or injury; (c) Occupational injury or disease incurred as a result of employment with the Employer, for which absence the Employee is entitled to Worker's Compensation payments; (d) Leaves of absence with Employer consent; (e) Service in the armed forces of the United States of America entitling such Employee to a guaranteed right of re-employment, provided he shall return to employment with the Employer within the statutory period during which such right to re-employment is guaranteed; and (f) A maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the Code. "PARTICIPANT" means an Employee or a former Employee who is eligible to participate in the Littell Segment or in its benefits, or who is receiving such benefits or who is eligible to receive a vested benefit the payment of which is deferred and also includes a Beneficiary who is receiving or has become entitled to receive a benefit under the Littell Segment. "PENSION" means a series of monthly amounts which are payable to a person who is entitled to receive benefits under the Littell Segment. "PLAN YEAR" means the calendar year; provided however, that, prior to January 1, 1995, "Plan Year" means the twelve month period from August 1 through July 31 and the short period from August 1, 1994 through December 31, 1994. "QUALIFIED JOINT AND SURVIVOR ANNUITY" when used in reference to a Participant means a monthly annuity for the life of the Participant with a survivor annuity for the life of his spouse, the monthly payments of which are equal to one-half of the monthly amount paid or payable to the Participant. "RETIRES" or "RETIREMENT" or "RETIRING" when used in reference to a Participant means the termination of such Participant's service with the Employer when he is entitled to a normal, deferred, early or disability retirement pension under Article IV. -7- "SHOP PLAN" means the Littell Division Shop Plan (formerly known as the F.J. Littell Machine Co. Shop Pension Plan), which has been assumed by the purchaser of the assets of the Littell Division of Allied Products Corporation, effective August 19, 1991. "SOCIAL SECURITY RETIREMENT AGE" means the age defined in Code Section 415(b)(8). Under that Code Section, a person's Social Security Retirement Age is (a) 65 if the year of birth is before 1938, (b) 66 if the year of birth is after 1937 but before 1955, or (c) 67 if the year of birth is after 1954. "VESTING SERVICE" when used in reference to a Participant means the following years of service: (a) Each year of service prior to January 1, 1976 which counted as "continuous service" under the Littell Segment as in effect prior to January 1, 1976 (as that term is therein defined); and (b) Each Plan Year after December 31, 1975 during which he has completed at least 1,000 Hours of Service; provided, however, that a Participant shall be credited with five-twelfths (5/12) of a year of Vesting Service if he completes 416.67 Hours of Service during the short Plan Year beginning August 1, 1994 and ending December 31, 1994. For purposes of this paragraph, the following two periods shall each be treated as a Plan Year: January 1, 1991 through December 31, 1991 and August 1, 1991 through July 31, 1992. (c) Upon his resumption of employment a former Employee's years of service which would otherwise be Vesting Service which follow five consecutive One-Year Breaks in Service shall be disregarded for the purpose of determining the nonforfeitable percentage of his benefit which accrued before such 5-year period. (d) Notwithstanding paragraph (c) of this definition if a former Employee had completed a year of service but did not have a nonforfeitable right to any portion of his benefits under the Littell Segment and the number of his consecutive One-Year Breaks In Service equals or exceeds the greater of (i) five or (ii) the aggregate number of his Years of Service [as modified by prior application of this definition] prior to such break, upon his resumption of employment such years of service which would otherwise be Vesting Service, shall be permanently disregarded and he -8- shall be considered as a new Employee for all purposes of the Littell Segment. (e) Vesting Service may be earned by a Participant after October 31, 1986. 2.2 GENDER, NUMBER AND REFERENCES. The masculine pronoun whenever used herein shall be deemed to include the feminine and the neuter, and the singular shall be deemed to include the plural whenever the context requires. The words "hereof", "herein", "hereunder" and other similar compounds of the word "here" shall mean and refer to the entire Littell Segment and not to any particular provision of the Littell Segment. All references herein to specific Articles and/or Sections shall mean and refer to Articles and/or Sections of the Littell Segment unless otherwise qualified. Article and Section headings are included for convenience of reference and are not intended to add to, or subtract from, the terms of the Littell Segment. Terms used in the Littell Segment when not defined in the Littell Segment shall have the meanings given them by the Merged Plan. ARTICLE III. ELIGIBILITY AND PARTICIPATION 3.1. ELIGIBILITY. Each Participant in the Littell Segment who upon the Effective Date continues as an Office Employee shall, from and after said date, be and continue to be a Participant until he no longer has any right to benefits hereunder. Because the Littell Segment was frozen as of October 31, 1986, an Employee who on or after the Effective Date is not already a Participant by reason of having been a Participant in the Littell Segment as aforesaid shall not be eligible to become a Participant. 3.2. DURATION. An Office Employee who is a Participant shall continue to be a Participant until he no longer has any right to benefits hereunder. If a Participant has a One-Year Break in Service before becoming entitled to receive (then or thereafter) a benefit hereunder, he thereupon shall cease to be a Participant unless and until he is re-employed; upon his reemployment, he shall again become a Participant. If an Employee has a One-Year Break in Service before becoming a Participant and is subsequently rehired, he shall be treated as a new Employee upon his rehire. -9- ARTICLE IV. PENSION BENEFITS 4.1. NORMAL RETIREMENT PENSION. Subject to the provisions of Sections 4.6 and 4.9, each Participant who Retires on his Normal Retirement Date shall be entitled to a monthly Pension equal to his Accrued Benefit as of October 31, 1986, based on the number of full years and fractions of a year of Credited Service as of October 31, 1986 (subject to the maximum described below) multiplied by the sum of: (a) 1% of his Average Monthly Compensation up to $800; and (b) 1/2 of 1% of that part, if any, of his Average Monthly Compensation exceeding $800 but not exceeding $2,200. Credited Service shall be limited to a maximum of 25 years earned prior to October 31, 1986, PROVIDED, HOWEVER, that in the event the Participant is entitled to a pension benefit under any other plan or plans meeting the requirements of Section 401 of the Code to which the Company has made contributions by reason of his Employment, such maximum shall bear the same ratio to 25 years as his total Credited Service under the Littell Segment prior to October 31, 1986 (without maximum limitations) bears to the sum of his total number of years of Credited Service under the Littell Segment prior to October 31, 1986 and the total number of years of service with the Company taken into account in determining his benefit under such plan or plans. Such Pension shall be payable monthly on the first day of each calendar month commencing with the month next following the month in which he Retires and ending with the payment for the month in which his death occurs; and if his death occurs within the 60-month period after such commencement date, such monthly payments for the remainder of such 60-month period shall be paid to his Beneficiary. If payment of a Participant's Pension begins while he is still employed by an Employer or by the Company pursuant to Section 4.8(a), any subsequent increases in his Pension (as a result of Credited Service earned after his Pension payments begin) for a Plan Year shall be reduced (but not below zero) by the Actuarial Equivalent (as specified in Section 4.14) of the Pension payment(s) he received during the preceding Plan Years; provided, however, that the Actuarial Equivalent value of a Paricipant's Pension shall not be reduced by application of this sentence. 4.2. DEFERRED RETIREMENT PENSION. Subject to the provisions of Section 4.9, each Participant who Retires on his Deferred Retirement Date shall be entitled to receive a monthly Pension computed in accordance with Section 4.1 hereof equal to his Accrued Benefit as of October 31, 1986, but in no event shall the monthly amount of his Pension commencing at his Deferred Retirement Date be less than the monthly -10- amount of Pension he would have been entitled to had he retired at his Normal Retirement Date. If payment of a Participant's Pension begins while he is still employed by an Employer or by the Company pursuant to Section 4.8(a), any subsequent increases in his Pension (as a result of Credited Service earned after his Pension payments begin) for a Plan Year shall be reduced (but not below zero) by the Actuarial Equivalent (as specified in Section 4.14) of the Pension payment(s) he received during the preceding Plan Year. Such Pension shall be payable monthly on the first day of each calendar month commencing with the month next following the month in which he Retires and ending with the payment for the month in which his death occurs; and if his death occurs within the 60-month period after such commencement date, such monthly payments for the remainder of such 60-month period shall be paid to his Beneficiary. 4.3. EARLY RETIREMENT PENSION. Subject to the provisions of Section 4.9, each Participant who Retires on his Early Retirement Date shall be entitled to receive, commencing at such first day of a calendar month between his Early Retirement Date and his Normal Retirement Date as he shall elect in writing delivered to the Plan Administrator (or the Company if there is no Plan Administrator) a monthly Pension computed in accordance with Section 4.1 hereof but based on his Accrued Benefit as of October 31, 1986, reduced, however, in the event such Pension commences before his Normal Retirement Date by 1/2 of 1% for each full calendar month by which such commencement date precedes his Normal Retirement Date. Such Pension shall be payable monthly on the first day of each calendar month commencing with the commencement date thereof as aforesaid and ending with the payment for the month in which his death occurs; and if his death occurs within the 60-month period after such commencement date, such monthly payments for the remainder of such 60-month period shall be paid to his Beneficiary. 4.4. DISABILITY RETIREMENT PENSION. Subject to the provisions of Section 4.9, each Participant who Retires at his Disability Retirement Date shall be entitled to receive a monthly Pension commencing on such Date which is computed in accordance with Section 4.1 hereof but based on his Accrued Benefit as of October 31, 1986. Such Pension shall be payable monthly on the first day of each calendar month commencing with the month next following the month in which he Retires and ending with the month in which the earliest of the following occurs: (a) his death, (b) his Disability terminates, or (c) his Normal Retirement Date -11- and in the event such occurrence is (c) above, his Normal Retirement Pension shall then commence but the 60-month certain payment period shall be deemed to commence on his Disability Retirement Date. 4.5. VESTED BENEFIT COMMENCING AT NORMAL (OR EARLY) RETIREMENT DATE. (a) Subject to the provisions of Section 4.9, each Participant whose Employment is terminated other than by Retirement after he has attained Normal Retirement Age or completed 5 years of Vesting Service shall be entitled to receive, commencing at his Normal Retirement Date, a monthly Pension equal to his Accrued Benefit as of October 31, 1986 computed in accordance with Section 4.1 hereof. Except as set forth in Section 4.5, any Participant whose Employment is terminated other than by Retirement before he has completed at least 5 years of Vesting Service shall be entitled to no benefits under the Littell Segment and any amounts accumulated for his benefit shall be forfeited. (b) If a Participant who is entitled to a benefit under this Section has completed at least 15 years of Credited Service at October 31, 1986, upon attaining age 55 he may elect to commence receiving, at any month-end between his Early Retirement Date and his Normal Retirement Date, such benefit reduced, however, by 1/2 of 1% for each full calendar month by which such commencement date precedes his Normal Retirement Date. Such Pension shall be payable monthly on the first day of each calendar month commencing with the month next following the month in which he elects the early retirement pension benefit (if qualified as aforesaid) or in which his Normal Retirement Date occurs and ending with payment for the month in which his death occurs; and if his death occurs within the 60-month period after such commencement date, such monthly payments for the remainder of such 60-month period shall be paid to his Beneficiary. 4.6. PRE-RETIREMENT SURVIVOR ANNUITY. Unless otherwise elected as provided below, a Participant who dies before the Annuity Starting Date and who has a surviving spouse shall have a death benefit paid to his surviving spouse in the form of a Pre-Retirement Survivor Annuity. Payment of such benefits must commence by the earlier of the date the Participant would have reached his Early Retirement Date or his Normal Retirement Date under the Littell Segment, unless the surviving spouse elects a later date. (a) "Pre-Retirement Survivor Annuity" shall mean an annuity for the life of the Participant's spouse equal to the amount of the annuity payment -12- which would have been paid to the spouse if (i) in the case of a Participant who would have attained Early Retirement Age if he had terminated employment before death, he had retired and commenced to receive his Pension in the form of a Qualified Joint and Survivor Annuity on the day immediately preceding his death, or (ii) in the case of any other Participant, he separated from service at the earlier of the date of his actual separation or his death, survived until his Early Retirement Date or Normal Retirement Date, and commenced to receive his Pension in the form of a Qualified Joint and Survivor Annuity on the day before his death. (b) For purposes of this Section, the "Annuity Starting Date" means the first day of the first period for which an amount is received as an annuity (whether by reason of retirement or disability). (c) A Participant may designate a Beneficiary other than his spouse if: (i) the Participant and his spouse have validly waived the Pre- Retirement Survivor Annuity in the same manner prescribed in Section 5.1 for waiving the Qualified Joint and Survivor Annuity, and the spouse has waived his or her right to be the Participant's Beneficiary, or (ii) the Participant has no spouse, or (iii) the spouse cannot be located. In such event, the designation of a Beneficiary shall be made on a form satisfactory to the Plan Administrator. A Participant may at any time revoke his designation of a Beneficiary or change his Beneficiary (in accordance with the rules set forth herein) by filing written notice of such revocation or change with the Plan Administrator. In the event no valid designation of Beneficiary exists at the time of the Participant's death, the death benefit shall be payable to the Participant's executor or administrator. (d) Any election to waive the Pre-Retirement Survivor Annuity must be made by the Participant in writing during the election period and shall require the spouse's consent in the same manner provided for in Section 5.1. -13- The election period to waive the Pre-Retirement Survivor Annuity shall begin on the first day of the Plan Year in which the Participant attains age 35 and end on the date of the Participant's death. In the event a Participant separates from service prior to the beginning of the election period, the election period shall begin on the date of such separation from service; provided however, that any waiver of the Pre-Retirement Survivor Annuity which is made before the first day of the Plan Year in which a Participant attains age 35 (the "35 Date") shall become invalid on the 35 Date, at which time the Participant may again waive the Pre-Retirement Survivor Annuity with the appropriate spousal consent. With regard to the election, the Plan Administrator shall provide each Participant with a written explanation of the Pre-Retirement Survivor Annuity containing comparable information to that required pursuant to Section 5.1 by the end of whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (ii) a reasonable period after the individual becomes a Participant; and (iii) in the case of a Participant who separates from service before attaining age 35, the period beginning one year before such separation and ending one year after such separation. 4.7. TRANSFER TO SHOP PLAN. Subject to the provisions of Section 4.9, an Office Employee who is transferred to Employment pursuant to which he becomes a participant in the Shop Plan prior to October 31, 1986, and whose Employment is terminated after he has completed at least 5 years of Vesting Service shall be entitled to receive a monthly Pension, the computation and commencement date of which are to be determined in accordance with Section 4.5 hereof but based on his Credited Service to such transfer date prior to October 31, 1986, except that for the purpose of determining whether he is entitled to commence receiving his Pension at an Early Retirement Date, his Credited Service shall be the sum of his Credited Service under the Littell Segment and his credited service for benefit accrual purposes under the Shop Plan through October 31, 1986. -14- 4.8. PAYMENT OF BENEFITS; REQUIRED DISTRIBUTIONS. Pensions will be payable on the first day of the month coincident with or next following the Participant's actual Retirement date, or if applicable, the date of the Participant's death. In no event, however, will payment of a Pension be postponed or delayed beyond the 60th day after the close of the Plan Year in which the Participant actually retires. If it is impossible for the Administrator to determine the amount of Pension payable to the Retired Participant then benefits shall commence no later than 60 days after the date on which the amount of his Pension can be determined. Notwithstanding anything contained in the Littell Segment to the contrary: (a) The entire interest of each Participant shall be distributed to such Participant not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2, or such interest shall be distributed, beginning not later than the time specified above, over the life of the Participant, the lives of the Participant and a designated individual beneficiary, a period not extending beyond the life expectancy of the Participant or a period not extending beyond the life expectancy of the Participant and a designated individual beneficiary. (b) In the event that a distribution of a Participant's interest has begun in accordance with the terms of this Section and such Participant dies before his entire interest is distributed, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death. In the event that a Participant dies before distribution of his interest has begun, the entire interest of the Participant shall be distributed within 5 years after the death of the Participant; provided that this sentence shall not apply if: (i) any portion of the Participant's interest is payable to or for the benefit of a designated beneficiary, such portion will be distributed over the life of the beneficiary or over a period not extending beyond the life expectancy of the beneficiary, and distributions commence no later than one year after the date of the Participant's death; or (ii) the portion of the Participant's interest to which the surviving spouse is entitled will be distributed over the life of the surviving spouse or over a period not extending beyond the life expectancy of the surviving spouse, and distributions commence no later than the date on which the Participant would have attained age 70-1/2. -15- 4.9. REQUIRED JOINT AND SURVIVOR BENEFIT. If a Participant is married on the date of the commencement of his Pension pursuant to Section 4.1 (Normal), 4.2 (Deferred), 4.3 (Early) or 4.4 (Disability) or of his vested benefit pursuant to Section 4.5, whichever is applicable, and if at that time such Participant has been married to the same spouse for at least one year, then, unless he has elected otherwise in accordance with the provisions of Section 5.1 hereof (after having received a written explanation of the terms and conditions of a Qualified Joint and Survivor Annuity and the effect of such election as described in Section 4.15 hereof), the Pension payable under the Littell Segment shall be in the form of a Qualified Joint and Survivor Annuity which shall be the Actuarial Equivalent of such Pension. 4.10. RE-EMPLOYMENT AFTER RETIREMENT. Subject to the provisions of Section 4.8(a) if a Participant who has Retired or otherwise terminated Employment and has commenced receiving a Pension hereunder is re-employed by the Employer after his Normal Retirement Date, his Pension shall be suspended for any month of re-employment in which he has 40 or more Hours of Service under the following rules: (a) No payment of benefits shall be suspended unless the Plan Administrator notifies the Participant by personal delivery or first class mail during the first calendar month or payroll period in which payment is suspended that his benefits are suspended; (b) Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a general description of the Littell Segment provisions relating to the suspension of payments, a copy of such provisions, information relating to the claims review procedure available to him under Section 5.3 of the Merged Plan document, and a statement that the applicable Department of Labor regulations may be found in Section 2530.203-3 of the Code of Federal Regulations. No benefit payments shall be suspended for a month during which a Participant's Employment after his Normal Retirement Date is for fewer than 40 Hours of Service. A Participant who remains in Employment after his Normal Retirement Date shall continue to receive Credited Service only through October 31, 1986. If such a Participant who has Retired at his Early Retirement Date, or for Disability or whose service has been terminated under circumstances entitling him to a vested Pension benefit (under Sections 4.3 through 4.5, inclusive) is re-employed by the Employer before his Normal Retirement Date, any Pension he may be receiving under the Littell Segment shall be suspended during the period of such re-employment and the Pension to which he is entitled upon his subsequent Retirement or other termination of service, shall be redetermined in accordance with the Littell Segment, provided, however, that -16- the Credited Service of such Participant shall include the Credited Service earned prior to October 31, 1986 accumulated before such prior Retirement or other termination and any subsequent Credited Service earned prior to October 31, 1986. The re-hired Participant's Pension as so redetermined will be reduced by amounts determined by the Plan Administrator to be the Actuarial Equivalent of such Pension benefits as may have been already paid him under the Littell Segment. 4.11. EFFECT OF AMENDMENTS TO LITTELL SEGMENT CHANGING BENEFITS. All rights and benefits, if any, provided under the Littell Segment for any Participant or the Beneficiary of any Participant shall be determined under the terms and provisions of the Littell Segment as they exist at the time such Participant's Employment terminates, whether by death, Retirement, resignation, discharge or otherwise, and such benefits, so determined and fixed, shall not be changed by amendments to the Littell Segment effective after such termination of Employment. 4.12. NO ADDITIONAL BENEFITS FROM FORFEITURES. In no event shall any forfeitures of benefits hereunder for any reason be applied to increase the benefits any Participant would otherwise receive under the Littell Segment. 4.13. CONSENTS. In no event shall the consent of any person (other than the Participant's spouse of at least one year), who is entitled to receive payments upon the death of the Participant be required as a condition to the right of a Participant to revoke or change, in accordance with the terms of the Littell Segment, any option previously elected. 4.14. ACTUARIAL EQUIVALENT. The amount of benefit payable in any form of benefit other than the life annuity with 60 monthly payments guaranteed shall be the Actuarial Equivalent of the amount payable in the form of a life annuity with 60 monthly payments guaranteed. Actuarial Equivalent shall be the adjusted benefit payable hereunder, as of any Participant's Retirement Date which would provide for equality in value of the aggregate amount expected to be received under the life annuity form as compared to the value of the aggregate amount expected to be received under another form of benefit, based upon the interest and mortality assumptions specified in Appendix A to the Littell Segment which is incorporated herein by this reference. 4.15. INFORMATION TO BE PROVIDED BY PLAN ADMINISTRATOR. The Plan Administrator shall provide each Participant, or if applicable, such Participant's spouse or beneficiary with: (a) A written nontechnical explanation of the forms of annuity available under the Littell Segment including the Qualified Joint and Survivor -17- Annuity, the circumstances under which the Qualified Joint and Survivor Annuity form of annuity will be provided unless an election to receive Pension benefits in a form other than the Qualified Joint and Survivor Annuity is made, the availability of any such election and the relative financial effect on a Participant's annuity of such election. (b) The Plan Administrator shall provide each Participant with a written nontechnical explanation of the benefits described in Section 5.2, the circumstances under which they will be provided if elected, the availability of such election and the relative financial effect on a Participant's annuity of such election. (c) The information described in subparagraphs (a) and (b) above shall include a statement informing Participants of the availability of additional information and how such information may be obtained. (d) A Participant may request the information described in subparagraph (c) above at any time prior to the Participant's actual retirement date. The Plan Administrator shall provide such information within 30 days of receipt of the Participant's written request and such information shall be in the form of a written explanation in nontechnical language. The Plan Administrator shall not be required to comply with any more than one request from any Participant. ARTICLE V. ALTERNATIVE OPTIONAL FORMS OF PENSIONS 5.1. ELECTION TO DECLINE QUALIFIED JOINT AND SURVIVOR ANNUITY. Any election to waive the Qualified Joint and Survivor Annuity must be made by the Participant in writing during the election period and be consented to by the Participant's spouse. The Participant's waiver and the spouse's consent (a) must identify both the Beneficiary and the form of payment (unless the spouse executes a general consent as described in Treasury Regulation Section 1.401(a)-20, Q&A-31(c)), and (b) must acknowledge the effect of such election and be witnessed by a Merged Plan representative or a notary public. Spousal consent shall not be required if it is established to the satisfaction of the Plan Administrator that the required consent cannot be obtained because there is no spouse, the spouse cannot be located, or other circumstances that may be prescribed by Treasury regulations. The election made by the Participant and consented to by his spouse may be revoked by the Participant in writing without the consent of the spouse at any time during the election period. Any new election must comply with the -18- requirements of this paragraph. A former spouse's waiver shall not be binding on a new spouse. The following rules shall apply to the election: (a) The election period to waive the Qualified Joint and Survivor Annuity shall be the 90-day period ending on the "annuity starting date." (b) For purposes of this Section, the "annuity starting date" means the first day of the first period for which an amount is received as an annuity (whether by reason of retirement or disability). (c) With regard to the election, the Plan Administrator shall provide the Participant within a reasonable period of time before the "annuity starting date" (and consistent with Treasury regulations), a written explanation of: (i) the terms and conditions of the Qualified Joint and Survivor Annuity, and (ii) the Participant's right to make an election to waive the Qualified Joint and Survivor Annuity, and (iii) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Annuity, and (iv) the right of the Participant to revoke such election, and the effect of such revocation. 5.2. PAYMENT IN OPTIONAL FORM. Subject to the following provisions of this Section and to those of Article IV, in lieu of the Pension benefit payable to a Participant in accordance with Section 4.1, 4.2, 4.3, 4.4, or 4.5, a Participant may choose an optional form of payment which is the Actuarial Equivalent of the monthly benefit as specified in such Section in one of the following forms and amounts: (a) LIFE-ONLY. A monthly pension payable to the Participant for his lifetime; (b) JOINT-AND-SURVIVOR ANNUITY. A monthly pension amount payable to the Participant for his lifetime and after his death, either 100%, 66-2/3% or 50% of such amount, payable monthly to a Beneficiary for the lifetime of such Beneficiary, which percentage and Beneficiary shall be designated by the Participant in his written request for such optional form of pension, PROVIDED, HOWEVER, that the value of the single-sum Actuarial -19- Equivalent of the pension thus payable to the Participant shall be greater than the value of the single-sum Actuarial Equivalent of the pension thus payable to any such Beneficiary other than his spouse, computed at the date of the commencement of such monthly pension; or (c) 60-MONTHS CERTAIN. A monthly pension amount payable to the Participant for his lifetime and, in the event of the Participant's death before the end of the 60-month period commencing with the pension commencement date the same monthly pension amount shall be payable for the remainder of such 60-month period to the Beneficiary designated by the Participant in writing filed with the Plan Administrator (or the Company if there is no Plan Administrator) before his death; PROVIDED, HOWEVER, that no such election shall be given effect if the Participant dies within two years of the date such election is made, except that any such election shall be given effect in any case in which: (i) such Participant dies from accidental causes, and (ii) the failure to give effect would deprive the Participant's surviving spouse of a survivor annuity, and (iii) such election is made before the accident occurs which resulted in his death. 5.3. EFFECT OF PARTICIPANT'S DEATH BEFORE RETIREMENT. If a Participant shall die prior to the time when he first becomes entitled to a Pension hereunder, no death benefit will be payable to his Beneficiary, EXCEPT: (a) as provided in Section 4.6, and (b) if such Participant dies after becoming eligible for Normal or Early Retirement but before actually Retiring, his Beneficiary shall be entitled to receive the death benefit under option (b) or (c) of Section 5.2 if effectively elected, or under Section 4.6 or 4.9 (if applicable) or under Section 4.1, 4.2 or 4.3 (if applicable) as if such Participant had Retired and had become entitled to commence receiving a pension immediately before his death. 5.4. FAILURE OF BENEFICIARY. A Participant who has elected option (c) under Section 5.2 or for whom the Pension benefit provided in Sections 4.1 through 4.5 is applicable, may change his designation of Beneficiary (subject to Sections 4.9 and 5.1) -20- at any time before his death. If no Beneficiary has been properly designated or if the Beneficiary does not survive the Participant, the remaining monthly Pension amounts due thereunder (or their Actuarial Equivalent in a lump-sum if requested by the executor or personal representative of the Participant) shall be paid to the estate of such Participant. If the Beneficiary shall die subsequent to such Beneficiary becoming entitled to such payments but before all required payments have been made and no successor Beneficiary shall have been properly designated by Participant, any remaining monthly Pension amounts due thereunder (or their Actuarial Equivalent in a lump-sum if requested by the executor or personal representative of the decedent Beneficiary) shall be paid to the estate of such decedent Beneficiary. If the Beneficiary designated under Section 5.2 or 5.5 shall die before the Participant's Pension benefit commences, the joint and-survivor benefit under Section 4.9 or as elected under Section 5.2 will be canceled automatically and the monthly Pension payable to such Participant hereunder will be made as if no such joint-and-survivor benefit had been in effect or elected, except that the Participant again may elect an optional form of Pension in accordance with Sections 5.1 and 5.2. 5.5. DESIGNATION OF BENEFICIARY. Subject to the provisions of Sections 4.9 and 5.1, each Participant may designate any legal or natural person to receive any benefits, including those of an annuity payable under the Littell Segment on account of his death. Unless a qualified domestic relations order as defined in Section 414(p) of the Code provides otherwise, a designation by the Participant naming his spouse as a Beneficiary shall be deemed to be revoked in the event of a subsequent divorce from such spouse. Each designation by a Participant shall be in writing, shall include a direction (consistent with the provisions of Articles IV and V) as to the manner in which such benefits will be paid to his Beneficiary, and shall be filed with the Plan Administrator in such form as it may require. A Participant, by a writing filed with the Plan Administrator, may change such beneficiary designation, in accordance with the terms of the Littell Segment, at any time and from time to time, without the consent of or notice to any person or persons previously designated by him. 5.6. SMALL PAYMENT PROVISIONS. Whenever the amount of the monthly benefit payable hereunder is less than $10.00, the Actuarial Equivalent of such monthly benefit shall be paid in equal annual or quarterly amounts. If, when a Participant separates from service, the actuarial equivalent lump sum value of the benefit hereunder is no more than $3,500, it shall be paid in a lump sum without the consent of the Participant as soon thereafter as is practicable; for this purpose, the actuarial equivalent shall be determined without regard to the recipient's sex based upon the interest rate and mortality assumptions which would be used (as of the first day of the Plan Year in which occurs the proposed date of distribution) by the PBGC for purposes of determining the present value of a lump sum distribution on plan termination. -21- 5.7. DIRECT ROLLOVER PROVISIONS. For distributions made on or after January 1, 1993, a "distributee" who is reasonably expected to receive one or more "eligible rollover distributions" in one taxable year of the distributee may elect, at the time and in the manner prescribed by the Company in accordance with reasonable administrative procedures as may from time to time be established by the Company to the extent permitted by law, to have any such eligible rollover distribution made in the form of a direct rollover to an "eligible retirement plan" specified by the distributee, provided that such eligible retirement plan provides for the acceptance of a direct rollover, subject to the requirements of Section 401(a)(31) of the Code, and regulations thereunder. For purposes of this Section, the term "eligible rollover distribution" means, subject to the limitations of Section 401(a)(31) of the Code, and regulations thereunder, any distribution of all or any portion of the balance to the credit of the distributee (including a distribution the value of which does not exceed $3,500), except that such term shall not include any distribution which is: (i) one of a series of substantially equal periodic payments (made not less frequently than annually) for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary or for a specified period of 10 years or more; (ii) required under Section 401(a)(9) of the Code; or (iii) not includible in gross income. For purposes of this Section, the term "distributee" means (i) a Participant, (ii) a Participant's surviving spouse, and (iii) a Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. For purposes of this Section, subject to the requirements of Section 401(a)(31) of the Code, and regulations thereunder and including any additional eligible retirement plans as may be included therein, "eligible retirement plan" means (i) an individual retirement account described in Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) a defined contribution plan qualified under Section 401(a) of the Code, or (iv) an annuity plan described in Section 403(a) of the Code; provided, however, that in the case of an eligible rollover distribution to a surviving spouse, a direct rollover may be made only to an individual retirement account or individual retirement annuity. ARTICLE VI. MISCELLANEOUS PROVISIONS RESPECTING PARTICIPANTS. 6.1. INFORMATION ON EMPLOYEES. Each Participant shall furnish promptly to the Plan Administrator (or the Company if there is no Plan Administrator) such information as it reasonably considers necessary or advisable for the purposes of administering the Littell Segment. If such information is not submitted, or shows that such information previously has been misstated on the records of the Littell Segment, -22- the Plan Administrator (or the Company if there is no Plan Administrator) will make such corrections and adjustments in accordance with the available facts as it considers appropriate. 6.2. REGULARLY KEPT RECORDS ARE BINDING The regularly kept records of the Company and/or the Employer shall be conclusive and binding upon all persons with respect to the nature and length of employment, the type and amount of compensation paid and the manner of payment thereof, the type and length of absence from work and all other matters contained therein relating to Employees. 6.3. SPENDTHRIFT CLAUSE. Amounts payable under the Littell Segment to a Participant or to a Beneficiary shall be paid only to him and upon his personal receipt (except as provided in Section 5.10 of the Merged Plan document regarding facility of payment). No benefit payable under the provisions hereof shall be assigned or alienated, or be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge. Any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge shall be void; and neither the Fund nor any part thereof shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to any benefit payment. Notwithstanding the foregoing, the Plan Administrator shall direct the Insurance Company and/or the Trustee to make all payments required by a qualified domestic relations order within the meaning of Section 414(p) of the Code from the Group Annuity Contract and/or from the Trust. The Plan Administrator shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such orders. 6.4. NOT A CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed as a contract of employment between the Employer and any Employee, or as giving a right to any Employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any Employee at any time with or without cause. 6.5. ADDRESSES. Each person entitled to benefits hereunder shall file with the Company from time to time in writing his complete mailing address and each change of mailing address. Any check representing payment hereunder, and any communication, addressed to a Participant or to any other person at his last address so filed (or if no such address has been filed, then at his last address indicated on the records of the Company) shall be deemed to have been received by such person for all purposes of the Littell Segment, and the Company shall not be obliged to search for or ascertain the location of any such person. -23- EX-21 9 EXHIBIT 21 EXHIBIT 21
State or Other % Of Jurisdiction Securities In Which Owned by Subsidiaries of Registrant (1) Incorporated Registrant - --------------------------------------------------------------------------- Allied Products Finance Corporation Delaware 100% (2) Aurora Corporation of Illinois..... Illinois 100% (2) Allied Products Financial Services Corporation..................... Delaware 100% (2) (1) Unnamed subsidiaries considered in the aggregate do not constitute a significant subsidiary. (2) Subsidiary included in consolidated financial statements.
03/06/95 EX-23 10 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Allied Products Corporation registration statement (File No. 33-60058) on Form S-8 of our report dated February 24, 1995, except for Note 11, as to which the date is March 10, 1995, on our audits of the consolidated financial statements and financial statement schedules of Allied Products Corporation and consolidated subsidiaries as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994, which report is included in this 1994 Annual Report of Form 10-K. Coopers & Lybrand L.L.P. Chicago, Illinois March 23, 1995 EX-24 11 EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY WHEREAS, ALLIED PRODUCTS CORPORATION, a Delaware corporation (herein referred to as the "Company"), is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its annual report on Form 10-K for the year ended December 31, 1994 and WHEREAS, each of the undersigned holds the office or offices in the Company hereinbelow set opposite his name, respectively; NOW THEREFORE, each of the undersigned hereby constitutes and appoints KENNETH B. LIGHT and DAVID B. CORWINE, and each of them individually, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the capacity or capacities set forth below to said Form 10-K and to any and all amendments thereto, and hereby ratifies and confirms all said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 13th day of March, 1995. Richard A. Drexler, Chairman of the Board, President and Chief /s/ Richard A. Drexler Executive Officer; Director ------------------------ James J. Hayden, Executive Vice President and Chief Financial /s/ James J. Hayden Officer; Director ------------------------ Kenneth B. Light, Executive Vice President and Chief /s/ Kenneth B. Light Administrative Officer, Director ------------------------ Robert J. Fleck, Vice President - Accounting and Chief Accounting /s/ Robert J. Fleck Officer ------------------------ Lloyd Drexler, Director /s/ Lloyd Drexler ------------------------ William D. Fischer, Director /s/ William D. Fischer ------------------------ Stanley J. Goldring, Director /s/ Stanley J. Goldring ------------------------ John E. Jones, Director /s/ John E. Jones ------------------------ John W. Puth, Director /s/ John W. Puth ------------------------ Mitchell I. Quain, Director /s/ Mitchell I. Quain ------------------------ S. S. Sherman, Director /s/ S. S. Sherman ------------------------ EX-27 12 EXHIBIT 27
5 THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1994 AND THE CONSOLIDATED STATEMENT OF INCOME (LOSS) AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 1,654 0 47,788 1,521 48,455 96,832 76,689 46,128 150,555 63,301 0 91 18,840 0 65,071 150,555 215,529 215,529 160,836 160,836 34,129 256 1,859 20,564 877 19,687 (5,354) 0 0 14,333 1.37 1.37
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